<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997
REGISTRATION NOS.: 811-2575
2-53856
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 34 /X/
AND/OR
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 24 /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
BARRY FINK, 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 24, 1997 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
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
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<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 24, 1997
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 24, 1997, 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/14
Additional Information/15
Report of Independent Accountants/18
Financial Statements -- August 31, 1997/23
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
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The Fund An open-end diversified management investment company
investing in money market instruments.
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Shares Offered Common Stock (see page 15).
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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).
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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).
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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 102
investment companies and other portfolios with assets of
approximately $102.3 billion at September 30, 1997 (see page
4).
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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 pages 7 and 9).
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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 9).
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Dividends Declared and automatically reinvested daily in additional
shares; cash payments of dividends available monthly (see page
14).
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Reports Individual periodic account statements; annual and semi-annual
Fund financial statements.
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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 14).
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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.
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended August 31, 1997.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
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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....................................................... 0.27%
12b-1 Fees............................................................ 0.10%
Other Expenses........................................................ 0.25%
Total Fund Operating Expenses......................................... 0.62%
</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 $34 $77
</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
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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 18.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
<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 0.050 0.053 0.030 0.027 0.040 0.064 0.079 0.086 0.068
Less dividends from net
investment income............ (0.050) (0.050) (0.053) (0.030) (0.027) (0.040) (0.064) (0.079) (0.086) (0.068)
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
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+...... 5.13% 5.15% 5.41% 3.07% 2.72% 4.10% 6.61% 8.27% 8.96% 7.01%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 0.62% 0.63% 0.65% 0.70% 0.69% 0.67% 0.62% 0.56% 0.56% 0.61%
Net investment income......... 5.01% 5.02% 5.28% 3.02% 2.67% 4.03% 6.41% 7.91% 8.66% 6.77%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions..................... $13,166 $11,389 $10,359 $8,492 $7,959 $9,214 $10,811 $11,902 $10,734 $8,056
</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
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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 Morgan Stanley, Dean Witter, Discover &
Co., a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses--securities, asset management
and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 102 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$98.6 billion as of September 30, 1997. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.7 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, 1997, the Fund accrued total compensation to the Investment
Manager amounting to 0.27% of the Fund's average daily net assets and the Fund's
total expenses amounted to 0.62% 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
4
<PAGE>
to 10% or less of the Fund's total assets in all such 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. 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 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.
5
<PAGE>
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
and other broker-dealer affiliates of InterCapital.
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 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.
6
<PAGE>
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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis,
without a sales charge. Pursuant to a Distribution Agreement between the Fund
and Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, shares of the Fund are distributed by the Distributor and
offered by DWR and other dealers who have entered into selected dealer
agreements with the Distributor ("Selected Broker-Dealers"). The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048. The offering price of the shares will be at their net
asset value next determined (see "Determination of Net Asset Value" below) after
receipt of a purchase order and acceptance by the Fund's transfer agent, Dean
Witter Trust FSB (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.
To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to the Transfer Agent at
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<PAGE>
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 FSB 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 FSB, 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. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Fund has reason to believe that additional
investments will increase the investment in the account to $1,000 within three
years. Subsequent investments must be $100 or more and may be made through the
Transfer Agent. In case of investments pursuant to (i) Systematic Payroll
Deduction Plans (including Individual Retirement Plans), (ii) the InterCapital
mutual fund asset allocation program and (iii) fee-based programs approved by
the Distributor, pursuant to which participants pay an asset based fee for
services in the nature of investment advisory or administrative services, the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required, provided, in the case of Systematic
Payroll Deduction Plans, that 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.
8
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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
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, 1997, 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 selected Class of the Dean
9
<PAGE>
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, 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 Dean
Witter Funds that are multiple class funds ("Dean Witter Multi-Class Funds") and
Dean Witter Funds that are not multiple class funds but which are sold with
either a front-end (at time of purchase) sales charge ("FSC 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 and Dean Witter Intermediate Term U.S. Treasury
Trust (which nine Funds, including the Fund, are referred to herein as the
"Exchange Funds"). Shares of the Exchange Funds received in an exchange for
shares of a Dean Witter Multi-Class Fund may be redeemed and exchanged only for
shares of the corresponding Class of a Dean Witter Multi-Class Fund or for
shares of one of the other Exchange Funds, provided that shares of the Exchange
Funds received in an exchange for Class A shares of a Dean Witter Multi-Class
Fund may also be redeemed and exchanged for shares of a FSC fund, and shares of
the Exchange Funds received in an exchange for Class B shares of a Dean Witter
Multi-Class Fund may also be redeemed and exchanged for shares of a CDSC fund.
In addition, shares of the Exchange Funds received in an exchange for shares of
a FSC fund may be redeemed and exchanged for Class A shares of a Dean Witter
Multi-Class Fund or for shares of one of the other Exchange Funds, and shares of
the Exchange Funds received in an exchange for shares of a CDSC fund may be
redeemed and exchanged for Class B shares of a Dean Witter Multi-Class Fund or
for shares of one of the other Exchange Funds.
An exchange 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. When exchanging into a money market fund, shares of
the Multi-Class Fund, the FSC fund, the CDSC fund or the Exchange Fund are
redeemed at their next calculated net asset value exchanged for shares of the
money market fund at their net asset value determined the following business
day. Ultimately, any applicable contingent deferred sales charge ("CDSC") will
have to be paid upon redemption of shares originally purchased from a CDSC fund
or a Class of a Dean Witter Multi-Class Fund that imposes a CDSC. (If shares of
an Exchange
Fund received in exchange for shares originally
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<PAGE>
purchased from a CDSC fund or Class B of a Dean Witter Multi-Class Fund are
exchanged for shares of another CDSC fund or a Dean Witter Multi-Class Fund
having a different CDSC schedule than that of the CDSC fund or the Dean Witter
Multi-Class 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 or from a Class of a Dean Witter
Multi-Class Fund that imposes a CDSC remain in the Exchange Fund, the holding
period (for the purpose of determining the rate of CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a CDSC fund or a Dean Witter
Multi-Class 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 or
shares of a Dean Witter Multi-Class Fund are reacquired. Thus, the CDSC is based
upon the time (calculated as described above) the shareholder was invested in
shares of a CDSC fund or in shares of a Dean Witter Multi-Class Fund. In the
case of exchanges of Class A shares of a Dean Witter Multi-Class Fund which are
subject to a CDSC, the holding period also includes the time (calculated as
described above) the shareholder was invested in shares of a FSC fund. 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 may be made after the shares of the
fund acquired by purchase (not by exchange or dividend reinvestment) have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment.
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.
ADDITIONAL INFORMATION REGARDING EXCHANGES. 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 or TCW/DW North American
Government Income Trust pursuant to the Exchange Privilege, and provided further
that the Exchange Privilege may be terminated or materially revised without
notice under certain unusual circumstances described in the Statement of
Additional Information. Shareholders maintaining margin accounts with DWR are
referred to their account executive regarding restrictions on exchanges of
shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement of each
Class of shares and any other conditions imposed by each
11
<PAGE>
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.
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
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<PAGE>
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
FSB, 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 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 CDSC 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 FSB, P.O.
Box 983, Jersey City, NJ 07303.
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<PAGE>
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 utilize 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.
EASYINVEST-SM---AUTOMATIC REDEMPTION
Shareholders may invest in shares of certain other Dean Witter Funds by
subscribing to EasyInvest, an automatic purchase plan which provides for the
automatic investment of any amount from $100 to $5,000 in shares of the
specified fund. Under EasyInvest, a shareholder may direct that a sufficient
number of shares of the Fund be automatically redeemed and the proceeds
transferred automatically to the Dean Witter Funds' Transfer Agent, on a
semi-monthly, monthly or quarterly basis, for investment in shares of the
specified fund. Redemptions will be effected on the business day preceding the
investment date and the Transfer Agent will receive the proceeds for investment
on the day following the redemption date.
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 cash. For such shareholders the shares
rein-
14
<PAGE>
vested 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, 1997 was 5.13%. The
effective annual yield on 5.13% is 5.26%, 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-
15
<PAGE>
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 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.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objectives by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objectives and policies and substantially the same investment restrictions as
those applicable to the Fund.
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.
16
<PAGE>
REMOVE APPLICATION CAREFULLY
1 6 0 --
--------------------------
for office use only
DEAN WITTER
LIQUID
ASSET
FUND [LOGO]
APPLICATION
DEAN WITTER LIQUID ASSET FUND INC.
Send to: Dean Witter Trust FSB (the "Transfer Agent"), P.O. Box 1040, Jersey
City, NJ 07303
<TABLE>
<S> <C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C><C>
INSTRUCTIONS For assistance in completing this application, telephone Dean Witter Trust FSB 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, 3.
use lines 1 & 3
---------------------------------------------------------------------------------------------------------
Minor's Name
Under the ---------------------------------------- Uniform Gifts to
Minors Act
------------------------------
Minor's Social Security Number
State of Residence of Minor
- -In the name of a
corporation, 4.
trust, ---------------------------------------------------------------------------------------------------------
partnership
or other Name of Corporation, Trust (including trustee name(s)) or Other
Organization
institutional
investors, use
line 4
If Trust, Date of Trust Instrument:
------------------------------------------------------------
------------------------------
Tax Identification Number
ADDRESS
---------------------------------------------------------------------------------------------------------
City State Zip Code
</TABLE>
<TABLE>
<S> <C> <C>
TO PURCHASE / / CHECK (enclosed) $ ---------------------- (Make Payable to Dean Witter Liquid Asset Fund Inc.)
SHARES: / / WIRE* On -------------------------------- MF* --------------------------------
Minimum Initial (Date) (Control number this transaction)
Investment:
$5,000
</TABLE>
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------
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 FSB
</TABLE>
<TABLE>
<S> <C> <C>
Account Number: 8900188413
Re: Dean Witter Liquid Asset Fund Inc.
Account Of: ----------------------------------------------------------------------------
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number: ------------------------------------------------------------
(Assigned by Telephone)
OPTIONAL SERVICES
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NOTE: If you are a current shareholder of Dean Witter
Liquid Asset Fund Inc., please indicate your fund
account number here.
[1] [6] [0] -
</TABLE>
<TABLE>
<S> <C>
DIVIDENDS All dividends will be reinvested daily in additional shares, unless the following option is
selected:
/ / Pay income dividends by check at the end of each month.
WRITE YOUR OWN / / Send an initial supply of checks.
CHECK FOR JOINT ACCOUNTS:
/ / Check this box if all owners are required to sign checks.
SYSTEMATIC / / Systematic Withdrawal Plan ($25 minimum)
WITHDRAWAL $ ------------------ / / Monthly or / / Quarterly
PLAN / / 10th or / / 25th of Month/Quarter
Minimum / / Pay shareholder(s) at address of record.
Account Value: / / Pay to the following: (If this payment option is selected a signature guarantee is required)
$5,000
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------
Name
------------------------------------------------------------
Address
------------------------------------------------------------
City State Zip Code
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
/ / Dean Witter Trust FSB is hereby authorized to honor telephonic or other instructions, without
PAYMENT TO signature guarantee, from any person for the redemption of any or all shares of Dean Witter Liquid Asset
PREDESIGNATED Fund Inc. held in my (our) account provided that proceeds are transmitted only to the following bank
BANK ACCOUNT account. (Absent its own negligence, neither Dean Witter Liquid Asset Fund Inc. nor Dean Witter Trust
FSB 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 (ASK YOUR BANK)
are registered
Minimum Amount: ----------------------------------------
$1,000 NAME OF BANK
----------------------------------------
ADDRESS OF BANK
( )
----------------------------------------
TELEPHONE NUMBER OF BANK
SIGNATURE AUTHORIZATION
I. FOR ALL ACCOUNTS NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE INFORMATION BELOW WILL
REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND EFFECT UNTIL ANOTHER DULY EXECUTED
FORM IS RECEIVED BY THE TRANSFER AGENT.
The Transfer Agent is hereby authorized to act as agent for the registered owner of shares of Dean Witter
Liquid Asset Fund Inc. (the "Fund") in effecting 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)
</TABLE>
<TABLE>
<S> <C> <C>
Name(s) must be
signed exactly the
same as shown on
lines 1 to 4 on the
reverse side of this
application
SIGNED THIS -------------------------------- DAY OF
---------------------------------------, 19 ---.
In addition complete
Section A or B below
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general partners/other
authorized signatories of the Registered Owner, and any of them ("Authorized
Person(s)") is/are currently authorized under the applicable governing document to
act with full power to sell, assign or transfer securities of the Fund for the
Registered Owner and to execute and deliver any instrument necessary to effectuate
the authority hereby conferred:
NAME/TITLE SIGNATURE
SIGNED THIS -------------------------------- DAY OF
---------------------------------------, 19 ---.
