<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1998
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. 35 /X/
AND/OR
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 25 /X/
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MORGAN STANLEY DEAN WITTER
LIQUID ASSET FUND INC.
(FORMERLY NAMED 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 22, 1998 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>
MORGAN STANLEY 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 22, 1998
Morgan Stanley 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 Morgan Stanley 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 22, 1998, 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>
Morgan Stanley 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/7
Purchase of Fund Shares/8
Shareholder Services/10
Redemption of Fund Shares/13
Dividends, Distributions and Taxes/15
Additional Information/16
Financial Statements -- August 31, 1998/18
Report of Independent Accountants/27
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.
Morgan Stanley 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 16).
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Purchase Investments may be made:
of Shares - By wire
- By mail
- By EasyInvest-SM-
- Through Dean Witter Reynolds Inc. Financial Advisors 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
Financial Advisors) 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 8).
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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 Morgan Stanley Dean Witter Advisors Inc., the Investment
Manager Manager of the Fund, and its wholly-owned subsidiary, Morgan
Stanley Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative
capacities to 100 investment companies and other portfolios
with assets of approximately $113.6 billion at September 30,
1998 (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 Morgan Stanley 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 8 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
15).
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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 13):
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 15).
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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, 1998.
<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........................................................ 0.24%
-----
Total Fund Operating Expenses......................................... 0.61%
-----
-----
</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
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of capital stock
outstanding throughout each year have been audited by PricewaterhouseCoopers
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,
--------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------- -------- ------- ------- ------- -------- -------- -------- ------- -------
<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......... 0.052 0.050 0.050 0.053 0.030 0.027 0.040 0.064 0.079 0.086
Less dividends from net
investment income............ (0.052) (0.050) (0.050) (0.053) (0.030) (0.027) (0.040) (0.064) (0.079) (0.086)
------- -------- ------- ------- ------- -------- -------- -------- ------- -------
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....... 5.29% 5.13% 5.15% 5.41% 3.07% 2.72% 4.10% 6.61% 8.27% 8.96%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 0.61% 0.62% 0.63% 0.65% 0.70% 0.69% 0.67% 0.62% 0.56% 0.56%
Net investment income......... 5.11% 5.01% 5.02% 5.28% 3.02% 2.67% 4.03% 6.41% 7.91% 8.66%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions..................... $15,321 $13,166 $11,389 $10,359 $8,492 $7,959 $9,214 $10,811 $11,902 $10,734
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
THE FUND AND ITS MANAGEMENT
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Morgan Stanley Dean Witter Liquid Asset Fund Inc. (formerly named Dean
Witter Liquid Asset Fund Inc.) (the "Fund") is an open-end diversified
management investment company incorporated in Maryland on September 3, 1974.
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors" 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 is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & 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. The
Investment Manager, which was incorporated in July, 1992 under the name Dean
Witter InterCapital Inc., changed its name to Morgan Stanley Dean Witter
Advisors Inc. on June 22, 1998.
MSDW Advisors and its wholly-owned subsidiary, Morgan Stanley Dean Witter
Services Company Inc. ("MSDW Services"), serve in various investment management,
advisory, management and administrative capacities to 100 investment companies,
28 of which are listed on the New York Stock Exchange, with combined assets of
approximately $109.5 billion as of September 30, 1998. The Investment Manager
also manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $4.1 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. MSDW Advisors has retained MSDW Services 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, 1998, 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 0.61% 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
4
<PAGE>
having total assets of less than $1 billion, if the principal amount of the
obligation is federally insured by the Bank Insurance Fund or the Savings
Association Insurance Fund (each of which is administered by the Federal Deposit
Insurance Corporation), limited to $100,000 principal amount per certificate and
to 10% or less of the Fund's total assets in all such 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
5
<PAGE>
agreements involve sales by the Fund of portfolio assets concurrently with an
agreement by the Fund to repurchase the same assets at a later date at a fixed
price.
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. Certain of the types of
investments described above may be variable rate or floating rate obligations.
The interest rates payable on variable rate or floating rate obligations are not
fixed and may fluctuate based upon changes in market rates. The interest rate
payable on a variable rate obligation may be adjusted at predesignated periodic
intervals and on a floating rate obligation whenever there is a change in the
market rate of interest on which the interest rate payable is based.
Although the Fund will generally not seek profits through short-term
trading, it may dispose of any portfolio security prior to its maturity if, on
the basis of a revised credit evaluation of the issuer or other circumstances or
considerations, it believes such disposition advisable.
The Fund is expected to have a high portfolio turnover due to the short
maturities of securities purchased, but this should not affect income or net
asset value as brokerage commissions are not normally charged on the purchase or
sale of money market instruments.
The Fund will attempt to balance its objectives of high income, capital
preservation and liquidity by investing in securities of varying maturities and
risks. The Fund will not, however, invest in securities that mature in more than
thirteen months from the date of purchase (see "Purchase of Fund Shares--
Determination of Net Asset Value"). The amounts invested in obligations of
various maturities of thirteen months or less will depend on management's
evaluation of the risks involved. Longer-term issues, while generally paying
higher interest rates, are subject, as a result of general changes in interest
rates, to greater fluctuations in value than shorter-term issues. Thus, when
rates on new debt securities increase, the value of outstanding securities may
decline, and vice versa. Such changes may also occur, but to a lesser degree,
with short-term issues. These changes, if realized, may cause fluctuations in
the amount of daily dividends and, in extreme cases, could cause the net asset
value per share to decline (see "Purchase of Fund Shares--Determination of Net
Asset Value"). Longer-term issues also increase the risk that the issuer may be
unable to pay an installment of interest or principal at maturity. Also, in the
event of unusually large redemption demands, such securities may have to be sold
at a loss prior to maturity, or the Fund might have to borrow money and incur
interest expense. Either occurrence would adversely impact the amount of daily
dividend and could result in a decline in the daily net asset value per share.
The Fund will attempt to minimize these risks by investing in longer-term
securities when it appears to management that interest rates on such securities
are not likely to increase substantially during the period of expected holding,
and then only in securities of high quality which are readily marketable.
However, there can be no assurance that the Fund will be successful in achieving
this or its other objectives.
The foregoing investment policies are not fundamental and may be changed by
the Board of Directors without shareholder vote.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be
6
<PAGE>
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
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., a broker-dealer affiliate of MSDW Advisors. In addition, the Fund
may incur brokerage commissions on transactions conducted through Dean Witter
Reynolds Inc., Morgan Stanley & Co. Incorporated and other broker-dealer
affiliates of MSDW Advisors.
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.
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.
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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
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The Fund offers its shares for sale to the public on a continuous basis,
without a sales charge. Pursuant to a Distribution Agreement between the Fund
and Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors" or the
"Distributor"), an affiliate of the Investment Manager, shares of the Fund are
distributed by the Distributor and offered by Dean Witter Reynolds Inc. ("DWR"),
a selected dealer and subsidiary of Morgan Stanley Dean Witter & Co., and other
dealers who have entered into selected dealer agreements with the Distributor
("Selected Broker-Dealers"). It is anticipated that DWR will undergo a change of
corporate name which is expected to incorporate the brand name of "Morgan
Stanley Dean Witter," pending approval of various regulatory agencies. 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, Morgan Stanley 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 P.O. Box
1040, Jersey City, NJ 07303. Checks should be made payable to Morgan Stanley
Dean Witter Liquid Asset Fund Inc. and sent to Morgan Stanley 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 Morgan Stanley 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 Distributor 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 MSDW
Advisors 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, administrative and/or
brokerage 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 Distributor 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
8
<PAGE>
various types of non-cash compensation as special sales incentives, including
trips, educational and/or business seminars and merchandise.
Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be
transmitted to the Fund with payment in Federal Funds on the business day
following the day the order is placed by the customer with DWR or another
Selected Broker-Dealer. Investors desiring same day effectiveness should wire
Federal Funds directly to the Transfer Agent. An order procedure exists pursuant
to which customers of DWR or other Selected Broker-Dealers can, upon request:
(a) have the proceeds from the sale of listed securities invested in shares of
the Fund on the day following the day the customer receives such proceeds in his
or her DWR or other Selected Broker-Dealer securities account; and (b) pay for
the purchase of certain listed securities by automatic liquidation of Fund
shares owned by the customer. In addition, there is an automatic purchase
procedure whereby consenting DWR or other Selected Broker-Dealer customers who
are shareholders of the Fund will have free credit cash balances in their DWR or
other Selected Broker-Dealer securities accounts as of the close of business
(4:00 p.m., New York time) on the last business day of each week (where such
balances do not exceed $5,000) automatically invested in shares of the Fund the
next following business day. Investors with free cash credit balances (i.e.,
immediately available funds) in securities accounts at DWR or other Selected
Broker-Dealers will not have any of such funds invested in the Fund until the
business day after the customer places an order with DWR or other Selected
Broker-Dealer to purchase shares of the Fund and will not receive the daily
dividend which would have been received had such funds been invested in the Fund
on the day the order was placed with DWR or other Selected Broker-Dealer.
Accordingly, DWR or other Selected Broker-Dealers may have the use of such free
credit balances during such period.
PLAN OF DISTRIBUTION
In accordance with a Plan of Distribution between the Fund and the
Distributor pursuant to Rule 12b-1 under the Act, certain services and
activities in connection with the distribution of the Fund's shares are
reimbursable expenses. The principal activities and services which may be
provided by the Distributor, DWR, its affiliates and other Selected
Broker-Dealers under the Plan include: (1) compensation to, and expenses of,
sales representatives and other employees of DWR 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. 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, 1998, 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.
9
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SHAREHOLDER SERVICES
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SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders whose shares of Morgan Stanley Dean Witter
Funds have an aggregate value of $10,000 or more. Shares of any Fund from which
redemptions will be made pursuant to the Plan must have a value of $1,000 or
more (referred to as a "SWP Fund"). The required share values are determined on
the date the shareholder establishes the Withdrawal Plan. The Withdrawal Plan
provides for monthly, quarterly, semi-annual or annual payments in any amount
not less than $25, or in any whole percentage of the value of the SWP Funds'
shares, on an annualized basis. If the SWP Fund shares, including shares
acquired in exchange for shares of other Funds, are subject to a contingent
deferred sales charge ("CDSC"), any applicable CDSC will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares" in the
Prospectuses of the Morgan Stanley Dean Witter Funds offered with multiple
Classes and "Redemptions and Repurchases--Contingent Deferred Sales Charge" in
the Prospectus of Morgan Stanley Dean Witter Global Short-Term Income Fund
Inc.), except that the CDSC, if any, will be waived on redemptions under the
Withdrawal Plan of up to 12% annually of the value of each SWP Fund account,
based on the share values next determined after the shareholder establishes the
Withdrawal Plan. Redemptions for which this CDSC waiver policy applies may be in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12% annually.
Under this CDSC waiver policy, amounts withdrawn each period will be paid by
first redeeming shares not subject to a CDSC because the shares were purchased
by the reinvestment of dividends or capital gains distributions, the CDSC period
has elapsed or some other waiver of the CDSC applies. If shares subject to a
CDSC must be redeemed, shares held for the longest period of time will be
redeemed first and continuing with shares held the next longest period of time
until shares held the shortest period of time are redeemed. Any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly, quarterly, semi-annual or annual
amount.
A shareholder wishing to participate in the Withdrawal Plan should make this
election on the Investment Application. A shareholder may suspend or terminate
participation in the Withdrawal Plan at any time. A shareholder who has
suspended participation may resume payments under the Withdrawal Plan, without
requiring a new determination of the account value for the 12% CDSC waiver. The
Withdrawal Plan may be terminated or revised at any time by the Fund.
Prior to adding an additional SWP Fund to an existing Withdrawal Plan, the
required $10,000/$1,000 share values must be met, to be calculated on the date
the shareholder adds the additional SWP Fund. However, the addition of a new SWP
Fund will not change the account value for the 12% CDSC waiver for the SWP Funds
already participating in the Withdrawal Plan.
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 MSDW Advisors serves as
investment manager (collectively, with the Fund, the "Morgan Stanley Dean Witter
Funds"), other than Morgan Stanley Dean Witter Liquid Asset Fund Inc., at the
net asset value per share of the selected Morgan Stanley 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 CDSC upon ultimate redemption. All such shares invested will begin to
earn dividends, if any, in the selected Morgan Stanley 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 Morgan Stanley Dean Witter Fund
targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Morgan Stanley Dean Witter Fund before entering the program.
10
<PAGE>
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 Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative 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 advisor.
