<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1996
REGISTRATION NOS.: 811-2575
2-53856
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- --------------------------------------------------------------------------------
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. 33 /X/
AND/OR
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 23 /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 18, 1996 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, 1996, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON OCTOBER 2, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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<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 18, 1996
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 18, 1996, 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, 1996/17
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-NEWS (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.
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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).
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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 100
investment companies and other portfolios with assets of
approximately $86.5 billion at September 30, 1996 (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).
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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).
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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, 1996.
<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........................................................ 0.25%
Total Fund Operating Expenses......................................... 0.63%
</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:....................................... $6 $20 $35 $78
</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,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
Net investment income......... 0.050 0.053 0.030 0.027 0.040 0.064 0.079 0.086 0.068 0.057
Less dividends from net
investment income............ (0.050) (0.053) (0.030) (0.027) (0.040) (0.064) (0.079) (0.086) (0.068) (0.057)
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
TOTAL INVESTMENT RETURN+...... 5.15% 5.41% 3.07% 2.72% 4.10% 6.61% 8.27% 8.96% 7.01% 5.93%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 0.63% 0.65% 0.70% 0.69% 0.67% 0.62% 0.56% 0.56% 0.61% 0.63%
Net investment income......... 5.02% 5.28% 3.02% 2.67% 4.03% 6.41% 7.91% 8.66% 6.77% 5.74%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions..................... $11,389 $10,359 $8,492 $7,959 $9,214 $10,811 $11,902 $10,734 $8,056 $6,965
</TABLE>
- ------------
+ Calculated based on the net asset value as of the last business day of the
period.
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 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$83.6 billion as of September 30, 1996. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $2.9 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, 1996, 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 0.63% 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
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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.
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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, 1996, 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,
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<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, if any, 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 and TCW/DW Balanced Fund
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-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. Such procedures may include
requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the experience of the Dean
Witter Funds in the past.
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<PAGE>
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-NEWS (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 proceeds 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
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<PAGE>
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 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
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<PAGE>
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, 1996 was 5.04%. The
effective annual yield on 5.04% is 5.17%, 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 that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty
14
<PAGE>
REMOVE APPLICATION CAREFULLY
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>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS For assistance in completing this application, telephone Dean Witter Trust Company at (800) 869-NEWS (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,
use lines 1 & 3 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 / / CHECK (enclosed) $ -------------------- (Make SHARES: Payable to Dean Witter Liquid Asset Fund Inc.)
Minimum Initial / / WIRE* On ---- MF* ----
Investment:
$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-NEWS (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:
-------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
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
$5,000 is selected a signature guarantee is required)
----------------------------------------------------------------------------------
Name
----------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------
City State Zip Code
<PAGE>
PAYMENT TO / / Dean Witter Trust Company is hereby authorized to
PREDESIGNATED honor telephonic or other instructions, without signature
BANK ACCOUNT guarantee, from any person for the redemption 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
333Company shall be liable for any redemption caused by unauthorized
instruction(s)):
Bank Account must ------------------------------------------------- ------------------------------
be in same name as NAME & BANK ACCOUNT NUMBER BANK'S ROUTING TRANSMIT CODE
shares are registered (ASK YOUR BANK)
Minimum Amount: -------------------------------------------------
$1,000 NAME OF BANK
-------------------------------------------------
ADDRESS OF BANK
( )
-------------------------------------------------
TELEPHONE NUMBER OF BANK
- ----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AUTHORIZATION
- ----------------------------------------------------------------------------------------------------------------------------------
NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY
I. FOR ALL MODIFICATION OF THE INFORMATION BELOW WILL REQUIRE AN
ACCOUNTS 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 SIGNED THIS DAY OF , 19 .
application
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
CORPORATIONS AND SEAL IS REQUIRED.