The Transfer Agent may, without inquiry, act only upon the instruction of ANY
PERSON(S) purporting to be (an) Authorized Person(s) as named in the Certification
Form last received by the Transfer Agent. The Transfer Agent and the Fund shall
not be liable for any claims, expenses (including legal fees) or losses resulting
from the Transfer Agent having acted upon any instruction reasonably believed
genuine.
*INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY HONOR
INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
</TABLE>
<TABLE>
<S> <C>
SECTION (A) NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
CORPORATIONS AND
INCORPORATED
ASSOCIATIONS ONLY. I, -------------------------------------------------, Secretary of the
SIGN ABOVE AND Registered Owner, do hereby certify that at a meeting on ----------------- at
COMPLETE THIS which a quorum was present throughout, the Board of Directors of the
SECTION corporation/the officers of the association duly adopted a resolution, which is
in full force and effect and 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 Witness my hand on behalf of the corporation/association this ------------- day
GUARANTEED** of ------------------------, 19 ---.
(or Corporate Seal)
--------------------------------------------------------------------------------
Secretary**
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the corporation/
association.
SIGNATURE
GUARANTEED** --------------------------------------------------------------------------------
(or Corporate Seal) Certifying Officer of the Corporation or Incorporated Association**
SECTION (B) NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
ALL OTHER
INSTITUTIONAL
INVESTORS
SIGNATURE ----------------------------------------------------------
GUARANTEED** Certifying
Trustee(s)/General Partner(s)/Other(s)**
SIGN ABOVE AND ----------------------------------------------------------
COMPLETE THIS Certifying
SECTION Trustee(s)/General Partner(s)/Other(s)**
Signed this
--------------------------------------------------------------------------------
day of
--------------------------------------------------------------------------------,
19 ------------------------
--------------------------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
</TABLE>
<TABLE>
<S> <C> <C> <C>
DEALER Above signature(s) guaranteed. Prospectus has been delivered by undersigned to
above-named applicant(s).
(if any)
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- 1997 Dean Witter Distributors Inc.
<PAGE>
DEAN WITTER LIQUID ASSET FUND
RESULTS OF SPECIAL MEETING (UNAUDITED)
On May 21, 1997, a special meeting of the shareholders of Dean Witter Liquid
Asset Fund was held for the purpose of voting on four separate matters, the
results of which are as follows:
1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND DEAN
WITTER INTERCAPITAL INC., IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.
<TABLE>
<CAPTION>
VOTE NO. OF SHARES
- ---------------------------------------- ------------------------
<S> <C>
For..................................... 5,707,224,869
Against................................. 230,463,004
Abstain................................. 576,088,920
</TABLE>
2) ELECTION OF DIRECTORS:
<TABLE>
<S> <C>
Michael Bozic
For..................................... 6,069,403,987
Withheld................................ 444,372,806
Charles A. Fiumefreddo
For..................................... 6,071,535,672
Withheld................................ 442,241,121
Edwin J. Garn
For..................................... 6,070,468,933
Withheld................................ 443,307,860
John R. Haire
For..................................... 6,059,487,018
Withheld................................ 454,289,775
Wayne E. Hedien
For..................................... 6,058,648,449
Withheld................................ 455,128,344
Dr. Manuel H. Johnson
For..................................... 6,076,349,660
Withheld................................ 437,427,133
Michael E. Nugent
For..................................... 6,081,000,478
Withheld................................ 432,776,315
Philip J. Purcell
For..................................... 6,084,129,623
Withheld................................ 429,647,170
John L. Schroeder
For..................................... 6,080,688,824
Withheld................................ 433,087,969
</TABLE>
3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN
OTHER INVESTMENT COMPANIES:
<TABLE>
<CAPTION>
VOTE NO. OF SHARES
- ---------------------------------------- ------------------------
<S> <C>
For..................................... 5,401,391,020
Against................................. 396,344,363
Abstain................................. 716,041,410
</TABLE>
4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
VOTE NO. OF SHARES
- ---------------------------------------- ------------------------
<S> <C>
For..................................... 5,918,835,379
Against................................. 141,111,125
Abstain................................. 453,830,289
</TABLE>
17
<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, 1997, 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, 1997 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, 1997
18
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL PAPER (81.0%)
AUTOMOTIVE - FINANCE (9.7%)
$ 285,000 Chrysler Financial Corp.
09/02/97 -12/30/97.............................. 5.56 - 5.67% $ 282,942,706
363,000 Ford Motor Credit Co.
10/29/97 - 01/08/98............................. 5.57 - 5.87 358,352,248
647,000 General Motors Acceptance Corp.
09/08/97 - 02/18/98............................. 5.55 - 6.03 639,014,104
----------------
1,280,309,058
----------------
BANK HOLDING COMPANIES (8.0%)
75,000 BankAmerica Corp.
12/29/97 - 01/26/98............................. 6.01 - 6.02 73,345,392
445,000 Bankers Trust New York Corp.
11/12/97 - 01/30/98............................. 5.70 - 5.79 435,966,318
150,000 Chase Manhattan Corp. 10/08/97.................... 5.54 149,109,500
80,000 Corestates Capital Corp.
09/30/97 - 10/15/97............................. 5.63 - 5.67 79,547,525
45,000 Morgan (J.P.) & Co., Inc.
09/25/97........................................ 5.64 44,819,300
80,000 PNC Funding Corp. 09/17/97 - 10/09/97............. 5.58 - 5.59 79,677,083
150,000 Republic New York Corp.
11/25/97 - 02/06/98............................. 5.57 - 5.64 146,901,069
40,000 SunTrust Banks, Inc. 10/28/97..................... 5.63 39,637,478
----------------
1,049,003,665
----------------
BANKS - COMMERCIAL (32.7%)
450,000 Abbey National North America Corp.
09/25/97 - 01/23/98............................. 5.64 - 5.85 446,152,794
520,000 ABN-AMRO North America Finance Inc.
09/12/97 - 12/18/97............................. 5.59 - 5.91 514,232,775
145,000 ANZ (Delaware) Inc.
09/12/97 - 12/23/97............................. 5.57 - 5.79 143,157,674
185,000 Barclays U.S. Funding Corp.
09/04/97 - 10/03/97............................. 5.56 - 5.75 184,189,875
530,000 Canadian Imperial Holdings Inc. 10/06/97 -
10/27/97........................................ 5.59 - 5.68 525,926,842
585,000 Deutsche Bank Financial Inc.
09/05/97 - 02/23/98............................. 5.57 - 5.68 574,413,481
50,000 Dresdner U.S. Finance Inc. 02/13/98............... 5.85 48,694,153
300,000 Internationale Nederlanden (U.S.) Funding Corp.
09/02/97 - 11/10/97............................. 5.53 - 5.92 297,928,924
25,000 KfW International Finance Inc. 10/20/97........... 5.54 24,805,562
195,000 National Australia Funding (DE) Inc.
10/01/97 - 12/17/97............................. 5.59 - 5.85 192,443,606
425,000 Societe Generale N.A., Inc.
09/08/97 - 02/05/98............................. 5.58 - 5.69 419,001,174
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 555,000 Toronto-Dominion Holdings USA Inc.
09/25/97 - 02/26/98............................. 5.61 - 5.78% $ 545,206,124
395,000 Westpac Capital Corp.
09/17/97 - 12/08/97............................. 5.63 - 5.83 391,854,183
----------------
4,308,007,167
----------------
BROKERAGE (1.8%)
235,000 Goldman Sachs Group L.P.
09/02/97 - 09/11/97............................. 5.69 - 5.71 234,667,900
----------------
CHEMICALS (0.7%)
100,000 Du Pont (E.I.) De Nemours & Co. 12/03/97.......... 5.68 98,538,055
----------------
FINANCE - COMMERCIAL (2.7%)
360,000 CIT Group Holdings, Inc.
09/18/97 - 12/23/97............................. 5.56 - 5.63 355,622,925
----------------
FINANCE - CONSUMER (10.0%)
428,000 American Express Credit Corp. 10/21/97 -
12/26/97........................................ 5.59 - 5.66 421,862,700
75,000 American General Finance Corp. 11/20/97 -
11/24/97........................................ 5.58 - 5.61 74,027,472
200,000 Avco Financial Services Inc.
09/05/97 - 11/14/97............................. 5.58 - 5.69 198,570,036
290,000 Beneficial Corp.
09/23/97 - 11/14/97............................. 5.57 - 5.65 287,359,456
40,000 Commercial Credit Co. 11/03/97.................... 5.57 39,602,778
220,000 Household Finance Corp.
09/26/97 - 12/29/97............................. 5.53 - 5.67 217,039,800
75,000 Norwest Financial, Inc.
12/04/97 - 12/12/97............................. 5.61 - 5.66 73,852,000
----------------
1,312,314,242
----------------
FINANCE - CORPORATE (3.3%)
440,000 Ciesco, L.P.
09/26/97 - 12/11/97............................. 5.55 - 5.62 435,497,306
----------------
FINANCE - DIVERSIFIED (6.5%)
263,000 Associates Corp. of
North America
09/09/97 - 12/29/97............................. 5.53 - 5.66 260,867,226
605,000 General Electric Capital Corp. 09/15/97 -
04/02/98........................................ 5.58 - 5.94 597,632,490
----------------
858,499,716
----------------
FINANCE - ENERGY (0.4%)
50,000 Chevron Oil Finance Co. 09/09/97.................. 5.56 49,922,917
----------------
FINANCE - EQUIPMENT (0.8%)
105,000 Deere (John) Capital Corp.
10/30/97 - 12/29/97............................. 5.61 - 5.89 103,676,883
----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
HOUSEHOLD PRODUCTS (0.2%)
$ 30,000 Procter & Gamble Co. 12/19/97..................... 5.60% $ 29,492,175
----------------
INDUSTRIALS (0.6%)
75,000 Caterpillar Financial Services Corp. 10/03/97 -
10/22/97........................................ 5.89 - 5.90 74,436,550
----------------
OFFICE EQUIPMENT (2.0%)
270,000 IBM Credit Corp.
09/22/97 - 12/19/97............................. 5.58 - 5.63 267,091,075
----------------
RETAIL (1.0%)
135,000 Sears Roebuck Acceptance Corp. 11/07/97 -
12/24/97........................................ 5.57 - 5.62 133,141,972
----------------
TELEPHONE (0.3%)
35,000 Ameritech Corp. 12/04/97.......................... 5.59 34,488,067
----------------
TELECOMMUNICATIONS(0.1%)
10,000 GTE Funding Inc. 09/05/97......................... 5.55 9,990,800
----------------
UTILITIES - FINANCE (0.2%)
20,000 National Rural Utilities Cooperative Finance Corp.
09/04/97........................................ 5.63 19,984,556
----------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $10,654,685,029).................................. 10,654,685,029
----------------
CERTIFICATES OF DEPOSIT (9.9%)
170,000 Bankers Trust Co.
12/30/97 - 12/31/97............................. 5.75 170,000,000
435,000 Chase Manhattan Bank (USA) 09/04/97 - 02/09/98.... 5.59 - 5.75 435,000,000
115,000 Mellon Bank, N.A.
09/02/97 - 11/05/97............................. 5.75 - 5.88 115,000,000
100,000 SunTrust Bank, Atlanta
09/29/97 - 10/07/97............................. 5.63 - 5.84 100,000,000
485,000 Union Bank of California, N.A. 09/09/97 -
02/04/98........................................ 5.59 - 5.75 485,000,000
----------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $1,305,000,000)................................... 1,305,000,000
----------------
SHORT-TERM BANK NOTES (5.5%)
195,000 BankBoston, N.A.
09/17/97 - 11/04/97............................. 5.57 - 5.69 195,000,000
265,000 F.C.C. National Bank
09/12/97 - 12/29/97............................. 5.69 - 5.89 265,000,000
100,000 First Union National Bank 10/14/97................ 5.80 100,000,000
120,000 La Salle National Bank
09/03/97 - 10/31/97............................. 5.56 - 5.77 120,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 50,000 NationsBank, N.A. 09/30/97........................ 5.63% $ 50,000,000
----------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $730,000,000)..................................... 730,000,000
----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (3.3%)
73,000 Federal Farm Credit Bank
11/12/97 - 07/23/98............................. 5.57 - 5.67 70,995,636
75,000 Federal Home Loan Banks
06/19/98 - 08/14/98............................. 5.67 - 5.75 71,290,153
130,000 Federal National Mortgage Association 05/27/98 -
06/22/98........................................ 5.67 - 5.75 124,357,583
175,000 U.S. Treasury Bills 02/05/98 - 05/28/98........... 5.52 - 5.96 168,822,180
----------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(AMORTIZED COST $435,465,552)..................................... 435,465,552
----------------
BANKERS' ACCEPTANCES (0.9%)
50,000 Bank of America NT & SA
09/19/97........................................ 5.76 49,844,444
41,000 Corestates Bank, N.A.