For further information regarding plan administration, custodial fees and
other details, investors should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative 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 Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative or
the Transfer Agent.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Morgan Stanley Dean Witter Funds for shares of the Fund, exists whereby
shares of Morgan Stanley Dean Witter Funds that are multiple class funds
("Morgan Stanley Dean Witter Multi-Class Funds"), Morgan Stanley Dean Witter
Funds that are not multiple class funds but which are sold with a front-end
sales charge ("FSC funds") and Morgan Stanley Dean Witter Global Short-Term
Income Fund Inc. ("Global Short-Term"), which is a Morgan Stanley Dean Witter
Fund offered with a CDSC, may be exchanged for shares of the Fund, Morgan
Stanley Dean Witter U.S. Government Money Market Trust, Morgan Stanley Dean
Witter Tax-Free Daily Income Trust, Morgan Stanley Dean Witter California
Tax-Free Daily Income Trust and Morgan Stanley Dean Witter New York Municipal
Money Market Trust (which five funds are hereinafter called "money market
funds"), and for shares of Morgan Stanley Dean Witter Short-Term U.S. Treasury
Trust, Morgan Stanley Dean Witter Limited Term Municipal Trust and Morgan
Stanley Dean Witter Short-Term Bond Fund (which eight 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 Morgan Stanley Dean Witter Multi-Class
Fund may be redeemed and exchanged only for shares of the corresponding Class of
a Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley
Dean Witter Multi-Class Fund may also be redeemed and exchanged for shares of
Global Short-Term. 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 Morgan Stanley 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 Global Short-Term may be redeemed and exchanged for Class
B shares of a Morgan Stanley 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, Global Short-Term 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 CDSC will have to be paid upon redemption of
shares originally purchased from Global Short-Term or a Class of a Morgan
Stanley Dean Witter Multi-Class Fund that imposes a CDSC.
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<PAGE>
(If shares of an Exchange Fund received in exchange for shares originally
purchased from Global Short-Term or Class B of a Morgan Stanley Dean Witter
Multi-Class Fund are exchanged for shares of Global Short-Term or a Morgan
Stanley Dean Witter Multi-Class Fund having a different CDSC schedule than that
of Global Short-Term or the Morgan Stanley 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 Global Short-Term or from a Class of a Morgan Stanley 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 Global Short-Term or a Morgan
Stanley 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 Global Short-Term or shares of a Morgan Stanley 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 Global Short-Term or in shares
of a Morgan Stanley Dean Witter Multi-Class Fund. In the case of exchanges of
Class A shares of a Morgan Stanley 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 Advisor, 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 Morgan Stanley Dean Witter Financial Advisor or other Selected
Broker-Dealer representative regarding restrictions on exchanges of shares of
the Fund pledged in their margin account.
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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 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 Morgan Stanley Dean
Witter Financial Advisor or other Selected Broker-Dealer representative (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 Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative, 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 Morgan Stanley Dean Witter Funds in the past.
Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative 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
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<PAGE>
amount not less than $500 (checks written in amounts under $500 will not be
honored by the Transfer Agent). Shareholders must sign checks exactly as their
shares are registered. If the account is a joint account, the check may contain
one signature unless the joint owners have specifically specified on an
Investment Application that all owners are required to sign checks. Only
shareholders having accounts in which no stock certificates have been issued
will be permitted to redeem shares by check.
Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares-- Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after receipt
of the check used for investment by the Transfer Agent. The Transfer Agent will
not honor a check in an amount exceeding the value of the account at the time
the check is presented for payment.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire instructions
to the Transfer Agent. Payment will be made by the Transfer Agent to the
shareholder's bank account at any commercial bank designated by the shareholder
in an Investment Application, by wire if the amount is $1,000 or more and the
shareholder so requests, and otherwise by mail. Normally, the Transfer Agent
will transmit payment the next business day following receipt of a request for
redemption in proper form. Only shareholders having accounts in which no stock
certificates have been issued will be permitted to redeem shares by wire
instructions.
DWR and any other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers who
are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Transfer Agent
will wire proceeds of redemptions to DWR's or another Selected Broker-Dealer's
bank account for credit to the shareholders' accounts the following business
day. DWR and other participating Selected Broker-Dealers have also informed the
Distributor and the Fund that they do not charge for this service.
Redemption instructions must include the shareholder's name and account
number and be wired or called to the Transfer Agent:
-- 800-869-NEWS (toll-free)
-- Telex No. 125076
3. BY MAIL
A shareholder may redeem shares by sending a letter to Morgan Stanley 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,
14
<PAGE>
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 Morgan Stanley Dean Witter
Trust FSB, P.O. Box 983, Jersey City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions within
one business day, and in no event later than seven days after receipt of such
redemption request in proper form. However, if the shares being redeemed were
purchased by check (including a certified or bank cashier's check), payment may
be delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
investment of the check by the Transfer Agent). In addition, the Fund may
postpone redemptions at certain times when normal trading is not taking place on
the New York Stock Exchange.
The Fund reserves the right, on sixty days' notice, to redeem at net asset
value the shares of any shareholder (other than shares held in an Individual
Retirement Account or custodial account under Section 403(b)(7) of the Internal
Revenue Code) whose shares due to redemptions by the shareholder have a value of
less than $1,000, or such lesser amount as may be fixed by the Board of
Directors.
AUTOMATIC REDEMPTION PROCEDURE
The Distributor has instituted an automatic redemption procedure which it
may 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 Morgan Stanley 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 Morgan Stanley 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
15
<PAGE>
February 1 will be deemed received by the shareholder in the prior year.
Shareholders may instruct the Transfer Agent (in writing) to have their
dividends paid out monthly in cash. For such shareholders the shares reinvested
and credited to their account during the month will be redeemed as of the close
of business on the monthly payment date (which will be no later than the last
business day of the month) and the proceeds will be paid to them by check.
Shareholders who have requested to receive dividends in cash will normally
receive their monthly dividend check during the first ten days of the following
month.
Stock certificates for dividends or distributions will not be issued unless
a shareholder requests in writing that a certificate be issued for a specific
number of shares.
TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains, if any, to shareholders and intends to otherwise
comply with all of the provisions of Subchapter M of the Internal Revenue Code
to continue to qualify as a regulated investment company, it is not expected
that the Fund will be required to pay any federal income tax.
Distributions of net investment income and realized net short-term capital
gains, if any, are taxable to shareholders who are required to pay taxes on
their income as ordinary income, whether such distributions are taken in cash or
reinvested in additional shares. Distributions of realized net long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund shares. No portion of such distributions will
be eligible for the federal dividends received deduction for corporations.
The Fund advises its shareholders annually as to the federal income tax
status of distributions paid during each calendar year. To avoid being subject
to a 31% federal withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions, shareholders' taxpayer identification
numbers must be furnished and certified as to accuracy.
Shareholders are urged to consult their own tax advisors 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, 1998 was 5.14%. The
effective annual yield on 5.14% is 5.27%, 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.
16
<PAGE>
CODE OF ETHICS. Directors, officers and employees of MSDW Advisors, MSDW
Services and MSDW Distributors are subject to a strict Code of Ethics adopted by
those companies. The Code of Ethics is intended to ensure that the interests of
shareholders and other clients are placed ahead of any personal interest, that
no undue personal benefit is obtained from a person's employment activities and
that actual and potential conflicts of interest are avoided. To achieve these
goals and comply with regulatory requirements, the Code of Ethics requires,
among other things, that personal securities transactions by employees of the
companies be subject to an advance clearance process to monitor that no Morgan
Stanley 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
Morgan Stanley 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.
17
<PAGE>
REMOVE APPLICATION CAREFULLY
1 6 0 --
--------------------------
for office use only
MORGAN STANLEY DEAN WITTER
LIQUID ASSET FUND
[LOGO]
APPLICATION
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
Send to: Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley Dean Witter Liquid
SHARES: Asset Fund Inc.)
Minimum Initial / / WIRE* On -------------------------------- MF* --------------------------------
Investment: (Date) (Control number this transaction)
$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 Morgan Stanley Dean Witter Trust FSB
</TABLE>
<TABLE>
<S> <C> <C>
Account Number: 8900188413
Re: Morgan Stanley 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 Morgan
Stanley 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>
/ / Morgan Stanley Dean Witter Trust FSB is hereby authorized to honor telephonic or other instructions,
PAYMENT TO without signature guarantee, from any person for the redemption of any or all shares of Morgan Stanley
PREDESIGNATED Dean Witter Liquid Asset Fund Inc. held in my (our) account provided that proceeds are transmitted
BANK ACCOUNT only to the following bank account. (Absent its own negligence, neither Morgan Stanley Dean Witter
Liquid Asset Fund Inc. nor Morgan Stanley 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 Morgan
Stanley 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, Morgan Stanley 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- 1998 Morgan Stanley Dean Witter Distributors Inc.
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (84.8%)
AUTOMOTIVE - FINANCE (15.1%)
$$200,000 American Honda Finance Corp....... 5.59 - 5.62% 10/29/98 - 11/20/98 $ 197,772,189
285,000 Chrysler Financial Corp........... 5.56 - 5.62 09/10/98 - 09/15/98 284,523,056
490,000 Daimler-Benz North America
Corp............................ 5.56 - 5.61 10/05/98 - 02/25/99 484,116,551
710,000 Ford Motor Credit Co.............. 5.55 - 5.60 10/02/98 - 12/03/98 704,744,208
645,000 General Motors Acceptance Corp.... 5.56 - 5.66 09/18/98 - 02/25/99 636,957,704
---------------
2,308,113,708
---------------
BANK HOLDING COMPANIES (13.4%)
45,000 Bank of New York Co., Inc......... 5.54 12/02/98 44,372,100
712,000 Bankers Trust Corp................ 5.62 - 5.73 09/16/98 - 03/26/99 696,925,142
240,000 Chase Manhattan Corp. (The)....... 5.56 - 5.60 11/25/98 - 12/24/98 236,145,733
50,000 Corestates Capital Corp........... 5.55 10/16/98 49,663,125
60,000 Mellon Financial Co............... 5.59 11/05/98 59,403,083
750,000 Morgan (J.P.) & Co., Inc.......... 5.56 - 5.67 09/01/98 - 12/30/98 746,670,319
50,000 NationsBank Corp.................. 5.59 11/10/98 49,466,250
80,000 PNC Funding Corp.................. 5.60 - 5.62 09/29/98 - 10/01/98 79,646,945
95,000 Republic New York Corp............ 5.58 - 5.59 11/13/98 - 11/24/98 93,881,667
---------------
2,056,174,364
---------------
BANKS - COMMERCIAL (25.9%)
300,000 ABN-AMRO North America Finance
Inc............................. 5.59 - 5.71 09/25/98 - 03/03/99 295,800,139
400,000 Abbey National North America
Corp............................ 5.57 - 5.58 10/07/98 - 11/05/98 396,976,444
35,000 ANZ (DE) Inc...................... 5.57 10/06/98 34,813,017
150,000 Canadian Imperial Holdings Inc.... 5.58 10/07/98 149,176,500
170,000 Commerzbank U.S. Finance Inc...... 5.60 - 5.61 10/01/98 - 02/12/99 167,026,033
690,000 Deutsche Bank Financial Inc....... 5.57 - 5.59 10/13/98 - 12/29/98 683,680,542
250,000 Dresdner U.S. Finance Inc......... 5.59 10/15/98 - 10/19/98 248,247,111
100,000 Internationale Nederlanden (U.S.)
Funding Corp.................... 5.64 - 5.65 11/13/98 - 12/23/98 98,584,889
300,000 National Australia Funding (DE)
Inc............................. 5.56 - 5.57 12/08/98 - 12/21/98 295,320,111
140,000 PNC Bank, N.A..................... 5.53 - 5.56 09/30/98 - 12/14/98 138,619,082
625,000 Societe Generale N.A., Inc........ 5.57 - 5.63 09/01/98 - 12/30/98 620,371,822
410,000 Toronto-Dominion Holdings U.S.A.