INCORPORATED
ASSOCIATIONS I, ____________________, Secretary of the Registered Owner, do hereby certify
ONLY. that at a meeting on _________________ at which a quorum was present
SIGN ABOVE AND throughout, the Board of Directors of the corporation/the officers of the
COMPLETE THIS association duly adopted a resolution, which is in full force and effect and
SECTION in accordance with the Registered Owner's charter and by-laws, which
resolution did the following: (1) empowered the above-named 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
(or Corporate of , 19 .
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 Certifying Officer of the Corporation or
Seal) 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 Certifying
SECTION 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 to above-named
(if any) 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
</TABLE>
- -Registered Trademark- 1996 Dean Witter Distributors Inc.
<PAGE>
days of a sale or a sale within sixty days of a purchase) of a security. In
addition, investment personnel may not purchase or sell a security for their
personal account within thirty days before or after any transaction in any Dean
Witter Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
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>
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, 1996, 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 at August 31, 1996 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 7, 1996
16
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL PAPER (76.6%)
AUTOMOTIVE - FINANCE (7.7%)
$ 335,000 Ford Motor Credit Co.
10/03/96 - 02/04/97............................. 5.46 - 5.57% $ 331,772,439
547,000 General Motors Acceptance Corp.
09/13/96 - 02/24/97............................. 5.43 - 5.85 539,882,651
-------------------
871,655,090
-------------------
BANK HOLDING COMPANIES (14.3%)
120,000 BankAmerica Corp.
09/20/96 - 09/26/96............................. 5.48 119,550,000
150,000 Chase Manhattan Corp.
09/05/96 - 10/07/96............................. 5.44 - 5.52 149,647,070
10,000 Corestates Capital Corp. 09/30/96............... 5.38 9,956,000
465,000 Morgan (J.P.) & Co. Inc.
09/06/96 - 01/03/97............................. 5.21 - 5.61 462,937,883
50,000 Mellon Financial Co. 02/06/97................... 5.54 48,809,708
305,000 NationsBank Corp.
09/24/96 - 02/28/97............................. 5.42 - 5.75 302,058,096
220,000 PNC Funding Corp.
09/06/96 - 10/23/96............................. 5.36 - 5.57 219,058,111
300,000 Republic New York Corp.
09/11/96 - 12/13/96............................. 5.37 - 5.65 298,280,931
15,000 U.S. Bancorp 09/05/96........................... 5.47 14,988,750
-------------------
1,625,286,549
-------------------
BANKS - COMMERCIAL (33.7%)
464,000 Abbey National North America Corp.
09/16/96 - 02/24/97............................. 5.42 - 5.66 458,561,858
250,000 ABN-AMRO North America Finance Inc.
09/03/96 - 12/20/96............................. 5.12 - 5.53 247,285,725
380,000 Canadian Imperial Holdings Inc.
09/05/96 - 11/12/96............................. 5.37 - 5.55 377,152,078
200,000 Commerzbank U.S. Finance Inc.
10/09/96 - 02/20/97............................. 5.55 196,812,417
555,000 Deutsche Bank Financial Inc.
09/27/96 - 02/03/97............................. 5.36 - 5.66 546,041,353
542,000 Dresdner U.S. Finance Inc.
09/19/96 - 02/14/97............................. 5.41 - 5.74 534,744,662
555,000 National Australia Funding (DE) Inc.
11/06/96 - 02/27/97............................. 5.40 - 5.56 544,459,365
145,000 SBC Finance (DE) Inc. 12/27/96.................. 5.64 142,395,478
545,000 Toronto-Dominion Holdings USA Inc.
09/10/96 - 12/24/96............................. 5.14 - 5.56 541,658,826
50,000 Union Commercial Funding Corp. 11/01/96......... 5.49 49,539,306
210,000 Westpac Capital Corp.
10/08/96 - 01/14/97............................. 5.50 - 5.70 207,235,461
-------------------
3,845,886,529
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
BROKERAGE (2.7%)
$ 215,000 Goldman Sachs Group L.P.
10/08/96 - 10/24/96............................. 5.53 - 5.54% $ 213,419,347
95,000 Morgan Stanley Group, Inc.
