<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1995
REGISTRATION NOS.: 811-2575
2-53856
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 32 /X/
AND/OR
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 22 /X/
------------------------
DEAN WITTER LIQUID
ASSET FUND INC.
(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)
___ immediately upon filing pursuant to paragraph (b)
_X_ on October 19, 1995 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 HAS FILED THE RULE 24F-2 NOTICE,
FOR ITS FISCAL YEAR ENDED AUGUST 31, 1995, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON SEPTEMBER 25, 1995.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ---------------------------------------------- ---------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Prospectus Summary; Summary of Fund Expenses
3. ......................................... Financial Highlights; Dividends, Distributions and Taxes
4. ......................................... Cover Page; Prospectus Summary; Investment Objectives and Policies;
The Fund and Its Management; Investment Restrictions
5. ......................................... The Fund and Its Management; Back Cover; Investment Objectives and
Policies
6. ......................................... Dividends, Distributions and Taxes; Additional Information
7. ......................................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. ......................................... Redemption of Fund Shares; Shareholder Services
9. ......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ......................................... Cover Page
11. ......................................... Table of Contents
12. ......................................... The Fund and Its Management
13. ......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ......................................... The Fund and Its Management; Directors and Officers
15. ......................................... Directors and Officers
16. ......................................... The Fund and Its Management; Purchase of Fund Shares; Custodian and
Transfer Agent; Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Description of Common Stock
19. ......................................... Purchase of Fund Shares; Redemption of Fund Shares
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... Purchase of Fund Shares
22. ......................................... Dividends, Distributions and Taxes
23. ......................................... Financial Statements
</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
OCTOBER 19, 1995
Dean Witter Liquid Asset Fund Inc. (the "Fund") is a no-load,
open-end diversified management investment company investing in the following
money market instruments: United States Government securities, obligations of
U.S. regulated banks and savings and loan associations having assets of $1
billion or more, high grade commercial paper, certificates of deposit of
$100,000 or less of U.S. regulated banks and savings institutions having total
assets of less than $1 billion which are fully federally insured as to principal
(the interest may not be insured) and high grade corporate obligations maturing
in thirteen months or less. The Fund has a 12b-1 Plan (see below). The
investment objectives of the Fund are high current income, preservation of
capital and liquidity (see "Investment Objectives and Policies").
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
In accordance with a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940 with Dean Witter Distributors Inc., the
Fund is authorized to reimburse for specific expenses incurred in promoting the
distribution of the Fund's shares. Reimbursement may in no event exceed an
amount equal to payments at the annual rate of 0.15% of the average daily net
assets of the Fund.
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 October 19, 1995, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at its address or at one of its telephone numbers listed on
this cover page. The Statement of Additional Information is incorporated herein
by reference.
<TABLE>
<S> <C>
Minimum initial investment ...... $5,000
Minimum additional investment.... $ 100
</TABLE>
Dean Witter
Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/3
The Fund and its Management/4
Investment Objectives and Policies/4
Investment Restrictions/6
Purchase of Fund Shares/7
Shareholder Services/9
Redemption of Fund Shares/12
Dividends, Distributions and Taxes/13
Additional Information/14
Report of Independent Accountants/16
Financial Statements -- August 31, 1995/17
For information about the Fund, including information on opening an account,
registration of shares, and other information relating to a specific account,
call:
- 800-869-6397 (toll-free) or
- 212-392-2550
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 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
- --------------------------------------------------------------------------------
The Fund An open-end diversified management investment company
investing in money market instruments.
- --------------------------------------------------------------------------------
Shares Offered Common Stock (see page 14).
- --------------------------------------------------------------------------------
Purchase Investments may be made:
of Shares - By wire
- By mail
- By EasyInvest-SM-
- Through Dean Witter Reynolds Inc. account executives and
other Selected Broker-Dealers.
Purchases are at net asset value, without a sales charge.
Minimum initial investment: $5,000. Subsequent investments:
$100 or more (by wire or by mail), $1,000 or more (through
account executives) or $100 to $5,000 (by EasyInvest).
Orders for purchase of shares are effective on day of receipt
of payment in Federal Funds if payment is received by the
Fund's transfer agent before 12:00 noon New York time (see
page 7).
- --------------------------------------------------------------------------------
Investment High current income, preservation of capital and liquidity
Objectives (see page 4).
- --------------------------------------------------------------------------------
Authorized Money market instruments (see page 4):
Investments - United States Government securities
- Obligations of U.S. regulated banks having assets of $1
billion or more
- High grade commercial paper
- High grade corporate obligations maturing in thirteen months
or less
- Certificates of deposit of savings banks and savings and
loan associations having
assets of $1 billion or more
- Certificates of deposit of $100,000 or less, of U.S.
regulated banks and savings
institutions, having total assets of less than $1 billion,
which are fully federally insured as
to principal. The interest may not be insured.
- Repurchase agreements and reverse repurchase agreements (see
pages 5 and 6).
- --------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the
Manager Fund, and its wholly-owned subsidiary, Dean Witter Services
Company Inc., serve in various investment management,
advisory, management and administrative capacities to
ninety-seven investment companies and other portfolios with
assets of approximately $76.4 billion at September 30, 1995
(see page 4).
- --------------------------------------------------------------------------------
Management Monthly fee at an annual rate of 0.50% of average daily net
Fee assets up to $500 million, scaled down at various levels of
net assets to 0.248% on assets over $17.5 billion (see page
4).
- --------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor") sells shares
of the Fund through Dean Witter Reynolds Inc. and other
Selected Broker-Dealers pursuant to selected dealer
agreements. Other than the reimbursement to the Distributor
pursuant to the Rule 12b-1 Distribution Plan, the Distributor
receives no distribution fees (see page 8).
- --------------------------------------------------------------------------------
Plan of The Fund is authorized to reimburse specific expenses incurred
Distribution in promoting the distribution of the Fund's shares pursuant to
a Plan of Distribution with the Distributor pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement
may in no event exceed an amount equal to payments at the
annual rate of 0.15 of 1% of average daily net assets of the
Fund (see page 8).
- --------------------------------------------------------------------------------
Dividends Declared and automatically reinvested daily in additional
shares; cash payments of dividends available monthly (see page
13).
- --------------------------------------------------------------------------------
Reports Individual periodic account statements; annual and semi-annual
Fund financial statements.
- --------------------------------------------------------------------------------
Redemption Shares are redeemable at net asset value without any charge
(see page 12):
of Shares - By check
- By telephone or wire instructions, with proceeds wired or
mailed to a predesignated bank account.
- By mail
A shareholder's account is subject to possible involuntary
redemption if its value falls below $1,000 (see page 13).
- --------------------------------------------------------------------------------
Risks The Fund's investments are limited to U.S. Government
securities, high grade corporate obligations and obligations
of banks and savings and loan associations having assets of $1
billion or more and certificates of deposit which are fully
federally insured as to principal; consequently, the portfolio
securities of the Fund are subject to minimal risk of loss of
income and principal. However, the investor is directed to the
discussion of "Repurchase Agreements" and "Reverse Repurchase
Agreements" (see page 5) concerning any risk associated with
such portfolio securities and management techniques.
- --------------------------------------------------------------------------------
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 in the table are for the
fiscal year ended August 31, 1995.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends.................................. None
Deferred Sales Charge................................................................. None
Redemption Fees....................................................................... None
Exchange Fee.......................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------------
Management Fees....................................................................... 0.28%
12b-1 Fees............................................................................ 0.10%
Other Expenses........................................................................ 0.27%
Total Fund Operating Expenses......................................................... 0.65%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:.............................................................. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares" and "Shareholder
Services."
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of capital stock
outstanding throughout each year 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
independent accountants which are contained in this Prospectus commencing on
page 16.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---------- --------- --------- --------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset
value,
beginning of
year.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- --------- --------- --------- ---------- ---------- ---------- --------- --------- ---------
Net investment
income........ 0.053 0.030 0.027 0.040 0.064 0.079 0.086 0.068 0.057 0.070
Less dividends
from net
investment
income........ (0.053) (0.030) (0.027) (0.040) (0.064) (0.079) (0.086) (0.068) (0.057) (0.070)
---------- --------- --------- --------- ---------- ---------- ---------- --------- --------- ---------
Net asset
value, end of
year.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- --------- --------- --------- ---------- ---------- ---------- --------- --------- ---------
---------- --------- --------- --------- ---------- ---------- ---------- --------- --------- ---------
TOTAL
INVESTMENT
RETURN........ 5.41% 3.07% 2.72% 4.10% 6.61% 8.27% 8.96% 7.01% 5.93% 7.22%
RATIOS TO
AVERAGE NET
ASSETS:
Expenses....... 0.65% 0.70% 0.69% 0.67% 0.62% 0.56% 0.56% 0.61% 0.63% 0.64%
Net investment
income........ 5.28% 3.02% 2.67% 4.03% 6.41% 7.91% 8.66% 6.77% 5.74% 6.98%
SUPPLEMENTAL
DATA:
Net assets, end
of year, in
millions...... $10,359 $8,492 $7,959 $9,214 $10,811 $11,902 $10,734 $8,056 $6,965 $6,946
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Liquid Asset Fund Inc. (the "Fund") is an open-end diversified
management investment company incorporated in Maryland on September 3, 1974.
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 ninety-seven investment companies, thirty of which
are listed on the New York Stock Exchange, with combined assets of approximately
$74.0 billion as of September 30, 1995. The Investment Manager also manages and
advises 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
provide the aforementioned administrative services to the Fund. The Fund's Board
of Directors reviews the various services provided by or under the direction of
the Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily at an annual rate of
0.50% of the daily net assets of the Fund up to $500 million, scaled down at
various asset levels to 0.248% on assets over $17.5 billion. For the fiscal year
ended August 31, 1995, the Fund accrued total compensation to the Investment
Manager amounting to 0.28% of the Fund's average daily net assets and the Fund's
total expenses amounted to 0.65% of the Fund's average daily net assets.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The investment objectives of the Fund are high current income, preservation
of capital and liquidity. The investment objectives may not be changed without
approval of the Fund's shareholders. The Fund seeks to achieve its objectives by
investing in the following money market instruments:
U.S.GOVERNMENT SECURITIES. Obligations issued or guaranteed as to principal
and interest by the United States or its agencies (such as the Export-Import
Bank of the United States, Federal Housing Administration, and Government
National Mortgage Association) or its instrumentalities (such as the Federal
Home Loan Bank, Federal Intermediate Credit Banks and Federal Land Bank),
including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government and
having total assets of $1 billion or more, and instruments secured by such
obligations, not including obligations of foreign branches of domestic banks;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 10% or less of the Fund's total assets in all such
4
<PAGE>
obligations and in all illiquid assets, in the aggregate;
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS. Commercial paper and corporate
debt obligations maturing in thirteen months or less which are rated in one of
the two highest rating categories for short-term debt obligations or, if not
rated, have been issued by issuers which have another short-term debt obligation
that is comparable in priority and security to such non-rated securities and is
so rated, by at least two nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the instrument was rated by only one such
organization) or which, if unrated, are of comparable quality as determined in
accordance with procedures established by the Board of Directors. The NRSROs
currently rating instruments of the type the Fund may purchase are Moody's
Investors Service, Inc., Standard & Poor's Corporation, Duff and Phelps, Inc.,
Fitch Investors Service, Inc., IBCA Limited and IBCA Inc., and Thomson
Bankwatch, Inc. Their rating criteria are described in the Appendix to the
Fund's Statement of Additional Information.
The foregoing rating limitations apply at the time of acquisition of a
security. Any subsequent change in any rating by a rating service will not
require elimination of any security from the Fund's portfolio. However, in
accordance with procedures adopted by the Fund's Board of Directors pursuant to
federal securities regulations governing money market funds, if the Investment
Manager becomes aware that a portfolio security has received a new rating from
an NRSRO that is below the second highest rating, then, unless the security is
disposed of within five days, the Investment Manager will perform a
creditworthiness analysis of any such downgraded securities, which analysis will
be reported to the Directors who will, in turn, determine whether the securities
continue to present minimal credit risks to the Fund.
The ratings assigned by the NRSROs represent their opinions as to the
quality of the securities they undertake to rate. It should be emphasized,
however, that the ratings are general and not absolute standards of quality.
Subject to the foregoing requirements, the Fund may invest in commercial
paper which has been issued pursuant to the "private placement" exemption
afforded by Section 4(2) of the Securities Act of 1933 (the "Securities Act")
and which may be sold to other institutional investors pursuant to Rule 144A
under the Securities Act. Management considers such legally restricted but
readily marketable commercial paper to be liquid. However, pursuant to
procedures approved by the Board of Directors of the Fund, if a particular
investment in such commercial paper is determined to be illiquid, that
investment will be included within the 10% limitation on illiquid investments
(see "Investment Restrictions"). If at any time the Fund's investments in
illiquid securities exceed 10% of the Fund's total assets, the Fund will attempt
to dispose of illiquid securities in an orderly fashion to reduce the Fund's
holdings in such securities to less than 10% of its total assets.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which 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") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine whether the
full value of the collateral, as specified in the agreement, has not decreased
below the repurchase price plus accrued interest. If such decrease occurs,
additional collateral will be requested, and when received, will be added to the
account to maintain full collateralization. The Fund will accrue 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 thirteen months. 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 and specifying the required value of the
collateral underlying the agreement.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements as
5
<PAGE>
part of its investment strategy. Reverse repurchase agreements involve sales by
the Fund of portfolio assets concurrently with an agreement by the Fund to
repurchase the same assets at a later date at a fixed price.
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. Certain of the types of
investments described above may be variable rate or floating rate obligations.
The interest rates payable on variable rate or floating rate obligations are not
fixed and may fluctuate based upon changes in market rates. The interest rate
payable on a variable rate obligation may be adjusted at predesignated periodic
intervals and on a floating rate obligation whenever there is a change in the
market rate of interest on which the interest rate payable is based.
Although the Fund will generally not seek profits through short-term
trading, it may dispose of any portfolio security prior to its maturity if, on
the basis of a revised credit evaluation of the issuer or other circumstances or
considerations, it believes such disposition advisable.
The Fund is expected to have a high portfolio turnover due to the short
maturities of securities purchased, but this should not affect income or net
asset value as brokerage commissions are not normally charged on the purchase or
sale of money market instruments.
The Fund will attempt to balance its objectives of high income, capital
preservation and liquidity by investing in securities of varying maturities and
risks. The Fund will not, however, invest in securities that mature in more than
thirteen months from the date of purchase (see "Purchase of Fund Shares --
Determination of Net Asset Value"). The amounts invested in obligations of
various maturities of thirteen months or less will depend on management's
evaluation of the risks involved. Longer-term issues, while generally paying
higher interest rates, are subject, as a result of general changes in interest
rates, to greater fluctuations in value than shorter-term issues. Thus, when
rates on new debt securities increase, the value of outstanding securities may
decline, and vice versa. Such changes may also occur, but to a lesser degree,
with short-term issues. These changes, if realized, may cause fluctuations in
the amount of daily dividends and, in extreme cases, could cause the net asset
value per share to decline (see "Purchase of Fund Shares--Determination of Net
Asset Value"). Longer-term issues also increase the risk that the issuer may be
unable to pay an installment of interest or principal at maturity. Also, in the
event of unusually large redemption demands, such securities may have to be sold
at a loss prior to maturity, or the Fund might have to borrow money and incur
interest expense. Either occurrence would adversely impact the amount of daily
dividend and could result in a decline in the daily net asset value per share.
The Fund will attempt to minimize these risks by investing in longer-term
securities when it appears to management that interest rates on such securities
are not likely to increase substantially during the period of expected holding,
and then only in securities of high quality which are readily marketable.
However, there can be no assurance that the Fund will be successful in achieving
this or its other objectives.
The foregoing investment policies are not fundamental and may be changed by
the Board of Directors without shareholder vote.
BROKERAGE ALLOCATION. Brokerage commissions are not normally charged on the
purchase or sale of money market instruments, but such transactions may involve
transaction costs in the form of spreads between bid and asked prices. Pursuant
to an order of the Securities and Exchange Commission, the Fund may effect
principal transactions in certain money market instruments with Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. In addition,
the Fund may incur brokerage commissions on transactions conducted through DWR.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions that
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 limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subsequent
6
<PAGE>
change in any applicable percentage resulting from market fluctuations or other
changes in total or net assets does not require elimination of any security from
the portfolio.
The Fund may not:
1. Borrow money, except from banks for
temporary or emergency purposes or to meet redemption requests which might
otherwise require the untimely disposition of securities, and not for
investment or leveraging, provided that borrowing in the aggregate may not
exceed 10% of the value of the Fund's total assets (including the amount
borrowed) at the time of such borrowing; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowing and in amounts not
in excess of 10% of the value of the Fund's total assets at the time of such
borrowing.
2. Purchase securities of any issuer,
except for securities issued by U.S. Government agencies or
instrumentalities, having a record, together with predecessors, of less than
three years' continuous operation, if, immediately after such purchase, more
than 5% of the Fund's total assets taken at market value would be invested
in such securities.
3. With respect to 75% of its total assets,
purchase any securities, other than obligations of the U.S. Government, or
its agencies or instrumentalities, if, immediately after such purchase, more
than 5% of the value of the Fund's total assets would be invested in
securities of any one issuer. (However, as a non-fundamental policy, the
Fund will not invest more than 10% of its total assets in the securities of
any one issuer. Futhermore, pursuant to current regulatory requirements, the
Fund may only invest more than 5% of its total assets in the securities of a
single issuer (and only with respect to one issuer at a time) for a period
of not more than three business days and only if the securities have
received the highest quality rating by at least two NRSROs.)
4. Purchase any securities, other than
obligations of the U.S. Government, or its agencies or instrumentalities, if,
immediately after such purchase, more than 10% of the outstanding securities
of one issuer would be owned by the Fund (for this purpose all indebtedness
of an issuer shall be deemed a single class of security).
5. Purchase any securities, other than
obligations of banks or of the U.S. Government, or its agencies or
instrumentalities, if, immediately after such purchase, more than 25% of the
value of the Fund's total assets would be invested in the securities of
issuers in the same industry; however, there is no limitation as to
investments in bank obligations or in obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities.
6. Invest more than 10% of its total assets
in illiquid securities, including repurchase agreements which have a
maturity of longer than seven days. For purposes of this restriction,
securities eligible for sale pursuant to Rule 144A under the Securities Act
are not considered illiquid if they are determined to be liquid under
procedures adopted by the Fund's Board of Directors.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis,
without a sales charge. 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 selected dealer
agreements with the Distributor ("Selected Broker-Dealers"). The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048. The offering price of the shares will be at their net
asset value next determined (see "Determination of Net Asset Value" below) after
receipt of a purchase order and acceptance by the Fund's transfer agent, Dean
Witter Trust Company (the "Transfer Agent"), in proper form and accompanied by
payment in Federal Funds (i.e., monies of member banks within the Federal
Reserve System held on deposit at a Federal Reserve Bank) available to the Fund
for investment. Shares commence earning income on the day following the date of
their purchase. Stock certificates will not be issued unless requested in
writing by the shareholder.
7
<PAGE>
To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to the Transfer Agent at P.O. Box
1040, Jersey City, NJ 07303. Checks should be made payable to Dean Witter Liquid
Asset Fund Inc. and sent to Dean Witter Trust Company at the above address.
Purchases by wire must be preceded by a call to the Transfer Agent advising it
of the purchase (see Investment Application or the front cover of this
Prospectus for the telephone number) and must be wired to The Bank of New York,
for credit to account of Dean Witter Trust Company, Harborside Financial Center,
Plaza Two, Jersey City, New Jersey, Account No. 8900188413. Wire purchase
instructions must include the name of the Fund and the shareholder's account
number. Purchases made by check are normally effective within two business days
for checks drawn on Federal Reserve System member banks, and longer for most
other checks. Wire purchases received by the Transfer Agent prior to 12:00 noon,
New York time, are normally effective that day and wire purchases received after
12:00 noon, New York time, are normally effective the next business day. Initial
investments must be at least $5,000, although the Fund, at its discretion, may
accept initial investments of smaller amounts, not less than $1,000. The minimum
initial investment under an Individual Retirement Account or Qualified
Retirement Plan for which the Transfer Agent acts as custodian or trustee is
$1,000. Subsequent investments must be $100 or more and may be made through the
Transfer Agent. In case of investments pursuant to Systematic Payroll Deduction
Plans (including Individual Retirement Plans), the Fund, in its discretion, may
accept investments without regard to any minimum amounts which would otherwise
be required, if the Fund has reason to believe that additional investments will
increase the investment in all accounts under such Plans to at least $5,000. The
Fund and the Distributor reserve the right to reject any purchase order.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or 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.
Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be
transmitted to the Fund with payment in Federal Funds on the business day
following the day the order is placed by the customer with DWR or another
Selected Broker-Dealer. Investors desiring same day effectiveness should wire
Federal Funds directly to the Transfer Agent. An order procedure exists pursuant
to which customers of DWR or other Selected Broker-Dealers can, upon request:
(a) have the proceeds from the sale of listed securities invested in shares of
the Fund on the day following the day the customer receives such proceeds in his
or her DWR or other Selected Broker-Dealer securities account; and (b) pay for
the purchase of certain listed securities by automatic liquidation of Fund
shares owned by the customer. In addition, there is an automatic purchase
procedure whereby consenting DWR or other Selected Broker-Dealer customers who
are shareholders of the Fund will have free credit cash balances in their DWR or
other Selected Broker-Dealer securities accounts as of the close of business
(4:00 p.m., New York time) on the last business day of each week (where such
balances do not exceed $5,000) automatically invested in shares of the Fund the
next following business day. Investors with free cash credit balances (i.e.,
immediately available funds) in securities accounts at DWR or other Selected
Broker-Dealers will not have any of such funds invested in the Fund until the
business day after the customer places an order with DWR or other Selected
Broker-Dealer to purchase shares of the Fund and will not receive the daily
dividend which would have been received had such funds been invested in the Fund
on the day the order was placed with DWR or other Selected Broker-Dealer.
Accordingly, DWR or other Selected Broker-Dealers may have the use of such free
credit balances during such period.
PLAN OF DISTRIBUTION
In accordance with a Plan of Distribution between the Fund and the
Distributor pursuant to Rule 12b-1 under the Act, certain services and
activities in connection with the distribution of the Fund's shares are
reimbursable expenses. The principal activities and services which may be
provided by the Distributor, DWR, its affiliates and other Selected
Broker-Dealers under the Plan include: (1) compensation to, and expenses of,
DWR's and other Selected Broker-Dealers' account executives and other employees
including overhead and telephone expenses; (2) sales incentives and bonuses to
sales representatives and to marketing personnel in connection with promoting
sales of the Fund's shares; (3) expenses incurred in connection with promoting
8
<PAGE>
sales of the Fund's shares; (4) preparing and distributing sales literature; and
(5) providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a payment
at the annual rate of 0.15 of 1% of the Fund's average daily net assets. For the
fiscal year ended August 31, 1995, the fee paid was accrued at the annual rate
of 0.10 of 1% of the Fund's average daily net assets. Expenses incurred pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through
payments accrued in any subsequent fiscal year.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of 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 and dividing by the
number of shares outstanding. 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.
The Fund utilizes the amortized cost method in valuing its portfolio
securities, which method involves valuing a security at its cost adjusted by a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
purpose of this method of calculation is to facilitate the maintenance of a
constant net asset value per share of $1.00 although there can be no assurance
that the $1.00 net asset value will be maintained.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available for
shareholders who own or purchase shares of the Fund having a minimum value of at
least $5,000. The 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. The shares will
be redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent, or amounts credited to a shareholders' DWR or other Selected Broker-
Dealer brokerage account, within five days after the date of the redemption. A
shareholder wishing to make this election should do so on the Investment
Application. The withdrawal plan may be terminated at any time by the Fund.
TARGETED DIVIDENDS. In states where it is legally permissible, shareholders
may elect to have all shares of the Fund earned as a result of dividends paid in
any given month redeemed as of the end of the month and invested in shares of
any other open-end investment company for which InterCapital serves as
investment manager (collectively, with the Fund, the "Dean Witter Funds"), other
than Dean Witter Liquid Asset Fund Inc., at the net asset value per share of the
selected Dean Witter Fund determined as of the last business day of the month,
without the imposition of any applicable front-end sales charge or without the
imposition of any applicable contingent deferred sales charge upon ultimate
redemption. All such shares invested will begin to earn dividends, if any, in
the selected Dean Witter Fund on the first business day of the succeeding month.
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-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. 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.
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
the self-employed,
9
<PAGE>
Individual Retirement Accounts and Custodial Accounts under Section 403(b)(7) of
the Internal Revenue Code. Adoption of such plans should be on advice of legal
counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Broker-
Dealer account executive or the Transfer Agent.
SYSTEMATIC PAYROLL DEDUCTION PLAN. There is also available to employers a
Systematic Payroll Deduction Plan by which their employees may invest in the
Fund. For further information, investors should contact their DWR or other
Selected Broker-Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE. An "Exchange Privilege", that is, the privilege of
exchanging shares of certain Dean Witter Funds for shares of the Fund, exists
whereby shares of various Dean Witter Funds which are open-end investment
companies sold with either a front-end (at time of purchase) sales charge ("FESC
funds") or a contingent deferred (at time of redemption) sales charge ("CDSC
funds") may be exchanged for shares of the Fund, Dean Witter U.S. Government
Money Market Trust, Dean Witter Tax-Free Daily Income Trust, Dean Witter
California Tax Free Daily Income Trust and Dean Witter New York Municipal Money
Market Trust (which five funds are hereinafter called "money market funds"), and
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
Growth Fund, Dean Witter Balanced Income Fund and Dean Witter Intermediate Term
U.S. Treasury Trust (which eleven Funds, including the Fund, are referred to
herein as the "Exchange Funds"). When exchanging into a money market fund from
an FESC fund or a CDSC fund, shares of the FESC fund or the CDSC fund are
redeemed at their next calculated net asset value and exchanged for shares of
the money market fund at their net asset value determined the following business
day. An exchange from an FESC fund or a CDSC fund to an 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. Subsequently,
shares of the Exchange Fund received in an exchange for shares of an FESC fund
(regardless of the type of fund originally purchased) may be redeemed and
exchanged for shares of the other Exchange Funds, FESC funds or CDSC funds
(however, shares of CDSC funds, including shares acquired in exchange for (i)
shares of FESC funds or (ii) shares of the Exchange Funds which were acquired in
exchange for shares of FESC funds, may not be exchanged for shares of FESC
funds). Additionally, shares of the Exchange Funds received in an exchange for
shares of a CDSC fund (regardless of the type of fund originally purchased) may
be redeemed and exchanged for shares of the other Exchange Funds or CDSC funds.
Ultimately, any applicable contingent deferred sales charge ("CDSC") will have
to be paid upon redemption of shares originally purchased from a CDSC fund. (If
shares of the Exchange Funds received in exchange for shares originally
purchased from a CDSC fund are exchanged for shares of another CDSC fund having
a different CDSC schedule than that of the CDSC fund from which the Exchange
Fund shares were acquired, the shares will be subject to the higher CDSC
schedule.) During the period of time the shares originally purchased from a CDSC
fund remain in the Exchange 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 a
CDSC fund. However, in the case of shares exchanged into an Exchange Fund on or
after April 23, 1990, 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 (see "Purchase of Fund Shares
- -- Plan of Distribution" in the respective Exchange Funds Prospectuses for a
description of Exchange Fund distribution fees). Exchanges involving FESC funds
or CDSC funds may be made after the shares of the FESC fund or CDSC fund
acquired by purchase (not by exchange or dividend reinvestment) have been held
for thirty days. There is no waiting period for exchanges of shares acquired by
exchange or dividend reinvestment.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW
Funds Management, Inc. serves as Adviser, under the
10
<PAGE>
terms and conditions described in the Prospectus and Statement of Additional
Information of each TCW/DW Fund.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by management to be abusive and
contrary to the best interests of the Fund's other shareholders and, at
management'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 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 Funds for which shares of the Fund may be 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 the Exchange Funds, TCW/ DW North American
Government Income Trust, TCW/DW Income and Growth Fund, TCW/DW Balanced Fund and
TCW/DW North American Intermediate Income Trust pursuant to the Exchange
Privilege, and provided further that the Exchange Privilege may be terminated or
materially revised without notice under certain unusual circumstances described
in the Statement of Additional Information. Shareholders maintaining margin
accounts with DWR are referred to their account executive regarding restrictions
on exchanges of shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until all applicable
share certificates have been received by the Transfer Agent and deposited in the
shareholder's account. An exchange will be treated for federal income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above Funds
pursuant to this Exchange Privilege by contacting their account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer but
who wish to make exchanges directly by writing or telephoning the Transfer
Agent) must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent, to
initiate an exchange. If the Authorization Form is used, exchanges may be made
in writing or by contacting the Transfer Agent at (800) 869-6397 (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. Shareholders are advised that during periods of drastic economic or
market changes it is possible that the telephone exchange procedures may be
difficult to
11
<PAGE>
implement, although this has not been the experience of the Dean Witter Funds in
the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTION OF FUND SHARES
- --------------------------------------------------------------------------------
A shareholder may withdraw all or any of his or her investments at any time,
without penalty or charge, by redeeming shares through the Transfer Agent at the
net asset value per share next determined (see "Purchase of Fund
Shares--Determination of Net Asset Value") after the receipt of a redemption
request meeting the applicable requirements as follows (all of which are subject
to the General Redemption Requirements set forth below):
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any amount not less than $500 (checks written
in amounts under $500 will not be honored by the Transfer Agent). Shareholders
must sign checks exactly as their shares are registered. If the account is a
joint account, the check may contain one signature unless the joint owners have
specifically specified on an Investment Application that all owners are required
to sign checks. Only shareholders having accounts in which no stock certificates
have been issued will be permitted to redeem shares by check.
Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares -- Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after receipt
of the check used for investment by the Transfer Agent. The Transfer Agent will
not honor a check in an amount exceeding the value of the account at the time
the check is presented for payment.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire instructions
to the Transfer Agent. Payment will be made by the Transfer Agent to the
shareholder's bank account at any commercial bank designated by the shareholder
in an Investment Application, by wire if the amount is $1,000 or more and the
shareholder so requests, and otherwise by mail. Normally, the Transfer Agent
will transmit payment the next business day following receipt of a request for
redemption in proper form. Only shareholders having accounts in which no stock
certificates have been issued will be permitted to redeem shares by wire
instructions.
DWR and any other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers who
are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Transfer Agent
will wire proceeds of redemptions to DWR's or another Selected Broker-Dealer's
bank account for credit to the shareholders' accounts the following business
day. DWR and other participating Selected Broker-Dealers have also informed the
Distributor and the Fund that they do not charge for this service.
Redemption instructions must include the shareholder's name and account
number and be wired or called to the Transfer Agent:
-- 800-869-6397 (toll-free)
-- Telex No. 125076
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust
Company, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and
surrendering stock certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank account,
as he or she may request. Proceeds of redemption may also be sent to some other
person, as requested by the shareholder.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). If the
pro-
12
<PAGE>
ceeds are to be paid to anyone other than the registered shareholder(s) or sent
to any address other than the shareholder's registered address or predesignated
bank account, 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), except in the case of redemption by check. Additional documentation
may be required where shares are held by a corporation, partnership, trustee or
executor. With regard to shares of the Fund acquired pursuant to the Exchange
Privilege, any applicable contingent deferred sales charge will be imposed upon
the redemption of such shares (see "Purchase of Fund Shares -- Exchange
Privilege").
If shares to be redeemed are represented by a stock certificate, the request
for redemption must be accompanied by the stock certificate and a stock
assignment form signed by the registered shareholder(s) exactly as the account
is registered. Shareholders are advised, for their own protection, to send the
stock certificate and assignment form in separate envelopes (if they are being
mailed and not hand delivered) to the Transfer Agent. Signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent (see
above). Additional documentation may be required where shares are held by a
corporation, partnership, trustee or executor.
All requests for redemption should be sent to Dean Witter Trust Company,
P.O. Box 983, Jersey City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions within
one business day, and in no event later than seven days after receipt of such
redemption request in proper form. However, if the shares being redeemed were
purchased by check (including a certified or bank cashier's check), payment 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). In addition, the Fund may
postpone redemptions at certain times when normal trading is not taking place on
the New York Stock Exchange.
The Fund reserves the right, on sixty days' notice, to redeem 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 Internal
Revenue Code) whose shares due to redemptions by the shareholder have a value of
less than $1,000, or such lesser amount as may be fixed by the Board of
Directors.
AUTOMATIC REDEMPTION PROCEDURE
The Distributor has instituted an automatic redemption procedure which it
may utililize to satisfy amounts due by the shareholder maintaining a brokerage
account with DWR or another Selected Broker-Dealer as a result of purchases of
securities or other transactions in the shareholder's brokerage account. Under
this procedure, unless the shareholder elects not to participate by so notifying
DWR or other Selected Broker-Dealer, the shareholder's DWR or other Selected
Broker-Dealer brokerage account will be scanned each business day prior to the
close of business (4:00 p.m., New York time). After application of any cash
balances in the account, a sufficient number of Fund shares may be redeemed at
the close of business to satisfy any amounts for which the shareholder is
obligated to make payment to DWR or another Selected Broker-Dealer. Redemptions
will be effected on the business day preceding the date the shareholder is
obligated to make such payment, and DWR or other Selected Broker-Dealer will
receive the redemption proceeds on the day following the redemption date.
Shareholders will receive all dividends declared and reinvested through the date
of redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends, payable on each
day the New York Stock Exchange is open for business, of all of its daily net
investment income to shareholders of record as of the close of business the
preceding business day. Dividends from net short-term capital gains, if any,
will be paid periodically. The amount of dividend may fluctuate from day to day
and may be omitted on some days if net realized losses on portfolio securities
exceed the Fund's net investment income. Dividends from net long-term capital
gains, if any, will be paid at least annually. Dividends are declared and
automatically reinvested daily in additional full and fractional shares of the
Fund (rounded to the last 1/100 of a share) at the net asset value per share at
the close of business on that day. Any
13
<PAGE>
dividends declared in the last quarter of any calendar year which are paid in
the following year prior to February 1 will be deemed received by the
shareholder in the prior year.
Shareholders may instruct the Transfer Agent (in writing) to have their
dividends paid out monthly in cash. For such shareholders the shares reinvested
and credited to their account during the month will be redeemed as of the close
of business on the monthly payment date (which will be no later than the last
business day of the month) and the proceeds will be paid to them by check.
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.
Stock 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.
TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains, if any, to shareholders and intends to otherwise
comply with all of the provisions of Subchapter M of the Internal Revenue Code
to continue to qualify as a regulated investment company, it is not expected
that the Fund will be required to pay any federal income tax.
Distributions of net investment income and realized net short-term capital
gains, if any, are taxable to shareholders who are required to pay taxes on
their income as ordinary income, whether such distributions are taken in cash or
reinvested in additional shares. Distributions of realized net long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund shares. No portion of such distributions will
be eligible for the federal dividends received deduction for corporations.
The Fund advises its shareholders annually as to the federal income tax
status of distributions paid during each calendar year. To avoid being subject
to a 31% federal withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions, shareholders' taxpayer identification
numbers must be furnished and certified as to accuracy.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
CURRENT AND EFFECTIVE YIELD
From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a given period (which period will be
stated in the advertisement). This income is then annualized. The "effective
yield" for a seven-day period is calculated similarly but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested each week
within a 365-day period. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. The
Fund's current yield for the seven days ended August 31, 1995 was 5.40%. The
effective annual yield on 5.40% is 5.54%, assuming daily compounding. The Fund
may also advertise the growth of hypothetical investments of $10,000, $50,000
and $100,000 in shares of the Fund.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par value
and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
Under ordinary circumstances, the Fund is not required, nor does it intend,
to hold Annual Meetings of Stockholders. The Directors may call Special Meetings
of Stockholders for action by stockholder vote as may be required by the Act or
the Fund's By-Laws.
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
re-
quires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor
14
<PAGE>
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.
STOCKHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at one of the telephone numbers or at the address set forth on the
front cover of this Prospectus.
15
<PAGE>
160--
for office use only
DEAN WITTER
LIQUID
ASSET
FUND [LOGO]
APPLICATION
DEAN WITTER LIQUID ASSET FUND INC.
Send to: Dean Witter Trust Company (the "Transfer Agent"), P.O. Box 1040, Jersey
City, NJ 07303
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS For assistance in completing this application, telephone Dean
Witter Trust Company at (800) 869-6397 (toll-free).
- ---------------------------------------------------------------------------------------------------------------------------
TO REGISTER
SHARES 1. _______________________________________________________________________________________________________
(please print) First Name Last Name
- -As joint
tenants,
use line 1 & 2 2. _______________________________________________________________________________________________________
First Name Last Name
(Joint tenants with rights of survivorship unless otherwise specified)
_____________________________
Social Security Number
- -As custodian
for a minor, 3. _______________________________________________________________________________________________________
use lines 1 & 3 Minor's Name
_______________________________
Under the ____________________________ Uniform Gifts to Minors Act Minor's Social Security Number
State of Residence of Minor
- -In the name of a
corporation, 4. _______________________________________________________________________________________________________
trust,
partnership Name of Corporation, Trust (including trustee name(s)) or Other Organization
or other
institutional _______________________________________________________________________________________________________
investors, use
line 4 _____________________________
If Trust, Date of Trust Instrument: ____________________ Tax Identification Number
- ---------------------------------------------------------------------------------------------------------------------------
ADDRESS _______________________________________________________________________________________________________
_______________________________________________________________________________________________________
City State Zip Code
- ---------------------------------------------------------------------------------------------------------------------------
TO PURCHASE
SHARES: / / CHECK (enclosed) $____________ (Make Payable to Dean Witter Liquid Asset Fund Inc.)
Minimum Initial
Investment: / / WIRE* On________________ MF*_________________________________
$5,000 (Date) (Control number this transaction)
_________________________________________________________________________________________
Name of Bank Branch
_________________________________________________________________________________________
Address
_________________________________________________________________________________________
Telephone Number
* For an initial investment made by wiring funds, obtain a control number by calling:
(800) 869-6397 (toll-free).
Your bank should wire to:
Bank of New York for credit to account of Dean Witter Trust Company
Account Number: 8900188413
Re: Dean Witter Liquid Asset Fund Inc.
Account Of:____________________________________________________________
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number: ____________________________________________
(Assigned by Telephone)
- ---------------------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES
- ---------------------------------------------------------------------------------------------------------------------------
NOTE: If you are a current shareholder of Dean Witter Liquid Asset Fund Inc., please indicate your fund
account number here.
[1] [6] [0] - __________________
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS All dividends will be reinvested daily in additional shares, unless the following option is selected:
/ / Pay income dividends by check at the end of each month.
- ---------------------------------------------------------------------------------------------------------------------------
WRITE YOUR OWN / / Send an initial supply of checks.
CHECK FOR JOINT ACCOUNTS:
/ / Check this box if all owners are required to sign checks.
- ---------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC / / Systematic Withdrawal Plan ($25 minimum)
WITHDRAWAL $ _____________ / / Monthly or / / Quarterly
PLAN / / 10th or / / 25th of Month/Quarter
Minimum / / Pay shareholder(s) at address of record.
Account Value: / / Pay to the following: (If this payment option is selected a signature guarantee is required)
$5,000
_________________________________________________________________________________________
Name
_________________________________________________________________________________________
Address
_________________________________________________________________________________________
City State Zip Code
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PAYMENT TO / / Dean Witter Trust Company is hereby authorized to honor telephonic or other
PREDESIGNATED instructions, without signature guarantee, from any person for the redemption
BANK ACCOUNT of any or all shares of Dean Witter Liquid Asset Fund Inc. held in my (our)
account provided that proceeds are transmitted only to the following bank
account. (Absent its own negligence, neither Dean Witter Liquid Asset Fund
Inc. nor Dean Witter Trust Company shall be liable for any redemption caused
by unauthorized instruction(s)):
Bank Account must
be in same name
as shares are ___________________________________________________________ ____________________________
registered NAME & BANK ACCOUNT NUMBER BANK'S ROUTING TRANSMIT CODE
Minimum Amount: ___________________________________________________________ (ASK YOUR BANK)
$1,000 NAME OF BANK
___________________________________________________________
ADDRESS OF BANK
( )
___________________________________________________________
TELEPHONE NUMBER OF BANK
- ---------------------------------------------------------------------------------------------------------------------------
SIGNATURE AUTHORIZATION
- ---------------------------------------------------------------------------------------------------------------------------
I. FOR ALL NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE
ACCOUNTS INFORMATION BELOW WILL REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL
FORCE AND EFFECT UNTIL ANOTHER DULY EXECUTED FORM IS RECEIVED BY THE TRANSFER
AGENT.
The Transfer Agent is hereby authorized to act as agent for the registered owner of
shares of Dean Witter Liquid Asset Fund Inc. (the "Fund") in affecting redemptions
of shares and is authorized to recognize the signature(s) below in payment of funds
resulting from such redemptions on behalf of the registered owners of such shares.
The Transfer Agent shall be liable only for its own negligence and not for 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.
I (we) certify to my (our) legal capacity, or the capacity of the investor named
above, to invest in and redeem shares of, and I (we) acknowledge receipt of a
current prospectus of, Dean Witter Liquid Asset Fund Inc. and I(we) further certify
my (our) authority to sign and act for and on behalf of the investor.
Under penalties of perjury, I certify (1) that the number shown on this form is my
correct taxpayer identification number and (2) that I am not subject to backup
withholding either because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding. (Note: You must cross out item (2) above if you have been notified by
IRS that you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return.)
Check Applicable Box:
/ / I am a United States Citizen. / / I am not a United States Citizen.