Inc............................. 5.54 - 5.72 09/22/98 - 01/28/99 404,928,302
230,000 UBS Finance (DE) Inc.............. 5.58 - 5.62 10/14/98 - 12/15/98 227,412,165
210,000 Westpac Capital Corp.............. 5.60 - 5.64 10/08/98 - 12/24/98 207,811,400
---------------
3,968,767,557
---------------
ENERGY (0.1%)
20,000 Shell Oil Co...................... 5.51 10/28/98 19,827,100
---------------
FINANCE (0.3%)
45,000 International Lease Finance
Corp............................ 5.58 11/06/98 44,546,250
---------------
FINANCE - COMMERCIAL (1.7%)
270,000 CIT Group Inc..................... 5.58 - 5.61 09/24/98 - 12/24/98 266,555,317
---------------
FINANCE - CONSUMER (10.2%)
600,000 American Express Credit Corp...... 5.56 - 5.61 10/09/98 - 05/21/99 589,876,206
45,000 American General Finance Corp..... 5.55 11/25/98 44,417,750
350,000 Avco Financial Services Inc....... 5.55 - 5.60 09/17/98 - 12/22/98 347,147,150
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$185,000 Beneficial Corp................... 5.58 - 5.59% 09/01/98 - 09/03/98 $ 184,969,500
350,000 Commercial Credit Co.............. 5.57 - 5.58 09/03/98 - 10/27/98 348,270,511
25,000 Household Finance Corp............ 5.58 09/28/98 24,896,875
30,000 Norwest Financial Inc............. 5.58 11/02/98 29,715,833
---------------
1,569,293,825
---------------
FINANCE - CORPORATE (3.8%)
595,000 Ciesco, L.P....................... 5.58 - 5.60 09/08/98 - 12/28/98 590,346,139
---------------
FINANCE - DIVERSIFIED (7.8%)
450,000 Associates Corp. of North
America......................... 5.57 - 5.60 09/15/98 - 12/28/98 445,424,196
761,000 General Electric Capital Corp..... 5.54 - 5.71 09/02/98 - 05/14/99 748,468,978
---------------
1,193,893,174
---------------
INDUSTRIAL SPECIALTIES (0.3%)
40,000 Deere & Co........................ 5.58 11/06/98 39,598,133
---------------
INSURANCE (0.7%)
75,000 American General Corp............. 5.58 - 5.59 11/02/98 - 11/12/98 74,235,422
30,000 Prudential Funding Corp........... 5.57 10/20/98 29,775,008
---------------
104,010,430
---------------
INVESTMENT BANKERS/BROKERS/SERVICES (2.6%)
400,000 Goldman Sachs Group L.P........... 5.54 - 5.57 10/16/98 - 11/24/98 395,983,242
---------------
MAJOR CHEMICALS (0.3%)
40,000 DuPont (E.I.) de Nemours & Co..... 5.58 10/28/98 39,651,983
---------------
OFFICE EQUIPMENT (1.0%)
110,000 IBM Credit Corp................... 5.58 10/20/98 - 12/03/98 108,775,614
50,000 International Business Machines
Corp............................ 5.57 11/20/98 49,391,111
---------------
158,166,725
---------------
RETAIL (1.6%)
245,000 Sears Roebuck Acceptance Corp..... 5.57 - 5.59 10/29/98 - 11/10/98 242,616,706
---------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $12,997,544,653)...................................................... 12,997,544,653
SHORT-TERM BANK NOTES (7.1%)
100,000 BankBoston, N.A................... 5.58 10/21/98 100,000,000
60,000 Corestates Bank, N.A.............. 5.59 09/21/98 60,000,000
130,000 F.C.C. National Bank.............. 5.57 - 5.58 09/11/98 - 09/17/98 130,000,000
100,000 First N.B. of Chicago............. 5.60 10/30/98 100,000,000
550,000 First Union National Bank......... 5.59 - 5.66 09/08/98 - 01/29/99 550,000,000
50,000 La Salle National Bank............ 5.60 02/10/99 50,000,000
100,000 NationsBank, N.A.................. 5.60 11/30/98 100,000,000
---------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $1,090,000,000)....................................................... 1,090,000,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (4.8%)
$209,000 Federal Farm Credit Bank.......... 5.67 - 5.76% 09/18/98 - 12/18/98 $ 207,466,320
135,000 Federal Home Loan Banks........... 5.52 - 5.70 09/11/98 - 04/12/99 132,612,486
40,000 Federal Home Loan Mortgage
Corp............................ 5.74 10/30/98 39,644,034
365,000 Federal National Mortgage
Assoc........................... 5.51 - 5.67 09/02/98 - 08/04/99 351,817,165
---------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $731,540,005)......................................................... 731,540,005
---------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
CERTIFICATES OF DEPOSIT (4.2%)
100,000 First Tennessee Bank N.A.......... 5.58 11/25/98 100,000,000
220,000 Fleet National Bank............... 5.61 09/29/98 - 10/08/98 220,000,000
100,000 Mellon Bank, N.A.................. 5.62 12/29/98 - 12/30/98 100,000,000
140,000 NationsBank N.A................... 5.59 - 5.60 09/09/98 - 12/29/98 140,000,000
80,000 U.S. Bank, N.A.................... 5.60 - 5.62 10/26/98 - 12/24/98 80,000,000
---------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $640,000,000)......................................................... 640,000,000
---------------
REPURCHASE AGREEMENT (0.1%)
9,068 The Bank of New York (dated
08/31/98; proceeds $9,069,307)
(a) (IDENTIFIED COST
$9,067,859)..................... 5.75 09/01/98 9,067,859
---------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(AMORTIZED COST $15,468,152,517) (B)................................................... 101.0 % 15,468,152,517
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS......................................... (1.0) (146,798,912)
------ ----------------
NET ASSETS............................................................................. 100.0 % $ 15,321,353,605
------ ----------------
------ ----------------
</TABLE>
- ---------------------
(a) Collateralized by $9,262,755 U.S. Treasury Note 3.375% due 01/15/07 valued
at $9,249,216.
(b) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $15,468,152,517)......................................................... $15,468,152,517
Cash....................................................................................... 89,999
Receivable for:
Interest............................................................................... 24,023,696
Capital stock sold..................................................................... 62,122
Prepaid expenses and other assets.......................................................... 191,936
---------------
TOTAL ASSETS.......................................................................... 15,492,520,270
---------------
LIABILITIES:
Payable for:
Capital stock repurchased.............................................................. 165,407,365
Investment management fee.............................................................. 3,442,028
Plan of distribution fee............................................................... 1,277,053
Accrued expenses and other payables........................................................ 1,040,219
---------------
TOTAL LIABILITIES..................................................................... 171,166,665
---------------
NET ASSETS............................................................................ $15,321,353,605
---------------
---------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................ $15,320,660,909
Accumulated undistributed net investment income............................................ 692,696
---------------
NET ASSETS............................................................................ $15,321,353,605
---------------
---------------
NET ASSET VALUE PER SHARE,
15,321,332,103 SHARES OUTSTANDING (25,000,000,000 SHARES AUTHORIZED OF $.01 PAR VALUE)... $1.00
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................................................... $803,199,716
------------
EXPENSES
Investment management fee..................................................................... 38,009,366
Transfer agent fees and expenses.............................................................. 31,263,774
Plan of distribution fee...................................................................... 13,562,638
Registration fees............................................................................. 2,008,023
Shareholder reports and notices............................................................... 670,657
Custodian fees................................................................................ 362,607
Professional fees............................................................................. 53,096
Directors' fees and expenses.................................................................. 18,965
Other......................................................................................... 110,396
------------
TOTAL EXPENSES........................................................................... 86,059,522
------------
NET INVESTMENT INCOME.................................................................... 717,140,194
NET REALIZED GAIN........................................................................ 22,513
------------
NET INCREASE.................................................................................. $717,162,707
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY 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, 1998 AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................... $ 717,140,194 $ 614,489,801
Net realized gain......................................................... 22,513 --
--------------- ---------------
NET INCREASE......................................................... 717,162,707 614,489,801
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................................... (717,132,845) (614,493,201)
Net realized gain......................................................... (22,513) --
--------------- ---------------
TOTAL................................................................ (717,155,358) (614,493,201)
--------------- ---------------
Net increase from capital stock transactions.............................. 2,155,436,091 1,776,444,915
--------------- ---------------
NET INCREASE......................................................... 2,155,443,440 1,776,441,515
NET ASSETS:
Beginning of period....................................................... 13,165,910,165 11,389,468,650
--------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $692,696 AND
$685,347, RESPECTIVELY)............................................... $15,321,353,605 $13,165,910,165
--------------- ---------------
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Liquid Asset Fund Inc. (the "Fund"), formerly Dean
Witter Liquid Asset Fund Inc., 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 Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), formerly Dean Witter InterCapital
Inc., the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the following annual rates to the net assets of the
Fund determined as of the close of each business day: 0.50% to the portion of
the daily net assets not exceeding $500 million; 0.425% to the portion of the
daily net assets exceeding $500 million but not exceeding $750 million; 0.375%
to the portion of the daily net assets exceeding $750 million but not exceeding
$1 billion; 0.35% to the portion of the daily net assets exceeding $1 billion
but not exceeding $1.35 billion; 0.325% to the portion of the daily net assets
exceeding $1.35 billion but not exceeding $1.75 billion; 0.30% to the portion of
the daily net
24
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED
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
Morgan Stanley 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"), its affiliates and other selected broker-dealers under the Plan:
(1) compensation to, and expenses of, sales representatives and other employees
of DWR 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)
preparation, printing and distributing sales literature; and (5) providing
advertising and promotional activities, including direct mail solicitation and
television, radio, newspaper, magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed
an amount equal to a payment at the annual rate of 0.15% of the Fund's average
daily net assets during the month. Expenses incurred by the Distributor pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through
payments accrued in any subsequent fiscal year. For the year ended August 31,
1998, the distribution fee was accrued at the annual rate of 0.10%.
25
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended August 31, 1998 aggregated $50,195,076,487 and
$48,680,438,238, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
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, 1998 included
in Directors' fees and expenses in the Statement of Operations amounted to
$5,083. At August 31, 1998, the Fund had an accrued pension liability of $50,149
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, 1998 AUGUST 31, 1997
---------------- -------------------
<S> <C> <C>
Shares sold...................................................... 43,113,580,761 35,926,788,140
Shares issued in reinvestment of dividends and distributions..... 715,431,667 612,893,395
---------------- -------------------
43,829,012,428 36,539,681,535
Shares repurchased............................................... (41,673,576,337) (34,763,236,620)
---------------- -------------------
Net increase..................................................... 2,155,436,091 1,776,444,915
---------------- -------------------
---------------- -------------------
</TABLE>
6. SUBSEQUENT EVENT
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series -- Liquid Asset Series ("Retirement
Liquid Asset") pursuant to a plan of reorganization (the "Plan") approved by the
shareholders of Retirement Liquid Asset on August 19, 1998. The acquisition was
accomplished by a tax-free exchange of 12,732,710 shares of the Fund at a net
asset value of $1.00 per share for 12,732,710 shares of Retirement Liquid Asset.
The net assets of the Fund and Retirement Liquid Asset immediately before the
acquisition were $15,729,214,021 and $12,732,710, respectively. Immediately
after the acquisition, the combined net assets of the Fund amounted to
$15,741,946,731.
7. FINANCIAL HIGHLIGHTS
See the "Financial Highlights" table on page 3 of this Prospectus.
26
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND
INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD
OF DIRECTORS OF MORGAN STANLEY 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
Morgan Stanley Dean Witter Liquid Asset Fund Inc. (the "Fund"), formerly Dean
Witter Liquid Asset Fund Inc., at August 31, 1998, 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, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
OCTOBER 7, 1998
27
<PAGE>
Morgan Stanley
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
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Morgan Stanley
Dean Witter
Liquid Asset Fund
[LOGO]
Prospectus
October 22, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
OCTOBER 22, 1998 LIQUID ASSET FUND INC.
- --------------------------------------------------------------------------------
Morgan Stanley 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 Morgan Stanley 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 22, 1998, 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, Morgan Stanley 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.
Morgan Stanley 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.................................................... 7
Investment Practices and Policies......................................... 13
Investment Restrictions................................................... 15
Portfolio Transactions and Brokerage...................................... 16
Purchase of Fund Shares................................................... 18
Redemption of Fund Shares................................................. 26
Dividends, Distributions and Taxes........................................ 28
Description of Common Stock............................................... 29
Custodian and Transfer Agent.............................................. 29
Independent Accountants................................................... 30
Reports to Shareholders................................................... 30
Legal Counsel............................................................. 30
Experts................................................................... 30
Registration Statement.................................................... 30
Financial Statements...................................................... 30
Appendix/Ratings.......................................................... 31
</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; changed
to Dean Witter Liquid Asset Fund Inc. on June 30, 1993; and changed to its
present name, Morgan Stanley Dean Witter Liquid Asset Fund Inc., on June 22,
1998.