10/15/96 - 11/25/96............................. 5.35 - 5.38 94,098,375
-------------------
307,517,722
-------------------
DRUGS (0.3%)
32,000 Warner-Lambert Co. 10/31/96..................... 5.48 31,707,200
-------------------
FINANCE - COMMERCIAL (1.4%)
160,000 CIT Group Holdings, Inc.
09/13/96 - 10/22/96............................. 5.39 - 5.52 159,187,865
-------------------
FINANCE - CONSUMER (6.0%)
390,000 American Express Credit Corp.
09/27/96 - 11/29/96............................. 5.36 - 5.43 386,026,111
125,000 Avco Financial Services Inc.
10/31/96 - 11/22/96............................. 5.37 - 5.42 123,672,704
30,000 Beneficial Corp. 12/30/96....................... 5.43 29,462,558
145,000 Household Finance Corp.
10/02/96 - 01/30/97............................. 5.42 - 5.51 143,096,489
-------------------
682,257,862
-------------------
FINANCE - DIVERSIFIED (5.0%)
165,000 Associates Corp. of North America
09/16/96 - 11/25/96............................. 5.36 - 5.43 163,717,456
417,000 General Electric Capital Corp.
09/19/96 - 03/03/97............................. 5.25 - 5.63 410,471,919
-------------------
574,189,375
-------------------
FOODS & BEVERAGES (1.7%)
100,000 Coca-Cola Co. 10/07/96 - 10/09/96............... 5.44 - 5.54 99,428,542
100,000 Heinz (H.J.) Co. 12/19/96....................... 5.65 98,322,500
-------------------
197,751,042
-------------------
INSURANCE (0.2%)
20,000 AIG Funding Inc. 03/17/97....................... 5.62 19,400,500
-------------------
OFFICE EQUIPMENT (3.3%)
40,000 Hewlett-Packard Co.
09/30/96........................................ 5.45 39,821,000
255,000 IBM Credit Corp.
09/10/96 - 11/25/96............................. 5.35 - 5.49 253,930,358
50,000 International Business Machines Corp.
10/01/96........................................ 5.33 49,772,236
35,000 Xerox Credit Corp. 12/12/96..................... 5.42 34,467,261
-------------------
377,990,855
-------------------
RETAIL (0.3%)
40,000 Sears Roebuck Acceptance Corp.
10/07/96 - 10/23/96............................. 5.46 - 5.53 39,736,378
-------------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $8,732,566,967)..................................... 8,732,566,967
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM BANK NOTES (11.3%)
$ 200,000 Bank of America (Illinois)
10/08/96 - 10/22/96............................. 5.54 - 5.55% $ 200,000,000
230,000 F.C.C. National Bank
09/10/96 - 11/05/96............................. 5.43 - 5.56 230,000,000
25,000 Fifth Third Bancorp of NW Ohio N.A.
10/09/96........................................ 5.40 25,000,000
315,000 First National Bank of Boston
10/01/96 - 10/30/96............................. 5.38 - 5.42 315,000,000
50,000 First National Bank of Chicago 11/26/96......... 5.45 50,000,000
195,000 First Union National Bank
09/03/96 - 10/31/96............................. 5.37 - 5.47 195,000,000
200,000 La Salle National Bank
09/05/96 - 12/26/96............................. 5.40 - 5.61 200,000,000
70,000 NationsBank, N.A. (Carolinas)
09/09/96 - 10/07/96............................. 5.50 - 5.55 70,000,000
-------------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $1,285,000,000)..................................... 1,285,000,000
-------------------
CERTIFICATES OF DEPOSIT (7.8%)
280,000 Chase Manhattan Bank (USA)
09/20/96 - 02/25/97............................. 5.40 - 5.75 280,000,000
195,000 Mellon Bank, N.A.
10/16/96 - 12/24/96............................. 5.55 - 5.63 195,000,000
410,000 Union Bank of California, N.A.
09/11/96 - 02/05/97............................. 5.40 - 5.78 410,000,000
-------------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $885,000,000)....................................... 885,000,000
-------------------
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (3.5%)
130,000 Federal Home Loan Banks
09/18/96 - 12/30/96............................. 5.28 - 5.47 129,210,100
120,000 Federal National Mortgage Assoc.