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
Name(s) must be -----------------------------------------------------------------------------------
signed exactly
the same as -----------------------------------------------------------------------------------
shown on lines
1 to 4 on the -----------------------------------------------------------------------------------
reverse side of
this application
SIGNED THIS _____________________ DAY OF _________________________, 19____.
In addition
complete Section
A or B below
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general
partners/other authorized signatories of the Registered Owner, and any of
them ("Authorized Person(s)") is/are currently authorized under the
applicable governing document to act with full power to sell, assign or
transfer securities of the Fund for the Registered Owner and to execute
and deliver any instrument necessary to effectuate the authority hereby
conferred:
NAME/TITLE SIGNATURE
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SIGNED THIS____________________________ DAY OF ___________________, 19___.
The Transfer Agent may, without inquiry, act only upon the instruction of
ANY PERSON(S) purporting to be (an) Authorized Person(s) as named in the
Certification Form last received by the Transfer Agent. The Transfer
Agent and the Fund shall not be liable for any claims, expenses
(including legal fees) or losses resulting from the Transfer Agent having
acted upon any instruction reasonably believed genuine.
*INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY
HONOR INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
- ---------------------------------------------------------------------------------------------------------------------------
SECTION (A) NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
CORPORATIONS
AND INCORPORATED
ASSOCIATIONS ONLY. I, ________________________________________________, Secretary of the Registered Owner, do hereby
certify that at a meeting on __________________________________________________ at which a quorum
was present throughout, the Board of Directors of the corporation/the officers of the association
SIGN ABOVE duly adopted a resolution, which is in full force and effect and in accordance with the Registered
AND COMPLETE Owner's charter and by-laws, which resolution did the following: (1) empowered the above-named
THIS SECTION Authorized Person(s) to effect securities transactions for the Registered Owner on the terms
described above; (2) authorized the Secretary to certify, from time to time, the names and titles
of the officers of the Registered Owner and to notify the Transfer Agent when changes in office
occur; and (3) authorized the Secretary to certify that such a resolution has been duly adopted
and will remain in full force and effect until the Transfer Agent receives a duly executed
amendment to the Certification Form.
SIGNATURE
GUARANTEED** Witness my hand on behalf of the corporation/association this ________ day of _______________, 19.
(or Corporate
Seal) _______________________________________________
Secretary**
The undersigned officer (other than the Secretary) hereby certifies that the foregoing instrument
has been signed by the Secretary of the corporation/association.
SIGNATURE
GUARANTEED**
(or Corporate
Seal) _______________________________________________
Certifying Officer of the Corporation or
Incorporated Association**
- ---------------------------------------------------------------------------------------------------------------------------
SECTION (B) NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
ALL OTHER
INSTITUTIONAL
INVESTORS
SIGNATURE _________________________________________________________________
GUARANTEED** Certifying
Trustee(s)/General Partner(s)/Other(s)**
SIGN ABOVE AND
COMPLETE THIS _________________________________________________________________
SECTION Certifying
Trustee(s)/General Partner(s)/Other(s)**
Signed this __________________________________ day of ______________________________, 19___
___________________________________________________________________________________________
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
- ---------------------------------------------------------------------------------------------------------------------------
DEALER Above signature(s) guaranteed. Prospectus has been delivered by undersigned
(if any) to above-named applicant(s).
Completion by
dealer only ____________________________________ ______________________________________
Firm Name Office Number-Account Number at
Dealer--A/E Number
____________________________________ ______________________________________
Address Account Executive's Last Name
____________________________________ ______________________________________
City, State, Zip Code Branch Office
- -R- 1993 Dean Witter Distributors Inc.
</TABLE>
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD
OF DIRECTORS OF DEAN WITTER LIQUID ASSET FUND INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights (appearing on page 3 of this
Prospectus) present fairly, in all material respects, the financial position of
Dean Witter Liquid Asset Fund Inc. (the "Fund") at August 31, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the ten years in the period then ended, 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 August 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
OCTOBER 10, 1995
16
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL PAPER (73.3%)
AUTOMOTIVE FINANCE (10.9%)
$ 265,000 Daimler-Benz North America Corp. 10/11/95 to
02/12/96........................................ 6.00 to 6.30% $ 262,167,639
365,000 Ford Motor Credit Co. 09/06/95 to 12/28/95...... 5.74 to 6.36 362,641,476
510,000 General Motors Acceptance Corp. 09/08/95 to
02/15/96........................................ 5.69 to 6.14 504,114,238
-------------------
1,128,923,353
-------------------
BANK HOLDING COMPANIES (19.0%)
220,000 BankAmerica Corp.
10/05/95 to 12/05/95............................ 5.62 to 6.25 217,643,161
523,000 Chemical Banking Corp.
09/01/95 to 12/29/95............................ 5.70 to 6.39 517,734,511
195,000 First Chicago Corp.
09/27/95 to 12/28/95............................ 5.75 to 5.88 192,759,056
50,000 First Union Corp.
11/22/95........................................ 5.78 49,353,111
280,000 Morgan (J.P.) & Co. Inc.
10/06/95 to 11/20/95............................ 5.74 to 6.36 277,613,167
255,000 NationsBank Corp.
09/06/95 to 11/08/95............................ 5.72 to 6.34 253,769,331
125,000 Norwest Corp.
09/20/95 to 09/28/95............................ 6.00 to 6.31 124,549,750
285,000 PNC Funding Corp.
09/05/95 to 11/27/95............................ 5.78 to 5.82 282,000,452
50,000 Republic New York Corp. 12/22/95................ 5.70 49,135,111
-------------------
1,964,557,650
-------------------
BANKS - COMMERCIAL (14.5%)
240,000 Abbey National North America Corp. 09/15/95 to
12/15/95........................................ 5.75 to 5.96 237,158,321
200,000 ABN-AMRO North America Finance Inc. 10/16/95 to
05/17/96........................................ 5.70 to 6.12 195,638,472
160,000 Canadian Imperial Holdings, Inc. 09/25/95 to
11/28/95........................................ 5.76 to 5.95 158,502,739
125,000 Dresdner U.S. Finance Inc. 09/05/95 to
10/19/95........................................ 5.74 to 6.71 124,644,611
160,000 National Australia Funding (Del.) Inc. 10/11/95
to 12/01/95..................................... 5.66 to 5.96 158,374,925
75,000 National Westminster Bancorp Inc. 09/11/95 to
09/29/95........................................ 6.05 to 6.24 74,742,133
23,000 Rabobank USA Financial Corp. 01/12/96........... 5.81 22,517,358
110,000 Societe Generale N.A. Inc. 12/20/95 to
12/22/95........................................ 5.74 to 5.77 108,086,733
425,000 Toronto-Dominion Holdings USA Inc. 09/20/95 to
02/09/96........................................ 5.74 to 6.32 417,240,968
-------------------
1,496,906,260
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
BROKERAGE (0.6%)
$ 60,000 Goldman Sachs Group L.P. 10/18/95............... 5.78 % $ 59,553,500
-------------------
CHEMICALS (0.8%)
80,000 Monsanto Co. 09/07/95 to 10/03/95............... 6.07 to 6.35 79,802,625
-------------------
DRUGS (0.2%)
25,000 Lilly (Eli) & Co. 11/08/95...................... 6.66 24,700,139
-------------------
ENERGY (0.2%)
25,000 Shell Oil Co. 11/02/95.......................... 5.99 24,749,417
-------------------
FINANCE - COMMERCIAL (4.3%)
340,000 CIT Group Holdings, Inc. 09/26/95 to 10/18/95... 5.75 to 6.31 338,091,433
110,000 Heller Financial Inc. 09/19/95 to 10/20/95...... 5.97 to 6.02 109,381,242
-------------------
447,472,675
-------------------
FINANCE - CONSUMER (7.4%)
524,000 American Express Credit Corp. 09/07/95 to
03/15/96........................................ 5.68 to 6.31 515,911,604
165,000 Avco Financial Services Inc. 09/14/95 to
11/14/95........................................ 5.77 to 5.97 163,560,644
40,000 Beneficial Corp. 11/10/95....................... 5.76 39,557,445
50,000 Household Finance Corp. 09/15/95................ 5.99 49,885,278
-------------------
768,914,971
-------------------
FINANCE - CORPORATE (0.5%)
49,900 Corporate Asset Funding Co. Inc. 11/09/95....... 5.75 49,356,755
-------------------
FINANCE - DIVERSIFIED (5.6%)
115,000 Associates Corp. of North America 09/20/95 to
11/03/95........................................ 5.77 to 6.08 113,992,930
474,000 General Electric Capital Corp. 09/19/95 to
03/27/96........................................ 5.59 to 7.08 466,149,814
-------------------
580,142,744
-------------------
FINANCE - EQUIPMENT (0.7%)
75,000 Deere (John) Capital Corp. 09/25/95 to
11/06/95........................................ 5.75 to 5.88 74,397,908
-------------------
FOODS & BEVERAGES (1.0%)
70,000 Coca-Cola Co. 09/29/95 to 12/07/95.............. 5.62 to 5.89 69,376,092
30,000 Nestle Capital Corp. 10/11/95 to 10/13/95....... 6.36 29,791,583
-------------------
99,167,675
-------------------
INDUSTRIALS (0.5%)
20,000 Minnesota Mining & Manufacturing Co. 10/26/95... 5.72 19,827,056
35,000 Motorola Inc. 09/06/95.......................... 5.75 34,972,243
-------------------
54,799,299
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OFFICE EQUIPMENT (3.0%)
$ 166,000 Hewlett-Packard Co. 09/29/95 to 11/30/95........ 5.71 to 6.04% $ 164,528,056
25,000 IBM Credit Corp. 09/08/95....................... 5.78 24,972,097
100,000 International Business Machines Corp.
09/22/95........................................ 5.78 99,665,167
28,750 Xerox Credit Corp. 09/14/95..................... 5.96 28,689,058
-------------------
317,854,378
-------------------
RETAIL (2.9%)
300,000 Sears Roebuck Acceptance Corp. 09/07/95 to
12/12/95........................................ 5.77 to 5.84 297,832,625
-------------------
TELEPHONES (1.2%)
125,000 AT&T Corp. 10/04/95 to 11/10/95................. 5.76 to 6.22 124,170,708
-------------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $7,593,302,682)..................................... 7,593,302,682
-------------------
SHORT-TERM BANK NOTES (13.4%)
50,000 Bank of New York 01/24/96....................... 5.63 50,000,000
250,000 F.C.C. National Bank 01/29/96 to 01/31/96....... 5.81 to 5.85 250,000,000
490,000 First National Bank of Boston 09/12/95 to
10/27/95........................................ 5.75 490,000,000
125,000 First Union National Bank 11/06/95 to
11/10/95........................................ 5.76 125,000,000
50,000 Fleet National Bank 11/01/95.................... 5.78 50,000,000
50,000 Harris Trust & Savings Bank 11/08/95............ 5.76 50,000,000
50,000 La Salle National Bank 09/07/95................. 6.36 50,000,000
75,000 Mellon Bank, N.A. 10/30/95 to 12/13/95.......... 5.78 to 6.22 75,000,000
30,000 NationsBank, N.A. (Carolinas) 09/12/95.......... 5.75 30,000,000
100,000 NBD Bank 10/10/95 to 10/17/95................... 6.25 to 6.32 99,999,731
25,000 PNC Bank, N.A. 09/12/95......................... 5.81 25,000,000
100,000 Wachovia Bank of N.C., N.A. 09/01/95............ 5.78 to 6.01 100,000,000
-------------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $1,394,999,731)..................................... 1,394,999,731
-------------------
CERTIFICATES OF DEPOSIT (6.7%)
70,000 Harris Trust & Savings Bank 09/28/95............ 5.73 70,000,000
100,000 NatWest Bank (Delaware) 12/26/95................ 5.80 100,000,000
440,000 Union Bank 12/04/95 to 04/15/96................. 5.65 to 5.88 440,000,000
85,000 Wachovia Bank of Georgia, N.A. 12/19/95 to
12/20/95........................................ 5.75 85,000,000
-------------------
TOTAL CERTIFICATES OF DEPOSIT
(IDENTIFIED COST $695,000,000)...................................... 695,000,000
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (5.1%)
$ 30,000 Federal Farm Credit Bank 10/31/95 to 05/03/96... 6.28 to 6.32% $ 29,399,792
319,000 Federal Home Loan Banks 09/01/95 to 01/19/96.... 5.74 to 7.22 314,964,480
80,000 Federal National Mortgage Association
12/29/95........................................ 6.44 78,386,889
110,000 U.S. Treasury Bills 09/21/95 to 08/22/96........ 5.71 to 5.86 105,711,283
-------------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(AMORTIZED COST $528,462,444)....................................... 528,462,444
-------------------
BANKERS' ACCEPTANCES (2.4%)
15,000 Bank of America NT & SA 11/21/95................ 5.76 14,808,300
90,000 Corestates Bank, N.A. 10/26/95 to 12/01/95...... 5.79 to 6.14 88,934,178
140,000 Republic National Bank of N.Y. 09/11/95......... 5.83 139,776,778
-------------------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $243,519,256)....................................... 243,519,256
-------------------
REPURCHASE AGREEMENT (0.1%)
12,238 The Bank of New York due 09/01/95 (dated
08/31/95; proceeds $12,240,153; collateralized
by $23,997,440 U.S. Treasury Note Principal
Strip due 05/15/05 valued at $12,853,757)
(Identified Cost $12,238,177)................... 5.8125 12,238,177
-------------------
TOTAL INVESTMENTS
(AMORTIZED COST $10,467,522,290) (A)...... 101.0% 10,467,522,290
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS.................................... (1.0) (108,046,271)
----- --------------
NET ASSETS................................ 100.0% $10,359,476,019
----- --------------
----- --------------
<FN>
- ---------------------
(a) The aggregate cost is the same for federal income tax purposes.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
<TABLE>
<S> <C>
ASSETS:
</TABLE>
<TABLE>
<S> <C>
Investments in securities, at value
(amortized cost $10,467,522,290).......................... $10,467,522,290
Cash........................................................ 90,999
Receivable for:
Interest................................................ 15,531,790
Capital stock sold...................................... 100,033
Prepaid expenses and other assets........................... 178,615
---------------
TOTAL ASSETS........................................... 10,483,423,727
---------------
LIABILITIES:
Payable for:
Capital stock repurchased............................... 117,812,286
Investment management fee............................... 2,465,636
Plan of distribution fee................................ 886,460
Accrued expenses and other payables......................... 2,783,326
---------------
TOTAL LIABILITIES...................................... 123,947,708
---------------
NET ASSETS:
Paid-in-capital............................................. 10,358,793,338
Accumulated undistributed net investment income............. 682,681
---------------
NET ASSETS............................................. $10,359,476,019
---------------
---------------
NET ASSET VALUE PER SHARE,
10,359,464,532 SHARES OUTSTANDING (25,000,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$1.00
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $558,228,524
------------
EXPENSES
Investment management fee................................... 26,483,251
Transfer agent fees and expenses............................ 23,481,620
Plan of distribution fee.................................... 9,034,905
Registration fees........................................... 926,948
Shareholder reports and notices............................. 426,605
Custodian fees.............................................. 333,847
Professional fees........................................... 80,416
Directors' fees and expenses................................ 28,248
Other....................................................... 83,077
------------
TOTAL EXPENSES......................................... 60,878,917
------------
NET INVESTMENT INCOME AND NET INCREASE...................... $497,349,607
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, AUGUST 31,
1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income and net increase...................... $ 497,349,607 $ 251,436,157
Dividends to shareholders from net investment income........ (497,395,126) (251,392,461)
Net increase from capital stock transactions................ 1,867,938,438 532,713,400
-------------- --------------
TOTAL INCREASE......................................... 1,867,892,919 532,757,096
NET ASSETS:
Beginning of period......................................... 8,491,583,100 7,958,826,004
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$682,681 AND $57,006, RESPECTIVELY)..................... $10,359,476,019 $8,491,583,100
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Liquid Asset Fund Inc. (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 incorporated in Maryland on
September 3, 1974 and commenced operations on September 22, 1975.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized
cost, which approximates market value.
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. In
determining net investment income, the Fund amortizes premiums, accretes
discounts and accrues interest income 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 income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays its Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the
daily net assets exceeding $1 billion but not exceeding $1.35 billion; 0.325% to
the portion of the daily net assets exceeding $1.35 billion but not exceeding
$1.75 billion; 0.30% to the portion of the daily net assets exceeding $1.75
billion but not exceeding $2.15 billion; 0.275% to the portion of the daily net
assets exceeding $2.15 billion but not exceeding $2.5 billion; 0.25% to the
portion of the daily net assets exceeding $2.5 billion but not exceeding $15
billion; 0.249% to the portion of the daily net assets exceeding $15 billion but
not exceeding $17.5 billion; and 0.248% to the portion of the daily net assets
exceeding $17.5 billion.
24
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1995, CONTINUED
Under the terms of the Agreement, the Investment Manager maintains certain of
the Fund's books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and pays
the salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and, in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,
finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Directors determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter Reynolds
Inc. ("DWR"), an affiliate of the Investment Manager and Distributor, its
affiliates and other dealers who have entered into selected dealer agreements
with the Distributor under the Plan: (1) compensation to, and expenses of,
account executives of DWR, selected broker-dealers and other employees,
including overhead and telephone expenses; (2) sales incentives and bonuses to
sales representatives and to marketing personnel in connection with promoting
sales of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparation, printing and distributing sales
literature; and (5) providing advertising and promotional activities, including
direct mail solicitation and television, radio, newspaper, magazine and other
media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed
an amount equal to a payment at the annual rate of 0.15% of the Fund's average
daily net assets during the month. Expenses incurred by the Distributor pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through
payments accrued in any subsequent fiscal year. For the year ended August 31,
1995, the distribution fee was accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended August 31, 1995 aggregated $40,271,876,951 and
$38,888,009,156, respectively.
25
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1995, CONTINUED
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $2,144,000.
The Fund established an unfunded noncontributory defined benefit pension plan
covering all independent Directors of the Fund who will have served as
independent Directors/Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended August 31, 1995 included in Directors' fees and expenses in the
Statement of Operations amounted to $7,778. At August 31, 1995, the Fund had an
accrued pension liability of $50,889 which is included in accrued expenses in
the Statement of Assets and Liabilities.
5. CAPITAL STOCK
Transactions in capital stock, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1995 AUGUST 31, 1994
---------------- ----------------
<S> <C> <C>
Shares sold................................ 28,802,984,447 27,170,639,852
Shares issued in reinvestment of
dividends................................. 495,919,572 250,596,824
---------------- ----------------
29,298,904,019 27,421,236,676
Shares repurchased......................... (27,430,965,581) (26,888,523,276)
---------------- ----------------
Net increase............................... 1,867,938,438 532,713,400
---------------- ----------------
---------------- ----------------
</TABLE>
6. FINANCIAL HIGHLIGHTS
See the "Financial Highlights" table on page 3 of this Prospectus.
26
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<S> <C>
MONEY MARKET FUNDS FIXED INCOME FUNDS
Dean Witter Liquid Asset Fund Inc. Dean Witter High Yield Securities Inc.
Dean Witter U.S. Government Money Market Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter Tax-Free Daily Income Trust Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Daily Income Trust Dean Witter Federal Securities Trust
Dean Witter New York Municipal Money Market Trust Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
EQUITY FUNDS Dean Witter New York Tax-Free Income Fund
Dean Witter American Value Fund Dean Witter World Wide Income Trust
Dean Witter Natural Resource Development Securities Dean Witter Intermediate Income Securities
Inc. Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Dividend Growth Securities Inc. Dean Witter Multi-State Municipal Series Trust
Dean Witter Developing Growth Securities Trust Dean Witter Premier Income Trust
Dean Witter World Wide Investment Trust Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Value-Added Market Series Dean Witter Diversified Income Trust
Dean Witter Utilities Fund Dean Witter Limited Term Municipal Trust
Dean Witter Capital Growth Securities Dean Witter Short-Term Bond Fund
Dean Witter European Growth Fund Inc. Dean Witter High Income Securities
Dean Witter Precious Metals and Minerals Trust Dean Witter National Municipal Trust
Dean Witter Pacific Growth Fund Inc. Dean Witter Balanced Income Fund
Dean Witter Health Sciences Trust Dean Witter Hawaii Municipal Trust
Dean Witter Global Dividend Growth Securities Dean Witter Intermediate Term U.S. Treasury
Dean Witter Global Utilities Fund Trust
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund DEAN WITTER RETIREMENT SERIES
Dean Witter Balanced Growth Fund Liquid Asset Series
Dean Witter Capital Appreciation Fund U.S. Government Money Market Series
Dean Witter Information Fund U.S. Government Securities Series
Intermediate Income Securities Series
ASSET ALLOCATION FUNDS American Value Series
Dean Witter Managed Assets Trust Capital Growth Series
Dean Witter Strategist Fund Dividend Growth Series
Dean Witter Global Asset Allocation Fund Strategist Series
Utilities Series
ACTIVE ASSETS ACCOUNT PROGRAM Value-Added Market Series
Active Assets Money Trust Global Equity Series
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
</TABLE>
<PAGE>
Dean Witter
Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
BOARD OF DIRECTORS
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Jonathan R. Page
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.