As of August 31, 1998 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
Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager" or "MSDW
Advisors"), a Delaware corporation, whose address is Two World Trade Center, New
York, New York 10048, is the Fund's Investment Manager. MSDW Advisors is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"), a Delaware
corporation. 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. Information as to these Directors and officers is contained under the
caption "Directors and Officers."
MSDW Advisors is the investment manager or investment advisor of the
following investment companies, which are collectively referred to as the
"Morgan Stanley Dean Witter Funds":
<TABLE>
<CAPTION>
OPEN-END FUNDS
<C> <S>
1 Active Assets California Tax-Free Trust
2 Active Assets Government Securities Trust
3 Active Assets Money Trust
4 Active Assets Tax-Free Trust
5 Morgan Stanley Dean Witter American Value Fund
6 Morgan Stanley Dean Witter Balanced Growth Fund
7 Morgan Stanley Dean Witter Balanced Income Fund
8 Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
9 Morgan Stanley Dean Witter California Tax-Free Income Fund
10 Morgan Stanley Dean Witter Capital Appreciation Fund
11 Morgan Stanley Dean Witter Capital Growth Securities
12 Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS" Portfolio
13 Morgan Stanley Dean Witter Convertible Securities Trust
14 Morgan Stanley Dean Witter Developing Growth Securities Trust
15 Morgan Stanley Dean Witter Diversified Income Trust
16 Morgan Stanley Dean Witter Dividend Growth Securities Inc.
17 Morgan Stanley Dean Witter Equity Fund
18 Morgan Stanley Dean Witter European Growth Fund Inc.
19 Morgan Stanley Dean Witter Federal Securities Trust
20 Morgan Stanley Dean Witter Financial Services Trust
21 Morgan Stanley Dean Witter Fund of Funds
22 Morgan Stanley Dean Witter Global Dividend Growth Securities
23 Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
24 Morgan Stanley Dean Witter Global Utilities Fund
25 Morgan Stanley Dean Witter Growth Fund
26 Morgan Stanley Dean Witter Hawaii Municipal Trust
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
27 Morgan Stanley Dean Witter Health Sciences Trust
28 Morgan Stanley Dean Witter High Yield Securities Inc.
29 Morgan Stanley Dean Witter Income Builder Fund
30 Morgan Stanley Dean Witter Information Fund
31 Morgan Stanley Dean Witter Intermediate Income Securities
32 Morgan Stanley Dean Witter International SmallCap Fund
33 Morgan Stanley Dean Witter Japan Fund
34 Morgan Stanley Dean Witter Limited Term Municipal Trust
35 Morgan Stanley Dean Witter Liquid Asset Fund Inc.
36 Morgan Stanley Dean Witter Market Leader Trust
37 Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
38 Morgan Stanley Dean Witter Mid-Cap Growth Fund
39 Morgan Stanley Dean Witter Multi-State Municipal Series Trust
40 Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
41 Morgan Stanley Dean Witter New York Municipal Money Market Trust
42 Morgan Stanley Dean Witter New York Tax-Free Income Fund
43 Morgan Stanley Dean Witter Pacific Growth Fund Inc.
44 Morgan Stanley Dean Witter Precious Metals and Minerals Trust
45 Morgan Stanley Dean Witter Select Dimensions Investment Series
46 Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
47 Morgan Stanley Dean Witter Short-Term Bond Fund
48 Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
49 Morgan Stanley Dean Witter Special Value Fund
50 Morgan Stanley Dean Witter S&P 500 Index Fund
51 Morgan Stanley Dean Witter S&P 500 Select Fund
52 Morgan Stanley Dean Witter Strategist Fund
53 Morgan Stanley Dean Witter Tax-Exempt Securities Trust
54 Morgan Stanley Dean Witter Tax-Free Daily Income Trust
55 Morgan Stanley Dean Witter U.S. Government Money Market Trust
56 Morgan Stanley Dean Witter U.S. Government Securities Trust
57 Morgan Stanley Dean Witter Utilities Fund
58 Morgan Stanley Dean Witter Value-Added Market Series
59 Morgan Stanley Dean Witter Value Fund
60 Morgan Stanley Dean Witter Variable Investment Series
61 Morgan Stanley Dean Witter World Wide Income Trust
<CAPTION>
CLOSED-END FUNDS
<C> <S>
1 InterCapital California Insured Municipal Income Trust
2 InterCapital California Quality Municipal Securities
3 Dean Witter Government Income Trust
4 High Income Advantage Trust
5 High Income Advantage Trust II
6 High Income Advantage Trust III
7 InterCapital Income Securities Inc.
8 InterCapital Insured California Municipal Securities
9 InterCapital Insured Municipal Bond Trust
10 InterCapital Insured Municipal Income Trust
11 InterCapital Insured Municipal Securities
12 InterCapital Insured Municipal Trust
13 Municipal Income Opportunities Trust
14 Municipal Income Opportunities Trust II
15 Municipal Income Opportunities Trust III
</TABLE>
4
<PAGE>
<TABLE>
<C> <S>
16 Municipal Income Trust
17 Municipal Income Trust II
18 Municipal Income Trust III
19 Municipal Premium Income Trust
20 InterCapital New York Quality Municipal Securities
21 Morgan Stanley Dean Witter Prime Income Trust
22 InterCapital Quality Municipal Income Trust
23 InterCapital Quality Municipal Investment Trust
24 InterCapital Quality Municipal Securities
</TABLE>
In addition, Morgan Stanley Dean Witter Services Company Inc. ("MSDW
Services"), a wholly-owned subsidiary of MSDW Advisors, serves as manager for
the following investment companies for which TCW Funds Management, Inc. is the
investment advisor (the "TCW/DW Funds"):
<TABLE>
<CAPTION>
OPEN-END FUNDS
<C> <S>
1 TCW/DW Emerging Markets Opportunities Trust
2 TCW/DW Global Telecom Trust
3 TCW/DW Income and Growth Fund
4 TCW/DW Latin American Growth Fund
5 TCW/DW Mid-Cap Equity Trust
6 TCW/DW North American Government Income Trust
7 TCW/DW Small Cap Growth Fund
8 TCW/DW Total Return Trust
<CAPTION>
CLOSED-END FUNDS
<C> <S>
1 TCW/DW Term Trust 2000
2 TCW/DW Term Trust 2002
3 TCW/DW Term Trust 2003
</TABLE>
MSDW Advisors also serves as: (i) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; (ii) sub-administrator of
Templeton Global Governments Income Trust, a closed-end investment company; and
(iii) investment advisor of Offshore Dividend Growth Fund and Offshore Money
Market Fund, mutual funds established under the laws of the Cayman Islands and
available only to investors who are participants in the International Active
Assets Account program and are neither citizens nor residents of the United
States.
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
5
<PAGE>
printing (in excess of costs borne by the Fund) and distributing prospectuses
and supplements thereto of the Fund used for sales purposes. The Investment
Manager has retained MSDW Services to provide its administrative services under
the Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Morgan Stanley Dean Witter
Distributors Inc. ("MSDW Distributors" or the "Distributor") (see "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, 1996, 1997 and 1998 amounted to
$30,669,867, $33,616,072 and $38,009,366, 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 advisor 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
6
<PAGE>
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 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 "Morgan Stanley Dean Witter" is a
property right of MSDW. The Fund has agreed that MSDW, or any corporate
affiliate of MSDW, may use, or at any time permit others to use, the name
"Morgan Stanley Dean Witter." The Fund has also agreed that in the event the
Agreement is terminated, or if the affiliation between MSDW Advisors and its
parent company is terminated, the Fund will eliminate the name "Morgan Stanley
Dean Witter" from its name if MSDW, or any corporate affiliate of MSDW, 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 MSDW
Advisors and with the 85 Dean Witter Funds and the 11 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 (57) Chairman and Chief Executive Officer of Levitz Furniture
Director Corporation (since November, 1995); Director or Trustee of the
c/o Levitz Furniture Corporation Morgan Stanley Dean Witter Funds; formerly President and Chief
7887 N. Federal Highway Executive Officer of Hills Department Stores (May, 1991-July,
Boca Raton, Florida 1995); 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. and Weirton Steel
Corporation.
Charles A. Fiumefreddo* (65) Chairman, Director or Trustee, President and Chief Executive
Chairman of the Board, Officer of the Morgan Stanley Dean Witter Funds; Chairman,
President and Chief Executive Chief Executive Officer and Trustee of TCW/ DW Funds; formerly
Officer and Director Chairman, Chief Executive Officer and Director of MSDW
Two World Trade Center Advisors, MSDW Distributors and MSDW Services, Executive Vice
New York, New York President and Director of Dean Witter Reynolds Inc. ("DWR"),
Chairman and Director of Morgan Stanley Dean Witter Trust FSB
("MSDW Trust"), and Director and/or officer of various MSDW
subsidiaries (until June, 1998).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Edwin J. Garn (66) Director or Trustee of the Morgan Stanley Dean Witter Funds;
Director formerly United States Senator (R-Utah) (1974-1992) and
c/o Huntsman Corporation Chairman, Senate Banking Committee (1980-1986); formerly Mayor
500 Huntsman Way of Salt Lake City, Utah (1971-1974); formerly Astronaut, Space
Salt Lake City, Utah Shuttle Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation (since January, 1993); Director of Franklin Covey
(time management systems), John Alden Financial Corp. (health
insurance), United Space Alliance (joint venture between
Lockheed Martin and the Boeing Company) and Nuskin Asia
(multilevel marketing); member of the board of various civic
and charitable organizations.
John R. Haire (73) Chairman of the Audit Committee and Director or Trustee of the
Director Morgan Stanley Dean Witter Funds; Chairman of the Audit
Two World Trade Center Committee and Trustee of the TCW/DW Funds; formerly Chairman of
New York, New York the Independent Directors or Trustees of the Morgan Stanley
Dean Witter Funds and the TCW/DW Funds (until June, 1998);
formerly President, Council for Aid to Education (1978-1989)
and Chairman and Chief Executive Officer of Anchor Corporation,
an Investment Adviser (1964-1978).
Wayne E. Hedien (64) Retired; Director or Trustee of the Morgan Stanley Dean Witter
Director Funds; Director of the PMI Group, Inc. (private mortgage
c/o Gordon Altman Butowsky insurance); Trustee and Vice Chairman of The Field Museum of
Weitzen Shalov & Wein Natural History; formerly associated with the Allstate
Counsel to the Independent Directors Companies (1966-1994), most recently as Chairman of The
114 West 47th Street Allstate Corporation (March, 1993-December, 1994) and Chairman
New York, New York and Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December, 1994);
director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (49) 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 Morgan Stanley Dean Witter Funds; Trustee of
Washington, DC the TCW/DW Funds; Director of NASDAQ (since June, 1995);
Director of Greenwich Capital Markets, Inc. (broker-dealer) and
NVR, Inc. (home construction) 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 (62) General Partner, Triumph Capital, L.P., a private investment
Director partnership; Director or Trustee of the Morgan Stanley Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); Director of various business organizations.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Philip J. Purcell* (55) Chairman of the Board of Directors and Chief Executive Officer
Director of MSDW, DWR and Novus Credit Services Inc.; Director of MSDW
1585 Broadway Distributors; Director or Trustee of the Morgan Stanley Dean
New York, New York Witter Funds; Director and/or officer of various MSDW
subsidiaries.
John L. Schroeder (68) Retired; Director or Trustee of the Morgan Stanley Dean Witter
Director Funds; Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and Chief
Weitzen Shalov & Wein Investment Officer of the Home Insurance Company (August,
Counsel to the Independent Directors 1991-September, 1995).
114 West 47th Street
New York, New York
Barry Fink (43) Senior Vice President (since March, 1997), Secretary and
Vice President, General Counsel (since February, 1997) and Director (since
Secretary and General Counsel July, 1998) of MSDW Advisors and MSDW Services; Senior Vice
Two World Trade Center President (since March, 1997) and Assistant Secretary and
New York, New York Assistant General Counsel (since February, 1997) of MSDW
Distributors; Assistant Secretary of DWR (since August, 1996);
Vice President, Secretary and General Counsel of the Morgan
Stanley 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 MSDW Advisors and
MSDW Services and Assistant Secretary of the Morgan Stanley
Dean Witter Funds and the TCW/DW Funds.
Jonathan R. Page (52) Senior Vice President of MSDW Advisors; Vice President of
Vice President various Morgan Stanley Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (52) First Vice President and Assistant Treasurer of MSDW Advisors
Treasurer and MSDW Services; Treasurer of the Morgan Stanley Dean Witter
Two World Trade Center Funds and the TCW/DW Funds.