09/05/97 - 09/23/97............................. 5.54 - 5.76 40,905,626
30,000 Wachovia Bank, N.A. 07/24/98...................... 5.83 28,493,933
----------------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $119,244,003)..................................... 119,244,003
----------------
REPURCHASE AGREEMENT (0.1%)
8,203 The Bank of New York due 09/02/97 (dated 08/29/97;
proceeds $8,207,956) (IDENTIFIED COST
$8,203,171) (a)................................. 5.25 8,203,171
----------------
TOTAL INVESTMENTS
(AMORTIZED COST $13,252,597,755) (B)................................ 100.7% 13,252,597,755
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS...................... (0.7) (86,687,590)
------- ----------------
NET ASSETS.......................................................... 100.0% $ 13,165,910,165
------- ----------------
------- ----------------
<FN>
- ---------------------
(a) Collateralized by $8,585,475 U.S. Treasury Bill 0.00% due 02/26/98 valued
at $8,367,234.
(b) Cost is the same for federal income tax purposes.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $13,252,597,755).......................... $ 13,252,597,755
Cash........................................................ 90,000
Receivable for:
Interest................................................ 28,253,677
Capital stock sold...................................... 664,291
Prepaid expenses and other assets........................... 237,118
----------------
TOTAL ASSETS........................................... 13,281,842,841
----------------
LIABILITIES:
Payable for:
Capital stock repurchased............................... 111,214,413
Investment management fee............................... 2,840,713
Plan of distribution fee................................ 1,042,929
Accrued expenses and other payables......................... 834,621
----------------
TOTAL LIABILITIES...................................... 115,932,676
----------------
NET ASSETS............................................. $ 13,165,910,165
----------------
----------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $ 13,165,224,818
Accumulated undistributed net investment income............. 685,347
----------------
NET ASSETS............................................. $ 13,165,910,165
----------------
----------------
NET ASSET VALUE PER SHARE,
13,165,896,012 SHARES OUTSTANDING (25,000,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$1.00
----------------
----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 690,250,758
-------------
EXPENSES
Investment management fee................................... 33,616,072
Transfer agent fees and expenses............................ 27,678,745
Plan of distribution fee.................................... 11,872,496
Registration fees........................................... 1,358,503
Shareholder reports and notices............................. 713,197
Custodian fees.............................................. 342,424
Professional fees........................................... 76,411
Directors' fees and expenses................................ 15,786
Other....................................................... 87,323
-------------
TOTAL EXPENSES......................................... 75,760,957
-------------
NET INVESTMENT INCOME AND NET INCREASE...................... $ 614,489,801
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<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, 1997 AUGUST 31, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 614,489,801 $ 556,631,606
Dividends from net investment income........................ (614,493,201) (556,625,540)
Net increase from capital stock transactions................ 1,776,444,915 1,029,986,565
--------------- ---------------
NET INCREASE........................................... 1,776,441,515 1,029,992,631
NET ASSETS:
Beginning of period......................................... 11,389,468,650 10,359,476,019
--------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$685,347 AND $688,747, RESPECTIVELY).................... $13,165,910,165 $11,389,468,650
--------------- ---------------
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997
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
26
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED
$1.35 billion; 0.325% to the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.30% to the portion of the daily net
assets exceeding $1.75 billion but not exceeding $2.15 billion; 0.275% to the
portion of the daily net assets exceeding $2.15 billion but not exceeding $2.5
billion; 0.25% to the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.249% to the portion of the daily net assets
exceeding $15 billion but not exceeding $17.5 billion; and 0.248% to the portion
of the daily net assets exceeding $17.5 billion.
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 selected broker-dealers under the Plan: (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 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
27
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED
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, 1997, the distribution fee was accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended August 31, 1997 aggregated $41,929,348,009 and
$40,711,109,361, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At August 31, 1997, the Fund had transfer agent
fees and expenses payable of approximately $150,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors 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, 1997 included
in Directors' fees and expenses in the Statement of Operations amounted to
$2,192. At August 31, 1997, the Fund had an accrued pension liability of $48,330
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, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
Shares sold...................................................... 35,926,788,140 31,284,601,651
Shares issued in reinvestment of dividends....................... 612,893,395 554,968,386
--------------- ---------------
36,539,681,535 31,839,570,037
Shares repurchased............................................... (34,763,236,620) (30,809,583,472)
--------------- ---------------
Net increase..................................................... 1,776,444,915 1,029,986,565
--------------- ---------------
--------------- ---------------
</TABLE>
6. FINANCIAL HIGHLIGHTS
See the "Financial Highlights" table on page 3 of this Prospectus.
28
<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 Tax-Free Daily Income Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter New York Municipal Money Market Trust Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Daily Income Trust Dean Witter California Tax-Free Income Fund
Dean Witter U.S. Government Money Market Trust Dean Witter New York Tax-Free Income Fund
EQUITY FUNDS Dean Witter Convertible Securities Trust
Dean Witter American Value Fund Dean Witter Federal Securities Trust
Dean Witter Natural Resource Development Dean Witter World Wide Income Trust
Securities Inc. Dean Witter Intermediate Income Securities
Dean Witter Dividend Growth Securities Inc. Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Developing Growth Securities Trust Dean Witter Multi-State Municipal Series 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 Precious Metals and Minerals Trust Dean Witter Short-Term Bond Fund
Dean Witter Capital Growth Securities Dean Witter High Income Securities
Dean Witter European Growth Fund Inc. 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 RETIREMENT SERIES
Dean Witter Mid-Cap Growth Fund Liquid Asset Series
Dean Witter Balanced Growth Fund U.S. Government Money Market Series
Dean Witter Capital Appreciation Fund U.S. Government Securities Series
Dean Witter Information Fund Intermediate Income Securities Series
Dean Witter Special Value Fund American Value Series
Dean Witter Financial Services Trust Capital Growth Series
Dean Witter Market Leader Trust Dividend Growth Series
Dean Witter S&P 500 Index Fund Strategist Series
Dean Witter Fund of Funds Utilities Series
ASSET ALLOCATION FUNDS Value-Added Market Series
Dean Witter Strategist Fund Global Equity Series
Dean Witter Global Asset Allocation Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets Government Securities Trust
Active Assets California Tax-Free 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
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
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 FSB
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 24, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
OCTOBER 24, 1997 LIQUID ASSET FUND INC.
- --------------------------------------------------------------------------------
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 24, 1997, 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................................................... 17
Redemption of Fund Shares................................................. 25
Dividends, Distributions and Taxes........................................ 26
Description of Common Stock............................................... 27
Custodian and Transfer Agent.............................................. 27
Independent Accountants................................................... 28
Reports to Shareholders................................................... 28
Legal Counsel............................................................. 28
Experts................................................................... 28
Registration Statement.................................................... 28
Financial Statements...................................................... 28
Appendix/Ratings.......................................................... 29
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated under Maryland law on September 3, 1974, under the
name Standard & Poor's/InterCapital Cash Management Fund, Inc. Its name was
changed to Standard & Poor's/InterCapital Liquid Asset Fund, Inc. on May 13,
1975; changed to InterCapital Liquid Asset Fund Inc. on September 1, 1977;
changed to Dean Witter/Sears Liquid Asset Fund Inc. on March 21, 1983; and
changed to its present name, Dean Witter Liquid Asset Fund Inc., on June 30,
1993.
As of August 31, 1997 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 Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), 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
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 Utilities Fund, Dean Witter High
3
<PAGE>
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, Dean Witter Financial Services Trust, Dean
Witter Market Leader Trust, Dean Witter S&P 500 Index Fund, Dean Witter Fund of
Funds, 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) administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (ii) 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, 1995, 1996 and 1997 amounted to
$26,483,251, $30,669,867 and $33,616,072, respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.
The Agreement was initially approved by the Directors on February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held on
May 21, 1997. The Agreement is substantially identical to a prior investment
management agreement which was initially approved by the Directors on October
30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement took effect on May 31, 1997
upon the consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc. 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 has an initial term ending April 30, 1999 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
5
<PAGE>
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.
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 85 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 (56) 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.
Charles A. Fiumefreddo* (64) 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 FSB ("DWT");
Director and/or officer of various MSDWD subsidiaries; formerly
Executive Vice President and Director of Dean Witter, Discover
& Co. (until February, 1993).
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds; formerly United
Director States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman 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
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.
(health insurance); Member of the board of various civic and
charitable organizations.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
John R. Haire (72) 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).
Wayne E. Hedien (63) Retired; Director or Trustee of the Dean Witter Funds; Director
Director of the PMI Group, Inc. (private mortgage insurance); Trustee
c/o Gordon Altman Butowsky and Vice Chairman of The Field Museum of Natural History;
Weitzen Shalov & Wein formerly associated with the Allstate Companies (1966-1994),
Counsel to the Independent Trustees most recently as Chairman of The Allstate Corporation (March,
114 West 47th Street 1993-December, 1994) and Chairman and Chief Executive Officer
New York, New York of its wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various other business
and charitable organizations.
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a con-
Director sulting firm; Co-Chairman and a founder of the Group of Seven
c/o Johnson Smick International, Inc. Council (G7C), an international economic commission; Director
1133 Connecticut Avenue, N.W. or Trustee of the Dean Witter Funds; Trustee of the TCW/DW
Washington, DC Funds; Director of NASDAQ (since June, 1995); Director of
Greenwich Capital Markets, Inc. (broker-dealer); Trustee of the
Financial Accounting Foundation (oversight organization for the
Financial Accounting Standards Board); 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 (61) General Partner, Triumph Capital, L.P., a private investment
Director partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief Executive Officer
Director of MSDWD, DWR and Novus Credit Services Inc.; Director of
1585 Broadway InterCapital, DWSC and Distributors; Director or Trustee of the
New York, New York Dean Witter Funds; Director and/or officer of various MSDWD
subsidiaries.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
John L. Schroeder (67) 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
114 West 47th Street
New York, New York
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary and
Vice President, General Counsel (since February, 1997) of InterCapital and
Secretary and General Counsel DWSC; Senior Vice President (since March, 1997) and Assistant
Two World Trade Center Secretary and Assistant General Counsel (since February, 1997)
New York, New York of Distributors; Assistant Secretary of DWR (since August,
1996); Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds (since February, 1997);
previously First Vice President (June, 1993-February, 1997),
Vice President (until June, 1993) and Assistant Secretary and
Assistant General Counsel of InterCapital and DWSC and
Assistant Secretary of the Dean Witter Funds and TCW/DW Funds.
Jonathan R. Page (51) 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 (51) 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
</TABLE>
- ------------------------
*Denotes Directors who are "Interested persons," as defined in the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT, and
Director of DWT, Executive Vice President, Chief Administrative Officer and
Director of DWR, and Director of SPS Transaction Services, Inc. and various
other MSDWD subsidiaries, Joseph J. McAlinden, Executive Vice President and
Chief Investment Officer of InterCapital and Director of DWT, Robert S.
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWT and
Director of DWT, and Peter M. Avelar and James F. Willison, Senior Vice
Presidents of InterCapital, are Vice Presidents of the Fund, and Marilyn K.
Cranney, First Vice President and Assistant General Counsel of InterCapital and
DWSC, LouAnne D. McInnis, Carsten Otto and Ruth Rossi, Vice Presidents and
Assistant General Counsels of InterCapital and DWSC, and Frank Bruttomesso and
Todd Lebo, staff attorneys with InterCapital, are Assistant Secretaries of the
Fund.
8
<PAGE>
THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES
The Board of Directors consists of nine (9) directors. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Directors. As of the date of this
Statement of Additional Information, there are a total of 85 Dean Witter Funds,
comprised of 128 portfolios. As of September 30, 1997, the Dean Witter Funds had
total net assets of approximately $98.6 billion and more than six million
shareholders.
Seven Directors (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Directors. The other two Directors (the
"management Directors") are affiliated with InterCapital. Four of the seven
independent Directors are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Directors. The Dean Witter Funds seek as Independent Directors
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 Directors 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 Directors serve as members of the Audit Committee and
the Committee of the Independent Directors. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1996,
the three Committees held a combined total of sixteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Directors 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 Directors is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Directors are required to select and nominate individuals to
fill any Independent Director vacancy on the Board of any Fund that has a Rule
12b-1 plan of distribution. 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.
9
<PAGE>
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT DIRECTORS AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Directors 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 Directors to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on 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.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Directors and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment 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 Directors.