10/19/95
Dean Witter
Liquid Asset Fund
Prospectus
October 19, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
LIQUID ASSET FUND INC.
OCTOBER 19, 1995
- ----------------------------------------------------------------------------
Dean Witter Liquid Asset Fund Inc. (the "Fund") is an open-end diversified
management investment company whose investment objectives are high current
income, preservation of capital and liquidity. The Fund seeks to achieve its
objectives by investing in the following money market instruments: United States
Government securities, obligations of U.S. regulated banks and savings and loan
associations having assets of $1 billion or more, high grade commercial paper,
Certificates of Deposit of $100,000 or less of U.S. regulated banks and savings
institutions having total assets of less than $1 billion which are fully insured
as to principal by the Federal Deposit Insurance Corporation (the interest may
not be insured) and high grade corporate obligations maturing in thirteen months
or less. (See "Investment Practices and Policies".)
The Fund is authorized to reimburse for specific expenses incurred in
promoting the distribution of the Fund's shares pursuant to a Plan of
Distribution with Dean Witter Distributors Inc. pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Reimbursement may in no event exceed an amount
equal to payments at the annual rate of 0.15% of the average daily net assets of
the Fund.
A Prospectus of the Fund dated October 19, 1995, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by request of the Fund at its address or at one of the telephone
numbers listed below or from the Fund's Distributor, Dean Witter Distributors
Inc., from Dean Witter Reynolds Inc. at any of its branch offices or from any
Selected Broker-Dealer. 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
Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
212-392-2550 or
800-869-6397 (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Directors and Officers................................................................. 6
Investment Practices and Policies...................................................... 13
Investment Restrictions................................................................ 14
Portfolio Transactions and Brokerage................................................... 15
Purchase of Fund Shares................................................................ 17
Redemption of Fund Shares.............................................................. 24
Dividends, Distributions and Taxes..................................................... 25
Description of Common Stock............................................................ 27
Custodian and Transfer Agent........................................................... 27
Independent Accountants................................................................ 27
Reports to Shareholders................................................................ 27
Legal Counsel.......................................................................... 28
Experts................................................................................ 28
Registration Statement................................................................. 28
Financial Statements................................................................... 28
Appendix/Ratings....................................................................... 29
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated under Maryland law on September 3, 1974, under the
name Standard & Poor's/InterCapital Cash Management Fund, Inc. Its name was
changed to Standard & Poor's/InterCapital Liquid Asset Fund, Inc. on May 13,
1975; changed to InterCapital Liquid Asset Fund Inc. on September 1, 1977;
changed to Dean Witter/Sears Liquid Asset Fund Inc. on March 21, 1983; and
changed to its present name, Dean Witter Liquid Asset Fund Inc., on June 30,
1993.
As of August 31, 1995 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage
ownership of shares of the Fund changes from time to time depending on purchases
and redemptions by shareholders and the total number of shares outstanding.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, 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 are
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to review by the Fund's Board of Directors. In
addition, Directors of the Fund provide guidance on economic factors and
interest rate trends. Information as to these Directors and officers is
contained under the caption "Directors and Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, InterCapital Income Securities Inc., InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital
Insured Municipal Income Trust, InterCapital Insured Municipal Securities,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
California Municipal Securities, InterCapital Quality Municipal Investment
Trust, InterCapital Quality Municipal Income Trust, InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, High Income Advantage Trust,
High Income Advantage Trust II, High Income Advantage Trust III, Dean Witter
Government Income Trust, Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Dividend Growth Securities Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter American Value Fund, Dean Witter Developing Growth
Securities Trust, Dean Witter U.S. Government Money Market Trust, Dean Witter
Variable Investment Series, Dean Witter World Wide Investment Trust, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Securities
Trust, Dean Witter World Wide Income Trust, Dean Witter California Tax-Free
Income Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added
Market Series, Dean Witter Utilities Fund, Dean Witter Managed Assets Trust,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist Fund,
Dean Witter Intermediate Income Securites, Dean Witter Capital Growth
Securities, Dean Witter Precious Metals and Minerals Trust, Dean Witter New York
Municipal Money Market Trust, Dean Witter European Growth Fund Inc., Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Premier Income Trust, Dean Witter Diversified Income Trust,
Dean Witter Health Sciences Trust, Dean Witter Retirement Series, Dean Witter
Global Dividend Growth Securities, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond
3
<PAGE>
Fund, Dean Witter Global Utilities Fund, Dean Witter High Income Securities,
Dean Witter National Municipal Trust, Dean Witter International SmallCap Fund,
Dean Witter Mid-Cap Growth Fund, Dean Witter Select Dimensions Investment
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,
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.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW 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 North American Intermediate Income Trust, TCW/DW Emerging Markets
Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW
Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves as: (i)
sub-adviser to Templeton Global Opportunities Trust, an open-end investment
company; (ii) administrator of The BlackRock Strategic Term Trust Inc., a
closed-end investment company; and (iii) sub-administrator of MassMutual
Participation Investors and Templeton Global Governments Income Trust,
closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objectives 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 expense, such office space, facilities, equipment,
clerical help, bookkeeping and certain legal services as the Fund may reasonably
require in the conduct of its business, including the services of personnel in
connection with the pricing of the Fund's shares and 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, and the
cost of printing (in excess of costs borne by the Fund) and distributing
prospectuses and supplements thereto of the Fund used for sales purposes.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital and DWSC on that date. The
foregoing internal reorganizations did not result in any change in the nature or
scope of the administrative services being provided to the Fund or any of the
fees being paid by the Fund for the overall services being performed under the
terms of the 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
4
<PAGE>
"Purchase of Fund Shares") will be paid by the Fund. The expenses borne by the
Fund include, but are not limited to: the distribution fee under the Plan
pursuant to Rule 12b-1 (see "Purchase of Fund Shares"); charges and expenses of
any registrar, custodian, stock transfer and dividend disbursing agent;
brokerage commissions; taxes; engraving and printing of stock 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 of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing,
including typesetting, and mailing of proxy statements and reports to
shareholders and prospective shareholders; fees and travel expenses of Directors
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, distribution, withdrawal or redemption
options; fees and expenses of legal counsel including counsel to the Directors
who are not interested persons of the Fund or of the Investment Manager (not
including compensation or expenses of attorneys who are employees of the
Investment Manager) and independent accountants in connection with any matter
relating to the Fund; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) 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 by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.50% of the portion of the daily net assets not exceeding
$500 million; 0.425% of the portion of the daily net assets exceeding $500
million but not exceeding $750 million; 0.375% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; 0.35% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.35 billion;
0.325% of the portion of the daily net assets exceeding $1.35 billion but not
exceeding $1.75 billion; 0.30% of the portion of the daily net assets exceeding
$1.75 billion but not exceeding $2.15 billion; 0.275% of the portion of the
daily net assets exceeding $2.15 billion but not exceeding $2.5 billion; 0.25%
of the portion of the daily net assets exceeding $2.5 billion but not exceeding
$15 billion; 0.249% of the portion of daily net assets exceeding $15 billion but
not exceeding $17.5 billion; and 0.248% of the portion of the daily net assets
exceeding $17.5 billion. Total compensation paid to the Investment Manager for
the Fund's fiscal years ended August 31, 1993, 1994 and 1995 amounted to
$24,638,765, $23,750,120 and $26,483,251, respectively.
Pursuant to the Agreement, total operating expenses of the Fund are subject
to applicable limitations under rules and regulations of states where the Fund
is authorized to sell its shares. Therefore, operating expenses are effectively
subject to the most restrictive of such limitations as the same may be amended
from time to time. Presently, the most restrictive limitation is as follows: If,
in any fiscal year, the Fund's total operating expenses, including the
investment management fee and the compensation paid to the Investment Manager
pursuant to the Plan of Distribution described below, and exclusive of taxes,
interest, brokerage fees and extraordinary expenses (to the extent permitted by
applicable state securities laws and regulations), exceed 2 1/2% of the first
$30,000,000 of average daily net assets, 2% of the next $70,000,000 and 1 1/2%
of any excess over $100,000,000, the Investment Manager will reimburse the Fund
for the amount of such excess. Such amount, if any, will be calculated daily and
credited on a monthly basis. During the fiscal years ended August 31, 1993, 1994
and 1995, the Fund's expenses did not exceed such limitation.
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.
5
<PAGE>
The Agreement was initially approved by the Board of Directors on October
30, 1992, and by the shareholders of the Fund at a Meeting of Shareholders held
on January 12, 1993. The Agreement is substantially identical to a prior
investment management agreement which was initially approved by the Board of
Directors on January 18, 1983 and by the shareholders of the Fund at a Special
Meeting of Shareholders held on March 18, 1983, as such prior agreement had been
amended, to bring its provisions in connection with the limitations on the
Fund's operating expenses imposed by state securities laws and regulations
thereunder up to date with current state securities laws, by approval of the
shareholders of the Fund on December 18, 1984. The Agreement took effect on June
30, 1993 upon the spin-off by Sears, Roebuck and Co. of its remaining shares of
DWDC. The Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Directors 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, 1994 and
will continue in effect 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 Directors of the Fund; provided that in either event such continuance is
approved annually by the vote of a majority of the Directors of the Fund who are
not parties to the Agreement or "interested persons" (as defined in the Act) of
any such party (the "Independent Directors"), 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 Directors, including all of the
Independent Directors, approved 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 Agreement 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.
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
The Directors 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 13 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Jack F. Bennett (71) Retired; Director or Trustee of the Dean Witter Funds; formerly
Director 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 Directors 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.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Michael Bozic (54) Private Investor; Director or Trustee of the Dean Witter Funds;
Director formerly President and Chief Executive Officer of Hills
c/o Gordon Altman Butowsky Department Stores (May, 1991-July, 1995) and Chairman and Chief
Weitzen Shalov & Wein Executive Officer (January, 1987-August, 1990) and President
Counsel to the Independent Directors and Chief Operating Officer (August, 1990-February, 1991) of
114 West 47th Street the Sears Merchandise Group of Sears, Roebuck and Co.; Director
New York, New York of Eaglemark Financial Services Inc., the United Negro College
Fund, Weirton Steel Corporation and Domain Inc. (home decor
retailer).
Charles A. Fiumefreddo* (62) Chairman and Chief Executive Officer and Director of In-
Chairman of the Board, terCapital, DWSC and Distributors; Executive Vice President and
President and Chief Executive Director of DWR; Chairman, Director or Trustee, President and
Officer and Director Chief Executive Officer of the Dean Witter Funds; Chairman,
Two World Trade Center Chief Executive Officer and Trustee of the TCW/DW Funds;
New York, New York 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
Director States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
2000 Eagle Gate Tower 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.
John R. Haire (70) Chairman of the Audit Committee and Chairman of the Committee
Director of the Independent Directors or Trustees and Director or
Two World Trade Center Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
New York, New York formerly 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 con-
Director sulting firm (since June, 1985); Koch Professor of Interna-
c/o Johnson Smick International, Inc. tional Economics and Director of the Center for Global Market
1133 Connecticut Avenue, N.W. Studies at George Mason University (since September, 1990);
Washington, DC Co-Chairman and a founder 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).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of the
Director Audit Committee and Chairman of the Committee of the
c/o Gordon Altman Butowsky Independent Trustees and Trustee of the TCW/DW Funds; formerly
Weitzen Shalov & Wein Chairman of the Financial Accounting Standards Advisory Council
Counsel to the Independent Directors and 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, L.P., a private investment
Director partnership (since April, 1988); formerly Vice President,
c/o Triumph Capital, L.P. Bankers Trust Company and BT Capital Corporation (1984-1988);
237 Park Avenue Director or Trustee of the Dean Witter Funds; Trustee of the
New York, New York TCW/DW Funds; Director of various business organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive Officer
Director of DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of the
New York, New York Dean Witter Funds; Director and/or officer of various DWDC
subsidiaries.
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Trustee
Director of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995),
Counsel to the Independent Directors Chairman and Chief Investment Officer of Axe-Houghton
114 West 47th Street Management and the Axe-Houghton Funds (April, 1983-June, 1991)
New York, New York and President of USF&G Financial 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, Assistant
and General Counsel Secretary and Assistant General Counsel of Disributors; Senior
Two World Trade Center Vice President and Secretary of DWTC; Assistant Secretary of
New York, New York DWR and Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/ DW Funds.
Jonathan R. Page (49) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (49) First Vice President (since May, 1991) of InterCapital and
Treasurer Assistant Treasurer (since January, 1993) of InterCapital;
Two World Trade Center First Vice President and Assistant Treasurer of DWSC; Treasurer
New York, New York of the Dean Witter Funds and the TCW/DW Funds; previously Vice
President of InterCapital.
<FN>
- ------------------------
*Denotes Directors who are "Interested persons", as defined in the Act.
</TABLE>
8
<PAGE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, Edmund C. Puckhaber, Executive Vice President of InterCapital, Robert
S. Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and
DWTC, Joseph J. McAlinden, Kevin Hurley, Peter M. Avelar and James F. Willison,
Senior Vice Presidents of InterCapital, and Patricia A. Cuddy, Vice President 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 Lawrence Lafer, LouAnne D. McInnis and Ruth Rossi, Vice Presidents and
Assistant General Counsels of InterCapital and DWSC, 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
$68.5 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 Directors.
Eight Directors, 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" Directors. Five of the
eight Independent Directors 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' Directors, that is, the management Directors,
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 Directors are charged with a wide variety of responsibilities
under the Act. In order to perform their duties effectively, the Independent
Directors 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 Directors 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 Directors are required to select and nominate individuals to
fill any Independent Director 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
Directors effectively control the selection of other Independent Directors 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 Directors, the governance arrangements from one
investment company group to another vary significantly. In some groups the
Independent Directors perform their role by attendance at periodic
9
<PAGE>
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 Directors in the performance of
their duties.
The governance structure of the Dean Witter Funds lies between these two
extremes. The Independent Directors and the Funds' Investment Manager alike
believe that these arrangements are effective and serve the interests of the
Funds' shareholders. All of the Independent Directors serve as members of the
Audit Committee and the Committee of the Independent Directors. Three of them
also serve as members of the Derivatives Committee.
The Committee of the Independent Directors 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 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 Directors 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 Directors 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 Directors 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 Directors.
10
<PAGE>
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 Director 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 DIRECTORS FOR ALL DEAN WITTER
FUNDS
The Independent Directors and the Funds' management believe that having the
same Independent Directors 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 Directors for each of the Funds or even of
sub-groups of Funds. It is believed that having the same individuals serve as
Independent Directors 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 Directors 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 Directors serve
on all Fund Boards enhances the ability of each Fund to obtain, at modest cost
to each separate Fund, the services of Independent Directors, and a Chairman of
their Committees, of the caliber, experience and business acumen of the
individuals who serve as Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT DIRECTORS
The Fund pays each Independent Director an annual fee of $1,000 ($1,200
prior to October 1, 1995) plus a per meeting fee of $50 for meetings of the
Board of Directors or committees of the Board of Directors attended by the
Director (the Fund pays the Chairman of the Audit Committee an annual fee of
$750 ($1,000 prior to January 1, 1995) and pays the Chairman of the Committee of
the Independent Directors an additional annual fee of $2,400, in each case
inclusive of the Committee meeting fees). The Fund also reimburses such
Directors for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Directors 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 has adopted a retirement program under which an Independent
Director who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or Trustee
of any Dean Witter Fund that has adopted the retirement program (each such Fund
referred to as an "Adopting Fund" and each such Director referred to as an
"Eligible Director") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Director
is entitled to receive from the Fund, commencing as of his or her retirement
date and continuing for the remainder of his or her life, an annual retirement
benefit (the "Regular Benefit") equal to 28.75% of his or her Eligible
Compensation plus 0.4791666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to a maximum of 57.50% after ten years of service. The
foregoing percentages may be changed by the Board.(1) "Eligible Compensation" is
one-fifth of the total compensation earned by such Eligible Director for service
to the Fund in the five year period prior to the date of the Eligible Director's
retirement. Benefits under the retirement program are not secured or funded by
the Fund. As of the date of this Statement of Additional Information, 58 Dean
Witter Funds have adopted the retirement program.
- ------------------------
(1) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
11
<PAGE>
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Directors by the Fund for the fiscal
year ended August 31, 1995 and the estimated retirement benefits for the Fund's
Independent Directors as of August 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
------------------------------- ----------------------------------------------------------------
ESTIMATED ESTIMATED
RETIREMENT CREDIT YEARS ESTIMATED ANNUAL
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED BENEFITS
NAME OF INDEPENDENT COMPENSATION ACCRUED AS RETIREMENT ELIGIBLE ELIGIBLE UPON
DIRECTOR FROM THE FUND FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- -------------------- -------------- -------------- ------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack F. Bennett..... $1,950 $1,275 8 46.0% $2,209 1$,016
Michael Bozic....... 1,900 303 10 57.5 1,950 1,121
Edwin J. Garn....... 2,000 612 10 57.5 1,950 1,121
John R. Haire....... 4,850(4) 2,920 10 57.5 5,093 2,929
Dr. Manuel H.
Johnson............ 1,700 249 10 57.5 1,950 1,121
Paul Kolton......... 2,000 1,236 10 57.0 2,425 1,383
Michael E. Nugent... 1,900 435 10 57.5 1,950 1,121
John L. Schroeder... 1,850 596 8 47.9 1,950 934
</TABLE>
- ------------------------
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,400 was paid to him as
Chairman of the Committee of the Independent Directors ($2,400) and as
Chairman of the Audit Committee ($1,000).
The following table illustrates the compensation paid to the Fund's
Independent Directors 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 TOTAL CASH
FOR SERVICE CHAIRMAN OF COMPENSATION
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 73 DEAN
OF 73 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
NAME OF INDEPENDENT WITTER OF 13 TCW/DW AUDIT FUNDS AND 13
DIRECTOR FUNDS FUNDS 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(5) 393,574
Dr. Manuel H. Johnson...... 122,461 60,750 -- 183,211
Paul Kolton................ 128,961 51,850 34,200(6) 215,011
Michael E. Nugent.......... 115,761 52,650 -- 168,411
John L. Schroeder.......... 85,938 -- -- 85,938
</TABLE>
- ------------------------
(5) For the 73 Dean Witter Funds.
(6) For the 13 TCW/DW Funds.
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 Directors as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
12
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. As discussed in the Prospectus, the Fund may enter
into repurchase agreements with financial institutions. The Fund follows certain
procedures designed to minimize the risks inherent in such agreements. These
procedures include effecting repurchase transactions only with large,
well-capitalized and well-established financial institutions whose financial
condition is continually monitored. In addition, the value of the collateral
underlying the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned on the repurchase
agreement. Such collateral will consist of Government Securities or "Eligible
Securities" (as described below under the caption "How Net Asset Value is
Determined") rated in the highest grade by a nationally recognized statistical
rating organization (a "NRSRO") whose ratings qualify the collateral security as
an Eligible Security. 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 10% of its total 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.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the Fund may
also use reverse repurchase agreements as part of its investment strategy.
Reverse repurchase agreements involve sales by the Fund to repurchase the same
assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than the
cost of obtaining the cash otherwise. Opportunities to achieve this advantage
may not always be available, and the Fund intends to use the reverse repurchase
technique only when it will be to its advantage to do so. The Fund will
establish a segregated account with its custodian bank in which it will maintain
cash or cash equivalents or other portfolio securities equal in value to its
obligations in respect of reverse repurchase agreements. Reverse repurchase
agreements are considered borrowings by the Fund and for purposes other than
meeting redemptions may not exceed 5% of the Fund's total assets.
PRIVATE PLACEMENTS. As discussed in the Prospectus, the Fund may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 (the "Securities Act") and which may be sold to other institutional
investors pursuant to Rule 144A under the Securities Act. The adoption by the
Securities and Exchange Commission of Rule 144A, which permits the resale of
certain restricted securities to institutional investors, had the effect of
broadening and increasing the liquidity of the institutional trading market for
securities subject to restrictions on resale to the general public. Section 4(2)
commercial paper sold pursuant to Rule 144A is restricted in that it can be
resold only to qualified institutional investors. However, since institutions
constitute virtually the entire market for such commercial paper, the market for
such Section 4(2) commercial paper is, in reality, as liquid as that for other
commercial paper. While the Fund generally holds to maturity commercial paper in
its portfolio, the advent of Rule 144A has greatly simplified the ability to
sell Section 4(2) commercial paper to other institutional investors. Under
procedures adopted by the Board of Directors of the Fund, the Fund may purchase
Section 4(2) commercial paper without being subject to the 10% limitation on
illiquid investments (see "Investment Restrictions" in the Prospectus) and will
be able to utilize Rule 144A to sell that paper to other institutional
investors. The procedures require that the Investment Manager consider the
following factors in determining that any restricted security eligible for sale
pursuant to Rule 144A be considered liquid: (1) the frequency of trades and
quotes for the security, (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers, (3) dealer
undertakings to make a market in the security, and (4) the nature of the
security and the nature of the market place trades (i.e., the time
13
<PAGE>
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The Investment Manager will report to the Board on a
quarterly basis on all restricted securities held by the Fund with regard to
their ongoing liquidity. In the event any Section 4(2) commercial paper or other
restricted security held by the Fund is determined to be illiquid by the Board
and the Investment Manager, that investment would be included as an illiquid
security subject to the 10% limitation on illiquid investments referred to
above.