New York, New York
</TABLE>
- ------------------------
*Denotes Directors who are "Interested persons," as defined in the Act.
In addition, Mitchell M. Merin, President, Chief Executive Officer and
Director of MSDW Advisors and MSDW Services, Chairman and Director of MSDW
Distributors and MSDW Trust, Executive Vice President and Director of DWR, and
Director of various MSDW subsidiaries, Robert M. Scanlan, President, Chief
Operating Officer and Director of MSDW Advisors and MSDW Services, Executive
Vice President of MSDW Distributors and MSDW Trust and Director of MSDW Trust,
Robert S. Giambrone, Senior Vice President of MSDW Advisors, MSDW Services, MSDW
Distributors and MSDW Trust and Director of MSDW Trust, Joseph J. McAlinden,
Executive Vice President and Chief Investment Officer of MSDW Advisors and
Director of MSDW Trust, and Peter M. Avelar and James F. Willison, Senior Vice
Presidents of MSDW Advisors, are Vice Presidents of the Fund, and Marilyn K.
Cranney and Carsten Otto, First Vice
9
<PAGE>
Presidents and Assistant General Counsels of MSDW Advisors and MSDW Services,
Frank Bruttomesso, LouAnne D. McInnis and Ruth Rossi, Vice Presidents and
Assistant General Counsels of MSDW Advisors and MSDW Services, and Todd Lebo, a
staff attorney with MSDW Advisors, are Assistant Secretaries of the Fund.
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 Morgan Stanley
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 Morgan
Stanley Dean Witter Funds, comprised of 121 portfolios. As of September 30,
1998, the Morgan Stanley Dean Witter Funds had total net assets of approximately
$105 billion and more than six million shareholders.
Seven Directors (77% of the total number) have no affiliation or business
connection with MSDW Advisors or any of its affiliated persons and do not own
any stock or other securities issued by MSDW Advisors' parent company, MSDW.
These are the "disinterested" or "independent" Directors. 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 Morgan Stanley 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.
Three of them also serve as members of the Derivatives Committee. In addition,
three of the Directors, including two Independent Directors, serve as members of
the Insurance Committee. During the calendar year ended December 31, 1997, the
Audit Committee, the Derivatives Committee and the Independent Directors held a
combined total of seventeen meetings.
The Independent Directors are 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 Morgan Stanley 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; and reviewing the adequacy of the Fund's system of internal
controls.
The Board of each Fund has formed a Derivatives Committee to approve
parameters for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
10
<PAGE>
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS
The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Morgan Stanley 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 of the caliber, experience and
business acumen of the individuals who serve as Independent Directors of the
Morgan Stanley Dean Witter Funds.
COMPENSATION OF INDEPENDENT DIRECTORS
The Fund pays each Independent Director an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Directors, the Independent
Directors or Committees of the Board of Directors attended by the Director (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750).
If a Board meeting and a meeting of the Independent Directors or a Committee
meeting, or a meeting of the Independent Directors and/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 for their services as Director. Mr. Haire
currently serves as Chairman of the Audit Committee. Prior to June 1, 1998, Mr.
Haire also served as Chairman of the Independent Directors, for which services
the Fund paid him an additional annual fee of $1,200.
The following table illustrates the compensation paid to the Fund's
Independent Directors by the Fund for the fiscal year ended August 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT DIRECTOR FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,600
Edwin J. Garn................................................. 1,650
John R. Haire................................................. 3,200
Wayne E. Hedien............................................... 1,682
Dr. Manuel H. Johnson......................................... 1,600
Michael E. Nugent............................................. 1,650
John L. Schroeder............................................. 1,650
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1997 for services
to the 84 Morgan Stanley 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, 1997. Mr. Haire serves as Chairman of the Audit Committee of each
Morgan Stanley Dean Witter Fund and each TCW/DW Fund and, prior to June 1, 1998,
also served as Chairman of the Independent Directors or Trustees of those Funds.
With respect to Messrs. Haire, Johnson,
11
<PAGE>
Nugent and Schroeder, the TCW/DW Funds are included solely because of a limited
exchange privilege between those Funds and five Morgan Stanley Dean Witter Money
Market Funds. Mr. Hedien's term as Director or Trustee of each Morgan Stanley
Dean Witter Fund commenced on September 1, 1997.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
CHAIRMAN OF FOR SERVICE COMPENSATION
FOR SERVICE INDEPENDENT AS FOR
AS DIRECTOR OR DIRECTORS/TRUSTEES CHAIRMAN OF SERVICES TO
TRUSTEE AND AND AUDIT INDEPENDENT 84
COMMITTEE FOR SERVICE AS COMMITTEES OF TRUSTEES MORGAN
MEMBER OF 84 TRUSTEE AND 84 AND AUDIT STANLEY
MORGAN STANLEY COMMITTEE MORGAN STANLEY COMMITTEES OF DEAN WITTER
NAME OF DEAN WITTER MEMBER OF 14 DEAN WITTER 14 FUNDS AND 14
INDEPENDENT DIRECTOR FUNDS TCW/DW FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $133,602 -- -- -- $133,602
Edwin J. Garn.............. 149,702 -- -- -- 149,702
John R. Haire.............. 149,702 $73,725 $157,463 $ 25,350 406,240
Wayne E. Hedien............ 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson...... 145,702 71,125 -- -- 216,827
Michael E. Nugent.......... 149,702 73,725 -- -- 223,427
John L. Schroeder.......... 149,702 73,725 -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Morgan
Stanley 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 Morgan Stanley 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 29.41% of his or her Eligible Compensation plus 0.4901667% 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 58.82% 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.
12
<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,
1998 and by the 57 Morgan Stanley Dean Witter Funds (including the Fund) for the
year ended December 31, 1997, and the estimated retirement benefits for the
Fund's Independent Directors, to commence upon their retirement, from the Fund
as of August 31, 1998 and from the 57 Morgan Stanley Dean Witter Funds as of
December 31, 1997.
RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
------------------------------------ ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED ---------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT DIRECTOR (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- ----------------------------------- ------------------- --------------- ---------------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic...................... 10 58.82% $ 380 $ 20,499 $ 971 $ 55,026
Edwin J. Garn...................... 10 58.82 565 30,878 971 55,026
John R. Haire...................... 10 58.82 (98) ) (19,823)(3) 2,389 132,002
Wayne E. Hedien.................... 9 50.00 494 0 825 46,772
Dr. Manuel H. Johnson.............. 10 58.82 230 12,832 971 55,026
Michael E. Nugent.................. 10 58.82 399 22,546 971 55,026
John L. Schroeder.................. 8 49.02 762 39,350 815 46,123
</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 or Trustee until May 1, 1999.
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 Acquisition 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 Acquisition 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
13
<PAGE>
Exchange Act of 1934) that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by the "Requisite NRSROs" (see
"Purchase of Fund Shares--Determination of Net Asset Value"). Additionally, upon
an Event of Insolvency (as defined in Rule 2a-7 of the Act) with respect to the
seller, the collateral must qualify the repurchase agreement for preferential
treatment under a provision of applicable insolvency law providing an exclusion
from any automatic stay of creditors' rights against the seller. 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, 1998, 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 fullprincipal 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
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Directors, including maintaining collateral from the borrower equal at all times
to the current market value of the securities loaned;
3. Purchase or sell real estate; however, the Fund may purchase
marketable securities issued by companies which invest in real estate or
interests therein;
4. Purchase securities on margin or sell short;
5. Purchase or sell commodities or commodity futures contracts, or oil,
gas or mineral exploration or development programs;
6. Underwrite securities of other issuers;
7. Purchase warrants, or write, purchase or sell puts, calls,
straddles, spreads, or combinations thereof;
8. Participate on a joint or joint and several basis in any securities
trading account;
9. Purchase the securities of any other investment company;
10. Purchase securities of any issuer for the purpose of exercising
control or management; and
11. Purchase or retain the securities of any issuer if any officer or
director of the Fund is an officer or director of such issuer and owns
beneficially more than 1/2 of 1% of the securities of such issuer and all of
the officers and directors of the Fund and its Investment Manager together
own more than 5% of the securities of such issuer.
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, 1996, 1997 and 1998, 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
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accounts. In the case of certain initial and secondary public offerings, the
Investment Manager utilizes a pro rata allocation process based on the size of
the Morgan Stanley Dean Witter Funds involved and the number of shares available
from the public offering.
The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such price and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not, in every case, benefit the
Fund directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the Fund did not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e. Certificates of Deposit and
Banker's Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers. During its fiscal years ended August 31, 1996, 1997 and
1998, 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, Morgan Stanley & Co. Incorporated 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 an affiliated broker or dealer 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, 1996, 1997 and 1998.
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
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securities will be substantial. Nevertheless, as brokerage commissions are not
normally charged on purchases and sales of such securities, the large number of
these transactions does not have an adverse effect upon the net yield and net
asset value of the shares of the Fund.
PURCHASE OF FUND SHARES
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As discussed in the Prospectus, the Fund offers its shares for sale to the
public on a continuous basis, without a sales charge. Pursuant to a Distribution
Agreement between the Fund and Morgan Stanley Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager and a wholly-owned
subsidiary of MSDW, 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 had 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. At their meeting held on April 30,
1998, the Directors, including a majority of the Independent Directors, approved
the continuation of the Distribution Agreement until April 30, 1999.
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, Morgan Stanley 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 Morgan Stanley 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
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certificates will not be issued unless requested in writing by the shareholder.
No certificates will be issued for fractional shares or to shareholders who have
elected the checking account, predesignated bank account or systematic
withdrawal plan methods of withdrawing cash from their accounts.
The Fund reserves the right to reject any order for the purchase of its
shares. In addition, the offering of shares of the Fund may be suspended at any
time and resumed at any time thereafter.
EXCHANGE PRIVILEGE
As discussed in the Prospectus under the caption "Exchange Privilege," an
Exchange Privilege exists whereby investors who have purchased shares of any of
the Morgan Stanley Dean Witter Funds that are multiple class funds ("Morgan
Stanley Dean Witter Multi-Class Funds"), Morgan Stanley Dean Witter Funds sold
with a front-end sales charge ("FSC funds") and Morgan Stanley Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term"), which is a Morgan
Stanley Dean Witter Fund offered with a contingent deferred sales charge
("CDSC"), 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, Morgan Stanley Dean Witter Tax-Free Daily Income Trust,
Morgan Stanley Dean Witter California Tax-Free Daily Income Trust, Morgan
Stanley Dean Witter New York Municipal Money Market Trust or Morgan Stanley Dean
Witter U.S. Government Money Market Trust (these five funds are hereinafter
called "money market funds"), or Morgan Stanley Dean Witter Short-Term U.S.
Treasury Trust, Morgan Stanley Dean Witter Limited Term Municipal Trust or
Morgan Stanley Dean Witter Short-Term Bond Fund (these eight 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 Morgan
Stanley Dean Witter Multi-Class Fund may be redeemed and exchanged only for
shares of the corresponding Class of a Morgan Stanley 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 Morgan
Stanley 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 Morgan Stanley Dean Witter Multi-Class Fund may also be
redeemed and exchanged for shares of Global Short-Term. 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 Morgan Stanley 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 Global Short-Term may
be redeemed and exchanged for Class B shares of a Morgan Stanley Dean Witter
Multi-Class Fund, for shares of Global Short-Term or for shares of one of the
other Exchange Funds. Ultimately, any applicable CDSC will have to be paid upon
redemption of shares originally purchased from Global Short-Term or a Class of a
Morgan Stanley 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 Morgan Stanley Dean Witter Multi-Class Fund or Global
Short-Term 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
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based upon the period of time the shareholder held shares in a Morgan Stanley
Dean Witter Multi-Class Fund or in Global Short-Term. However, in the case of
Class B shares of a Morgan Stanley Dean Witter Multi-Class Fund or shares of
Global Short-Term 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 Morgan Stanley Dean
Witter Multi-Class Fund or Global Short-Term 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 Morgan Stanley Dean Witter Multi-Class
Fund or of Global Short-Term are reacquired. Thus, a CDSC is imposed only upon
an ultimate redemption, based upon the time (calculated as described above) the
shareholder was invested in a Morgan Stanley Dean Witter Multi-Class Fund or in
Global Short-Term. In the case of exchanges of Class A shares of a Morgan
Stanley 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 Morgan Stanley Dean Witter Multi-Class
Fund or in Global Short-Term are exchanged for shares of a Morgan Stanley Dean
Witter Multi-Class Fund, shares of Global Short-Term, 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 Morgan
Stanley 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 Morgan Stanley Dean Witter Multi-Class Fund
Prospectus under the caption "Purchase of Fund Shares" and in the Prospectus of
Global Short-Term 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 Advisor, under the terms and conditions
described in the Prospectus and Statement of Additional Information of each
TCW/DW Fund.