09/18/96 - 10/10/96............................. 5.34 - 5.42 119,461,611
160,000 U.S. Treasury Bills
02/06/97 - 03/06/97............................. 5.06 - 5.14 156,302,017
-------------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(AMORTIZED COST $404,973,728)....................................... 404,973,728
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
BANKERS' ACCEPTANCES (1.3%)
$ 95,000 Chase Manhattan Bank, N.A.
09/10/96 - 02/13/97............................. 5.37 - 5.69% $ 93,727,418
52,000 Corestates Bank, N.A.
10/11/96 - 01/27/97............................. 5.35 - 5.70 51,219,551
-------------------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $144,946,969)....................................... 144,946,969
-------------------
REPURCHASE AGREEMENT (0.1%)
8,377 The Bank of New York due 09/03/96 (dated
08/30/96; proceeds $8,382,258; collateralized by
$8,755,229 Federal Home Loan Mortgage Corp.
11.00% due 07/25/18 valued at $8,545,037)
(Identified Cost $8,377,487).................... 5.125 8,377,487
-------------------
TOTAL INVESTMENTS
(AMORTIZED COST $11,460,865,151) (A)...... 100.6% 11,460,865,151
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS.................................... (0.6) (71,396,501)
----- --------------
NET ASSETS................................ 100.0% $11,389,468,650
----- --------------
----- --------------
<FN>
- ---------------------
(a) 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, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $11,460,865,151).......................... $11,460,865,151
Cash........................................................ 89,999
Receivable for:
Interest................................................ 22,825,928
Capital stock sold...................................... 33,380
Prepaid expenses and other assets........................... 180,265
---------------
TOTAL ASSETS........................................... 11,483,994,723
---------------
LIABILITIES:
Payable for:
Capital stock repurchased............................... 88,171,043
Investment management fee............................... 2,586,448
Plan of distribution fee................................ 938,268
Accrued expenses and other payables......................... 2,830,314
---------------
TOTAL LIABILITIES...................................... 94,526,073
---------------
NET ASSETS:
Paid-in-capital............................................. 11,388,779,903
Accumulated undistributed net investment income............. 688,747
---------------
NET ASSETS............................................. $11,389,468,650
---------------
---------------
NET ASSET VALUE PER SHARE,
11,389,451,097 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, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $626,139,047
------------
EXPENSES
Investment management fee................................... 30,669,867
Transfer agent fees and expenses............................ 26,264,255
Plan of distribution fee.................................... 10,716,020
Registration fees........................................... 778,253
Shareholder reports and notices............................. 549,793
Custodian fees.............................................. 350,439
Professional fees........................................... 71,169
Directors' fees and expenses................................ 16,452
Other....................................................... 91,193
------------
TOTAL EXPENSES......................................... 69,507,441
------------
NET INVESTMENT INCOME AND NET INCREASE...................... $556,631,606
------------
------------
</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,
1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income and net increase...................... $ 556,631,606 $ 497,349,607
Dividends from net investment income........................ (556,625,540) (497,395,126)
Net increase from capital stock transactions................ 1,029,986,565 1,867,938,438
-------------- --------------
TOTAL INCREASE......................................... 1,029,992,631 1,867,892,919
NET ASSETS:
Beginning of period......................................... 10,359,476,019 8,491,583,100
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$688,747 AND $682,681, RESPECTIVELY).................... $11,389,468,650 $10,359,476,019
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996
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's investment objectives are
high current income, preservation of capital and liquidity. The Fund was
incorporated in Maryland on September 3, 1974 and commenced operations on
September 22, 1975.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. 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.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable 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 the 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
24
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
$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.
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, other employees and selected broker-dealers,
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,
1996, the distribution fee was accrued at the annual rate of 0.10%.
25
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
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, 1996 aggregated $39,035,358,131 and
$38,557,393,044, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $2,330,000.