LENDING OF PORTFOLIO SECURITIES. Subject to Investment Restriction 2 below,
the Fund may lend portfolio securities to brokers, dealers and financial
institutions provided that cash equal to at least 100% of the market value of
the securities loaned is deposited by the borrower with the Fund and is
maintained each business day in a segregated account pursuant to applicable
regulations. The creditworthiness of firms to which the Fund lends its portfolio
securities is monitored on an ongoing basis. While such securities are on loan,
the borrower will pay the Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby earning additional
income. The Fund will not lend its portfolio securities if such loans are not
permitted by the laws or regulations of any state in which its shares are
qualified for sale and will not lend more than 10% of the value of its total
assets. Loans would be subject to termination by the Fund in the normal
settlement time, currently five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Fund and its
shareholders. The Fund may pay reasonable finders, borrowers, administrative,
and custodial fees in connection with a loan. During its fiscal year ended
August 31, 1995, the Fund did not lend any of its portfolio securities and it
has no intention of doing so in the foreseeable future.
VARIABLE AND FLOATING RATE OBLIGATIONS. As stated in the Prospectus, the
Fund may invest in variable and floating rate obligations. The interest rate
payable on a variable rate obligation is adjusted at predesignated periodic
intervals and, on floating rate obligations, 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. As a result, the purchase of variable rate and floating rate
obligations should enhance the ability of the Fund to maintain a stable net
asset value per share (see "How Net Asset Value is Determined") and to sell
obligations prior to maturity at a price approximating the full principal amount
of the obligations. 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 an obligation prior to maturity, is
enhanced. The payment of principal and interest by issuers of certain
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 an obligation meets the
Fund's investment quality requirements.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
Fund has adopted certain investment restrictions listed below as fundamental
policies which cannot be changed without the approval of the holders of a
"majority" of the outstanding shares of the Fund, as defined in the Act.
Majority is defined in the Act as the lesser of (a) sixty-seven percent or more
of the shares present at a meeting of shareholders, if the holders of more than
fifty percent of the outstanding shares of the Fund are present or represented
by proxy, or (b) more than fifty percent of the outstanding shares of the Fund.
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<PAGE>
These restrictions provide that the Fund may not:
1. Purchase any common stocks or other equity securities;
2. Make loans to others, except through the purchase of the debt
obligations and repurchase agreements referred to under "Investment
Practices and Policies" above and "Investment Objectives and Policies" in
the Prospectus; and loans of portfolio securities in excess of 10% of the
value of the Fund's total assets, made in accordance with guidelines
established by the Fund's Board of Directors, including maintaining
collateral from the borrower equal at all times to the current market value
of the securities loaned;
3. Purchase or sell real estate; however, the Fund may purchase
marketable securities issued by companies which invest in real estate or
interests therein;
4. Purchase securities on margin or sell short;
5. Purchase or sell commodities or commodity futures contracts, or oil,
gas or mineral exploration or development programs;
6. Underwrite securities of other issuers;
7. Purchase warrants, or write, purchase or sell puts, calls,
straddles, spreads, or combinations thereof;
8. Participate on a joint or joint and several basis in any securities
trading account;
9. Purchase the securities of any other investment company;
10. Purchase securities of any issuer for the purpose of exercising
control or management; and
11. Purchase or retain the securities of any issuer if any officer or
director of the Fund is an officer or director of such issuer and owns
beneficially more than 1/2 of 1% of the securities of such issuer and all of
the officers and directors of the Fund and its Investment Manager together
own more than 5% of the securities of such issuer.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision by the Board of Directors, the Investment
Manager is responsible for decisions to buy and sell securities for the Fund and
arranges for the execution of portfolio security transactions on behalf of the
Fund. Purchases of portfolio securities are made from dealers, underwriters and
issuers; sales, if any, prior to maturity, are made to dealers and issuers. The
Fund does not normally incur any brokerage commission expense on such
transactions. Money market instruments are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased or sold directly from or
to an issuer, no commissions or discounts are paid. During the Fund's fiscal
years ended August 31, 1993, 1994 and 1995, the Fund did not pay any
underwriter's discounts on principal transactions or brokerage commissions on
agency transactions.
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
15
<PAGE>
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 for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such price and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not, in every case, benefit the
Fund directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the Fund did not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e. Certificates of Deposit and
Banker's Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers. During its fiscal years ended August 31, 1993, 1994 and
1995, the Fund did not effect any principal transactions with DWR.
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 Directors of the Fund,
including a majority of the Directors who are not "interested" Directors (as
defined in the Act), 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 pay any brokerage
commissions or underwriting discounts to DWR or any other broker-dealer during
the fiscal years ended August 31, 1993, 1994 and 1995.
Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the average
monthly value of such securities owned during the year. Based on this
definition, it is anticipated that the Fund's policy of investing in securities
with remaining maturities of thirteen months or less will not result in a
quantifiable portfolio turnover rate. However, because of the short-term nature
of the Fund's portfolio securities, it is anticipated that the number of
purchases and sales or maturities of such securities will be substantial.
Nevertheless, as brokerage commissions are not normally charged on purchases and
sales of such securities, the large number of these transactions does not have
an adverse effect upon the net yield and net asset value of the shares of the
Fund.
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<PAGE>
PURCHASE OF FUND SHARES
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As discussed in the Prospectus, the Fund offers its shares for sale to the
public on a continuous basis, without a sales charge. Pursuant to a Distribution
Agreement between the Fund and Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager and a wholly-owned
subsidiary of DWDC, shares of the Fund are distributed by the Distributor and
through certain selected broker-dealers which have entered into selected dealer
agreements with the Distributor ("Selected Broker-Dealers") at an offering price
equal to the net asset value per share next determined following receipt of an
effective purchase order (accompanied by Federal Funds). Dealers in the
securities markets in which the Fund will invest usually require immediate
payment in Federal Funds. Since the payment by a Fund shareholder for his or her
other shares cannot be invested until it is converted into and available to the
Fund in Federal Funds, the Fund requires such payments to be so available before
a share purchase order can be considered effective. All checks submitted for
payment are accepted subject to collection at full face value in United States
funds and must be drawn in United States dollars in a United States bank.
The Board of Directors of the Fund, including a majority of the Directors
who are not and were not at the time of their vote "interested persons" (as
defined in the Act) of either party to the Distribution Agreement (the
"Independent Directors"), approved, at its meeting held on October 30, 1992, 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. The Distribution Agreement took
effect on June 30, 1993 upon the spin-off by Sears, Roebuck and Co. of its
remaining shares of DWDC. By its terms, the Distribution Agreement had an
initial term ending April 30, 1994 and will continue in effect from year to year
thereafter if approved by the Directors. At its meeting held on April 20, 1995,
the Fund's Board of Directors, including all of the Independent Directors,
approved continuation of the Distribution Agreement until April 30, 1996.
SHAREHOLDER INVESTMENT ACCOUNT. 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 stock certificate.
If a stock 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 directly through the Transfer Agent, the
shareholder will be mailed a written confirmation of the transaction.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check payable to Dean Witter Liquid Asset Fund
Inc. in any amount, not less than $100, directly to the Transfer Agent. The
shares so purchased will be credited to the Shareholder Investment Account.
ACCOUNT STATEMENTS. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the shareholder
by the Transfer Agent in full and fractional shares of the Fund (rounded to the
nearest 1/100 of a share, with the exception of purchases made through
reinvestment of dividends, which are rounded to the last 1/100 of a share). A
confirmation will be mailed to the shareholder after each shareholder instituted
purchase or redemption transaction effected through the Transfer Agent. A
quarterly statement of the account is sent to all shareholders. Share
certificates will not be issued unless requested in writing by the shareholder.
No certificates will be issued for fractional shares or to shareholders who have
elected the checking account, predesignated bank account or systematic
withdrawal plan methods of withdrawing cash from their accounts.
The Fund reserves the right to reject any order for the purchase of its
shares. In addition, the offering of shares of the Fund may be suspended at any
time and resumed at any time thereafter.
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<PAGE>
EXCHANGE PRIVILEGE
As discussed in the Prospectus under the caption "Exchange Privilege", an
Exchange Privilege exists whereby investors who have purchased shares of any of
the Dean Witter Funds sold with either a front-end sales charge ("FESC funds")
or a contingent deferred sales charge ("CDSC funds") will be permitted, after
the shares of the fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days, to redeem all or part of their
shares in that fund, have the proceeds invested in shares of the Fund, Dean
Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust or Dean Witter U.S.
Government Money Market Trust (these five funds are hereinafter called "money
market funds"), or Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Balanced Growth Fund, Dean Witter Balanced Income Fund or Dean Witter
Intermediate Term U.S. Treasury Trust (these eleven funds, including the Fund,
are referred to herein as the "Exchange Funds"). There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. Subsequently,
shares of the Exchange Funds received in an exchange for shares of an FESC fund
(regardless of the type of fund originally purchased) may be redeemed and
exchanged for shares of the other Exchange Funds, FESC funds or CDSC funds
(however, shares of CDSC funds, including shares acquired in exchange of (i)
shares of FESC funds or (ii) shares of the Exchange Funds which were acquired in
exchange for shares of FESC funds, may not be exchanged for shares of FESC
funds.) Additionally, shares of the Exchange Funds received in an exchange for
shares of a CDSC fund (regardless of the type of fund originally purchased) may
be redeemed and exchanged for shares of the other Exchange Funds or CDSC funds.
Ultimately, any applicable contingent deferred sales charge ("CDSC") will have
to be paid upon redemption of shares orginally purchased from a CDSC fund. 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.)
When shares of any CDSC fund are exchanged for shares of the Fund or any
other Exchange Fund, the exchange is executed at no charge to the shareholder,
without the imposition of the CDSC at the time of the exchange. During the
period of time the shareholder remains in the Exchange 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 the 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 of a CDSC fund exchanged into an Exchange Fund on
or after April 23, 1990, upon 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 12b-1 distribution fees incurred on or after that date which
are 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 last day of the month in which shares of a
CDSC fund are reacquired. Thus, a CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the shareholder
was invested in a CDSC fund. Shares of a CDSC fund acquired in exchange for
shares of an FESC fund (or in exchange for shares of other Dean Witter Funds for
which shares of an FESC fund have been exchanged) are not subject to any CDSC
upon their redemption.
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<PAGE>
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 and (iii) acquired in exchange for shares of FESC funds, or for
shares of other Dean Witter Funds for which shares of FESC funds have been
exchanged (all such shares called "Free Shares"), will be exchanged first.
Shares of Dean Witter American Value Fund acquired prior to April 30, 1984,
shares of Dean Witter Dividend Growth Securities Inc. and Dean Witter Natural
Resource Development Securities Inc. acquired prior to July 2, 1984, and shares
of Dean Witter Strategist Fund acquired prior to November 8, 1989 are also
considered Free Shares and will be the first Free Shares to be exchanged. After
an exchange, all dividends earned on shares in the 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 the same Exchange
Privilege Account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to a
higher CDSC rate). Shares equal to any appreciation in the value of non-Free
Shares exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to the
lesser of (a) the purchase payments for, or (b) the current net asset value of,
the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro rata basis between the
non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the procedures described in the CDSC fund Prospectus under the caption
"Contingent Deferred Sales Charge", any applicable CDSC will be imposed upon the
ultimate redemption of shares of any fund, regardless of the number of exchanges
since those shares were originally purchased.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW
Funds Management, Inc. serves as Adviser, under the terms and conditions
described in the Prospectus and Statement of Additional Information of each
TCW/DW Fund.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone or telegraph instructions. Accordingly, in such event the
investor shall bear the risk of loss. The Staff of the Securities and Exchange
Commission is currently considering the propriety of such policies.
With respect to the redemption or 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.
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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 the 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.
Shares of the Fund acquired pursuant to the Exchange Privilege will be held
by the Fund's transfer agent in an Exchange Privilege Account distinct from any
account of the same shareholder who may have acquired shares of the Fund
directly. A shareholder of the Fund will not be permitted to make additional
investments in such Exchange Privilege Account, except through the exchange of
additional shares of the fund in which the shareholder had initially invested,
and the proceeds of any shares redeemed from such Account may not thereafter be
placed back into that Account. If such a shareholder desires to make any
additional investments in the Fund, a separate account will be maintained for
receipt of such investments. The Fund will have additional costs for account
maintenance if a shareholder has more than one account with the Fund.
The Fund also maintains Exchange Privilege Accounts for shareholders who
acquired their shares of the Fund pursuant to exchange privileges offered by
other investment companies with which the Investment Manager is not affiliated.
The Fund also expects to make available such exchange privilege accounts to
other investment companies that may hereafter be managed by the Investment
Manager.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $10,000 for
Dean Witter Short-Term U.S. Treasury Trust, although that fund may, in its
discretion, accept initial purchases of as low as $5,000, and $5,000 for the
Fund, Dean Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free
Daily Income Trust, and Dean Witter New York Municipal Money Market Trust,
although those funds may, at their discretion, accept initial investments of as
low as $1,000. The minimum initial investment for all other 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 those funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other 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
any of the Dean Witter Funds, 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,
TCW/DW North American Government Income Trust, TCW/DW Income and Growth Fund,
TCW/DW Balanced Fund and TCW/DW North American Intermediate Income Trust
pursuant to this Exchange Privilege, and provided further that the Exchange
Privilege may be terminated or materially revised 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.
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<PAGE>
PLAN OF DISTRIBUTION
In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Act between the Fund and the Distributor, the Distributor provides certain
services and finances certain activities in connection with the distribution of
Fund shares (the "Plan" refers to the Plan and Agreement of Distribution prior
to the reorganization described above and to the Plan of Distribution after the
reorganization). The Plan was initially approved by the Board of Directors on
January 18, 1983 and by the Fund's shareholders on March 18, 1983. The vote of
the Board of Directors included a majority of the Directors who are not and were
not at the time of their vote interested persons of the Fund (as defined in the
Act) and who have and had at the time of their vote no direct or indirect
financial interest in the operation of the Plan (the "Independent 12b-1
Directors"), cast in person at a meeting called for the purpose of voting on
such Plan.
The Plan provides that the Distributor bears the expense of all promotional
and distribution related activities on behalf of the Fund, except for expenses
that the Directors determine to reimburse, as described below. The following
activities and services may be provided by the Distributor under the Plan: (1)
compensation to and expenses of DWR's and other Selected Broker-Dealers' account
executives and other employees; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales of
the Fund's shares; (3) expenses incurred in connection with promoting sales of
the Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
DWR account executives are paid an annual residual commission, currently a
gross residual of up to 0.10 of 1% of the current value of the respective
accounts for which they are the account executives of record. The "gross
residual" is a charge which reflects residual commissions paid by DWR to its
account executives and DWR's expenses associated with the servicing of
shareholder accounts, including the expenses of operating DWR's branch offices
in connection with the servicing of shareholder accounts, which expenses include
lease costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communication costs and the costs of stationery and
supplies and other expenses relating to branch office servicing of shareholder
accounts.
The Fund is authorized to reimburse the Distributor for specific expenses
incurred or to be incurred in promoting the distribution of the Fund's shares.
Reimbursement is made through monthly payments in amounts determined in advance
of each calendar quarter by the Directors, including a majority of the
Independent 12b-1 Directors. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.15 of 1% of the
Fund's average daily net assets during the month. No interest or other financing
charges will be incurred for which reimbursements under the Plan will be made.
In addition, no interest charges, if any, incurred on any distribution expense
incurred pursuant to the Plan will be reimbursable under the Plan. In making
quarterly determinations of the amounts that may be expended by the Fund, the
Investment Manager provides and the Directors review a quarterly budget of
projected incremental distribution expenses to be incurred on behalf of the
Fund, together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Directors determine which particular expenses, and
the portions thereof, that may be borne by the Fund, and in making such a
determination consider the scope of the Distributor's commitment to promoting
the distribution of the Fund's shares.
At their meeting held on October 30, 1992, the Directors of the Fund,
including all of the Independent 12b-1 Directors, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon the reorganization described above, the share distribution
activities theretofore performed by the Fund or for the Fund by DWR were assumed
by the Distributor and DWR's sales activities are now performed pursuant to the
terms of a selected dealer agreement between the Distributor and DWR. The
amendments provide that payments under the Plan will be made to the Distributor
rather than to the Investment Manager as before the amendment, and that the
21
<PAGE>
Distributor in turn is authorized to make payments to DWR, its affiliates or
other Selected Broker-Dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
compensation for its own distribution-related expenses.
The Fund accrued $9,034,905 to the Distributor pursuant to the Plan, for the
fiscal year ended August 31, 1995. This is 0.10 of 1% of the Fund's average
daily net assets for its fiscal year ended August 31, 1995. Based upon the total
amounts spent by the Distributor during the period, it is estimated that the
amount paid by the Fund for distribution was spent in approximately the
following ways: (i) advertising -- $-0-; (ii) printing and mailing prospectuses
to other than current shareholders -- $-0-; (iii) compensation to underwriters
- -- $-0-; (iv) compensation to dealers -- $-0-; (v) compensation to sales
personnel -- $-0-; and (vi) other, which includes payments to DWR for expenses
substantially all of which relate to compensation of sales personnel and
associated overhead expenses -- $9,034,905.
Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations, the Distributor is not
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
Under the Plan, the Distributor provides the Fund, for review by the
Directors, and the Directors review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred by the Distributor on behalf of the Fund during such calendar quarter,
which report includes: (1) an itemization of the types of expenses and the
purposes therefor; (2) the amounts of such expenses; and (3) a description of
the benefits derived by the Fund. In the Directors' quarterly review of the Plan
they considered its continued appropriateness and the level of compensation
provided therein.
The Plan will continue from year to year, provided such continuance is
approved annually by a vote of the Directors, including a majority of the
Independent 12b-1 Directors. Any amendment to increase materially the maximum
amount authorized to be spent under the Plan must be approved by the
shareholders of the Fund, and all material amendments to the Plan must be
approved by the Directors 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 Directors or by a vote of the holders 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 selection or nomination of the Independent 12b-1
Directors is committed to the discretion of the Independent 12b-1 Directors.
Pursuant to the Plan the Directors were provided, at their meeting held on
April 20, 1995, with all the information the Board of Directors deemed necessary
to make an informed determination on whether the Plan should be continued. In
making their determination to continue the Plan and Agreement until April 30,
1995, the Directors, including all of the Independent 12b-1 Directors,
unanimously arrived at the conclusion that the Plan had benefitted the Fund and
also unanimously concluded that, in their judgment, there is a reasonable
likelihood that the Plan will continue to benefit the Fund and its shareholders.
No interested person of the Fund nor any Director of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or indirect
financial interest in the operation of the Plan except to the extent that DWR,
the Distributor or the Investment Manager 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.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value of the Fund is
determined as of 4:00 p.m., New York time (or, on days when the New York Stock
Exchange closes prior to 4:00 p.m., at such earlier time), on each day that the
New York Stock Exchange is open. The New York Stock Exchange currently observes
the following holidays: New Year's Day; Presidents' Day; Good Friday; Memorial
Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
22
<PAGE>
The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of shares of the
Fund. The Fund utilizes the amortized cost method in valuing its portfolio
securities even though the portfolio securities may increase or decrease in
market value, generally, in connection with changes in interest rates. The
amortized cost method of valuation involves valuing a security at its cost at
the time of purchase adjusted by a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument. During such periods, the yield to investors in the Fund may
differ somewhat from that obtained in a similar company which uses mark to
market values for all its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.
The Fund's use of the amortized cost method to value its portfolio
securities and the maintenance of the per share net asset value of $1.00 is
permitted by Rule 2a-7 of the Act (the "Rule") and is conditioned on its
compliance with various conditions contained in the Rule including: (a) the
Fund's Board of Directors is obligated, as a particular responsibility within
the overall duty of care owed to the Fund's shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objectives, to stabilize the net asset value per share
as computed for the purpose of distribution and redemption at $1.00 per share;
(b) the procedures include (i) calculation, at such intervals as the Directors
determine are appropriate and as are reasonable in light of current market
conditions, of the deviation, if any, between net asset value per share using
amortized cost to value portfolio securities and net asset value per share based
upon available market quotations with respect to such portfolio securities; (ii)
periodic review by the Directors of the amount of deviation as well as methods
used to calculate it; and (iii) maintenance of written records of the procedures
and the Directors' considerations made pursuant to them and any actions taken
upon such consideration; (c) the Board of Directors will consider what steps
should be taken, if any, in the event of a difference of more than 1/2 of 1%
between the two methods of valuation; and (d) the Board of Directors should take
such action as it deems appropriate (such as shortening the average portfolio
maturity, realizing gains or losses or withholding dividends) to eliminate or
reduce to the extent reasonably practicable material dilution or other unfair
results to investors or existing shareholders which might arise from differences
between the two methods of valuation.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Fund's interest
in the instrument is subject to market action) until the date noted on the face
of the instrument as the date on which the principal amount must be paid, or in
the case of an instrument called for redemption, the date on which the
redemption payment must be made.