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With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
Selected Broker-Dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any Selected
Broker-Dealer.
The Distributor and any Selected Broker-Dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of the shares of any
other fund and the general administration of the Exchange Privilege. No
commission or discounts will be paid to the Distributor or any Selected
Broker-Dealer for any transactions pursuant to this Exchange Privilege.
Shares of the Fund acquired pursuant to the Exchange Privilege will be held
by the Fund's transfer agent in an Exchange Privilege account distinct from any
account of the same shareholder who may have acquired shares of the Fund
directly. A shareholder of the Fund will not be permitted to make additional
investments in such Exchange Privilege account, except through the exchange of
additional shares of the fund in which the shareholder had initially invested,
and the proceeds of any shares redeemed from such 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 Morgan Stanley Dean Witter
Multi-Class Fund, Global Short-Term, 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 Morgan Stanley 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, Morgan Stanley Dean Witter Tax-Free Daily Income Trust, Morgan Stanley
Dean Witter California Tax-Free Daily Income Trust, and Morgan Stanley 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 Morgan
Stanley 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 Morgan Stanley 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
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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 Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative or the Transfer Agent.
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 Financial Advisors 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
Financial Advisors, 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 Financial Advisors 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.
22
<PAGE>
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 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.
Morgan Stanley Dean Witter Financial Advisors 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 Financial Advisors of record. The
residual is a charge which reflects residual commissions paid by DWR to its
Financial Advisors 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 $13,562,638 to the Distributor pursuant to the Plan, for
the fiscal year ended August 31, 1998. This is 0.10 of 1% of the Fund's average
daily net assets for its fiscal year ended August 31, 1998. 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 -- $13,562,638.
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, 1999, was approved by the Board of Directors, including a
majority of the Independent 12b-1 Directors, at their meeting held on April 30,
1998. 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
23
<PAGE>
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, MSDW Advisors, MSDW Services, 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.
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.
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<PAGE>
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio security 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 on which in
accordance with the terms of the security the principal amount must
unconditionally be paid, or in the case of a security called for redemption, the
date on which the redemption payment must be made.
A variable rate security 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 floating rate security 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 Rated
Security with a remaining maturity of 397 calendar days or less that has
received a rating from 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) an Unrated Security that is of comparable
quality to a security meeting the requirements of (i) above, as determined by
the money market fund's board of directors; (iii) in addition, in the case of a
security that is subject to a Demand Feature or Guarantee: (A) the Guarantee has
received a rating from an NRSRO or the Guarantee is issued by a guarantor that
has received a rating from an NRSRO with respect to a class of debt obligations
(or any debt obligation within that class) that is comparable in priority and
security to the Guarantee, unless: (1) the Guarantee is issued by a person that
directly or indirectly controls, is controlled by or is under common control
with the issuer of the security subject to the Guarantee (other than a sponsor
of a Special Purpose Entity with respect to an Asset Backed Security); (2) the
security subject to the Guarantee is a repurchase agreement that is
Collateralized Fully; or (3) the Guarantee itself is a Government Security and
(B) the issuer of the Demand Feature or Guarantee, or another institution, has
undertaken promptly to notify the holder of the security in the event the Demand
Feature or Guarantee is substituted with another Demand Feature or Guarantee (if
such substitution is permissible under the terms of the Demand Feature or
Guarantee).
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 short-term rating category from the Requisite 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
25
<PAGE>
purchase of any instrument with a remaining maturity of more than 397 days.
Should the disposition of a portfolio security result in a dollar-weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash in such a manner as to reduce such maturity to 90 days or less as
soon as is reasonably practicable.
If the Board of Directors determines that it is no longer in the best
interests of the Fund and its shareholders to maintain a stable price of $1.00
per share or if the Board believes that maintaining such price no longer
reflects a market-based net asset value per share, the Board has the right to
change from an amortized cost basis of valuation to valuation based on market
quotations. The Fund will notify shareholders of any such change.
REDEMPTION OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund may be redeemed at their
net asset value at any time. When a redemption is made by check and a check is
presented to the Transfer Agent for payment, the Transfer Agent will redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. This enables the shareholder to continue earning
daily income dividends until the check has cleared.
A check drawn by a shareholder against his or her other account in the Fund
constitutes a request for redemption of a number of shares sufficient to provide
proceeds equal to the amount of the check. Payment of the proceeds of a check
will normally be made on the next business day after receipt by the Transfer
Agent of the check in proper form. If a check is presented for payment to the
Transfer Agent by a shareholder or payee in person, the Transfer Agent will make
payment by means of a check drawn on the Fund's account or, in the case of a
shareholder payee, to the shareholder's predesignated bank account, but will not
make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment: (1) for any periods during which the New York Stock Exchange is closed
(other than for customary weekend and 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 (the "Withdrawal Plan") is available for shareholders whose
shares of Morgan Stanley Dean Witter Funds have an aggregate value of $10,000 or
more. Shares of any Fund from which redemptions will be made pursuant to the
Plan must have a value of $1,000 or more (referred to as a "SWP Fund"). The
required share values are determined on the date the shareholder establishes the
Withdrawal Plan. The Withdrawal Plan provides for monthly, quarterly,
semi-annual or annual payments in any amount not less than $25, or in any whole
percentage of the value of the SWP Funds' shares, on an annualized basis. If the
SWP Fund shares, including shares acquired in exchange for shares of other
Funds, are subject to a CDSC, any applicable CDSC will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares" in the
Statements of Additional Information of the Morgan Stanley Dean
26
<PAGE>
Witter Funds offered with a CDSC), except that the CDSC, if any, will be waived
on redemptions under the Withdrawal Plan of up to 12% annually of the value of
each SWP Fund account, based on the share values next determined after the
shareholder establishes the Withdrawal Plan. Redemptions for which this CDSC
waiver policy applies may be in amounts up to 1% per month, 3% per quarter, 6%
semi-annually or 12% annually. Under this CDSC waiver policy, amounts withdrawn
each period will be paid by first redeeming shares not subject to a CDSC because
the shares were purchased by the reinvestment of dividends or capital gains
distributions, the CDSC period has elapsed or some other waiver of the CDSC
applies. If shares subject to a CDSC must be redeemed, shares held for the
longest period of time will be redeemed first and continuing with shares held
the next longest period of time until shares held the shortest period of time
are redeemed. Any shareholder participating in the Withdrawal Plan will have
sufficient shares redeemed from his or her account so that the proceeds (net of
any applicable CDSC) to the shareholder will be the designated monthly,
quarterly, semi-annual or annual amount.
A shareholder may suspend or terminate participation in the Withdrawal Plan
at any time. A shareholder who has suspended participation may resume payments
under the Withdrawal Plan, without requiring a new determination of the account
value for the 12% CDSC waiver. The Withdrawal Plan may be terminated or revised
at any time by the Fund.
Prior to adding an additional SWP Fund to an existing Withdrawal Plan, the
required $10,000/$1,000 share values must be met, to be calculated on the date
the shareholder adds the additional SWP Fund. However, the addition of a new SWP
Fund will not change the account value for the 12% CDSC waiver for the SWP Funds
already participating in the Withdrawal Plan.
Dividends and capital gains distributions on shares held under the
Withdrawal Plan will be invested in additional full and fractional shares at net
asset value (without a sales charge). Shares will be credited to an open account
for the investor by the Transfer Agent; no share certificates will be issued. A
shareholder is entitled to a share certificate upon written request to the
Transfer Agent, although in that event the shareholder's Withdrawal Plan will be
terminated.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month, quarter, or semi-annual or annual period and normally a check
for the proceeds will be mailed by the Transfer Agent, or amounts credited to a
shareholder's Dean Witter Reynolds Inc. or other selected broker-dealer
brokerage account, or amounts deposited electronically into the shareholder's
bank account via the Automated Clearing House, within five business days after
the date of redemption.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes. Shareholders who acquired their shares of the Fund
other than by exchange may make additional investments under the Withdrawal Plan
subject only to the Fund's minimum investment requirement.
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party, or sent to an address other than the one listed on the
account, must send complete written instructions to the Transfer Agent to enroll
in the Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments and the
address to which checks are mailed through his or her Morgan Stanley Dean Witter
Financial Advisor or other selected broker-dealer representative 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
27
<PAGE>
may also terminate the Withdrawal Plan at any time by written notice to the
Transfer Agent. In the event of such termination, the account will be continued
as a regular Shareholder Investment Account. The shareholder may also redeem all
or part of the shares held in the Withdrawal Plan account (see "Redemption of
Fund Shares" in the Prospectus) at any time. Shareholders wishing to enroll in
the Withdrawal Plan should contact their Morgan Stanley Dean Witter Financial
Advisor or other selected broker-dealer representative.
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, 1998 was 5.14%.
The effective annual yield on this date was 5.27%, 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
28
<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 $52,763,
$263,815 and $527,630, respectively, at August 31, 1998.
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.
Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"), 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. MSDW Trust is an affiliate of Morgan Stanley
Dean Witter Advisors Inc., the Fund's Investment Manager, and of Morgan Stanley
Dean Witter Distributors Inc., the Fund's Distributor. As Transfer Agent and
Dividend Disbursing Agent, MSDW Trust's responsibilities
29
<PAGE>
include maintaining shareholder accounts, including providing subaccounting and
recordkeeping services for certain retirement accounts; disbursing cash
dividends and reinvesting dividends; processing account registration changes;
handling purchase and redemption transactions; mailing prospectuses and reports;
mailing and tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services MSDW Trust
receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
PricewaterhouseCoopers 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,
1998, 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 PricewaterhouseCoopers 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, 1998, and the report of the independent accountants thereon, are set
forth in the Fund's Prospectus, and are incorporated herein by reference.
30
<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.
31
<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.
32
<PAGE>
MORGAN STANLEY 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):
<TABLE>
<CAPTION>
Page in
Prospectus
----------
<S> <C>
Financial Highlights for the years ended August 31, 1989, 1990, 1991, 1992,
1993, 1994, 1995, 1996, 1997 and 1998. . . . . . . . . . . . . . . . . . . . . . 3
Portfolio of Investments at August 31, 1998. . . . . . . . . . . . . . . . . . . 18
Statement of assets and liabilities at August 31, 1998 . . . . . . . . . . . . . 21
Statement of operations for the year ended August 31, 1998 . . . . . . . . . . . 22
Statement of changes in net assets for the years ended
August 31, 1997 and August 31, 1998. . . . . . . . . . . . . . . . . . . . . . . 23
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
(2) Financial statements included in the Statement of Additional
Information (Part B):
None
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
1. Form of Articles of Amendment to the Articles of Incorporation of
the Registrant.
5. Form of Amended Investment Management Agreement between the
Registrant and Morgan Stanley Dean Witter Advisors Inc.
8. Form of Amended and Restated Transfer Agency and Service
Agreement between the Registrant and Morgan Stanley
Dean Witter Trust FSB
9 Form of Amended Services Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.
11. Consent of Independent Accountants.
16. Schedules for Computations of Performance Quotations.
1
<PAGE>
27. Financial Data Schedule as of August 31, 1998.
All other exhibits were previously filed via EDGAR 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, 1998
-------------- ------------------------
Shares of Common Stock 1,974,862
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 ADVISOR
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The
principal address of the Morgan Stanley Dean Witter Funds is Two World Trade
Center, New York, New York 10048.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) Dean Witter Government Income Trust
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) InterCapital California Insured Municipal Income Trust
(6) InterCapital California Quality Municipal Securities
(7) InterCapital Income Securities Inc.