The Fund had 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,
1996 included in Directors' fees and expenses in the Statement of Operations
amounted to $928. At August 31, 1996, the Fund had an accrued pension liability
of $49,402 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, 1996 AUGUST 31, 1995
---------------- ----------------
<S> <C> <C>
Shares sold................................ 31,284,601,651 28,802,984,447
Shares issued in reinvestment of
dividends................................. 554,968,386 495,919,572
---------------- ----------------
31,839,570,037 29,298,904,019
Shares repurchased......................... (30,809,583,472) (27,430,965,581)
---------------- ----------------
Net increase............................... 1,029,986,565 1,867,938,438
---------------- ----------------
---------------- ----------------
</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
Dean Witter Japan Fund Intermediate Income Securities Series
Dean Witter Income Builder Fund American Value Series
Dean Witter Special Value Fund Capital Growth Series
Dividend Growth Series
ASSET ALLOCATION FUNDS Strategist Series
Dean Witter Strategist Fund Utilities Series
Dean Witter Global Asset Allocation Fund Value-Added Market Series
ACTIVE ASSETS ACCOUNT PROGRAM Global Equity Series
Active Assets Money Trust
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
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
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.
Dean Witter
Liquid Asset Fund
Prospectus
October 18, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
LIQUID ASSET FUND INC.
OCTOBER 18, 1996
- ----------------------------------------------------------------------------
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 18, 1996, 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-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Directors and Officers................................................................. 6
Investment Practices and Policies...................................................... 12
Investment Restrictions................................................................ 14
Portfolio Transactions and Brokerage................................................... 15
Purchase of Fund Shares................................................................ 16
Redemption of Fund Shares.............................................................. 24
Dividends, Distributions and Taxes..................................................... 25
Description of Common Stock............................................................ 26
Custodian and Transfer Agent........................................................... 26
Independent Accountants................................................................ 27
Reports to Shareholders................................................................ 27
Legal Counsel.......................................................................... 27
Experts................................................................................ 27
Registration Statement................................................................. 27
Financial Statements................................................................... 27
Appendix/Ratings....................................................................... 28
</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, 1996 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 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 Fund, Dean Witter Global
3
<PAGE>
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, Dean Witter Japan Fund,
Dean Witter Income Builder Fund, Dean Witter Special Value 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 Total Return Trust, TCW/DW Mid-Cap Equity
Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic 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, 1994, 1995 and 1996 amounted to
$23,750,120, $26,483,251 and $30,669,867, 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, 1994, 1995
and 1996, 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 17, 1996, the Fund's Board of Directors, including all of the
Independent Directors, approved continuation of the Agreement until April 30,
1997.
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 82 Dean Witter Funds and the 14 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture
Director Corporation (since November, 1995); Director or Trustee of the
c/o Levitz Furniture Corporation Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer, President
and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services Inc., the United Negro College
Fund and Weirton Steel Corporation.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (63) 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 (64) 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
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.;
Member of the board of various civic and charitable
organizations.
John R. Haire (71) 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; Chairman of the Audit
New York, New York Committee and Chairman of the Committee of the Independent
Trustees and Trustee of the TCW/DW Funds; formerly President,
Council for Aid to Education (1978-1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation
(insurance).
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a con-
Director sulting firm; Koch Professor of International Economics and
c/o Johnson Smick International, Inc. Director of the Center for Global Market Studies at George
1133 Connecticut Avenue, N.W. Mason University; Co-Chairman and a founder of the Group of
Washington, DC Seven Council (G7C), an international economic commission;
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 (1986-1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private investment
Director partnership (since 1988); formerly Vice President, Bankers
c/o Triumph Capital, L.P. Trust Company and BT Capital Corporation (1984-1988); Director
237 Park Avenue or Trustee of the Dean Witter Funds; Trustee of the TCW/DW
New York, New York Funds; Director of various business organizations.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Philip J. Purcell* (53) 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 (66) 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 and 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
Sheldon Curtis (64) 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 (50) 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 (50) First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
<FN>
- ------------------------
*Denotes Directors who are "Interested persons", as defined in the Act.