The Chairman of the Committee of the Independent Directors 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
Director of the Dean Witter Funds and as an Independent Director and, since July
1, 1996, as Chairman of the Committee of the Independent Directors 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 DIRECTORS FOR ALL DEAN
WITTER FUNDS
The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Directors for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Directors of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Directors arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Directors serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Directors, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Directors of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT DIRECTORS
The Fund pays each Independent Director 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 Directors attended by the Director (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Directors an additional annual fee of $1,200). If a Board
meeting and a Committee meeting, or more than one Committee meeting, take place
on a single day, the Directors are paid a single meeting fee by the Fund. The
Fund also reimburses such Directors for travel and other out-of-pocket expenses
incurred by them in connection with attending such meetings. Directors and
officers of the Fund who are or have been employed by the Investment Manager or
an affiliated company receive no compensation or expense reimbursement from the
Fund.
10
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Directors by the Fund for the fiscal year ended August 31, 1997.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT DIRECTOR FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,650
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,800
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,850
John L. Schroeder............................................. 1,850
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
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. Hedien's term as Director of the
Dean Witter Funds commenced on September 1, 1997.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT DIRECTOR FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
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 Director who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent Director
or Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Director referred to
as an "Eligible Director") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Director
is entitled to receive from the 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.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Director for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Director's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.
- ------------------------
(1) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
11
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Directors by the Fund for the fiscal year ended August 31,
1997 and by the 57 Dean Witter Funds (including the Fund) as of December 31,
1996, and the estimated retirement benefits for the Fund's Independent
Directors, to commence upon their retirement, from the Fund as of August 31,
1997 and from the 57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
-------------------------
ESTIMATED RETIREMENT
CREDITED BENEFITS ESTIMATED ANNUAL
YEARS ACCRUED AS BENEFITS
OF SERVICE ESTIMATED EXPENSES UPON RETIREMENT(2)
AT PERCENTAGE ---------------------- --------------------
RETIREMENT OF BY ALL FROM FROM ALL
(MAXIMUM ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT DIRECTOR 10) COMPENSATION FUND FUNDS FUND FUNDS
- ------------------------------ ---------- ---------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic................. 10 50.0% $ 346 $ 20,147 $ 875 $ 51,325
Edwin J. Garn................. 10 50.0 489 27,772 875 51,325
John R. Haire................. 10 50.0 (679)(3) 46,952 2,211 129,550
Dr. Manuel H. Johnson......... 10 50.0 207 10,926 875 51,325
Michael E. Nugent............. 10 50.0 349 19,217 875 51,325
John L. Schroeder............. 8 41.7 663 38,700 729 42,771
</TABLE>
- ------------------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Directors as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. As discussed in the Prospectus, when cash may be
available to the Fund for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security ("collateral"), which is held by the Fund's
custodian bank, at a specified price and at a fixed time in the future, usually
not more than seven days from the date of purchase. The Fund will receive
interest from the institution until the time when the repurchase is to occur.
Although such date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are not
subject to any limits and may exceed 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, whose financial
conditions will be continually monitored. In addition, the value of the
collateral underlying the repurchase agreement will always be at least equal to
the resale price, which consists of the purchase price paid to the seller of the
securities plus the accrued resale premium which is defined as the amount
specified in the repurchase agreement or the daily amortization of the
difference between the purchase price and the resale price specified in the
repurchase agreement. Such collateral will consist entirely of securities that
are direct obligations of, or that are fully guaranteed as to principal and
interest by, the United States or any agency thereof, and/or certificates of
deposit, bankers' acceptances which are eligible for acceptance by a Federal
Reserve Bank, and, if the seller is a bank, mortgage related securities (as such
term is defined in section 3(a)(41) of the Securities Exchange Act of 1934) that
at the time the repurchase agreement is entered into are rated in the highest
rating category
12
<PAGE>
by the "Requisite NRSROs" (see "Purchase of Fund Shares--Determination of Net
Asset Value"). Additionally, the collateral must qualify the repurchase
agreement for preferential treatment under the Federal Deposit Insurance Act of
the Federal Bankruptcy Code. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 10% of its total assets. The Fund's investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Manager, liquidity or other considerations warrant.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the Fund may
also use reverse repurchase agreements as part of its investment strategy.
Reverse repurchase agreements involve sales by the Fund to repurchase the same
assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than the
cost of obtaining the cash otherwise. Opportunities to achieve this advantage
may not always be available, and the Fund intends to use the reverse repurchase
technique only when it will be to its advantage to do so. The Fund will
establish a segregated account with its custodian bank in which it will maintain
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.
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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, 1997, the Fund did not lend any of its portfolio securities, and it
has no intention of doing so in the foreseeable future.
VARIABLE AND FLOATING RATE OBLIGATIONS. As stated in the Prospectus, the
Fund may invest in variable and floating rate obligations. The interest rate
payable on a variable rate obligation is adjusted at predesignated periodic
intervals and, on floating rate obligations, whenever there is a change in the
market rate of interest on which the interest rate payable is based. Other
features may include the right whereby the Fund may demand prepayment of the
principal amount of the obligation prior to its stated maturity (a "demand
feature") and the right of the issuer to prepay the principal amount prior to
maturity. The principal benefit of a variable rate obligation is that the
interest rate adjustment minimizes changes in the market value of the
obligation. As a result, the purchase of variable rate and floating rate
obligations should enhance the ability of the Fund to maintain a stable net
asset value per share (see "How Net Asset Value is Determined") and to sell
obligations prior to maturity at a price approximating the full principal amount
of the obligations. The principal benefit to the Fund of purchasing obligations
with a demand feature is that liquidity, and the ability of the Fund to obtain
repayment of the full principal amount of an obligation prior to maturity, is
enhanced. The payment of principal and interest by issuers of certain
obligations purchased by the Fund may be guaranteed by letters of credit or
other credit facilities offered by banks or other financial institutions. Such
guarantees will be considered in determining whether an obligation meets the
Fund's investment quality requirements.
INVESTMENT RESTRICTIONS
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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;
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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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision by the Board of Directors, the Investment
Manager is responsible for decisions to buy and sell securities for the Fund and
arranges for the execution of portfolio security transactions on behalf of the
Fund. Purchases of portfolio securities are made from dealers, underwriters and
issuers; sales, if any, prior to maturity, are made to dealers and issuers. The
Fund does not normally incur any brokerage commission expense on such
transactions. Money market instruments are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased or sold directly from or
to an issuer, no commissions or discounts are paid. During the Fund's fiscal
years ended August 31, 1995, 1996 and 1997, 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.
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The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such price and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not, in every case, benefit the
Fund directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the Fund did not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e. Certificates of Deposit and
Banker's Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers. During its fiscal years ended August 31, 1995, 1996 and
1997, 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 and other brokers and dealers that are affiliates of the
Investment Manager. In order for an affiliated broker or dealer to effect
portfolio transactions for the Fund, the commissions, fees or other remuneration
received by the affiliated broker or dealer 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 the affiliated broker or dealer 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 an affiliated broker or dealer or any
other broker-dealer during the fiscal years ended August 31, 1995, 1996 and
1997.
Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the average
monthly value of such securities owned during the year. Based on this
definition, it is anticipated that the Fund's policy of investing in securities
with remaining maturities of thirteen months or less will not result in a
quantifiable portfolio turnover rate. However, because of the short-term nature
of the Fund's portfolio securities, it is anticipated that the number of
purchases and sales or maturities of such securities will be substantial.
Nevertheless, as brokerage commissions are not normally charged on purchases and
sales of such securities, the large number of these transactions does not have
an adverse effect upon the net yield and net asset value of the shares of the
Fund.
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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 MSDWD, 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 April 24, 1997, the
current Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement has an initial term ending April 30, 1998 and will continue in effect
from year to year thereafter if approved by the Directors. The current
Distribution Agreement took effect on May 31, 1997 upon the consummation of the
merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc. and is
substantially identical to the Fund's prior Distribution Agreement except for
its dates of effectiveness and termination.
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 FSB (the
"Transfer Agent"). This is an open account in which shares owned by the investor
are credited by the Transfer Agent in lieu of issuance of a stock certificate.
If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be redeposited
in the account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder instituted transaction takes place in the
Shareholder Investment Account directly through the Transfer Agent, the
shareholder will be mailed a written confirmation of the transaction.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check payable to Dean Witter Liquid Asset Fund
Inc. in any amount, not less than $100, directly to the Transfer Agent. The
shares so purchased will be credited to the Shareholder Investment Account.
ACCOUNT STATEMENTS. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the shareholder
by the Transfer Agent in full and fractional shares of the Fund (rounded to the
nearest 1/100 of a share, with the exception of purchases made through
reinvestment of dividends, which are rounded to the last 1/100 of a share). A
confirmation will be mailed to the shareholder after each shareholder instituted
purchase or redemption transaction effected through the Transfer Agent. A
quarterly statement of the account is sent to all shareholders. Share
certificates will not be issued unless requested in writing by the shareholder.
No certificates will be issued for fractional shares or to shareholders who have
elected the checking account, predesignated bank account or systematic
withdrawal plan methods of withdrawing cash from their accounts.
The Fund reserves the right to reject any order for the purchase of its
shares. In addition, the offering of shares of the Fund may be suspended at any
time and resumed at any time thereafter.
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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 that are multiple class funds ("Dean Witter Multi-Class
Funds") and Dean Witter Funds sold with either a front-end sales charge ("FSC
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 or Dean Witter
Intermediate Term U.S. Treasury Trust (these nine 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. Shares of the
Exchange Funds received in an exchange for shares of a Dean Witter Multi-Class
Fund may be redeemed and exchanged only for shares of the corresponding Class of
a Dean Witter Multi-Class Fund or for shares of one of the other Exchange Funds,
provided that shares of the Exchange Funds received in an exchange for Class A
shares of a Dean Witter Multi-Class Fund may also be redeemed and exchanged for
shares of a FSC fund, and shares of the Exchange Funds received in an exchange
for Class B shares of a Dean Witter Multi-Class Fund may also be redeemed and
exchanged for shares of a CDSC fund. In addition, shares of the Exchange Funds
received in an exchange for shares of a FSC fund may be redeemed and exchanged
for Class A shares of a Dean Witter Multi-Class Fund or for shares of one of the
other Exchange Funds, and shares of the Exchange Funds received in an exchange
for shares of a CDSC fund may be redeemed and exchanged for Class B shares of a
Dean Witter Multi-Class Fund or for shares of one of the other Exchange Funds.
Ultimately, any applicable contingent deferred sales charge ("CDSC") will have
to be paid upon redemption of shares originally purchased from a CDSC fund or a
Class of a Dean Witter Multi-Class Fund that imposes a CDSC. An exchange will be
treated for federal income tax purposes the same as a repurchase or redemption
of shares, on which the shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
When shares of a Dean Witter Multi-Class Fund or any CDSC fund are exchanged
for shares of any 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 Dean Witter Multi-Class Fund or 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 Dean Witter Multi-Class
Fund or 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 Dean Witter Multi-Class Fund or of a CDSC fund are
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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 Dean
Witter Multi-Class Fund or in a CDSC fund. In the case of exchanges of Class A
shares of a Dean Witter Multi-Class Fund which are subject to a CDSC, the
holding period also includes the time (calculated as described above) the
shareholder was invested in a FSC fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in a
CDSC fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of
a CDSC Fund, shares of a FSC Fund, or 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 one, 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 FSC
funds, or for shares of other Dean Witter Funds for which shares of FSC funds
have been exchanged (all such shares called "Free Shares"), will be exchanged
first. After an exchange, all dividends earned on shares in the Exchange Fund
will be considered Free Shares. If the exchanged amount exceeds the value of
such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that if shares held for
identical periods of time but subject to different CDSC schedules are held in
the same Exchange Privilege Account, the shares of that block that are subject
to a lower CDSC rate will be exchanged prior to the shares of that block that
are subject to a higher CDSC rate). Shares equal to any appreciation in the
value of non-Free Shares exchanged will be treated as Free Shares, and the
amount of the purchase payments for the non-Free Shares of the fund exchanged
into will be equal to the lesser of (a) the purchase payments for, or (b) the
current net asset value of, the exchanged non-Free Shares. If an exchange
between funds would result in exchange of only part of a particular block of
non-Free Shares, then shares equal to any appreciation in the value of the block
(up to the amount of the exchange) will be treated as Free Shares and exchanged
first, and the purchase payment for that block will be allocated on a pro rata
basis between the non-Free Shares of that block to be retained and the non-Free
Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase payment
for such shares, and the amount of purchase payment for the exchanged non-Free
Shares will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the Dean Witter Multi-Class Fund
Prospectus under the caption "Purchase of Fund Shares" and 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
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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 Exchange Privilege account may
not thereafter be placed back into that Exchange Privilege account, except by
utilizing the Reinstatement Privilege (see "Redemptions and
Repurchases--Reinstatement Privilege" in the Dean Witter Multi-Class Fund, CDSC
fund, or FSC fund Prospectus). 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 for the
Exchange Privilege account of each Class is $10,000 for Dean Witter Short-Term
U.S. Treasury Trust, although that fund may, in its discretion, accept initial
purchases of as low as $5,000, and $5,000 for the Fund, Dean Witter Tax-Free
Daily Income Trust, Dean Witter California Tax-Free Daily Income Trust, and Dean
Witter New York Municipal Money Market Trust, although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum initial
investment for the Exchange Privilege account of each Class is $5,000 for Dean
Witter Special Value Fund. The minimum initial investment for the Exchange
Privilege account of each Class of all other Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other Funds may limit the number of times this
Exchange Privilege may be exercised by any investor within a specified period of
time. Also, the Exchange Privilege may be terminated or revised at any time by
any of the Dean Witter Funds, upon such notice as may be required by applicable
regulatory agencies (presently sixty days' prior written notice for termination
or material revision), provided that six months' prior written notice of
termination will be given to the shareholders who hold shares of Exchange Funds
or TCW/DW North American Government Income Trust pursuant to this Exchange
Privilege, and provided further that the Exchange Privilege may be terminated or
materially revised at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange Commission
by order so permits (provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist), or (e) if the Fund would be unable to invest
amounts effectively in accordance with its investment objective(s), policies and
restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
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PLAN OF DISTRIBUTION
As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act with the Distributor whereby
the expenses of certain activities in connection with the distribution of shares
of the Fund are reimbursed. 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 will bear the expense of all
promotional and distribution related activities on behalf of the Fund, including
personal services to shareholders and maintenance of shareholder accounts,
except for expenses that the Directors determine to reimburse, as described
below. The Distributor, DWR, its affiliates and any other Selected Broker-Dealer
may be reimbursed for the following expenses and services under the Plan: (1)
compensation to and expenses of account executives and other employees of the
Distributor, DWR, its affiliates and other 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) 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.