A variable rate obligation that is subject to a demand feature is deemed to
have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. A floating rate instrument that is
subject to a demand feature is deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.
An Eligible Security is defined in the Rule to mean a security which: (a)
has a remaining maturity of 397 days or less; (b) (i) is rated in the two
highest short-term rating categories by any two NRSROs that have issued a
short-term rating with respect to the security or class of debt obligations of
the issuer, or (ii) if only one NRSRO has issued a short-term rating with
respect to the security, then by that NRSRO; (c) was a long-term security at the
time of issuance whose issuer has outstanding a short-term obligation
23
<PAGE>
which is comparable in priority and security and has a rating as specified in
clause (b) above; or (d) if no rating is assigned by any NRSRO as provided in
clauses (b) and (c) above, the unrated security is determined by the Board to be
of comparable quality to any such rated security.
As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and procedures
adopted by the Board, the authority to determine which securities present
minimal credit risks and which unrated securities are comparable in quality to
rated securities.
Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government Securities, so that, at the time of purchase:
(a) except as further limited in (b) below with regard to certain securities, no
more than 5% of its total assets will be invested in the securities of any one
issuer; and (b) with respect to Eligible Securities that have received a rating
in less than the highest category by any one of the NRSROs whose ratings are
used to qualify the security as an Eligible Security, or determined to be of
comparable quality: (i) no more than 5% in the aggregate of the Fund's total
assets in all such securities, and (ii) no more than the greater of 1% of total
assets, or $1 million, in the securities of any one issuer.
The presence of a line of credit or other credit facility offered by a bank
or other financial institution which guarantees the payment obligation of the
issuer, in the event of a default in the payment of principal or interest of an
obligation, may be taken into account in determining whether an investment is an
Eligible Security, provided that the guarantee itself is an Eligible Security.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Directors determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the Fund
to maintain a dollar-weighted average portfolio maturity (not more than 90 days)
appropriate to its objective of maintaining a stable net asset value of $1.00
per share and precludes the purchase of any instrument with a remaining maturity
of more than 397 days. Should the disposition of a portfolio security result in
a dollar-weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash in such a manner as to reduce such maturity to 90 days
or less as soon as is reasonably practicable.
If the Board of Directors determines that it is no longer in the best
interests of the Fund and its shareholders to maintain a stable price of $1.00
per share or if the Board believes that maintaining such price no longer
reflects a market-based net asset value per share, the Board has the right to
change from an amortized cost basis of valuation to valuation based on market
quotations. The Fund will notify shareholders of any such change.
REDEMPTION OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund may be redeemed at their
net asset value at any time. When a redemption is made by check and a check is
presented to the Transfer Agent for payment, the Transfer Agent will redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. This enables the shareholder to continue earning
daily income dividends until the check has cleared.
A check drawn by a shareholder against his or her other account in the Fund
constitutes a request for redemption of a number of shares sufficient to provide
proceeds equal to the amount of the check. Payment of the proceeds of a check
will normally be made on the next business day after receipt by the Transfer
Agent of the check in proper form. If a check is presented for payment to the
Transfer Agent by a shareholder or payee in person, the Transfer Agent will make
payment by means of a check drawn on the Fund's account or, in the case of a
shareholder payee, to the shareholder's predesignated bank account, but will not
make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment: (1) for any periods during which the New York Stock Exchange is closed
(other than for customary weekend and
24
<PAGE>
holiday closings), (2) when trading on that Exchange is restricted or an
emergency exists, as determined by the Securities and Exchange Commission, so
that disposal of the Fund's investments or determination of the Fund's net asset
value is not reasonably practicable, or (3) for such other periods as the
Commission by order may permit for the protection of the Fund's shareholders.
As discussed 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 (other than shares held in an Individual
Retirement Account or custodial account under Section 403(b)(7) of the Internal
Revenue Code) whose shares due to redemptions by the shareholder have a value of
less than $1,000 or such lesser amounts as may be fixed by the Board of
Directors. However, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value of his or her
shares is less than $1,000 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
$1,000 or more before the redemption is processed.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of the
Fund having a minimum value of $5,000, which provides for monthly or quarterly
checks in any dollar amount, not less than $25, or in any whole percentage of
the account balance, on an annualized basis. The Transfer Agent acts as agent
for the shareholder in tendering to the Fund for redemption sufficient full and
fractional shares to provide the amount of the periodic withdrawal payment
designated in the application. The shares will be redeemed at their net asset
value determined, at the shareholder's option, on the tenth or twenty-fifth day
(or next 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 withdrawal plan may be terminated at any time by the
Fund.
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 through
his or her Account Executive or 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
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 regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the withdrawal plan account (see "Redemption of Fund Shares"
in the Prospectus) at any time. If the number of shares redeemed is greater than
the number of shares paid as dividends, such redemptions may, of course,
eventually result in liquidation of all the shares in the account. The automatic
cash withdrawal method of redemption is not available for shares held in an
Exchange Privilege Account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. As discussed in the Prospectus, the Fund
intends to distribute all of its daily net investment income and net short-term
capital gains, if any, to shareholders of record as of the close of business the
preceding business day. Net income, for dividend purposes, includes accrued
interest and amortization of market discount, plus or minus any gains or losses
realized on sales of portfolio securities, less the amortization of market
premium and the estimated expenses of the Fund. Net income will be calculated
immediately prior to the determination of net asset value per share of the Fund.
The Board of Directors may revise the dividend policy, or postpone the
payment of dividends, if the Fund should have or anticipate any large unexpected
expense, loss or fluctuation in net assets which, in the opinion of the Board,
might have a significant adverse effect on shareholders.
25
<PAGE>
TAXES. 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 provided that
it distributes all of its taxable net investment income and all of its net
realized gains.
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 one year. Gains or losses on the sale of securities held for one year or
less will be short-term capital gains or losses.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of realized
net short-term and long-term capital gains. Such interest and realized net
short-term capital gains 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. Since the Fund's
income is expected to be derived entirely from interest rather than dividends,
none of such distributions will be eligible for the federal dividends received
deduction available to corporations. Realized net long-term gains distributions,
which are taxable as long-term capital gains, are not eligible for the dividends
received deduction.
The Fund may be subject to tax or taxes in certain states where it does
business. Furthermore, in those states which have income tax laws, the tax
treatment of the Fund and of shareholders with respect to distributions by the
Fund may differ from federal tax treatment.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
INFORMATION ON COMPUTATION OF YIELD
The Fund's current yield for the seven days ended August 31, 1995 was 5.40%.
The effective annual yield on this date was 5.54%, assuming daily compounding.
The Fund's annualized current yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining, for a stated seven-day period, the net change,
exclusive of capital changes and including the value of additional shares
purchased with dividends and any dividends declared therefrom (which reflect
deductions of all expenses of the Fund such as management fees), in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining (for the same stated seven-day period as for the
current yield) the net change, exclusive of capital changes and including the
value of additional shares purchased with dividends and any dividends declared
therefrom (which reflect deductions of all expenses of the Fund such as
management fees), in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 dividend by 7, and subtracting 1 from
the result.
The yields quoted in any advertisement or other communication should not be
considered a representation of the yields of the Fund in the future since the
yield is not fixed. Actual yields will depend not only on the type, quality and
maturities of the investments held by the Fund and changes in interest rates on
such investments, but also on changes in the Fund's expenses during the period.
Yield information may be useful in reviewing the performance of the Fund and
for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a fixed
yield for a stated period of time, the Fund's yield fluctuates.
26
<PAGE>
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 the sum of all
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception to
$10,000, $50,000 and $100,000, as the case may be. Investments of $10,000,
$50,000 and $100,000 in the Fund at inception would have grown to $45,332,
$226,660 and $453,320, respectively, at August 31, 1995.
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------
The Fund has an authorized capital of 25 billion shares of common stock with
a par value of $.01 per share. All shares are of the same class and are freely
transferable. Each outstanding share is entitled to one vote on all matters
submitted to a vote of shareholders and to a pro rata share of the Fund's net
assets in liquidation and of dividends declared. The Fund may also issue
fractional shares.
The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than fifty percent of the shares voting in any election
of directors can, if they choose to do so, elect all of the directors of the
Fund, in which event the holders of the remaining shares will be unable to elect
any person as a director. Shares issued will be fully paid and non-assessable
and will have no preemptive, conversion or sinking rights.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances in excess of
$100,000 are unprotected by federal deposit insurance. Such balances may, at
times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares, 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 of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts, including
providing 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.
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 together with the report of its independent accountants,
will be sent to shareholders each year.
The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Directors.
27
<PAGE>
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 August 31,
1995, which are included in the Prospectus and incorporated by reference in this
Statement of Additional Information, 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.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund for the fiscal year ended
August 31, 1995, and the report of the independent accountants thereon, are set
forth in the Fund's Prospectus, and are incorporated herein by reference.
28
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
Description of the highest commercial paper, bond and other short- and
long-term rating categories assigned by Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc.
("Fitch"), Duff and Phelps, Inc. ("Duff"), IBCA Limited and IBCA Inc. ("IBCA")
and Thomson BankWatch, Inc. ("Thomson"):
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Duff applies the modifiers (+) and
(-) to the rating Duff-1 in recognition of significant quality differences
within the highest tier. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
The rating TBW-1 is the highest short-term rating assigned by Thomson and
indicates a very high degree of likelihood that principal and interest will be
paid on a timely basis. The rating TBW-2 by Thomson is its second highest
rating; while the degree of safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is not as high as for issues
rated TBW-1.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay interest and repay principal.
Bonds rated AA by S&P are judged by S&P to have a very strong capacity to pay
interest and repay principal, and differ only in small degrees from issues rated
AAA.
29
<PAGE>
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations 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 rated bonds. Moody's applies
numerical modifiers 1, 2 and 3 in the Aa rating category. The modifier 1
indicates a ranking for the security in the higher end of this rating category,
the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a
ranking in the lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit quality
with negligible risk factors that are only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA are judged by Duff to be of high credit quality
with strong protection factors; risk is modest but may vary slightly from time
to time because of economic conditions. Duff applies modifiers of (+) and (-) to
the AA category.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have a
very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very significantly.
IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank and
whether such bank would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Ratings and Individual Ratings. In addition, IBCA assigns banks Long- and
Short-Term Ratings as used in the corporate ratings discussed above. Legal
Ratings, which range in gradation from 1 through 5, address the question of
whether the bank would receive support by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely on support from state authorities or its
owners.
Companies rated A are considered by Thomson to possess an exceptionally
strong balance sheet and earnings record, translating into an excellent
reputation and unquestioned access to their natural money markets; if weakness
or vulnerability exists in any aspect of a company's business, it is entirely
mitigated by the strengths of the organization. Companies rated A/B- by Thomson
are judged by Thomson to be financially very solid with a favorable track record
and no readily apparent weakness; their overall risk profiles, while low, are
not quite as favorable as for companies in the highest rating category.
30
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
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 years ended August
31, 1986, 1987, 1988, 1989, 1990, 1991, 1992,
1993, 1994 and 1995. . . . . . . . . . . . . . . . . . . . . 3
Portfolio of Investments at August 31 ,1995. . . . . . . . . 17
Statement of assets and liabilities at
August 31, 1995. . . . . . . . . . . . . . . . . . . . . . . 21
Statement of operations for the fiscal year ended
August 31, 1995. . . . . . . . . . . . . . . . . . . . . . . 22
Statement of changes in net assets for the
fiscal years ended August 31, 1994 and 1995. . . . . . . . . 23
Notes to Financial Statements. . . . . . . . . . . . . . . . 24
(2) Financial statements included in the Statement of
Additional Information (Part B):
None
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
2. - Amended and Restated By-Laws of
Registrant
8. - Form of Custody Agreement between the Registrant
and The Bank of New York
1
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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 of the
Registrant
16. - Schedules 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 August 31, 1995
-------------- -------------------------
Shares of Beneficial Interest 1,547,027
Item 27. INDEMNIFICATION
Reference is made to Section 3.15 of the Registrant's By-Laws and Section
2-418 of the Maryland General Corporation Law.
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 director,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
2
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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
Directors, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Director, 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) 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
3
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(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.
(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
4
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(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 North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) TCW/DW Total Return Trust
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.
5
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NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
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.
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
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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
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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 of the Dean Witter Funds and the TCW/DW
Treasurer 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
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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
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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
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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.
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(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
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(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) 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
None.
13
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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 16th day of October, 1995.
DEAN WITTER LIQUID ASSET FUND INC.
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. 32 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,
Director and Chairman
By /s/ Charles A. Fiumefreddo 10/16/95
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 10/16/95
----------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 10/16/95
----------------------------
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 10/16/95
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
EXHIBIT INDEX
Exhibit No. Description
2. - Amended and Restated By-Laws of Registrant
8. - Form of Custody Agreement between Registrant
and The Bank of New York
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 the Registrant
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedule
<PAGE>
AMENDED AND RESTATED
(JANUARY 25, 1995)
BY-LAWS
OF
DEAN WITTER LIQUID ASSET FUND INC.
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Corporation in
the State of Maryland shall be in the City of Baltimore.
SECTION 1.2. OTHER OFFICES. In addition to its principal office in the
State of Maryland, the Corporation may have an office or offices in the City
of New York, State of New York, and at such other places as the Board of
Directors may from time to time designate or the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 2.1. PLACE OF MEETINGS. Meetings of stockholders shall be held at
such place, within or without the State of Maryland, as may be designated
from time to time by the Board of Directors.
SECTION 2.2. ANNUAL MEETINGS. An annual meeting of stockholders, when
required, at which the stockholders shall elect a Board of Directors and
transact such other business as may properly come before the meeting, shall
be held in December of each year, the precise date in December to be fixed by
the Board of Directors. Notwithstanding anything to the contrary contained
herein, the Corporation shall not be required to hold an annual meeting in
any year in which none of the following is required to be acted upon by
stockholders under the Investment Company Act of 1940, as amended:
(1) election of directors;
(2) approval of an investment advisory or management agreement;
(3) ratification of the selection of independent accountants; and
(4) approval of a distribution plan or agreement;
provided, however, that a special meeting of stockholders shall promptly be
called when requested in writing by the recordholders of not less than 10% of
the Corporation's shares.
SECTION 2.3. SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation shall be held whenever called by the Board of Directors or the
President of the Corporation. Special meetings of stockholders shall also be
called by the Secretary upon the written request of the holders of shares
entitled to vote not less than twenty-five percent (25%) of all the votes
entitled to be cast at such meeting. Such request shall state the purpose or
purposes of such meeting and the matters proposed to be acted on thereat. The
Secretary shall inform such stockholders of the reasonable estimated cost of
preparing and mailing such notice of the meeting, and upon payment to the
Corporation of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to a vote at such meeting.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted upon at
any special meeting of stockholders held during the preceding twelve months.
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice of every
stockholders' meeting stating the place, date and time, and in the case of a
special meeting the purpose or purposes thereof, shall be
1
<PAGE>
given by the Secretary not less than ten (10) nor more than ninety (90) days
before such meeting to each stockholder entitled to vote at such meeting,
either by mail or by presenting it to him personally, or by leaving it at his
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 stockholder at his address as it appears on the records of
the Corporation.
SECTION 2.5. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Charter of the Corporation, or by these By-Laws, at
all meetings of stockholders the holders of a majority of the shares 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 stockholders
present or represented by proxy and entitled to vote thereat shall have power
to adjourn the meeting from time to time without notice other than
announcement at the meeting, until a quorum shall be present. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted if the meeting had been held as originally called.
SECTION 2.6. VOTING RIGHTS, PROXIES. At each meeting of the stockholders
at which a quorum is present, each holder of stock entitled to vote thereat
shall be entitled to one vote in person or by proxy, executed in writing by
the stockholder or his duly authorized attorney-in-fact, for each share of
stock of the Corporation entitled to vote so registered in his name on the
books of the Corporation on the date fixed as the record date for the
determination of stockholders 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 stockholders, 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.
SECTION 2.7. VOTE REQUIRED. Except as otherwise provided by law, by the
Charter of the Corporation, or by these By-Laws, at each meeting of
stockholders at which a quorum is present, any election shall be decided by a
plurality, and all other questions shall be decided by a majority of the
votes cast by the stockholders present in person or represented by proxy and
entitled to vote in such election or with respect to any such matter.
SECTION 2.8. ACTION BY STOCKHOLDERS 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 stockholders may be taken without a meeting if a
consent in writing setting forth the action shall be signed by all the
stockholders entitled to vote upon the action and such consent shall be filed
with the records of the Corporation.
ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER AND TERM. The Board of Directors shall consist of not
less than three (3) and not more than fifteen (15) directors, the number of
directors to be fixed from time to time within the above-specified limits by
the affirmative vote of a majority of the whole Board of Directors. At the
first annual meeting of stockholders and at each meeting thereafter, the
stockholders shall elect directors to hold office until their successors are
elected and qualify. Directors need not be stockholders of the Corporation.
SECTION 3.2. POWERS. The business of the Corporation shall be managed by
the Board of Directors which may exercise all powers of the Corporation and
do all lawful acts and things which are not by law or by the Charter of the
Corporation, or by these By-Laws, directed or required to be exercised or
done exclusively by the stockholders.
SECTION 3.3. ORGANIZATIONAL MEETINGS. The first meeting of each newly
elected Board of Directors for the purposes of organization and the election
of officers and otherwise shall be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, or as shall be specified in a written waiver signed
by all directors.
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SECTION 3.4. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such time and place as shall be determined from time to time
by the Board of Directors without further notice.
SECTION 3.5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called at any time by the President and shall be called by such
President or the Secretary upon the written request of any two (2) directors.
SECTION 3.6. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Board of Directors, stating the place, date and time thereof,
shall be given not less than two (2) days before such meeting to each
director, 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 director at his address as it appears on the records
of the Corporation.
SECTION 3.7. TELEPHONE MEETINGS. Any member or members of the Board of
Directors or of any committee designated by the Board, may participate in a
meeting of the Board, 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 3.8. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Board of Directors, a majority of the whole Board 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 directors present shall
be the act of the Board of Directors, unless the concurrence of a greater
proportion is expressly required for such action by law, the Charter of the
Corporation or these By-Laws. If at any meeting of the Board there be less
than a quorum present, the directors 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 3.9. REMOVAL. Any one or more of the directors may be removed,
either with or without cause, at any time, by the affirmative vote of the
stockholders holding a majority of the outstanding shares entitled to vote
for the election of directors. (For purposes of determining the circumstances
and procedures under which such removal of directors may take place, the
provisions of Section 16(c) of the Investment Company Act of 1940 shall be
applicable to the same extent as if the Corporation were subject to the
provisions of that Section.) The successor or successors of any director or
directors so removed may be elected by the stockholders entitled to vote
thereon at the same meeting to fill any resulting vacancies for the unexpired
term of removed directors. Except as provided by law, pending such an
election (or in the absence of such an election), the successor or successors
of any director or directors so removed may be chosen by the Board of
Directors.
SECTION 3.10. VACANCIES. Except as otherwise provided by law, any vacancy
occurring in the Board of Directors and newly created directorships resulting
from an increase in the authorized number of directors may be filled by the
vote of a majority of the directors then in office or, if only one director
shall then be in office, by such director. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders or until his successor is elected and
qualifies.
SECTION 3.11. ACTION BY DIRECTORS 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 Board of Directors may be taken without a meeting if a
consent in writing setting forth the action shall be signed by all of the
directors entitled to vote upon the action and such written consent is filed
with the minutes of proceedings of the Board of Directors.
SECTION 3.12. EXPENSES AND FEES. Each director may be allowed expenses, if
any, for attendance at each regular or special meeting of the Board of
Directors and each director who is not an officer or employee of the
Corporation or of its investment manager or underwriter or of any corporate
affiliate of any of said persons shall receive for services rendered as a
director of the Corporation such compensation as may be fixed by the Board of
Directors. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
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SECTION 3.13. 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 Corporation and all
checks, notes, drafts and other obligations for the payment of money by the
Corporation shall be signed, and all transfer of securities standing in the
name of the Corporation shall be executed, by the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Corporation as shall be designated for that purpose by vote of the Board of
Directors; notwithstanding the above, nothing in this Section 3.13 shall be
deemed to preclude the electronic authorization, by designated persons, of
the Corporation's Custodian to transfer assets of the Corporation.