</TABLE>
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, Robert S. Giambrone, Senior Vice President of InterCapital,
DWSC, Distributors and DWTC and Director of DWTC, Joseph J. McAlinden, Executive
Vice President and Chief Investment Officer of InterCapital and Director of
DWTC, 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, LouAnne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Carsten Otto, a Staff Attorney with
InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of eight (8) trustees. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Trustees. As of the date of this Statement of
Additional Information, there are a total of 82 Dean Witter Funds, comprised of
122 portfolios. As of September 30, 1996, the Dean Witter Funds had total net
assets of approximately $78 billion and more than five million shareholders.
8
<PAGE>
Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with InterCapital. Four of the six
independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are 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
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1995,
the three Committees held a combined total of fifteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Trustees or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Dean Witter Funds have such a plan.
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; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed 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.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts 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 both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
9
<PAGE>
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee 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.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended August 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,750
Edwin J. Garn................................................. 1,800
John R. Haire................................................. 3,913(1)
Dr. Manuel H. Johnson......................................... 1,750
Michael E. Nugent............................................. 1,750
John L. Schroeder............................................. 1,750
</TABLE>
- ------------------------
(1) Of Mr. Haire's compensation from the Fund, $3,150 was paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).
10
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for services
to the 79 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 11 TCW/DW Funds that were in operation at December 31, 1995.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, 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.
COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
TOTAL
FOR SERVICE AS COMPENSATION
FOR SERVICE CHAIRMAN OF PAID
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 79 DEAN
OF 79 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael Bozic.............. $126,050 -- -- $126,050
Edwin J. Garn.............. 136,450 -- -- 136,450
John R. Haire.............. 98,450 $82,038 $217,350(2) 397,838
Dr. Manuel H. Johnson...... 136,450 82,038 -- 218,488
Michael E. Nugent.......... 124,200 75,038 -- 199,238
John L. Schroeder.......... 136,450 46,964 -- 183,414
</TABLE>
- ------------------------
(2) For the 79 Dean Witter Funds in operation at December 31, 1995. As noted
above, on July 1, 1996, Mr. Haire became Chairman of the Committee of the
Independent Trustees and the Audit Committee of the TCW/DW Funds in addition
to continuing to serve in such positions for the Dean Witter Funds.
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Trustee 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 Trustee referred to as
an "Eligible Trustee") 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 Trustee
is entitled to receive from the Adopting 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 25.0% of his or her Eligible
Compensation plus 0.4166666% 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 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(3) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Trustee for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Trustee's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.
- ------------------------
(3) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee 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 retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended August 31,
1996 and by the 57 Dean Witter Funds (including the Fund) as of December 31,
1995, and the estimated retirement benefits for the Fund's Independent Trustees
from the Fund as of August 31, 1996 and from the 57 Dean Witter Funds as of
December 31, 1995.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
-------------------------------------- ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(4)
CREDITED YEARS ESTIMATED ------------------------ ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- ----------------------------------- ------------------- ----------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic...................... 10 50.0% $ 377 $ 26,359 $ 850 $ 51,550
Edwin J. Garn...................... 10 50.0 548 41,901 850 51,550
John R. Haire...................... 10 50.0 961 261,763 2,296 130,404
Dr. Manuel H. Johnson.............. 10 50.0 229 16,748 850 51,550
Michael E. Nugent.................. 10 50.0 391 30,370 850 51,550
John L. Schroeder.................. 8 41.7 728 51,812 708 42,958
</TABLE>
- ------------------------
(4) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (3) above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
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
12
<PAGE>
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 liquid 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 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, 1996, 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
13
<PAGE>
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.
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.
14
<PAGE>
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
- --------------------------------------------------------------------------------
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, 1994, 1995 and 1996, 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 various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain initial
and secondary public offerings, the Investment Manager may utilize a pro-rata
allocation process based on the size of the Dean Witter Funds involved and the
number of shares available from the public offering.