The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through payments at the end of each month. 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, if any, incurred on any distribution
expense incurred pursuant to the Plan will be reimbursable under the Plan. In
the case of all expenses other than expenses representing a residual to account
executives, such amounts shall be determined at the beginning of each calendar
quarter by the Directors, including a majority of the Independent 12b-1
Directors. Expenses representing a residual to account executives may be
reimbursed without prior determination. In the event that the Distributor
proposes that monies shall be reimbursed for other than such expenses, then in
making quarterly determinations of the amounts that may be expended by the Fund,
the Distributor will provide and the Directors will 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 will determine which particular expenses,
and the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's shares.
The Distributor has informed the Fund that the entire amount of the fees
payable by the Fund each year pursuant to the Plan is characterized as a
"service fee" under the Rules of the Association of the National Association of
Securities Dealers (of which the Distributor is a member). Such fee is a payment
made for personal service and/or maintenance of shareholder accounts.
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 an internal reorganization, 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
21
<PAGE>
compensation for its own distribution-related expenses. At their meeting held on
July 23, 1997, the Directors of the Fund, including all of the Independent 12b-1
Directors, approved amendments to the Plan to change the provisions regarding
quarterly budgets.
DWR's account executives are credited with an annual residual commission,
currently a residual of up to 0.10% of the current value of the respective
accounts for which they are the account executives of record. The residual is a
charge which reflects residual commissions paid by DWR to its account executives
and expenses of DWR associated with the sale and promotion of Fund shares and
the servicing of shareholders' accounts, including the expenses of operating
branch offices in connection with the servicing of shareholders' accounts, which
expenses include lease costs, the salaries and employee benefits of operations
and sales support personnel, utility costs, communications costs and the costs
of stationery and supplies and other expenses relating to branch office
servicing of shareholder accounts.
The Fund accrued $11,872,496 to the Distributor pursuant to the Plan, for
the fiscal year ended August 31, 1997. This is 0.10 of 1% of the Fund's average
daily net assets for its fiscal year ended August 31, 1997. 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 -- $11,872,496.
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. The most recent continuance of the Plan for one
year, until April 30, 1998, was approved by the Board of Directors, including a
majority of the Independent 12b-1 Directors, at their meeting held on April 24,
1997. 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.
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 the
Distributor, InterCapital, DWSC, DWR or certain of their employees may be deemed
to have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Fund.
22
<PAGE>
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; Reverend Dr. Martin Luther King, Jr.
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 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
23
<PAGE>
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.
A "NRSRO" is a nationally recognized statistical rating organization. The
term "Requisite NRSROs" means (i) any two NRSROs that have issued a rating with
respect to a security or class of debt obligations of an issuer, or (ii) if only
one NRSRO has issued a rating with respect to such security or issuer at the
time a fund purchases or rolls over the security, that NRSRO.
An Eligible Security is generally defined in the Rule to mean (i) a security
with a remaining maturity of 397 calendar days or less that has received a
short-term rating (or that has been issued by an issuer that has received a
short-term rating with respect to a class of debt obligations, or any debt
obligation within that class, that is comparable in priority and security with
the security) by the Requisite NRSROs in one of the two highest short-term
rating categories (within which there may be sub-categories or gradations
indicating relative standing); or (ii) a security; (A) that at the time of
issuance had a remaining maturity of more than 397 calendar days but that has a
remaining maturity of 397 calendar days or less; and (B) whose issuer has
received from the Requisite NRSROs a rating with respect to a class of debt
obligations (or any debt obligation within that class) that is now comparable in
priority and security with the security, in one of the two highest short-term
rating categories (within which there may be sub-categories or gradations
indicating relative standing); or (iii) an unrated security that is of
comparable quality to a security meeting the requirements of (i) or (ii) above,
as determined by the money market fund's board of directors.
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.
24
<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.
It has been and remains the Fund's policy and practice that, if checks for
redemption proceeds remain uncashed, no interest will accrue on amounts
represented by such uncashed checks.
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
25
<PAGE>
termination, the account will be continued as a regular shareholder investment
account. The shareholder may also redeem all or part of the shares held in the
withdrawal plan account (see "Redemption of Fund Shares" in the Prospectus) at
any time. If the number of shares redeemed is greater than the number of shares
paid as dividends, such redemptions may, of course, eventually result in
liquidation of all the shares in the account. The automatic cash withdrawal
method of redemption is not available for shares held in an Exchange Privilege
Account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. As discussed in the Prospectus, the Fund
intends to distribute all of its daily net investment income and net short-term
capital gains, if any, to shareholders of record as of the close of business the
preceding business day. Net income, for dividend purposes, includes accrued
interest and amortization of market discount, plus or minus any gains or losses
realized on sales of portfolio securities, less the amortization of market
premium and the estimated expenses of the Fund. Net income will be calculated
immediately prior to the determination of net asset value per share of the Fund.
The Board of Directors may revise the dividend policy, or postpone the
payment of dividends, if the Fund should have or anticipate any large unexpected
expense, loss or fluctuation in net assets which, in the opinion of the Board,
might have a significant adverse effect on shareholders.
It has been and remains the Fund's policy and practice that, if checks for
dividends or distributions paid in cash remain uncashed, no interest will accrue
on amounts represented by such uncashed checks.
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, 1997 was 5.13%.
The effective annual yield on this date was 5.26%, 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
26
<PAGE>
shares purchased with dividends and any dividends declared therefrom (which
reflect deductions of all expenses of the Fund such as management fees), in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining (for the same stated seven-day period as for the
current yield) the net change, exclusive of capital changes and including the
value of additional shares purchased with dividends and any dividends declared
therefrom (which reflect deductions of all expenses of the Fund such as
management fees), in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 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 $50,111,
$250,555 and $501,110, respectively, at August 31, 1997.
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 FSB, 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
FSB 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 FSB's
responsibilities include maintaining shareholder accounts, including providing
27
<PAGE>
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 FSB receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements together with the report of its independent accountants,
will be sent to shareholders each year.
The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Directors.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, 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,
1997, 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, 1997, and the report of the independent accountants thereon, are set
forth in the Fund's Prospectus, and are incorporated herein by reference.
28
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
Description of the highest commercial paper, bond and other short- and
long-term rating categories assigned by Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc.
("Fitch"), Duff and Phelps, Inc. ("Duff"), IBCA Limited and IBCA Inc. ("IBCA")
and Thomson BankWatch, Inc. ("Thomson"):
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Duff applies the modifiers (+) and
(-) to the rating Duff-1 in recognition of significant quality differences
within the highest tier. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
The rating TBW-1 is the highest short-term rating assigned by Thomson and
indicates a very high degree of likelihood that principal and interest will be
paid on a timely basis. The rating TBW-2 by Thomson is its second highest
rating; while the degree of safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is not as high as for issues
rated TBW-1.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay interest and repay principal.
Bonds rated AA by S&P are judged by S&P to have a very strong capacity to pay
interest and repay principal, and differ only in small degrees from issues rated
AAA.
29
<PAGE>
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa rated bonds. Moody's applies
numerical modifiers 1, 2 and 3 in the Aa rating category. The modifier 1
indicates a ranking for the security in the higher end of this rating category,
the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a
ranking in the lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit quality
with negligible risk factors that are only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA are judged by Duff to be of high credit quality
with strong protection factors; risk is modest but may vary slightly from time
to time because of economic conditions. Duff applies modifiers of (+) and (-) to
the AA category.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have a
very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very significantly.
IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank and
whether such bank would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Ratings and Individual Ratings. In addition, IBCA assigns banks Long- and
Short-Term Ratings as used in the corporate ratings discussed above. Legal
Ratings, which range in gradation from 1 through 5, address the question of
whether the bank would receive support by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely on support from state authorities or its
owners.
Companies rated A are considered by Thomson to possess an exceptionally
strong balance sheet and earnings record, translating into an excellent
reputation and unquestioned access to their natural money markets; if weakness
or vulnerability exists in any aspect of a company's business, it is entirely
mitigated by the strengths of the organization. Companies rated A/B- by Thomson
are judged by Thomson to be financially very solid with a favorable track record
and no readily apparent weakness; their overall risk profiles, while low, are
not quite as favorable as for companies in the highest rating category.
30
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included in Prospectus (Part A):
Page in
Prospectus
----------
Financial Highlights for the years August 31,
1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995,
1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio of Investments at August 31, 1997 . . . . . . . 19
Statement of assets and liabilities at
August 31, 1997 . . . . . . . . . . . . . . . . . . . . . 23
Statements of operations for the year ended
August 31, 1997 . . . . . . . . . . . . . . . . . . . . . 24
Statement of changes in net assets for the years ended
August 31, 1996 and August 31, 1997 . . . . . . . . . . . 25
Notes to Financial Statements . . . . . . . . . . . . . . 26
(2) Financial statements included in the Statement of Additional
Information (Part B):
None
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
5. Investment Management Agreement between the Registrant
and Dean Witter InterCapital Inc.
6. Distribution Agreement between the Registrant and Dean
Witter Distributors Inc.
8. Form of Amended and Restated Transfer Agency and Service
Agreement
11. Consent of Independent Accountants
15. Amended and Restated Plan of Distribution Pursuant to
Rule 12b-1
16. Schedules for Computation of Performance Quotations
<PAGE>
27. Financial Data Schedule
Other. Power of Attorney.
- --------------------------------------------------
All other exhibits were previously filed and are hereby incorporated by
reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at September 30, 1997
-------------- ------------------------
Shares of Common Stock 1,751,862
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 Acts remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Directors, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Director, officer, employee or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
2
<PAGE>
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 Morgan Stanley, 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
(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
3
<PAGE>
(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 Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Mid-Cap Growth Fund
(48) Dean Witter Select Dimensions Investment Series
(49) Dean Witter Balanced Growth Fund
(50) Dean Witter Balanced Income Fund
(51) Dean Witter Hawaii Municipal Trust
(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
(58) Dean Witter Financial Services Trust
(59) Dean Witter Market Leader Trust
(60) Dean Witter S&P 500 Index Fund
(61) Dean Witter Fund of Funds
4
<PAGE>
The term "TCW/DW Funds" refers to the following registered investment companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW 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 Executive Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer Officer and Director of Dean Witter Distributors
and Director Inc. ("Distributors") and Dean Witter Services
Company Inc. ("DWSC"); Chairman and Director of
Dean Witter Trust FSB ("DWT"); 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;
Director and/or officer of various Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD") subsidiaries;
formerly Executive Vice President and Director of
Dean Witter, Discover & Co.
Philip J. Purcell Chairman, Chief Executive Officer and Director
Director of MSDWD and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer of Dean
Director Witter Capital, a division of DWR; Director of
DWR, DWSC, Distributors and DWT; Trustee of the
TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of Dean
Director Witter Financial; Director of DWR, DWSC,
Distributors and DWT.
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
- ----------------- -------------------------------------------------
Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice President, Administrative Officer of MSDWD; Executive
Chief Financial Officer Vice President and Chief Financial Officer of DWSC
and Director and Distributors; Director of DWR, DWSC,
Distributors and MSDWD.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director and Secretary of MSDWD; 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 DWT; Vice
President of the Dean Witter Funds and the TCW/DW
Funds.