(8) InterCapital Insured California Municipal Securities
(9) InterCapital Insured Municipal Bond Trust
(10) InterCapital Insured Municipal Income Trust
(11) InterCapital Insured Municipal Securities
(12) InterCapital Insured Municipal Trust
(13) InterCapital New York Quality Municipal Securities
(14) InterCapital Quality Municipal Income Trust
(15) InterCapital Quality Municipal Investment Trust
(16) InterCapital Quality Municipal Securities
(17) Municipal Income Opportunities Trust
(18) Municipal Income Opportunities Trust II
(19) Municipal Income Opportunities Trust III
(20) Municipal Income Trust
(21) Municipal Income Trust II
(22) Municipal Income Trust III
(23) Municipal Premium Income Trust
(24) Morgan Stanley Dean Witter Prime Income Trust
OPEN-END INVESTMENT COMPANIES
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
3
<PAGE>
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter S&P 500 Index Fund
(46) Morgan Stanley Dean Witter S&P 500 Select Fund
(47) Morgan Stanley Dean Witter Select Dimensions Investment Series
(48) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(50) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(52) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value-Added Market Series
(59) Morgan Stanley Dean Witter Value Fund
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust
4
<PAGE>
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Mitchell M. Merin Chairman and Director of Morgan Stanley Dean Witter
President, Chief Distributors Inc. ("MSDW Distributors") and Morgan Executive
Officer and Stanley Dean Witter Trust FSB ("MSDW Trust"); President,
Director Chief Executive Officer and Director of Morgan Stanley
Dean Witter Services Company Inc. ("MSDW Services");
Executive Vice President and Director of Dean Witter
Reynolds Inc. ("DWR"); Director of various Morgan
Stanley Dean Witter & Co. ("MSDW") subsidiaries.
Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice Administrative Officer of MSDW; Executive Vice
President and Chief President and Chief Financial Officer of MSDW Services;
Financial Officer Director of DWR and MSDW.
Robert M. Scanlan President, Chief Operating Officer and Director of MSDW
President, Chief Services, Executive Vice President of MSDW Distributors;
Operating Officer Executive Vice President and Director of MSDW Trust;
and Director Vice President of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds
Executive Vice President and Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison Executive Vice President and Chief Administrative Officer
Executive Vice President of MSDW Services.
And Chief Administrative
Officer
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW Secretary,
Secretary, General Services; Senior Vice President, Assistant Secretary and
Counsel and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds and the TCW/DW Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds.
Rajesh Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Ronald J. Worobel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial Officer of the
Treasurer Morgan Stanley 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 and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Salvatore DeSteno Vice President of MSDW Services.
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Frank Bruttomesso Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Ronald Caldwell
Vice President
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Joseph Cardwell
Vice President
Philip Casparius
Vice President
David Dineen
Vice President
Bruce Dunn
Vice President
Michael Durbin
Vice President
Sheila Finnerty
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Sandra Grossman
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Christopher Jones
Vice President
Kevin Jung
Vice President
Carol Espejo Kane
Vice President
James P. Kastberg
Vice President
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Richard Norris
Vice President
George Paoletti
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ruth Rossi Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan Stanley Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION WITH
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- --------------------- ------------------------------------------------------------
<S> <C>
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
Item 29. PRINCIPAL UNDERWRITERS
Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant. MSDW Distributors
is also the principal underwriter of the following investment companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
12
<PAGE>
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter Prime Income Trust
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Short-Term Bond Fund
(49) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(50) Morgan Stanley Dean Witter Special Value Fund
(51) Morgan Stanley Dean Witter Strategist Fund
(52) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(53) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(54) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(55) Morgan Stanley Dean Witter U.S. Government Securities Trust
(56) Morgan Stanley Dean Witter Utilities Fund
(57) Morgan Stanley Dean Witter Value-Added Market Series
(58) Morgan Stanley Dean Witter Value Fund
(59) Morgan Stanley Dean Witter Variable Investment Series
(60) Morgan Stanley Dean Witter World Wide Income Trust
(61) TCW/DW Emerging Markets Opportunities Trust
(62) TCW/DW Global Telecom Trust
(63) TCW/DW Income and Growth
(64) TCW/DW Latin American Growth Fund
(65) TCW/DW Mid-Cap Equity Trust
(66) TCW/DW North American Government Income Trust
(67) TCW/DW Small Cap Growth Fund
(68) TCW/DW Total Return Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 28 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
13
<PAGE>
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Richard M. DeMartini Director
Christine Edwards Executive Vice President, Secretary, Director and Chief
Legal Officer.
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief
Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vidala Senior Vice President and Financial Principal
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.
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 19th day of October, 1998.
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
/s/Barry Fink
------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 35 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer President, Chief
Executive Officer,
Director and Chairman
/s/ Charles A. Fiumefreddo 10/19/98
-----------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
/s/ Thomas F. Caloia 10/19/98
-----------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
/s/ Barry Fink 10/19/98
-----------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
/s/ David M. Butowsky 10/19/98
-----------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
1. Form of Articles of Amendment to the Articles of Incorporation of the
Registrant.
5. Form of Amended Investment Management Agreement between
the Registrant and Morgan Stanley Dean Witter Advisors Inc.
8. Form of Amended and Restated Transfer Agency and Service
Agreement between the Registrant and Morgan Stanley Dean Witter
Trust FSB
9. Form of Amended Services Agreement between Morgan Stanley
Dean Witter Trust FSB
11. Consent of Independent Accountants
16. Schedules for Computation of Performance Quotations
27. Financial Data Schedule
<PAGE>
EXHIBIT 1
DEAN WITTER LIQUID ASSET FUND INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CORPORATION
PURSUANT TO MGCL SECTION 2-605 (a)(4)
Dean Witter Liquid Asset Fund Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by striking out
Article SECOND of the Articles of Incorporation and inserting in lieu thereof
the following:
"SECOND
The name of the Corporation is Morgan Stanley Dean Witter Liquid Asset Fund
Inc."
SECOND: The foregoing amendment to the Charter of the Corporation has
been approved by the Board of Directors and is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law.
THIRD: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940.
FOURTH: These Articles of Amendment shall become effective at 9:00 a.m.,
Eastern Time, on June 22, 1998.
<PAGE>
IN WITNESS WHEROF, the Corporation has caused these presents to be signed
in its name and on its behalf by its President and attested by its Secretary
on this 19th day of June 1998.
DEAN WITTER LIQUID ASSET
FUND INC.
/s/ Charles A. Fiumefreddo
----------------------
Charles A. Fiumefreddo
President
ATTESTED:
/s/ BARRY FINK
----------
Barry Fink
Secretary
THE UNDERSIGNED, the President of Dean Witter Liquid Asset Fund
Inc. who executed on behalf of the Corporation the foregoing Articles of
Amendment of which this certificate is made a part, hereby acknowledges in
the name and on behalf of the Corporation the foregoing Articles of
Amendment to be the corporate act of the Corporation and hereby certifies
that to the best of his knowledge, information and belief the matters and
facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
/s/ Charles A. Fiumefreddo
----------------------
Charles A. Fiumefreddo
President
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997, and amended as of April 30,
1998 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 who are also directors, officers
or employees of the Investment Manager, 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
98NYC6635
<PAGE>
shares, and 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). 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
2
<PAGE>
thereunder, as such limitations may be raised or lowered from time to time, the
Investment Manager shall 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.
3
<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 & 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, as amended, on April 30, 1998 in New York, New York.
<TABLE>
<S> <C>
DEAN WITTER LIQUID ASSET FUND INC.
By: /s/ BARRY FINK
..............................................
Attest:
/s/ FRANK BRUTTOMESSO
.............................................
DEAN WITTER INTERCAPITAL INC.
By: /s/ CHARLES A. FIUMEFREDDO
..............................................
Attest:
/s/ MARILYN K. CRANNEY
.............................................
</TABLE>
4
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
MORGAN STANLEY DEAN WITTER TRUST FSB
[open-end funds]
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 Terms of Appointment. . . . . . . . . . . . . . . . . . . . . 1
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 5
Article 3 Representations and Warranties of MSDW TRUST. . . . . . . . . 6
Article 4 Representations and Warranties of the Fund. . . . . . . . . . 7
Article 5 Duty of Care and Indemnification. . . . . . . . . . . . . . . 7
Article 6 Documents and Covenants of the Fund and MSDW TRUST. . . . . . 10
Article 7 Duration and Termination of Agreement . . . . . . . . . . . . 13
Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Article 9 Affiliations. . . . . . . . . . . . . . . . . . . . . . . . . 14
Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article 11 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 15
Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 15
Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . . . 17
Article 14 Personal Liability. . . . . . . . . . . . . . . . . . . . . . 17
i
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of June, 1998
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 MORGAN STANLEY DEAN WITTER TRUST FSB
("MSDW TRUST"), 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 MSDW TRUST as its transfer agent,
dividend disbursing agent and shareholder servicing agent and MSDW TRUST 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 MSDW TRUST
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints MSDW TRUST to act as, and MSDW
TRUST 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
-1-
<PAGE>
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 MSDW TRUST agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and MSDW TRUST, MSDW TRUST 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;
-2-
<PAGE>
(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. MSDW
TRUST 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 would result in an overissue, MSDW TRUST shall refuse
to issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, MSDW TRUST
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), MSDW TRUST shall:
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(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 MSDW TRUST in writing those transactions and
assets to be treated as exempt from Blue Sky reporting for each State; and
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(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 MSDW
TRUST 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 MSDW TRUST 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 MSDW TRUST.
(d) MSDW TRUST shall provide such additional services and
functions not specifically described herein as may be mutually agreed between
MSDW TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.
Article 2 FEES AND EXPENSES
2.1 For performance by MSDW TRUST pursuant to this Agreement,
each Fund agrees to pay MSDW TRUST 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 MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse MSDW TRUST for out of pocket expenses in connection
with the services rendered
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by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
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 MSDW TRUST by
the Fund upon request prior to the mailing date of such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF MSDW TRUST
MSDW TRUST 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.
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Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MSDW TRUST 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 MSDW TRUST shall not be responsible for, and the Fund
shall indemnify and hold MSDW TRUST harmless from and against, any and all
losses, damages, costs,
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charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of MSDW TRUST 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 MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received by
MSDW TRUST 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 MSDW TRUST 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 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.
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<PAGE>
5.2 MSDW TRUST 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 MSDW TRUST as a result of the lack of good faith,
negligence or willful misconduct of MSDW TRUST, its officers, employees or
agents.
5.3 At any time, MSDW TRUST 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
MSDW TRUST under this Agreement, and MSDW TRUST 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. MSDW TRUST, 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 MSDW TRUST 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. MSDW TRUST, 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.
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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 MSDW TRUST
6.1 The Fund shall promptly furnish to MSDW TRUST the
following, unless previously furnished to Dean Witter Trust Company, the prior
transfer agent of the Fund:
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(a) If a corporation:
(i) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of MSDW TRUST 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;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of
Trustees of the Fund authorizing the appointment of MSDW TRUST 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;
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<PAGE>
(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 MSDW
TRUST deems to be appropriate or necessary for the proper performance of its
duties.
6.2 MSDW TRUST 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.
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<PAGE>
6.3 MSDW TRUST 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, MSDW TRUST agrees that all such records prepared or maintained by
MSDW TRUST relating to the services performed by MSDW TRUST 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 MSDW TRUST 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
MSDW TRUST and the Fund.
6.5 In case of any request or demands for the inspection of
the Shareholder records of the Fund, MSDW TRUST will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. MSDW TRUST 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,
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<PAGE>
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 MSDW TRUST 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, MSDW TRUST 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.
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 MSDW TRUST 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 MSDW TRUST;
PROVIDED, HOWEVER, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations and duties, and
that MSDW TRUST
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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 MSDW TRUST 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 & 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 MSDW
TRUST as directors, officers, employees, agents and shareholders or otherwise,
and that the directors, officers, employees, agents and shareholders of MSDW
TRUST 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.
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<PAGE>
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 Morgan Stanley Dean Witter Advisors Inc. or
any of its affiliates ("Additional Funds") desires to retain MSDW TRUST to act
as transfer agent, dividend disbursing agent and/or shareholder servicing agent,
and MSDW TRUST desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between MSDW TRUST 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 MSDW TRUST 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 MSDW TRUST and the
Fund issued by a surety company satisfactory to MSDW TRUST, except that MSDW
TRUST may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as MSDW
TRUST deems appropriate indemnifying MSDW TRUST 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
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account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST 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 MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to MSDW TRUST 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 MSDW TRUST:
Morgan Stanley 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.
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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.