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
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<PAGE>
DWR only when the price available from DWR is better than that available from
other dealers. During its fiscal years ended August 31, 1994, 1995 and 1996, 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, 1994, 1995 and 1996.
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.
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 17, 1996,
the Fund's Board of Directors, including all of the Independent Directors,
approved continuation of the Distribution Agreement until April 30, 1997.
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<PAGE>
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.
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.
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<PAGE>
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.
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
18
<PAGE>
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.
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.
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 is $5,000 for Dean Witter Special
Value Fund. 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
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<PAGE>
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 and TCW/DW Balanced Fund 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.
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
20
<PAGE>
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
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 $10,716,020 to the Distributor pursuant to the Plan, for
the fiscal year ended August 31, 1996. This is 0.10 of 1% of the Fund's average
daily net assets for its fiscal year ended August 31, 1996. 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 -- $10,716,020.
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 17, 1996, 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
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<PAGE>
April 30, 1997, 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.
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
22
<PAGE>
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 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.
23
<PAGE>
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 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
24
<PAGE>
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.
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, 1996 was 5.04%.
The effective annual yield on this date was 5.17%, 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).
25
<PAGE>
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 divided 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.
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 $47,666,
$238,330 and $476,660, respectively, at August 31, 1996.
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.
26
<PAGE>
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.
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,
1996, 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, 1996, and the report of the independent accountants thereon, are set
forth in the Fund's Prospectus, and are incorporated herein by reference.
27
<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.
28
<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.
29
<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 August 31,
1987, 1988, 1989, 1990, 1991, 1992, 1993,
1994, 1995 and 1996......................................... 3
Portfolio of Investments at August 31, 1996................. 17
Statement of assets and liabilities at
August 31, 1996............................................. 21
Statement of operations for the year ended
August 31, 1996............................................. 22
Statement of changes in net assets for the
years ended August 31, 1995 and August 31, 1996............. 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:
8. -- Amendment to the Custodian Agreement between the
Registrant and The Bank of New York
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance Quotation
27. -- Financial Data Schedule
-------------------------------------
All other exhibits previously filed and incorporated
by reference.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at October 1, 1996
-------------- ------------------------
Shares of Common Stock 1,634,887
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 directors, 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
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company Act
of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act
remains in effect.
Registrant, in conjunction with the Investment Manager,
Registrant's 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
<PAGE>
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
(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
3
<PAGE>
(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 Global Asset Allocation Fund
(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
(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 Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
The term "TCW/DW Funds" refers to the following registered investment companies:
4
<PAGE>
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 Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10)TCW/DW Strategic Income 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.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January,
1995) of the Board of Directors of NASDAQ.
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
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
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.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWTC.
and Chief Investment
Officer
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
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
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 and Director of DWTC; Vice President
of the Dean Witter Funds and the TCW/DW Funds.
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.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
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.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. 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.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
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.
Kirk Balzer
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
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
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of various Dean Witter Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
James Kastberg
Vice President
Stanley Kapica
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
Michael Knox
Vice President Vice President of various Dean Witter Funds.
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.
LouAnne 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
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell
Vice President Vice President of Dean Witter Global Short-
Term Income Fund Inc.
Hugh Rose
Vice President
Robert Rossetti
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
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
Rafael Scolari
Vice President Vice President of Prime Income Trust.
Peter Seeley Vice President of Dean Witter World
Vice President Wide 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.
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.
(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 Limited Term Municipal 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
11
<PAGE>
(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 Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(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 Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income 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.
12
<PAGE>
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.
<PAGE>
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, 1996.
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. 33 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 10/16/96
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 10/16/96
----------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 10/16/96
----------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic
Edwin J.Garn
John R. Haire
Manuel H. Johnson
Michael E. Nugent
John L. Schroeder
By /s/ David M. Butowsky 10/16/96
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
8. - Amendment to the Custody Agreement between
the Registrant and The Bank of New York
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedule
All other exhibits previously filed and incorporated by
reference.