Mitchell M. Merin President and Chief Strategic Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Strategic Officer Executive Vice President and Director of DWT;
Executive Vice President and Director of
DWR;Director of SPS Transaction Services, Inc. and
various other MSDWD subsidiaries.
John B. Van Heuvelen President, Chief Operating Officer and Director of
Executive Vice DWT
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWT.
and Chief Investment
Officer
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Peter M. Avelar Vice President of various Dean Witter Funds.
Senior Vice President
Mark Bavoso Vice President of various Dean Witter Funds.
Senior Vice President
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 F. Gaylor Vice President of various Dean Witter Funds.
Senior Vice President
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWT and Director of DWT; Vice President of the
Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta Vice President of various Dean Witter Funds.
Senior Vice President
Kenton J. Hinchcliffe Vice President of various Dean Witter Funds.
Senior Vice President
Kevin Hurley Vice President of various Dean Witter Funds
Senior Vice President
Margaret Iannuzzi
Senior Vice President
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 H. Kolleeny Vice President of various Dean Witter Funds.
Senior Vice President
Jonathan R. Page Vice President of various Dean Witter Funds.
Senior Vice President
Ira N. Ross Vice President of various Dean Witter Funds.
Senior Vice President
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari Vice President of Prime Income Trust.
Senior Vice President
Rochelle G. Siegel Vice President of various Dean Witter Funds.
Senior Vice President
Jayne M. Stevlingston Vice President of various Dean Witter Funds.
Senior Vice President
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
- ----------------- -------------------------------------------------
Paul D. Vance Vice President of various Dean Witter Funds.
Senior Vice President
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Dean Witter Funds.
Senior Vice President
Ronald J. Worobel Vice President of various Dean Witter Funds.
Senior Vice President
Douglas Brown
First Vice President
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.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
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.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of DWT.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
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
- ----------------- -------------------------------------------------
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Dean Witter Funds.
Vice President
Kirk Balzer Vice President of various Dean Witter Funds.
Vice President
Nancy Belza
Vice President
Dale Boettcher
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno Vice President of DWSC.
Vice President
Frank J. DeVito Vice President of DWSC.
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
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 Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter Variable Investment
Vice President Series.
Peter Hermann Vice President of various Dean Witter Funds.
Vice President
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
James P. Kastberg
Vice President
Michelle Kaufman Vice President of various Dean Witter Funds.
Vice President
Michael Knox Vice President of various Dean Witter Funds.
Vice President
Paula LaCosta Vice President of various Dean Witter Funds.
Vice President
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Dean Witter Funds.
Vice President
Catherine Maniscalco Vice President of Dean Witter Natural Resource
Vice President Development Securities Inc.
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
- ----------------- -------------------------------------------------
Albert McGarity
Vice President
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
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metals and
Vice President Minerals Trust.
11
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
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
Peter Seeley Vice President of Dean Witter World Wide
Vice President Income Trust
Naomi Stein
Vice President
Kathleen H. Stromberg Vice President of various Dean Witter Funds.
Vice President
Marybeth Swisher
Vice President
Vinh Q. Tran Vice President of various Dean Witter Funds.
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Dean Witter Funds.
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware corporation, is
the principal underwriter of the Registrant. Distributors is also the
principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(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
12
<PAGE>
(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
(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 Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Variable Investment Series
(51) Dean Witter Capital Appreciation Fund
(52) Dean Witter Intermediate Term U.S. Treasury Trust
(53) Dean Witter Information Fund
(54) Dean Witter Japan Fund
(55) Dean Witter Income Builder Fund
(56) Dean Witter Special Value Fund
(57) Dean Witter Financial Services Trust
(58) Dean Witter Market Leader Trust
13
<PAGE>
(59) Dean Witter S&P 500 Index Fund
(60) Dean Witter Fund of Funds
(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.
Name Positions and Office with 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
Not Applicable.
14
<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 22nd day of October, 1997.
DEAN WITTER LIQUID ASSET FUND INC.
By /s/ Barry Fink
--------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 34 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 10/22/97
-------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 10/22/97
-------------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 10/22/97
-------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Michael E. Nugent Edwin J. Garn
John R. Haire John L. Schroeder
Wayne E. Hedein
By /s/ David M. Butowsky 10/22/97
-------------------------------
David M. Butowsky
Attorney-in-Fact
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DEAN WITTER LIQUID ASSET FUND INC.
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
5. Investment Management Agreement between the Registrant and Dean Witter
InterCapital Inc.
6. Distribution Agreement between the Registrant and Dean Witter
Distributors Inc.
8. Form of Amended and Restated Transfer Agency and Service Agreement
11. Consent of Independent Accountants
15. Amended and Restated Plan of Distribution Pursuant to Rule 12b-1
16. Schedules for Computation of Performance Quotations
27. Financial Data Schedule
Other Power of Attorney
All other exhibits previously filed and incorporated by reference.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between Dean Witter
Liquid Asset Fund Inc., a Maryland corporation (hereinafter called the "Fund"),
and Dean Witter InterCapital Inc., a Delaware corporation (hereinafter called
the "Investment Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Directors, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager
shall obtain and evaluate such information and advice relating to the
economy, securities markets and securities as it deems necessary or useful to
discharge its duties hereunder; shall continuously manage the assets of the
Fund in a manner consistent with the investment objectives and policies of
the Fund; shall determine the securities to be purchased, sold or otherwise
disposed of by the Fund and the timing of such purchases, sales and
dispositions; and shall take such further action, including the placing of
purchase and sale orders on behalf of the Fund, as the Investment Manager
shall deem necessary or appropriate. The Investment Manager shall also
furnish to or place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the Investment
Manager in the discharge of its duties as the Fund may, from time to time,
reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment
Manager shall be deemed to include persons employed or otherwise retained by
the Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and
assistance as the Investment Manager may desire. The Investment Manager
shall, as agent for the Fund, maintain the Fund's records and books of
account (other than those maintained by the Fund's transfer agent, registrar,
custodian and other agents). All such books and records so maintained shall
be the property of the Fund and, upon request therefor, the Investment
Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available
to the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties
and obligations hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the
officers and employees, if any, of the Fund, and provide such office space
and equipment and such clerical and bookkeeping services as the Fund shall
reasonably require in the conduct of its business, including the pricing of
Fund shares, and preparation of prospectuses, proxy statements and reports
required
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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). The
Investment Manager shall also bear 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.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including without limitation: the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any
stock transfer or dividend agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State
or other governmental agencies; the cost and expense of engraving or printing
stock certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund
and its shares with the Securities and Exchange Commission and various states
and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); 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 and mailing 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 the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of legal counsel and independent accountants in connection with
any matter relating to the Fund (not including compensation or expenses of
attorneys employed by the Investment Manager); membership dues of the
Investment Company Institute; interest payable 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 related thereto); and all other charges and
costs of the Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 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 $1.3 billion; 0.325% of the portion of the daily
net assets exceeding $1.3 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
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. Except
as hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be
paid monthly. Such calculations shall be made by applying 1/365ths of the
annual rates to the Fund's net assets each day determined as of the close of
business on that day or the last previous business day. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Subject to the provisions of
paragraph 7 hereof, payment of the Investment Manager's compensation for the
preceding month shall be made as promptly as possible after completion of the
computation contemplated by paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws
or regulations thereunder, as such limitations may be raised or lowered from
time to time, the Investment Manager shall
2
<PAGE>
reduce its management fee to the extent of such excess and, if required,
pursuant to any such laws or regulations, will reimburse the Fund for annual
operating expenses in excess of any expense limitation that may be
applicable; provided, however, there shall be excluded from such expenses the
amount of any interest, taxes, brokerage commissions and extraordinary
expenses (to the extent permitted by state securities laws or regulations
thereunder) paid or payable by the Fund. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis, and shall be
based upon the expense limitation applicable to the Fund as at the end of the
last business day of the month. Should two or more such expense limitations
be applicable as at the end of the last business day of the month, that
expense limitation which results in the largest reduction in the Investment
Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt of fixed income securities in the Fund's
portfolio accrued to and including the last day of the Fund's fiscal year, and
dividends declared but not paid on any equity securities in the Fund's
portfolio, the record dates for which fall on or prior to the last day of such
fiscal year, but shall not include gains from the sales of securities.
8. The Investment Manager will use its best efforts in the supervision
and management of the investment activities of the Fund, but in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations hereunder, the Investment Manager shall not be liable to the
Fund or any of its investors for any error of judgment or mistake of law or
for any act or omission by the Investment Manager or for any losses sustained
by the Fund or its investors.
9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any director, officer or employee of the Investment Manager to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1999 and from
year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority (as defined in the Act) of the
outstanding voting securities of the Fund or by the Board of Directors of the
Fund; provided that in either event such continuance is also approved
annually by the vote of a majority of the Directors of the Fund who are not
parties to this Agreement or "interested persons" (as defined in the Act) of
any such party, which vote must be cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that (a) the Fund may,
at any time and without the payment of any penalty, terminate this Agreement
upon thirty days' written notice to the Investment Manager, either by
majority vote of the Board of Directors of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (within the
meaning of the Act) unless such automatic termination shall be prevented by
an exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund. Any notice under this Agreement
shall be given in writing, addressed and delivered, or mailed post-paid, to
the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or
if they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the
Investment Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the law of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
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<PAGE>
13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right
of Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will
only use the name "Dean Witter" as a component of its name and for no other
purpose, (ii) it will not purport to grant to any third party the right to
use the name "Dean Witter" for any purpose, (iii) the Investment Manager or
its parent, Morgan Stanley, Dean Witter, Discover & Co., or any corporate
affiliate of the Investment Manager's parent, may use or grant to others the
right to use the name "Dean Witter," or any combination or abbreviation
thereof, as all or a portion of a corporate or business name or for any
commercial purpose, including a grant of such right to any other investment
company, (iv) at the request of the Investment Manager or its parent, the
Fund will take such action as may be required to provide its consent to the
use of the name "Dean Witter," or any combination or abbreviation thereof, by
the Investment Manager or its parent or any corporate affiliate of the
Investment Manager's parent, or by any person to whom the Investment Manager
or its parent or any corporate affiliate of the Investment Manager's parent
shall have granted the right to such use, and (v) upon the termination of any
investment advisory agreement into which the Investment Manager and the Fund
may enter, or upon termination of affiliation of the Investment Manager with
its parent, the Fund shall, upon request by the Investment Manager or its
parent, cease to use the name "Dean Witter" as a component of its name, and
shall not use the name, or any combination or abbreviation thereof, as a part
of its name or for any other commercial purpose, and shall cause its
officers, Directors and shareholders to take any and all actions which the
Investment Manager or its parent may request to effect the foregoing and to
reconvey to the Investment Manager or its parent any and all rights to such
name.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
DEAN WITTER LIQUID ASSET FUND INC.
By: /s/ Barry Fink
-------------------------------------
Attest:
/s/ Ruth Rossi
- -------------------------------------
DEAN WITTER INTERCAPITAL INC.
By: /s/ Charles A. Fiumefreddo
-------------------------------------
Attest:
/s/ Marilyn K. Cranney
- -------------------------------------
4
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of May, 1997 between Dean Witter Liquid
Asset Fund Inc., a Maryland corporation (the "Fund"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and
it is in the interest of the Fund to offer its shares for sale continuously,
and
WHEREAS, the Fund, and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's
transferable shares of beneficial interest, of $.01 par value (the "Shares"),
in order to promote the growth of the Fund and facilitate the distribution of
its Shares.
Now, Therefore, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. (a) The Fund hereby appoints
the Distributor as the principal underwriter of the Fund to sell Shares to
the public on the terms set forth in this Agreement and the Fund's prospectus
and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund, during the term of this Agreement, shall sell Shares to
the Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate
of the Distributor, upon the terms described herein and in the Fund's
prospectus (the "Prospectus") and statement of additional information
included in the Fund's registration statement (the "Registration Statement")
most recently filed from time to time with the Securities and Exchange
Commission (the "SEC") and effective under the Securities Act of 1933, as
amended (the "1933 Act") and 1940 Act or as said Prospectus may be otherwise
amended or supplemented and filed with the SEC pursuant to Rule 497 under the
1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of the Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not
apply to Shares issued by the Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company
with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company
by the Fund; or (ii) pursuant to reinvestment of dividends or capital gains
distributions; or (iii) pursuant to the reinstatement privilege afforded
redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM THE FUND. (a) The Distributor shall
have the right to buy from the Fund the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors and
securities dealers. The price which the Distributor shall pay for the Shares
so purchased from the Fund shall be the net asset value, determined as set
forth in the Prospectus, used in determining the public offering price on
which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price, as set forth in the Prospectus, to investors or to securities dealers,
including DWR, having selected dealer agreements with the Distributor
pursuant to Section 7 ("Selected Dealers").