SECTION 3.14. CONTRACTS. Except as otherwise provided by law or by the
Charter of the Corporation, no contract or transaction between the
Corporation and any partnership or corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any
officer or director of the Corporation is pecuniarily or otherwise interested
therein or is a member, officer or director of such interest shall be known
to the Board of Directors of the Corporation. Specifically, but without
limitation of the foregoing, the Corporation may enter into one or more
contracts appointing Dean Witter Reynolds InterCapital Inc. investment
manager of the Corporation, and may otherwise do business with Dean Witter
Reynolds InterCapital Inc., notwithstanding the fact that one or more of the
directors of the Corporation and some or all of its officers are, have been
or may become directors, officers, members, employees, or stockholders of
Dean Witter Reynolds InterCapital Inc.; and in the absence of fraud, the
Corporation and Dean Witter Reynolds InterCapital Inc. may deal freely with
each other, and neither such contract appointing Dean Witter Reynolds
InterCapital Inc. investment manager to the Corporation nor any other
contract or transaction between the Corporation and Dean Witter Reynolds
InterCapital Inc. shall be invalidated or in any wise affected thereby, nor
shall any director or officer of the Corporation by reason thereof be liable
to the Corporation or to any stockholder or creditor of the Corporation or to
any other person for any loss incurred under or by reason of any such
contract or transaction. For purposes of this paragraph, any reference to
"Dean Witter Reynolds InterCapital Inc." shall be deemed to include said
company and any parent, subsidiary or affiliate of said company and any
successor (by merger, consolidation or otherwise) to said company or any such
parent, subsidiary or affiliate.
SECTION 3.15. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Corporation 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 Corporation) by
reason of the fact that he is or was a director, officer, employee or agent
of the Corporation. 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 Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Directors acting in their official capacity
must act in good faith and in a manner reasonably believed to be in the best
interest of the Corporation. 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 Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful. A director may not be indemnified
in respect of any proceeding charging improper personal benefit to the
director, whether or not involving action in the director's official
capacity, in which the director was adjudged to be liable on the basis that
personal benefit was improperly received.
(b) The Corporation 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 Corporation to obtain a judgment or decree in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation. The indemnification shall be against
expenses, including attorney's fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit
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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 Corporation: 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 Corporation, 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 Corporation 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
director or officer 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 director, officer, employee, or agent of the
Corporation 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
subsection (a) or (b) of this section may be made by the Corporation only as
authorized in the specific case after a determination that indemnification of
the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsection
(a) or (b).
(2) The determination shall be made:
(i) By the Board of Directors, by a majority vote of a quorum which
consists of directors who were not parties to the action ("non-party
directors"), suit or proceeding; or if a quorum of non-party directors
is not obtainable by a majority vote of a committee of at least two
non-party directors; or
(ii) If the required quorum is not obtainable; or if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination that indemnification is permissible is made by independent
legal counsel, authorization of indemnification and determination as to
reasonableness of expenses shall be made by a committee of non-party
directors or by the non-party quorum of the Board, or if neither exists, by
the full Board.
(4) Notwithstanding the provisions of paragraphs (1) and (2) of this
subsection (d), 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 Sections 17(h) and (i) of the Investment
Company Act of 1940, as amended ("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 directors who are neither
"interested persons" of the Corporation, as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended, 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 director, officer,
employee or agent of the Corporation in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition thereof if:
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(1) authorized in the specific case by the Board of Directors; and
(2) the Corporation receives an undertaking by or on behalf of the
director, officer, employee or agent of the Corporation to repay the
advance if it is not ultimately determined that such person is entitled to
be indemnified by the Corporation; and
(3) either
(i) such person provides a security for his undertaking, or
(ii) the Corporation 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 directors who are
neither "interested persons" of the Corporation, as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, 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 stockholders or disinterested directors 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 director, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person.
(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the
Corporation, 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 Corporation pay for that portion of the premium, if any, for
insurance to indemnify any officer or director against liability for any act
for which the Corporation itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
director or officer of the Corporation against any liability to the
Corporation 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.
(i) Any indemnification of, or advance of expenses to, a director in
accordance with this Section, if arising out of a proceeding by or in the
right of the Corporation, shall be reported in writing to the shareholders
with the notice of the next stockholders' meeting or prior to the meeting.
ARTICLE IV
COMMITTEES
SECTION 4.1. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate an
Executive Committee and/or other committees, each committee to consist of two
(2) or more of the directors of the Corporation and may delegate to such
committees, in the intervals between meetings of the Board of Directors, any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to: declare
dividends, to issue stock or to recommend to stockholders any action
requiring stockholder approval. 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 member of the Board of Directors 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.
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All actions of the Executive Committee shall be reported to the Board of
Directors at the meeting thereof next succeeding to the taking of such
action.
SECTION 4.2. ADVISORY COMMITTEE. The Board of Directors may appoint an
advisory committee which shall be composed of persons who do not serve the
Corporation in any other capacity and which shall have advisory functions
with respect to the investments of the Corporation, but which shall have no
power to determine that any security or other investment shall be purchased,
sold or otherwise disposed of by the Corporation. The number of persons
constituting any such advisory committee shall be determined from time to
time by the Board of Directors. 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 Board of Directors may from
time to time determine to be appropriate.
SECTION 4.3. 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 Board appointed pursuant to Section 4.1
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 V
OFFICERS
SECTION 5.1. EXECUTIVE OFFICERS. The executive officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Chairman of the Board shall be
selected from among the directors but none of the other executive officers
need be a member of the Board of Directors. 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 Corporation shall be elected annually
by the Board of Directors at its organizational meeting following the meeting
of stockholders at which the Board of Directors was elected, and each
executive officer so elected shall hold office until his successor is elected
and has qualified.
SECTION 5.2. OTHER OFFICERS AND AGENTS. The Board of Directors may also
elect one or more Assistant Vice Presidents, Assistant Secretaries and
Assistant Treasurers and may elect, or may delegate to the President the
power to appoint, such other officers and agents as the Board of Directors
shall at any time or from time to time deem advisable.
SECTION 5.3. TERM, REMOVAL AND VACANCIES. Each officer of the Corporation
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Corporation may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.
SECTION 5.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Corporation shall be fixed by the Board of Directors, or by the
President to the extent provided by the Board of Directors with respect to
officers appointed by the President.
SECTION 5.5. POWER AND DUTIES. All officers and agents of the Corporation,
as between themselves and the Corporation, shall have such authority and
perform such duties in the management of the Corporation as may be provided
in or pursuant to these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors; provided, that no rights of any third
party shall be affected or impaired by any such By-Law or resolution of the
Board unless he has knowledge thereof.
SECTION 5.6. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors,
shall be a signatory on all Annual and Semi-Annual Reports as may be sent to
stockholders, and he shall perform such other duties as the Board of
Directors may from time to time prescribe.
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SECTION 5.7. The President. (a) The President shall be the chief executive
officer of the Corporation; he shall have general and active management of
the business of the Corporation, shall see that all orders and resolutions of
the Board of Directors are carried into effect, and, in connection therewith,
shall be authorized to delegate to one or more Vice Presidents such of his
powers and duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the stockholders and the Board of Directors; and he shall perform
such other duties as the Board of Directors may, from time to time,
prescribe.
SECTION 5.8. 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 Board of Directors. 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 Board of Directors 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 Board of Directors or
the President may from time to time prescribe.
SECTION 5.9. 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 Board of Directors or the President.
SECTION 5.10. THE SECRETARY. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the stockholders and of the Board of
Directors 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 stockholders and special meetings of
the Board of Directors, and shall perform such other duties and have such
powers as the Board of Directors, may from time to time prescribe. He shall
keep in safe custody the seal of the Corporation 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 5.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors or the President, 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 Board of
Directors or the President may from time to time prescribe.
SECTION 5.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Corporation. He shall keep or cause to be kept full and
accurate accounts or receipts and disbursements in books belonging to the
Corporation, and he shall render to the Board of Directors whenever any of
them require it, an account of his transactions as Treasurer and of the
financial condition of the Corporation; and he shall perform such other
duties as the Board of Directors may from time to time prescribe.
SECTION 5.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors or the President, 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 powers as the
Board of Directors, or the President, may from time to time prescribe.
SECTION 5.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Board of Directors may deem it
desirable, the Board may delegate the powers and duties of an officer or
officers to any other officer or officers or to any Director or Directors.
ARTICLE VI
CAPITAL STOCK
SECTION 6.1. ISSUANCE OF STOCK. The Corporation shall not issue its shares
of capital stock except as approved by the Board of Directors.
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SECTION 6.2. CERTIFICATES OF STOCK. Certificates for shares of each class
of the capital stock of the Corporation shall be in such form and of such
design as the Board of Directors shall approve, subject to the right of the
Board of Directors to change such form and design at any time or from time to
time, and shall be entered in the books of the Corporation 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 the Corporation by the
President, or a Vice President or an Assistant Treasurer, and countersigned
by the Secretary or an Assistant Secretary or the Treasurer of the
Corporation; shall be sealed with the corporate seal; and shall contain such
recitals as may be required by law. Where any stock certificate is signed by
a Transfer Agent or by a Registrar, the signature of such corporate officers
and the corporate seal may be facsimile, printed or engraved. The Corporation
may, at its option, defer the issuance of a certificate or certificates to
evidence shares of capital stock owned of record by any stockholder until
such time as demand therefor shall be made upon the Corporation or its
Transfer Agent, but upon the making of such demand each stockholder shall be
entitled to such certificate or certificates.
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 Corporation, whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate
or certificates shall, nevertheless, be adopted by the Corporation 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
Corporation.
No certificate shall be issued for any share of stock until such share is
fully paid.
SECTION 6.3. TRANSFER OF STOCK. Transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by his attorney thereunto duly authorized by a power of
attorney duly executed and filed with the Corporation or a Transfer Agent of
the Corporation, if any, upon written request in proper form if no share
certificate has been issued, or in the event such certificate has been
issued, upon presentation and surrender in proper form of said certificate.
SECTION 6.4. RECORD DATE. The Board of Directors may fix in advance a date
as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any rights,
or in order to make a determination of stockholders for any other purpose.
Such date, in any case shall be not more than ninety (90) days, and in case
of a meeting of stockholders not less than ten (10) days prior to the date on
which particular action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, twenty (20) days. If the stock transfer books are closed
for the purpose of determining stockholders entitled to notice of a vote at a
meeting of stockholders, such books shall be closed for at least ten (10)
days immediately preceding such meeting.
SECTION 6.5. LOST, STOLEN, DESTROYED AND MULTILATED CERTIFICATES. The
Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon satisfactory
proof of such loss, theft, or destruction; and the Board of Directors may, in
its discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give to the Corporation 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.
SECTION 6.6. REGISTERED OWNERS OF STOCK. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the
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owner of shares of stock, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Maryland.
SECTION 6.7. FRACTIONAL DENOMINATIONS. Subject to any applicable
provisions of law and the Charter of the Corporation, the Corporation may
issue shares of its capital stock in fractional denominations, provided that
the transactions in which and the terms and conditions upon which shares in
fractional denominations may be issued may from time to time be limited or
determined by or under the authority of the Board of Directors.
ARTICLE VII
SALE AND REDEMPTION OF STOCK
SECTION 7.1. SALE OF STOCK. Upon the sale of each share of its Common
Stock, except as otherwise permitted by applicable laws and regulations, the
Corporation shall receive in cash or in securities valued as provided in
Article VIII of these By-Laws, not less than the current net asset value
thereof, exclusive of any distributing commission or discount, and in no
event less than the par value thereof.
SECTION 7.2. REDEMPTION OF STOCK. Subject to and in accordance with any
applicable laws and regulations and any applicable provisions of the
Corporation's Articles of Incorporation, the Corporation shall redeem all
outstanding shares of its capital stock duly delivered or offered for
redemption by any registered stockholder in a manner prescribed by or under
authority of the Board of Directors. Any shares so delivered or offered for
redemption shall be redeemed at a redemption price prescribed by the Board of
Directors in accordance with applicable laws and regulations; provided that
in no event shall such price be less than the applicable net asset value of
such shares as determined in accordance with the provisions of Article VIII
of these By-Laws. The Corporation shall pay redemption prices in cash.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE; VALUATION OF
PORTFOLIO SECURITIES AND OTHER ASSETS
SECTION 8.1. NET ASSET VALUE. The net asset value of a share of capital
stock of the Corporation shall be determined in accordance with applicable
laws and regulations under the supervision of such persons and at such time
or times as shall from time to time be prescribed by the Board of Directors.
Each such determination shall be made by subtracting from the value of the
assets of the Corporation (as determined pursuant to Section 8.2 of these
By-Laws) the amount of its liabilities, dividing the remainder by the number
of shares of Common Stock issued and outstanding, and adjusting the results
to the nearest full cent per share.
SECTION 8.2. VALUATION OF PORTFOLIO SECURITIES AND OTHER ASSETS. Except as
otherwise required by any applicable law or regulation of any regulatory
agency having jurisdiction over the activities of the Corporation, the
Corporation shall determine the value of its portfolio securities and other
assets as follows:
(a) securities for which market quotations are readily available shall
be valued at current market value;
(b) all other securities and assets shall be valued at amounts deemed
best to reflect their fair value as determined in good faith by or under
the supervision of such persons and at such time or times as shall from
time to time be prescribed by the Board of Directors.
(c) All quotations, sale prices, bid and asked prices and other
information shall be obtained from such sources as the persons making such
determination believe to be reliable and any determination of net asset
value based thereon shall be conclusive.
ARTICLE IX
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Charter of the
Corporation, dividends and distributions upon the Common Stock of the
Corporation may be declared at such intervals as the Board
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of Directors may determine, in cash, in securities or other property, or in
shares of stock of the Corporation, from any sources permitted by law, all as
the Board of Directors shall from time to time determine.
Inasmuch as the computation of net income and net profits from the sale of
securities or other properties for federal income tax purposes may vary from
the computation thereof on the books of the Corporation, the Board of
Directors shall have power, in its discretion, to distribute as income
dividends and as capital gain distributions, respectively, amounts sufficient
to enable the Corporation to avoid or reduce liability for federal income
taxes.
ARTICLE X
BOOKS AND RECORDS
SECTION 10.1. LOCATION. The books and records of the Corporation may be
kept outside the State of Maryland at such place or places as the Board of
Directors may from time to time determine, except as otherwise required by
law.
SECTION 10.2. STOCK LEDGERS. The Corporation shall maintain at the office
of its Transfer Agent an original stock ledger containing the names and
addresses of all stockholders and the number of shares held by each
stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for
visual inspection.
SECTION 10.3. ANNUAL STATEMENT. The President or a Vice President or the
Treasurer shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the Corporation, including a statement of assets
and liabilities and a statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting of stockholders if such
meeting be held, and shall be filed within twenty (20) days thereafter at the
principal office of the Corporation in the State of Maryland.
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
stockholders, directors, or of any committee is required to be given under
the provisions of the statute or under the provisions of the Charter of the
Corporation 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 Directors or committee in person, shall be deemed equivalent
to the giving of such notice to such person.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. SEAL. The Board of Directors shall adopt a corporate seal,
which shall be in the form of a circle, and shall have inscribed thereon the
name of the Corporation, the year of its incorporation, and the words
"Corporate Seal--Maryland." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 12.2. FISCAL YEAR. The fiscal year of the Corporation shall end on
such date as the Board of Directors may by resolution specify, and the Board
of Directors may by resolution change such date for future fiscal years at
any time and from time to time.
SECTION 12.3. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Corporation, and all notes or other evidences of
indebtedness issued in the name of the Corporation, shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate, or as may be specified in or pursuant to the
agreement between the Corporation and the bank or trust company appointed as
Custodian of the securities and funds of the Corporation.
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ARTICLE XIII
COMPLIANCE WITH FEDERAL REGULATIONS
The Board of Directors is hereby empowered to take such action as they may
deem to be necessary, desirable or appropriate so that the Corporation is or
shall be in compliance with any federal or state statute, rule or regulation
with which compliance by the Corporation is required.
ARTICLE XIV
AMENDMENTS
These By-Laws may be amended, altered, or repealed at any annual or
special meeting of the stockholders by the affirmative vote of the holders of
a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote, provided notice of the general purpose of
the proposed amendment, alteration or repeal is given in the notice of said
meeting; or, at any meeting of the Board of Directors, by a vote of a
majority of the whole Board of Directors, provided, however, that any By-Law
or amendment or alteration of the By-Laws adopted by the Board of Directors
may be amended, altered or repealed and any By-Law repealed by the Board of
Directors may be reinstated, by vote of the stockholders of the Corporation.
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CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991, between DEAN
WITTER/Sears Liquid Asset Fund Inc., a Massachusetts business trust organized
and existing under the laws of the Commonwealth of Massachusetts, having its
principal office and place of business at 2 World Trade Center, New York, New
York 10048 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person
is an Officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
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4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received (irrespective of constructive receipt) by
the Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
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12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
15. "Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the
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Securities Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
19. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer or employee of the Fund, but
in each case only if duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as holding
the position of "Officer of DWTC" shall be an Officer only for purposes of
Articles XII and XIII hereof.
20. "Option" shall mean a Call Option, Covered Call Option, Index Option
and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
24. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
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<PAGE>
for the same, or evidencing or representing any other rights or interest
therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
26. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
27. "Shares" shall mean the shares of beneficial interest of the Fund and
its Series.
28. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust Company, a New Jersey
limited purpose trust company, its successors and assigns.
30. "Transfer Agent Account" shall mean any account in the name of the
Transfer Agent maintained with The Bank of New York pursuant to a Cash
Management and Related Services Agreement between The Bank of New York and the
Transfer Agent.
31. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
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ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series separate
and apart from each other Series and from other assets held by the Custodian.
Except as otherwise expressly provided in this Agreement, the Custodian will not
be responsible for any Securities and moneys not actually received by it, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto. The Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previously made and
moneys are not finally collected, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Fund shall deliver to
the Custodian a certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of Securities specifically
allocated to a Series in any Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Directors of the Fund, substantially in
the form of Exhibit B hereto, approving,
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authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate to deposit in such Depository
all Securities specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible with respect to
such Securities in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral.
Securities and moneys deposited in either the Book-Entry System or a Depository
will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a
Certificate, to accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series. All securities are to be
held or disposed of by the Custodian for, and subject at all times to the
instructions of, the Fund pursuant to the terms of this Agreement. The Custodian
shall have no power or authority to assign, hypothecate, pledge or otherwise
dispose of any Securities except as provided by the terms of this Agreement, and
shall have the sole power to release and deliver Securities held pursuant to
this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Such moneys will be held in such manner and account as the Fund and the
Custodian shall agree upon in writing from time to time. Money credited to a
separate account for a Series shall be subject only to drafts, orders, or
charges of the Custodian pursuant to this Agreement and shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of Trustees certified
by an Officer and by the Secretary or Assistant Secretary of the Fund setting
forth the name and address of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose for which payment
is to be made, and declaring such purpose to be a proper corporate purpose;
provided, however, that amounts
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representing dividends or distributions with respect to Shares shall be paid
only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees
or operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
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5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due or payable;
(b) Promptly give notice to the Fund and promptly present for payment
and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account
the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
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<PAGE>
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940 in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer, or futures commission
merchant of a statement or confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers, or future
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commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures Contract
Option, the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities purchased by or for
the Fund, pay to the broker specified in
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the Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver such to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale and settlement; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly appointed and registered
nominee of the
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Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise
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and settlement; (e) the exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put Option, deliver or direct a
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct a
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
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Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, against delivery of such
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Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
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12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract,
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(or with respect to any number of identical Futures Contract(s)): (a) the Series
for which the Futures Contract is being entered; (b) the category of Futures
Contract (the name of the underlying index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery or
settlement date a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index Futures Contract,
the total cash settlement amount to be paid or received, and with respect to a
Financial Futures Contract, the Securities and/or amount of cash to be delivered
or received; (c) the broker, dealer, or futures commission merchant to or from
whom payment or delivery is to be made or received; and (d) the amount of cash
and/or Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the
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statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other
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information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the date of sale; (e) the sale price; (f) the date
of settlement; (g) the total amount payable to the Fund upon such sale; and (h)
the name of the broker of futures commission merchant through whom the sale was
made. The Custodian shall consent to the cancellation of the Futures Contract
Option being closed against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
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5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the
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Futures Contract underlying the Futures Option Contract; (d) the exercise price;
(e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of
the broker or futures commission merchant to whom the premium is to be paid; and
(h) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series. The Custodian shall
effect the withdrawals from the Senior Security Account specified in the
Certificate. The withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by
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such broker for the account of the Custodian (or any nominee of the Custodian)
as custodian of the Fund, issue a receipt or make the deposits into the Margin
Account and the Senior Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Fund to such broker, dealer, or financial institution; (e) the
date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in connection with
such Reverse Repurchase Agreement. The Custodian shall, upon receipt of
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the total amount payable to the Fund specified in the Certificate, Oral
Instructions, or Written Instructions make the delivery to the broker, dealer,
or financial institution and the deposits, if any, to the Senior Security
Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker,
dealer, or financial institution with whom the Reverse Repurchase Agreement is
to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or Written
Instructions, make the payment to the broker, dealer, or financial institution
and the withdrawals, if any, from the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular Reverse
Repurchase Agreement be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution
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to which the loan was made. The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial institution to which the loan was
made upon receipt of the total amount designated in the Certificate as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or a
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time
to time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
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2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash and/or
Securities are maintained in a Collateral Account for any Series, the Custodian
shall furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document,
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the Fund shall promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Directors of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein and the declaration of dividends and
distributions thereon the Custodian to rely on Oral Instructions, Written
Instructions, or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to
be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
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(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish, or cause to be
furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth
the Series and number of Shares received by the Transfer Agent for redemption
and that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount specified in the Certificate
issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account of
such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series, (except a borrowing for
investment or for temporary or emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the provisions of paragraph 2 of
this Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund
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for such Series payable on demand and shall bear interest from the date incurred
at a rate per annum (based on a 360-day year for the actual number of days
involved) equal to the Federal Funds Rate plus 1/2%, such rate to be adjusted on
the effective date of any change in such Federal Funds Rate but in no event to
be less than 6% per annum. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien and security interest in the aggregate
amount of such overdrafts and indebtedness as may from time to time exist in and
to any property specifically allocated to such Series at any time held by it for
the benefit of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or control of any
third party acting in the Custodian's behalf. The Fund authorizes the Custodian,
in its sole discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any money balance of account standing
to such Series' credit on the Custodian's books. In addition, the Fund hereby
covenants that on each Business Day on which either it intends to enter a
Reverse Repurchase Agreement and/or otherwise borrow from a third party, or
which next succeeds a Business Day on which at the close of business the Fund
had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall
prior to 9 a.m., New York City time, advise the Custodian, in writing, of each
such borrowing, shall specify the Series to which the same relates, and shall
not incur any indebtedness, including pursuant to any Reverse Repurchase
Agreement, not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the
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borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents. The Custodian may, with respect to questions of
law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, or of its own counsel, at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
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(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by the
Fund, as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan, except that this subparagraph shall not excuse any liability the
Custodian may have for failing to act in accordance with Article X hereof or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
sub-paragraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
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similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late crediting
by a Depository of any amount payable upon Securities deposited in a Depository
which may mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue amount on
Securities held in a Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any action suit or proceeding
in respect to any Securities held by a Depository which in its opinion may
involve it in expense or liability, unless indemnity satisfactory to it against
all expense and liability be furnished as often as may be required, or
alternatively, the Fund shall be subrogated to the rights of the Custodian with
respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
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6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including,
but not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any Sub-Custodian of the Securities and moneys
owned by the Fund, provided such Sub-Custodian is a banking institution located
in a foreign country and appointed by the Custodian pursuant to paragraph 7 of
this Article.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation, and any such expenses with respect to a
Series incurred by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it for the account of
a Series the amount of any loss, damage, liability or expense, including counsel
fees, for which it
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shall be entitled to reimbursement under the provisions of this Agreement
attributable to, or arising out of, its serving as Custodian for such Series.