<PAGE>
AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter Liquid Asset Fund Inc.(the "Fund") and The Bank of New York (the
"Custodian") to the Custody Agreement between the Fund and the Custodian dated
September 20, 1991 (the "Custody Agreement"). The Custody Agreement is hereby
amended as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save
the Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking insitution located in a foreign
country and identified on Schedule A attached hereto and as amended from time
to time upon mutual agreement of the parties (each, a "Subcustodian") to
exercise reasonable care with respect to the safekeeping of such Securities
and moneys to the same extent that the Custodian would be liable to the Fund
if the Custodian were holding such securities and moneys in New York. In the
event of any loss to the Fund by reason of the failure of the Custodian or a
Subcustodian to utilize reasonable care, the Custodian shall be liable to the
Fund only to the extent of the Fund's direct damages, to be determined based
on the market value of the Securities and moneys which are the subject of the
loss at the date of discovery of such loss and without reference to any
special conditions or circumstances.
8. (b) The Custodian shall not be liable for any loss which results from
(i) the general risk of investing, or (ii) investing or holding Securities and
moneys in a particular country including, but not limited to, losses resulting
from nationalization, expropriation or other governmental actions; regulation of
the banking or securities industry; currency restrictions, devaluations or
fluctuations; or market conditions which prevent the orderly execution of
securities transactions or affect the value of Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due to
forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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 LIQUID ASSET FUND INC.
[SEAL] By:/s/ David A. Hughey
---------------------
Attest:
/s/ Robert M. Scanlan
- ------------------------
THE BANK OF NEW YORK
[SEAL] By:/s/ Steve Grunston
---------------------
Attest:
/s/ Vincent Blazewitcz
- ------------------------
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Chartered Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de Chile
China Standard Chartered Bank
Colombia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial de France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking Corp.
Indonesia Hong Kong and Shanghai Banking Corp.
Ireland Allied Irish Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Lt.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico (Banamex)
Netherlands Mees Pierson
New Zealand ANZ Banking Group Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Peru Citibank, N.A.
Philippines Hong Kong and Shanghai Banking Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
Taiwan Hong Kong and Shanghai Banking Corp.
Thailand Siam Commercial Bank
Turkey Citibank, N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
*Not yet 17(f)5 compliant
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 33 to the Registration Statement on Form N-1A
(the "Registration Statement") of our report dated October 7, 1996, 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 7, 1996
<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, 1996
(A-B) x 365/N
(1.0009664 -1) x 365/7 = 5.04%
The Fund's effective annualized yield for the seven days ending
August 31, 1995
365/N
A - 1
365/7
1.0009664 - 1 = 5.17%
A = Value of a share of the Fund at end of period.
B = Value of a share of the Fund at beginning of period.
N = Number of days in the period.
CALCULATION
(1.0009664 -1) x 365/7
= 5.04%
((1.0009664) ^ 52.14285714-1)
= 5.17%
<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-96 $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ----------- ---------- -------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
22-Sep-75 376.66 $47,666 $238,330 $476,660
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 11,460,865,151
<INVESTMENTS-AT-VALUE> 11,460,865,151
<RECEIVABLES> 22,859,308
<ASSETS-OTHER> 270,264
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,483,994,723
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 94,526,073
<TOTAL-LIABILITIES> 94,526,073
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,388,779,903
<SHARES-COMMON-STOCK> 11,389,451,097
<SHARES-COMMON-PRIOR> 10,359,464,532
<ACCUMULATED-NII-CURRENT> 688,747
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,389,468,650
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 626,139,047
<OTHER-INCOME> 0
<EXPENSES-NET> 69,507,441
<NET-INVESTMENT-INCOME> 556,631,606
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 556,631,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 556,625,540
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,284,601,651
<NUMBER-OF-SHARES-REDEEMED> (30,809,583,472)
<SHARES-REINVESTED> 554,968,386
<NET-CHANGE-IN-ASSETS> 1,029,992,631
<ACCUMULATED-NII-PRIOR> 682,681
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30,669,867
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 69,507,441
<AVERAGE-NET-ASSETS> 11,126,557,378
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