(c) The Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(e) hereof. The Fund shall also have the right to suspend the sale
of the Shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by federal or New
York authorities, or if there shall have been some other extraordinary event
which, in the judgment of the Fund, makes it impracticable to sell the
Shares.
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(d) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept
orders for the purchase of Shares. The Distributor will confirm orders upon
their receipt, and the Fund (or its agent) upon receipt of payment therefor
and instructions will deliver share certificates for such Shares or a
statement confirming the issuance of Shares. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Fund's transfer agent to receive instructions
directly from the Selected Dealer on behalf of the Distributor as to
registration of Shares in the names of investors and to confirm issuance of
the Shares to such investors. The Distributor is also authorized to instruct
the transfer agent to receive payment directly from the Selected Dealer on
behalf of the Distributor, for prompt transmittal to the Fund's custodian, of
the purchase price of the Shares. In such event the Distributor shall obtain
from the Selected Dealer and maintain a record of such registration
instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to
redeem the Shares so tendered in accordance with the applicable provisions
set forth in the Prospectus. The price to be paid to redeem the Shares shall
be equal to the net asset value determined as set forth in the Prospectus.
All payments by the Fund hereunder shall be made in the manner set forth
below.
The proceeds of any redemption of Shares shall be paid by the Fund to the
redeeming shareholders, in each case in accordance with applicable provisions
of the Prospectus in New York Clearing House funds.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office
of the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of
the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of
the shareholder, or at the discretion of the Distributor. The Distributor
shall promptly transmit to the transfer agent of the Fund, for redemption,
all such orders for repurchase of Shares. Payment for Shares repurchased may
be made by the Fund to the Distributor for the account of the shareholder.
The Distributor shall be responsible for the accuracy of instructions
transmitted to the Fund's transfer agent in connection with all such
repurchases.
(d) With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Fund to transmit payments for such redemptions and
repurchases directly to the Selected Dealer on behalf of the Distributor for
the account of the shareholder. The Distributor shall obtain from the
Selected Dealer, and shall maintain, a record of such orders. The Distributor
is further authorized to obtain from the Fund, and shall maintain, a record
of payments made directly to the Selected Dealer on behalf of the
Distributor.
(e) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the SEC, by order, so permits.
SECTION 5. DUTIES OF THE FUND. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use
2
<PAGE>
in connection with the distribution of the Shares, including one certified
copy, upon request by the Distributor, of all financial statements prepared
by the Fund and examined by independent accountants. The Fund shall, at the
expense of the Distributor, make available to the Distributor such number of
copies of the prospectus as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to register Shares under
the 1933 Act, to the end that there will be available for sale such number of
Shares as investors may reasonably be expected to purchase.
(c) The Fund shall use its best efforts to pay the filing fees for an
appropriate number of the Shares for sale under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, such filing
fees shall be borne by the Fund. The Distributor shall furnish any
information and other material relating to its affairs and activities as may
be required by the Fund in connection with the sale of its Shares in any
state.
(d) The Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. DUTIES OF THE DISTRIBUTOR. (a) The Distributor shall sell
Shares of the Fund through DWR and may sell Shares through other securities
dealers and its own Account Executives and shall devote reasonable time and
effort to promote sales of Shares, but shall not be obligated to sell any
specific number of Shares. The services of the Distributor hereunder are not
exclusive and it is understood that the Distributor may act as principal
underwriter for other registered investment companies, so long as the
performance of its obligations hereunder is not impaired thereby. It is also
understood that Selected Dealers, including DWR, may also sell shares for
other registered investment companies.
(b) Neither the Distributor nor any Selected Dealers shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the applicable terms
and limitations of the Rules of the Association of the National Association
of Securities Dealers, Inc. ("NASD").
SECTION 7. SELECTED DEALERS AGREEMENTS. The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers
on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such requirements
may from time to time exist.
SECTION 8. PAYMENT OF EXPENSES. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under
this Agreement, including the payment to Selected Dealers of any service fees
and other expenses for sales of the Fund's Shares (except such expenses as
are specifically undertaken herein by the Fund) incurred or paid by Selected
Dealers, including DWR. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any supplementary sales literature used
by the Distributor or furnished by it for use by Selected Dealers in
connection with the offering of the Shares for sale. Any expenses of
advertising incurred in connection with such offering will also be the
obligation of the Distributor. It is understood and agreed that, so long as
the Fund's Plan of Distribution pursuant to Rule 12b-1 (the "Rule 12b-1
Plan") continues in effect, any expenses incurred by the Distributor
hereunder may be paid in accordance with the terms of such Rule 12b-1 Plan.
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(b) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund
or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and
Prospectuses and all amendments and supplements thereto, and the expenses of
preparing, printing, mailing and otherwise distributing prospectuses and
statements of additional information, annual or interim reports or proxy
materials to shareholders.
(c) The Fund shall pay the filing fees and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying the Fund as a
broker or dealer, in such states of the United States or other jurisdictions
as shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost
of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, which may be based upon
the 1933 Act, or on any other statute or at common law, on the ground that
the Registration Statement or related Prospectus as from time to time may be
amended and supplemented, or the annual or interim reports to shareholders of
the Fund, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, information furnished to the Fund
in connection therewith by or on behalf of the Distributor; provided,
however, that in no case (i) is the indemnity of the Fund in favor of the
Distributor and any such controlling persons to be deemed to protect the
Distributor or any such controlling persons thereof against any liability to
the Fund or its security holders to which the Distributor or any such
controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Distributor or such controlling persons (or after the Distributor or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense or if it so elects, to assume the defense, of any
suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but,
in case the Fund does not elect to assume the defense of any such suit, it
will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund shall promptly notify the Distributor
of the commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Fund and
each of its Directors and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in
conformity with, information furnished to the Fund in writing by or on behalf
of the Distributor for use in connection with the Registration Statement or
related Prospectus, as from time to time may be amended, or the annual or
interim reports to shareholders.
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(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which
arise as a result of actions taken pursuant to instructions from, or on
behalf of the Distributor to: (1) redeem all or a part of shareholder
accounts in the Fund pursuant to Section 4 hereof and pay the proceeds to the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance
thereof and receive payment therefor pursuant to Section 3(e).
(iii) In case any action shall be brought against the Fund or any person
so indemnified by this subsection 9(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or expenses
(or actions in respect thereof) referred to herein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Fund on the one hand and the
Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Fund on the one hand and the Distributor on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Fund on the one hand and the Distributor on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Fund or the Distributor and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Distributor agree that
it would not be just and equitable if contribution were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
claim. Notwithstanding the provisions of this subsection (c), the Distributor
shall not be required to contribute any amount in excess of the amount by
which the total price at which the Shares distributed by it to the public
were offered to the public exceeds the amount of any damages which it has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1998 and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Directors
of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, cast in person or by proxy, and (ii) a majority of
those Directors who are not parties to this Agreement or interested persons
of any such party and who have no direct or indirect financial interest in
this Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any
agreement related thereto, cast in person at a meeting called for the purpose
of voting upon such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors of the Fund, by a majority of the Directors of the
Fund who are not interested persons of the Fund and
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who have no direct or indirect financial interest in this Agreement or by
vote of a majority of the outstanding voting securities of the Fund, or by
the Distributor, on sixty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person", when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors of the Fund, or by the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Directors of the Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a
meeting called for the purpose of voting on such approval.
SECTION 12. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the
1940 Act. To the extent that the applicable law of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER LIQUID ASSET FUND INC.
By: /s/ Charles A. Fiumefreddo
---------------------------------
DEAN WITTER DISTRIBUTORS INC.
By: /s/ Robert S. Giambrone
---------------------------------
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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1 Terms of Appointment................................... 1
Article 2 Fees and Expenses...................................... 2
Article 3 Representations and Warranties of DWTFSB............... 3
Article 4 Representations and Warranties of the Fund............. 3
Article 5 Duty of Care and Indemnification....................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB......... 4
Article 7 Duration and Termination of Agreement.................. 5
Article 8 Assignment............................................. 5
Article 9 Affiliations........................................... 6
Article 10 Amendment.............................................. 6
Article 11 Applicable Law......................................... 6
Article 12 Miscellaneous.......................................... 6
Article 13 Merger of Agreement.................................... 7
Article 14 Personal Liability..................................... 7
</TABLE>
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997
by and between each of the Funds listed on the signature pages hereof, each of
such Funds acting severally on its own behalf and not jointly with any of such
other Funds (each such Fund hereinafter referred to as the "Fund"), each such
Fund having its principal office and place of business at Two World Trade
Center, New York, New York, 10048, and DEAN WITTER TRUST FSB ("DWTFSB"), a
federally chartered savings bank, having its principal office and place of
business at Harborside Financial Center, Plaza Two, Jersey City, New Jersey
07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent, dividend
disbursing agent and shareholder servicing agent and DWTFSB desires to accept
such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act as,
the transfer agent for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent in connection with any accumulation, open-account or
similar plans provided to the holders of such Shares ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book form
in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934 Act")
a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding.
DWTFSB shall also provide to the Fund on a regular basis the total number
of Shares that are authorized, issued and outstanding and shall notify
the Fund in case any proposed issue of Shares by the Fund would result in
an overissue. In case any issue of Shares
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would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for such
Shares. When recording the issuance of Shares, DWTFSB shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue
of sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing agent
in connection with dividend reinvestment, accumulation, open-account or
similar plans (including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited to,
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing appropriate forms required with respect to dividends and
distributions by federal tax authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account
information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of
DWTFSB for the Fund's status under the securities laws of any State or
other jurisdiction is limited to the inclusion on the system of each
State as to which the Fund has informed DWTFSB that shares may be sold in
compliance with state securities laws and the reporting of purchases and
sales in each such State to the Fund as provided above and as agreed from
time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and certain
transactional fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject to
mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees to
reimburse DWTFSB for out of pocket expenses in connection with the services
rendered by DWTFSB hereunder. In addition, any other expenses incurred by DWTFSB
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
2
<PAGE>
Article 3 REPRESENTATIONS AND WARRANTIES OF DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of Section
17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale.
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of
3
<PAGE>
offering of such Shares in such State or other jurisdiction or in violation
of any stop order or other determination or ruling by any federal agency or
any State or other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund for any action taken or omitted by
it in reliance upon such instructions or upon the opinion of such counsel.
DWTFSB, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided to DWTFSB or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. DWTFSB, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
5.4 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article 5
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent of
the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary
of the Fund as to such approval;
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(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Trustees, with a certificate of the
Secretary of the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of Share certificates, check
forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by Section
31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB agrees that
all such records prepared or maintained by DWTFSB relating to the services
performed by DWTFSB hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential and shall not be voluntarily disclosed to any other person except
as may be required by law or with the prior consent of DWTFSB and the Fund.
6.5 In case of any request or demands for the inspection of the Shareholder
records of the Fund, DWTFSB will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection.
DWTFSB reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written notice,
and by DWTFSB on 90 days written notice, to the other party without payment of
any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
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8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its obligations
and duties hereunder with any person or entity including but not limited to
companies which are affiliated with DWTFSB; PROVIDED, HOWEVER, that such person
or entity has and maintains the qualifications, if any, required to perform such
obligations and duties, and that DWTFSB shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor as it is for its
own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment company whose adviser,
administrator, sponsor or principal underwriter is or may become affiliated with
Morgan Stanley, Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the case
may be), officers, employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the Fund's investment
adviser and/or distributor, are or may be interested in DWTFSB as directors,
officers, employees, agents and shareholders or otherwise, and that the
directors, officers, employees, agents and shareholders of DWTFSB may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent, dividend
disbursing agent and/or shareholder servicing agent, and DWTFSB desires to
render such services, such services shall be provided pursuant to a letter
agreement, substantially in the form of Exhibit A hereto, between DWTFSB and
each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTFSB and the Fund issued by a
surety company satisfactory to DWTFSB, except that DWTFSB may accept an
affidavit of loss and indemnity agreement executed by the registered holder (or
legal representative) without surety in such form as DWTFSB deems appropriate
indemnifying DWTFSB and the Fund for the issuance of a replacement certificate,
in cases where the alleged loss is in the amount of $1,000 or less.
12.3 In the event that any check or other order for payment of money on the
account of any Shareholder or new investor is returned unpaid for any reason,
DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may instruct
DWTFSB.