The expenses for which the Custodian shall be entitled to reimbursement
hereunder shall include, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling outside of New York
City transactions involving the purchase and sale of Securities of the Fund.
Notwithstanding the foregoing or anything else contained in this Agreement to
the contrary, the Custodian shall, prior to effecting any charge for
compensation, expenses, or any overdraft or indebtedness or interest thereon,
submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing, Oral Instructions, or Written Instructions
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian, whether
by hand delivery, telecopier or other similar device, or otherwise, by the close
of business of the same day that such Oral Instructions or Written Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions or Written Instructions
given to the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in
Appendix E hereto, which are in the possession of the Custodian shall be the
property of the Fund. Such books
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and records shall be prepared and maintained by the Custodian as required by the
Investment Company Act of 1940, as amended, and other applicable securities laws
and rules and regulations. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the Custodian its
expenses of providing such copies. Upon reasonable request of the Fund, the
Custodian shall provide in hard copy or on micro-film, whichever the Custodian
elects, any records included in any such delivery which are maintained by the
Custodian on a computer disc, or are similarly maintained, and the Fund shall
reimburse the Custodian for its expenses of providing such hard copy or
micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for
any such liability, claim, loss and demand arising out of the Custodian's own
negligence, bad faith, or willful misconduct or that of its officers,
employees, or agents.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securities
and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
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<PAGE>
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement
shall continue until terminated by either the Custodian giving to the Fund, or
the Fund giving to the Custodian, a notice in writing specifying the date of
such termination, which date shall be not less than 60 days after the date of
the giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written
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<PAGE>
notice in the event of the "Bankruptcy" of The Bank of New York. As used in this
sub-paragraph, the term "Bankruptcy" shall mean The Bank of New York's making a
general assignment, arrangement or composition with or for the benefit of its
creditors, or instituting or having instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or the entry of a order for relief under
any applicable bankruptcy law or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or if a
petition is presented for the winding up or liquidation of the party or a
resolution is passed for its winding up or liquidation, or it seeks, or becomes
subject to, the appointment of an administrator, receiver, trustee, custodian or
other similar official for it or for all or substantially all of its assets or
its taking any action in furtherance or, or indicating its consent to approval
of, or acquiescence in, any of the foregoing.
ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to and to receive notices
from the Custodian.
2. The parties hereto shall utilize the Terminal Link only for the
purpose of the Fund providing Certificates to the Custodian and the Custodian
providing notices to the Fund and only after the Fund and the Custodian shall
have established access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such access codes. Each use
of the Terminal Link by the Fund shall constitute a representation and warranty
that at least two such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of,
or through the Terminal and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
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<PAGE>
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Bank's prior written
consent. The Fund acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund or the Custodian and whether with or without
the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will, and will cause its officers and employees to, treat
the user and authorization codes, passwords and authentication keys applicable
to Terminal Link with extreme care. Each party hereby irrevocably authorizes the
other to act in accordance with and rely on Certificates and notices received by
it through the Terminal Link. Each party acknowledges that it is its
responsibility to assure that only its authorized persons use the Terminal Link
on its behalf, and that a party shall not be responsible nor liable for use of
the Terminal Link on its behalf of the other party by unauthorized persons
except that the other party shall be liable for such use thereof by unauthorized
persons who have obtained access thereto as a result of the bad faith or willful
misconduct of such party or any of its officers or employees.
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<PAGE>
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willfull misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000, provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, it is hereby agreed
that in no event shall either party or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal Link be
responsible for any special, indirect, incidental or consequential damages which
the other party may incur or experience by reason of its use of the Terminal
Link even if such party, manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the Terminal Link
shall either party or any such manufacturer or supplier be liable for acts of
God, or with respect to the following to the extent beyond such person's
reasonable control: machine or computer breakdown or malfunction, interruption
or malfunction of communication facilities, labor difficulties or any other
similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or of any notice transmitted by the Terminal Link, verify to the
other party by use of the Terminal Link its receipt of such Certificate or
notice, and in the absence of such verification a party to whom a Certificate or
notice is sent shall not be liable for any failure to act in accordance with
such Certificate or notice, and the sending party may not claim that such
Certificate or notice was received by the other.
- 39 -
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
- 40 -
<PAGE>
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Directors. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER/SEARS LIQUID ASSET FUND INC.
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________
- 42 -
<PAGE>
APPENDIX A
I, , President and I, ,
of DEAN WITTER , a Maryland corporation (the
"Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Directors of the Fund in conformity with the Fund's Articles of Incorporation
and By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of DWTC" shall
be an Authorized Person only for purposes of Articles XII and XIII. The
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
_________________ ________________ _________________
<PAGE>
APPENDIX B
I, , President and I, ,
of DEAN WITTER , a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of DWTC"
is specified serve in the following positions with the Fund and each has been
duly elected or appointed by the Board of Directors of the Fund to each such
position and qualified therefor in conformity with the Fund's Articles of
Incorporation and By-Laws. With respect to the following individuals
for whom a position of "Officer of DWTC" is specified, each such
individual has been designated by a resolution of the Board
of Directors of the Fund to be an Officer for purposes of the Fund's
Custody Agreement with The Bank of New York, but only for purposes of
Articles XII and XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, hereby certifies that he or she is the
duly elected and acting of DEAN WITTER (the "Fund"),
further certifies that the following resolutions were adopted by the Board of
Directors of the Fund at a meeting duly held on , 199 , at which a quorum
at all times present and that such resolutions have not been modified or
rescinded and are in full force an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 199
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on instructions by the Fund
to the Custodian communicated by a Terminal Link as defined in the Custody
Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to officers of the Fund as defined in the Custody Agreement,
and shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody Agreement
shall, following the establishment of such access codes and such internal
safekeeping procedures, advise the Custodian that the same have been established
by delivering a Certificate, as defined in the Custody Agreement, and the
Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of DEAN WITTER
, as of the day of , 199 .
<PAGE>
APPENDIX D
I, , an Assistant Vice President with THE
BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a Maryland
corporation (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Directors of the Fund at a meeting duly held on
, 199 , at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a
Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in The Depository Trust Company ("DTC"), as a "Depository" as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize DTC to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a
Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as a Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he
or she is the duly elected and acting of , a
Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
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
activities 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
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
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:
FIXED INCOME FUNDS
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of daily net
Income Fund 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 0.060% of the portion of the daily net
Securities Trust 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 0.040% of the net assets.
Income Trust
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 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and
0.050% of the portion of the daily net
assets exceeding $500 million.
Dean Witter High Income 0.050% to the net assets.
Securities
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. 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
B-1
<PAGE>
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 0.060% of the portion of the daily net
Income Securities 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 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State Municipal 0.035% to the net assets.
Series Trust (10)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% to the net assets not exceeding
Income Fund $500 million and 0.0525% of the net
assets exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities Trust
Dean Witter Select Dimensions 0.65% to the net assets.
Series-North American Government
Securities Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net
Securities Trust 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 0.050% of the portion of such daily net
Securities Trust 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
B-2
<PAGE>
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 0.050% to the net assets.
Series-High Yield
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income
Dean Witter World Wide Income 0.075% of the daily net assets up to
Trust $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 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
Dean Witter American Value 0.0625% of the portion of the daily net
Fund 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 0.065% to the portion of daily net
Securities 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 0.050% of the portion of daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of daily net
assets exceeding $500 million.
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. 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.
B-3
<PAGE>
Dean Witter European Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $500 million; and
0.057% of the portion of daily net
assets exceeding $500 million.
Dean Witter Global Asset Allocation 1.0% to the net assets.
Fund
Dean Witter Global Dividend 0.075% to the net assets.
Growth Securities
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 0.075% to the net assets.
Small Cap Fund
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 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and
0.050% of the portion of the daily net
assets exceeding $250 million.
Dean Witter Pacific Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $1 billion; and
0.057% of the portion of daily net
assets exceeding $1 billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series 0.085% to the net assets.
American Value
Dean Witter Retirement Series 0.085% to the net assets.
Capital Growth
Dean Witter Retirement Series 0.075% to the net assets.
Dividend Growth
Dean Witter Retirement Series 0.10% to the net assets.
Global Equity
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income Securities
Dean Witter Retirement Series 0.050% to the net assets.
Liquid Asset
Dean Witter Retirement Series 0.085% to the net assets.
Strategist
Dean Witter Retirement Series 0.050% to the net assets.
U.S. Government Money Market
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Dean Witter Retirement Series 0.075% to the net assets.
Utilities
B-4
<PAGE>
Dean Witter Retirement Series 0.050% to the net assets.
Value Added
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 0.050% of the portion of daily net
Series assets not exceeding $500 million; and
0.45% of the portion of daily net assets
exceeding $500 million.
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth
Dean Witter Variable Investment 0.0625% of the portion of daily net
Series-Dividend Growth assets not exceeding $500 million; and
0.050% of the portion of daily net
assets exceeding $500 million.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Equity
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth
Dean Witter Variable Investment 0.050% to the net assets.
Series-Managed
Dean Witter Variable Investment 0.065% of the portion of daily net
Series-Utilities assets exceeding $500 million and 0.055%
of the portion of daily net assets
exceeding $500 million.
Dean Witter World Wide 0.055% of the portion of daily net
Investment Trust assets not exceeding $500 million; and
0.05225% of the portion of daily net
assets exceeding $500 million.
B-5
<PAGE>
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 0.050% of the portion of the daily net
Daily Income Trust 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 0.050% of the portion of the daily net
Fund Inc. 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 0.050% of the portion of the daily net
Money Market Trust 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-
B-6
<PAGE>
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 0.050% of the net assets.
Liquid Assets
Dean Witter Retirement Series 0.050% of the net assets.
U.S. Government Money Market
Dean Witter Select Dimensions Series- 0.50% to the net assets.
Money Market Portfolio
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust 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 0.050% of the portion of the daily net
Money Market Trust 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 0.050% to the net assets.
Series-Money Market
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government Income 0.060% to the average weekly net
Trust 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
B-7
<PAGE>
$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 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-8
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 32 to the Registration Statement on Form N-1A (the
"Registration Statement") of our report dated October 10, 1995, relating to the
financial statements and financial highlights of Dean Witter Liquid Asset Fund
Inc., which appears in such Prospectus, and to the incorporation by reference of
our report into the Statement of Additional Information which constitutes part
of this Registration Statement. We also consent to the references to us under
the heading "Financial Highlights" in the Prospectus and under the headings
"Independent Accountants" and "Experts" in the Statement of Additional
Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 10, 1995
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER/SEARS LIQUID ASSET FUND INC.
WHEREAS, Dean Witter/Sears Liquid Asset Fund Inc. (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 March 21, 1993, the Fund adopted a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the Act, and the Directors then
determined that there was a reasonable likelihood that the Plan of Distribution
would benefit the Fund and its shareholders; and
WHEREAS, the Directors 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 Agreement incorporated in said Plan and Agreement of
Distribution was entered into by the Fund with Dean Witter Reynolds Inc.
("DWR"); and
WHEREAS, the Fund and DWR desire to substitute DW Distributors Inc. (the
"Distributor") in the place of DWR as distributor of the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue to
promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of this date, 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 and restates the Plan of
Distribution previously adopted, and the Distributor hereby agrees to the terms
of said Plan of Distribution (the "Plan"), as amended and restated herein, in
accordance with Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund is hereby authorized to utilize its assets to finance certain
activities in connection with the distribution of its shares.
2. Subject to the supervision of the Board of Directors and the terms of
the Distribution Agreement, the Distributor is authorized to promote the
distribution of the Fund's shares and to provide related services through DWR,
its affiliates or other broker-dealers it may select, and its own Registered
Representatives. The Distributor, DWR, its affiliates and said broker-dealers
shall be reimbursed, directly or through the Distributor, as it may direct, as
provided in paragraph 4 hereof for their services and expenses, which may
include one or more of the following: (1) compensation to, and expenses of,
account executives and other employees, including overhead and telephone
expenses; (2) sales incentives and bonuses to sales representatives of the
Distributor, DWR, its affiliates and other broker-dealers, and to marketing
personnel in connection with promoting sales of shares of the Fund; (3) expenses
incurred in connection with promoting sales of shares of the Fund; (4) preparing
and distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.
3. The Distributor hereby undertakes to directly bear all costs of
rendering the services to be performed by it under this Plan and under the
Distribution Agreement, except for those specific expenses that the Board of
Directors determines to reimburse as hereinafter set forth.
4. The Fund is hereby authorized to reimburse the Distributor, DWR, its
affiliates and other broker-dealers for incremental distribution expenses
incurred by them specifically on behalf of the Fund. Reimbursement will be made
through payments at the end of each month in such amounts determined in advance
of each fiscal quarter by the Fund's Board of Directors, including a majority of
the Directors who are not "interested persons" of the Fund, as defined in the
Act. The amount of each monthly payment may in no event exceed an amount equal
to a payment at the annual rate of 0.15 of 1% of the Fund's average net assets
during the month. In making quarterly determination of the amounts that may be
expended by the Fund, the Distributor shall provide, and the Directors
1
<PAGE>
shall review, a quarterly budget of projected incremental distribution expenses
to be incurred by the Distributor, DWR, its affiliates or other broker-dealers
on behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Board of Directors shall
determine the particular expenses, and the portion thereof, that may be borne by
the Fund, and in making such determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the shares of the Fund
directly or through DWR, its affiliates or other broker-dealers.
5. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers.
6. If, as of the end of any fiscal year, the actual expenses incurred by
the Distributor, DWR, its affiliates and other broker-dealers on behalf of the
Fund (including accrued expenses and amounts reserved for incentive compensation
and bonuses) are less than the amount of payments made by the Fund pursuant to
this Plan, the Distributor shall promptly make appropriate reimbursement to the
Fund. If, however, as of the end of any fiscal year, the actual expenses of the
Distributor, DWR, its affiliates and other broker-dealers are greater than the
amount of payments made by the Fund pursuant to this Plan, the Fund will not
reimburse the Distributor, DWR, its affiliates or other broker-dealers for such
expenses through payments accrued pursuant to this Plan in the subsequent fiscal
year.
7. The Distributor shall provide the Fund for review by the Board of
Directors, and the Board of Directors shall review, promptly after the end of
each fiscal quarter a written report regarding the incremental distribution
expenses incurred by the Distributor, DWR, its affiliates or other broker-
dealers on behalf of the Fund during such fiscal quarter, which report shall
include: (1) an itemization of the types of expenses and the purposes therefor;
(2) the amounts of such expenses; and (3) a description of the benefits derived
by the Fund.
8. This Plan, as amended and restated, shall become effective upon
approval by a vote of the Board of Directors of the Fund, and of the Directors
who are not "interested persons" of the Fund, as defined in the Act, and who
have no direct or indirect financial interest in the operation of this Plan,
cast in person at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect until April 30, 1993, 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 8 hereof.
This Plan may not be amended to increase materially the amount to be spent for
the services described herein unless such amendment is approved by a vote of at
least a majority of the outstanding voting securities of the Fund, as defined in
the Act, and no material amendment to this Plan shall be made unless approved in
the manner provided for approval in paragraph 8 hereof.
10. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Directors who are not "interested persons"
of the Fund, as defined in the Act, and who have no direct or indirect financial
interest in the operation of this Plan or by a vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act, on no more
than 30 days' written notice of any other party to this Plan.
11. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
12. The Fund shall preserve copies of this Plan and all reports made
pursuant to paragraph 7 hereof, for a period of not less than six years from the
date of this Plan, as amended and restated herein, or any such report, as the
case may be, the first two years in an easily accessible place.
13. This Plan shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
2
<PAGE>
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
Plan of Distribution, as amended and restated, as of the day and year set forth
below in New York, New York.
Date: March 21, 1983 DEAN WITTER/SEARS LIQUID ASSET FUND INC.
As amended on January 4, 1993
By:
-------------------------------------
Attest:
- -----------------------------------
DW DISTRIBUTORS INC.
By:
-------------------------------------
Attest:
- -----------------------------------
DEAN WITTER REYNOLDS INC.
By:
-------------------------------------
Attest:
- -----------------------------------
3
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
16) The Fund's current yield for the seven days ending
August 31, 1995
(A-B) x 365/N
(1.001035 -1) x 365/7 = 5.40%
The Fund's effective annualized yield for the seven days ending
August 31, 1995
365/N
A - 1
365/7
1.001035 - 1 = 5.54%
A = Value of a share of the Fund at end of period.
A = Value of a share of the Fund at beginning of period.
N = Number of days in the period.
CALCULATION
(1.001035 -1) x 365/7
= 5.40%
((1.001035) x 52.1428714-1)
= 5.54%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER LIQUID ASSET FUND INC.
(A) GROWTH OF $10,000
(B) GROWTH OF $50,000
(C) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
INVESTED - P TOTAL
$10,000, $50,000 & RETURN - TR (A) GROWTH OF (B) GROWTH OF (C) GROWTH OF
$100,000 31-Aug-95 $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ----------- ----------- ---------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
22-Sep-75 353.32 $45,332 $226,660 $453,320
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 10,467,522,290
<INVESTMENTS-AT-VALUE> 10,467,522,290
<RECEIVABLES> 15,631,823
<ASSETS-OTHER> 269,614
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,483,423,727
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 123,947,708
<TOTAL-LIABILITIES> 123,947,708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,358,793,338
<SHARES-COMMON-STOCK> 10,354,464,532
<SHARES-COMMON-PRIOR> 8,491,526,094
<ACCUMULATED-NII-CURRENT> 682,681
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,359,476,019
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 558,228,524
<OTHER-INCOME> 0
<EXPENSES-NET> 60,878,917
<NET-INVESTMENT-INCOME> 497,349,607
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 497,395,126
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,802,984,447
<NUMBER-OF-SHARES-REDEEMED> 27,430,965,581
<SHARES-REINVESTED> 495,919,572
<NET-CHANGE-IN-ASSETS> 1,867,892,919
<ACCUMULATED-NII-PRIOR> 57,006
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,483,251
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 60,878,917
<AVERAGE-NET-ASSETS> 9,418,300,719
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.053
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