6
<PAGE>
12.4 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or to DWTFSB shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
12. Dean Witter Dividend Growth Securities Inc.
7
<PAGE>
13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
8
<PAGE>
SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By: __________________________________
Barry Fink
Vice President and General Counsel
ATTEST:
_____________________________
Assistant Secretary
DEAN WITTER TRUST FSB
By: __________________________________
John Van Heuvelen
President
ATTEST:
_____________________________
Executive Vice President
9
<PAGE>
EXHIBIT A
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (INSET NAME OF INVESTMENT COMPANY) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and appoint
Dean Witter Trust FSB ("DWTFSB") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent, registrar
and agent in connection with any accumulation, open-account or similar plan
provided to the holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund to
DWTFSB of fees as set out in the fee schedule attached hereto as Schedule A,
DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(NAME OF FUND)
By: _________________________________
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By: __________________________________
Its: _________________________________
Date: ________________________________
10
<PAGE>
SCHEDULE A
Fund: Dean Witter Liquid Asset Fund Inc.
Fees: (1) Annual maintenance fee of $15.00 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constitutiing part of this
Post-Effective Amendment No. 34 to the Registration Statement on Form N-1A
(the "Registration Statement") of our report dated October 7, 1997, 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
also constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Financial Highlights" in such Prospectus
and under the headings "Independent Accountants" and "Experts" in such
Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 22, 1997
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER LIQUID ASSET FUND INC.
WHEREAS, Dean Witter Liquid Asset Fund Inc. (the "Fund") is engaged in
business as an open-end management investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, on January 4, 1993, the Fund amended and restated a Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the Act which had
initially been adopted on March 21, 1983, and the Directors then determined
that there was a reasonable likelihood that the Plan of Distribution, as then
amended and restated, would benefit the Fund and its shareholders; and
WHEREAS, the Directors believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to
continue to benefit the Fund and its shareholders; and
WHEREAS, the Agreement incorporated in said initial Plan and Agreement of
Distribution was entered into by the Fund with Dean Witter Reynolds Inc.
("DWR"); and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of
the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue
to promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of May 31, 1997, pursuant to which the Fund
has employed the Distributor in such capacity during the continuous offering
of shares of the Fund.
NOW, THEREFORE, the Fund hereby amends and restates the Plan of
Distribution previously adopted and amended and restated, and the Distributor
hereby agrees to the terms of said Plan of Distribution (the "Plan"), as
amended and restated herein, in accordance with Rule 12b-1 under the Act on
the following terms and conditions:
1. The Fund is hereby authorized to utilize its assets to finance certain
activities in connection with the distribution of its shares.
2. Subject to the supervision of the Directors and the terms of the
Distribution Agreement, the Distributor is authorized to promote the
distribution of the Fund's shares and to provide related services through
DWR, its affiliates or other broker-dealers it may select, and its own
Registered Representatives. The Distributor, DWR, its affiliates and said
broker-dealers shall be reimbursed, directly or through the Distributor, as
it may direct, as provided in paragraph 4 hereof for their services and
expenses, which may include one or more of the following: (1) compensation
to, and expenses of, account executives and other employees, including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives of the Distributor, DWR, its affiliates and other
broker-dealers, and to marketing personnel in connection with promoting sales
of shares of the Fund; (3) expenses incurred in connection with promoting
sales of shares of the Fund; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
3. The Distributor hereby undertakes to directly bear all costs of
rendering the services to be performed by it under this Plan and under the
Distribution Agreement, except for those specific expenses
that the Directors determine to reimburse as hereinafter set forth.
4. The Fund is hereby authorized to reimburse the Distributor, DWR, its
affiliates and other broker-dealers for incremental distribution expenses
incurred by them specifically on behalf of the Fund. Reimbursement will be
made through payments at the end of each month. The amount of each monthly
payment may in no event exceed an amount equal to a payment at the annual
rate of 0.15 of 1% of the Fund's average net assets during the month. In the
case of all expenses other than expenses representing
1
<PAGE>
a residual to account executives, such amounts shall be determined at the
beginning of each calendar quarter by the Directors, including a majority of
the Directors who are not "interested persons" of the Fund, as defined in the
Act. Expenses representing a residual to account executives may be reimbursed
without prior determination. In the event that the Distributor proposes that
monies shall be reimbursed for other than such expenses, then in making the
quarterly determinations of the amounts that may be expended by the Fund, the
Distributor shall provide, and the Directors shall review, a quarterly budget
of projected incremental distribution expenses to be incurred by the
Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund, together with a report explaining the purposes and anticipated benefits
of incurring such expenses. The Directors shall determine the particular
expenses, and the portion thereof, that may be borne by the Fund, and in
making such determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the shares of the Fund directly
or through DWR, its affiliates or other broker-dealers.
5. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers.
6. If, as of the end of any calendar year, the actual expenses incurred by
the Distributor, DWR, its affiliates and other broker-dealers on behalf of
the Fund (including accrued expenses and amounts reserved for incentive
compensation and bonuses) are less than the amount of payments made by the
Fund pursuant to this Plan, the Distributor shall promptly make appropriate
reimbursement to the Fund. If, however, as of the end of any calendar year,
the actual expenses of the Distributor, DWR, its affiliates and other
broker-dealers are greater than the amount of payments made by the Fund
pursuant to this Plan, the Fund will not reimburse the Distributor, DWR, its
affiliates or other broker-dealers for such expenses through payments accrued
pursuant to this Plan in the subsequent calendar year.
7. The Distributor shall provide to the Directors of the Fund and the
Directors shall review, promptly after the end of each calendar quarter, a
written report regarding the incremental distribution expenses incurred by
the Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund during such calendar quarter, which report shall include: (1) an
itemization of the types of expenses and the purposes therefor; (2) the
amounts of such expenses; and (3) a description of the benefits derived by
the Fund.
8. This Plan, as amended and restated, shall become effective upon
approval by a vote of the Directors of the Fund, and of the Directors who are
not "interested persons" of the Fund, as defined in the Act, and who have no
direct or indirect financial interest in the operation of this Plan, cast in
person at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect until April 30, 1998 and from year
to year thereafter, provided such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph
8 hereof. This Plan may not be amended to increase materially the amount to
be spent for the services described herein unless such amendment is approved
by a vote of at least a majority of the outstanding voting securities of the
Fund, as defined in the Act, and no material amendment to this Plan shall be
made unless approved in the manner provided for approval in paragraph 8
hereof.
10. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Directors who are not "interested
persons" of the Fund, as defined in the Act, and who have no direct or
indirect financial interest in the operation of this Plan or by a vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Act, on no more than thirty days' written notice to any other party to this
Plan.
11. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons of the Fund shall be committed to
the discretion of the Directors who are not interested persons.
12. The Fund shall preserve copies of this Plan and all reports made
pursuant to paragraph 7 hereof, for a period of not less than six years from
the date of this Plan, as amended and restated herein, or any such report, as
the case may be, the first two years in an easily accessible place.
13. This Plan shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall
control.
2
<PAGE>
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
Plan of Distribution, as amended and restated, as of the day and year set
forth below in New York, New York.
Date: March 21, 1983 DEAN WITTER LIQUID ASSET FUND INC.
As amended on January 4, 1993
and July 23, 1997
By: /s/ Barry Fink
---------------------------------
Attest:
/s/ LouAnne McInnis DEAN WITTER DISTRIBUTORS INC.
- --------------------------------------
By: /s/ Robert M. Scanlan
---------------------------------
Attest:
/s/ Robert S. Giambrone DEAN WITTER REYNOLDS INC.
- --------------------------------------
BY: /s/ Charles A. Fiumefreddo
---------------------------------
Attest:
/s/ Marilyn K. Cranney
- --------------------------------------
3
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
(16) The Fund's current yield for the seven days ending
August 29, 1997
(A-B) x 365/N
(1.000983 -1) x 365/7 = 5.13%
The Fund's effective annualized yield for the seven days ending
August 29, 1997
365/N
A - 1
365/7
1.000983 - 1 = 5.26%
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
(1.000983 -1) x 365/7
= 5.13%
((1.000983) ^ 52.14285714-1)
= 5.26%
<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-97 $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
22-Sep-75 401.11 $50,111 $250,555 $501,110
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 13,252,597,755
<INVESTMENTS-AT-VALUE> 13,252,597,755
<RECEIVABLES> 28,917,968
<ASSETS-OTHER> 327,118
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,281,842,841
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 115,932,676
<TOTAL-LIABILITIES> 115,932,676
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,165,224,818
<SHARES-COMMON-STOCK> 13,165,896,012
<SHARES-COMMON-PRIOR> 11,389,451,097
<ACCUMULATED-NII-CURRENT> 685,347
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13,165,910,165
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 690,250,758
<OTHER-INCOME> 0
<EXPENSES-NET> 75,760,957
<NET-INVESTMENT-INCOME> 614,489,801
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 614,489,801
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (614,493,201)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,926,788,140
<NUMBER-OF-SHARES-REDEEMED> (34,763,236,620)
<SHARES-REINVESTED> 612,893,395
<NET-CHANGE-IN-ASSETS> 1,776,441,515
<ACCUMULATED-NII-PRIOR> 688,747
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,616,072
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75,760,957
<AVERAGE-NET-ASSETS> 12,308,464,227
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that WAYNE E. HEDIEN, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF THE
DEAN WITTER FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: September 1, 1997
/s/ Wayne E. Hedien
-------------------------------
Wayne E. Hedien
<PAGE>
SCHEDULE A
1. Active Assets Money Trust
2. Active Assets Tax-Free Trust
3. Active Assets Government Securities Trust
4. Active Assets California Tax-Free Trust
5. Dean Witter New York Municipal Money Market Trust
6. Dean Witter American Value Fund
7. Dean Witter Tax-Exempt Securities Trust
8. Dean Witter Tax-Free Daily Income Trust
9. Dean Witter Capital Growth Securities
10. Dean Witter U.S. Government Money Market Trust
11. Dean Witter Precious Metals and Minerals Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter World Wide Investment Trust
14. Dean Witter Value-Added Market Series
15. Dean Witter Utilities Fund
16. Dean Witter Strategist Fund
17. Dean Witter California Tax-Free Daily Income Trust
18. Dean Witter Convertible Securities Trust
19. Dean Witter Intermediate Income Securities
20. Dean Witter World Wide Income Trust
21. Dean Witter S&P 500 Index Fund
22. Dean Witter U.S. Government Securities Trust
23. Dean Witter Federal Securities Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter California Tax-Free Income Fund
26. Dean Witter New York Tax-Free Income Fund
27. Dean Witter Select Municipal Reinvestment Fund
28. Dean Witter Variable Investment Series
29. High Income Advantage Trust
30. High Income Advantage Trust II
31. High Income Advantage Trust III
32. InterCapital Insured Municipal Bond Trust
33. InterCapital Insured Municipal Trust
34. InterCapital Insured Municipal Income Trust
35. InterCapital Quality Municipal Investment Trust
36. InterCapital Quality Municipal Income Trust
37. Dean Witter Government Income Trust
38. Municipal Income Trust
39. Municipal Income Trust II
40. Municipal Income Trust III
41. Municipal Income Opportunities Trust
42. Municipal Income Opportunities Trust II
43. Municipal Income Opportunities Trust III
44. Municipal Premium Income Trust
45. Prime Income Trust
46. Dean Witter Short-Term U.S. Treasury Trust
47. Dean Witter Diversified Income Trust
<PAGE>
48. InterCapital California Insured Municipal Income Trust
49. Dean Witter Health Sciences Trust
50. Dean Witter Global Dividend Growth Securities
51. InterCapital Quality Municipal Securities
52. InterCapital California Quality Municipal Securities
53. InterCapital New York Quality Municipal Securities
54. Dean Witter Retirement Series
55. Dean Witter Limited Term Municipal Trust
56. Dean Witter Short-Term Bond Fund
57. Dean Witter Global Utilities Fund
58. InterCapital Insured Municipal Securities
59. InterCapital Insured California Municipal Securities
60. Dean Witter High Income Securities
61. Dean Witter National Municipal Trust
62. Dean Witter International SmallCap Fund
63. Dean Witter Mid-Cap Growth Fund
64. Dean Witter Select Dimensions Investment Series
65. Dean Witter Global Asset Allocation Fund
66. Dean Witter Balanced Growth Fund
67. Dean Witter Balanced Income Fund
68. Dean Witter Intermediate Term U.S. Treasury Trust
69. Dean Witter Hawaii Municipal Trust
70. Dean Witter Japan Fund
71. Dean Witter Capital Appreciation Fund
72. Dean Witter Information Fund
73. Dean Witter Fund of Funds
74. Dean Witter Special Value Fund
75. Dean Witter Income Builder Fund
76. Dean Witter Financial Services Trust
77. Dean Witter Market Leader Trust
78. Dean Witter Managers' Select Fund
79. Dean Witter Liquid Asset Fund Inc.
80. Dean Witter Natural Resource Development Securities Inc.
81. Dean Witter Dividend Growth Securities Inc.
82. Dean Witter European Growth Fund Inc.
83. Dean Witter Pacific Growth Fund Inc.
84. Dean Witter High Yield Securities Inc.
85. Dean Witter Global Short-Term Income Fund Inc.
86. InterCapital Income Securities Inc.