MORGAN STANLEY DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
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EQUITY FUNDS
10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund
38. Morgan Stanley Dean Witter S&P 500 Select Fund
BALANCED FUNDS
39. Morgan Stanley Dean Witter Balanced Growth Fund
40. Morgan Stanley Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
41. Morgan Stanley Dean Witter Strategist Fund
42. Dean Witter Global Asset Allocation Fund
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FIXED INCOME FUNDS
43. Morgan Stanley Dean Witter High Yield Securities Inc.
44. Morgan Stanley Dean Witter High Income Securities
45. Morgan Stanley Dean Witter Convertible Securities Trust
46. Morgan Stanley Dean Witter Intermediate Income Securities
47. Morgan Stanley Dean Witter Short-Term Bond Fund
48. Morgan Stanley Dean Witter World Wide Income Trust
49. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
50. Morgan Stanley Dean Witter Diversified Income Trust
51. Morgan Stanley Dean Witter U.S. Government Securities Trust
52. Morgan Stanley Dean Witter Federal Securities Trust
53. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
55. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
56. Morgan Stanley Dean Witter Limited Term Municipal Trust
57. Morgan Stanley Dean Witter California Tax-Free Income Fund
58. Morgan Stanley Dean Witter New York Tax-Free Income Fund
59. Morgan Stanley Dean Witter Hawaii Municipal Trust
60. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
61. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
SPECIAL PURPOSE FUNDS
62. Dean Witter Retirement Series
63. Morgan Stanley Dean Witter Variable Investment Series
64. Morgan Stanley Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
65. TCW/DW North American Government Income Trust
66. TCW/DW Latin American Growth Fund
67. TCW/DW Income and Growth Fund
68. TCW/DW Small Cap Growth Fund
69. TCW/DW Total Return Trust
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70. TCW/DW Global Telecom Trust
71. TCW/DW Mid-Cap Equity Trust
72. TCW/DW Emerging Markets Opportunities Trust
By:
-------------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- -------------------------
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
-------------------------------------
John Van Heuvelen
President
ATTEST:
- -------------------------
Executive Vice President
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EXHIBIT A
Morgan Stanley 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
Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") 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 MSDW TRUST of fees as set out in the fee schedule attached hereto as
Schedule A, MSDW TRUST 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.
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Please indicate MSDW TRUST'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:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
-----------------------
Its:
----------------------
Date:
---------------------
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SCHEDULE A
Fund: Morgan Stanley 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.
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SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995, and amended as of June
22, 1998, by and between Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (herein referred to as "MSDW Advisors"), and Morgan Stanley Dean
Witter Services Company Inc., a Delaware corporation (herein referred to as
"MSDW Services").
WHEREAS, MSDW Advisors has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which MSDW Advisors is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, MSDW Advisors desires to retain MSDW Services to perform the
administrative services as described below; and
WHEREAS, MSDW Services desires to be retained by MSDW Advisors to
perform such administrative services:
Now, therefore, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. MSDW Services agrees to provide administrative services to each Fund
as hereinafter set forth. Without limiting the generality of the foregoing,
MSDW Services shall (i) administer the Fund's business affairs and supervise
the overall day-to-day operations of the Fund (other than rendering
investment advice); (ii) provide the Fund with full administrative services,
including the maintenance of certain books and records, such as journals,
ledger accounts and other records required under the Investment Company Act
of 1940, as amended (the "Act"), the notification to the Fund and MSDW
Advisors of available funds for investment, the reconciliation of account
information and balances among the Fund's custodian, transfer agent and
dividend disbursing agent and MSDW Advisors, and the calculation of the net
asset value of the Fund's shares; (iii) provide the Fund with the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary to provide effective operation of the Fund; (iv)
oversee the performance of administrative and professional services rendered
to the Fund by others, including its custodian, transfer agent and dividend
disbursing agent, as well as accounting, auditing and other services; (v)
provide the Fund with adequate general office space and facilities; (vi)
assist in the preparation and the printing of the periodic updating of the
Fund's registration statement and prospectus (and, in the case of an open-end
Fund, the statement of additional information), tax returns, proxy
statements, and reports to its shareholders and the Securities and Exchange
Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that MSDW Advisors enters into an Investment Management
Agreement with another investment company, and wishes to retain MSDW Services
to perform administrative services hereunder, it shall notify MSDW Services
in writing. If MSDW Services is willing to render such services, it shall
notify MSDW Advisors in writing, whereupon such other Fund shall become a
Fund as defined herein.
2. MSDW Services 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 MSDW Services shall
be deemed to include officers of MSDW Services and persons employed or
otherwise retained by MSDW Services (including officers and employees of MSDW
Advisors, with the consent of MSDW Advisors) to furnish services, statistical
and other factual data, information with respect to technical and scientific
developments, and such other information, advice and assistance as MSDW
Services may desire. MSDW Services shall maintain each Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, MSDW
Services shall surrender to MSDW Advisors or to the Fund such of the books
and records so requested.
1
C65500
<PAGE>
3. MSDW Advisors will, from time to time, furnish or otherwise make
available to MSDW Services such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as MSDW Services
may reasonably require in order to discharge its duties and obligations to
the Fund under this Agreement or to comply with any applicable law and
regulation or request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by MSDW Services, MSDW Advisors shall pay to MSDW Services
monthly compensation calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or
rates set forth on Schedule B to the net assets of each Fund. Except as
hereinafter set forth, (i) in the case of an open-end Fund, compensation
under this Agreement shall be calculated by applying 1/365th of the annual
rate or rates to the Fund's or the Series' daily net assets determined as of
the close of business on that day or the last previous business day and (ii)
in the case of a closed-end Fund, compensation under this Agreement shall be
calculated by applying the annual rate or rates to the Fund's average weekly
net assets determined as of the close of the last business day of each week.
If this Agreement becomes effective subsequent to the first day of a month or
shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth on Schedule B.
Subject to the provisions of paragraph 5 hereof, payment of MSDW Services'
compensation for the preceding month shall be made as promptly as possible
after completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to MSDW Advisors pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, or, in the case of
InterCapital Income Securities Inc. or Morgan Stanley Dean Witter Variable
Investment Series or any Series thereof, the expense limitation specified in
the Fund's Investment Management Agreement, the fee payable hereunder shall
be reduced on a pro rata basis in the same proportion as the fee payable by
the Fund under the Investment Management Agreement is reduced.
6. MSDW Services shall bear the cost of rendering the administrative
services to be performed by it under this Agreement, and shall, at its own
expense, pay the compensation of the officers and employees, if any, of the
Fund employed by MSDW Services, and such clerical help and bookkeeping
services as MSDW Services shall reasonably require in performing its duties
hereunder.
7. MSDW Services will use its best efforts in the performance of
administrative activitives on behalf of each Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MSDW Services 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 MSDW Services or for any losses sustained by the Fund or its
investors. It is understood that, subject to the terms and conditions of the
Investment Management Agreement between each Fund and MSDW Advisors, MSDW
Advisors shall retain ultimate responsibility for all services to be
performed hereunder by MSDW Services. MSDW Services shall indemnify MSDW
Advisors and hold it harmless from any liability that MSDW Advisors may incur
arising out of any act or failure to act by MSDW Services in carrying out its
responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, MSDW Services, and in any person
controlling, controlled by or under common control with MSDW Services, and
that MSDW Services and any person controlling, controlled by or under common
control with MSDW Services may have an interest in the Fund. It is also
understood that MSDW Services and any affiliated persons thereof or any
persons controlling, controlled by or under common control with MSDW Services
have and may have advisory, management, administration service or other
contracts with other organizations and persons, and may have other interests
and businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
2
<PAGE>
9. This Agreement shall continue until April 30, 1999, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party
on 30 days' written notice delivered to the other party. In the event that
the Investment Management Agreement between any Fund and MSDW Advisors is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any
manner by written agreement executed by each of the parties hereto.
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
MORGAN STANLEY DEAN WITTER ADVISORS INC.
By:
-------------------------------
Attest:
---------------------------
MORGAN STANLEY DEAN WITTER SERVICES
COMPANY INC.
By:
-------------------------------
Attest:
---------------------------
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AS AMENDED AS OF JUNE 22, 1998
OPEN-END FUNDS
<TABLE>
<S> <C>
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter Retirement Series
6. Morgan Stanley Dean Witter American Value Fund
7. Morgan Stanley Dean Witter Balanced Growth Fund
8. Morgan Stanley Dean Witter Balanced Income Fund
9. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
10. Morgan Stanley Dean Witter California Tax-Free Income Fund
11. Morgan Stanley Dean Witter Capital Appreciation Fund
12. Morgan Stanley Dean Witter Capital Growth Securities
13. Morgan Stanley Dean Witter Competitive Edge Fund,
"BEST IDEAS" Portfolio
14. Morgan Stanley Dean Witter Convertible Securities Trust
15. Morgan Stanley Dean Witter Developing Growth Securities Trust
16. Morgan Stanley Dean Witter Diversified Income Trust
17. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
18. Morgan Stanley Dean Witter Equity Fund
19. Morgan Stanley Dean Witter European Growth Fund Inc.
20. Morgan Stanley Dean Witter Federal Securities Trust
21. Morgan Stanley Dean Witter Financial Services Trust
22. Morgan Stanley Dean Witter Fund of Funds
(i) Domestic Portfolio
(ii) International Portfolio
23. Morgan Stanley Dean Witter Global Dividend Growth Securities
24. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
25. Morgan Stanley Dean Witter Global Utilities Fund
26. Morgan Stanley Dean Witter Growth Fund
27. Morgan Stanley Dean Witter Hawaii Municipal Trust
28. Morgan Stanley Dean Witter Health Sciences Trust
29. Morgan Stanley Dean Witter High Yield Securities Inc.
30. Morgan Stanley Dean Witter Income Builder Fund
31. Morgan Stanley Dean Witter Information Fund
32. Morgan Stanley Dean Witter Intermediate Income Securities
33. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
34. Morgan Stanley Dean Witter International SmallCap Fund
35. Morgan Stanley Dean Witter Japan Fund
36. Morgan Stanley Dean Witter Limited Term Municipal Trust
37. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
38. Morgan Stanley Dean Witter Market Leader Trust
39. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
40. Morgan Stanley Dean Witter Mid-Cap Growth Fund
41. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
42. Morgan Stanley Dean Witter Natural Resource Development
Securities Inc.
43. Morgan Stanley Dean Witter New York Municipal Money Market Trust
44. Morgan Stanley Dean Witter New York Tax-Free Income Fund
45. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
46. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
47. Morgan Stanley Dean Witter Select Dimensions Investment Series
(i) American Value Portfolio
(ii) Balanced Growth Portfolio
(iii) Developing Growth Portfolio
(iv) Diversified Income Portfolio
(v) Dividend Growth Portfolio
(vi) Emerging Markets Portfolio
(vii) Global Equity Portfolio
(viii) Growth Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
48. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
49. Morgan Stanley Dean Witter U.S. Government Money Market Trust
50. Morgan Stanley Dean Witter Utilities Fund
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
51. Morgan Stanley Dean Witter Short-Term Bond Fund
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Special Value Fund
54. Morgan Stanley Dean Witter Strategist Fund
55. Morgan Stanley Dean Witter S&P 500 Index Fund
56. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
57. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
58. Morgan Stanley Dean Witter U.S. Government Securities Trust
59. Morgan Stanley Dean Witter Value-Added Market Series
60. Morgan Stanley Dean Witter Variable Investment Series
(i) Capital Appreciation Portfolio
(ii) Capital Growth Portfolio
(iii) Competitive Edge "Best Ideas" Portfolio
(iv) Dividend Growth Portfolio
(v) Equity Portfolio
(vi) European Growth Portfolio
(vii) Global Dividend Growth Portfolio
(viii) High Yield Portfolio
(ix) Income Builder Portfolio
(x) Money Market Portfolio
(xi) Quality Income Plus Portfolio
(xii) Pacific Growth Portfolio
(xiii) S&P 500 Index Portfolio
(xiv) Strategist Portfolio
(xv) Utilities Portfolio
61. Morgan Stanley Dean Witter World Wide Income Trust
62. Morgan Stanley Dean Witter Worldwide High Income Fund
63. Dean Witter Global Asset Allocation Fund
CLOSED-END FUNDS
64. High Income Advantage Trust
65. High Income Advantage Trust II
66. High Income Advantage Trust III
67. InterCapital Income Securities Inc.
68. Dean Witter Government Income Trust
69. InterCapital Insured Municipal Bond Trust
70. InterCapital Insured Municipal Trust
71. InterCapital Insured Municipal Income Trust
72. InterCapital California Insured Municipal Income Trust
73. InterCapital Insured Municipal Securities
74. InterCapital Insured California Municipal Securities
75. InterCapital Quality Municipal Investment Trust
76. InterCapital Quality Municipal Income Trust
77. InterCapital Quality Municipal Securities
78. InterCapital California Quality Municipal Securities
79. InterCapital New York Quality Municipal Securities
</TABLE>
A-2
<PAGE>
SCHEDULE B
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF JUNE 22, 1998
Monthly compensation calculated daily by applying the following annual
rates to a fund's daily net assets:
FIXED INCOME FUNDS
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Balanced Income Fund
Morgan Stanley Dean Witter 0.055% of the portion of the daily net assets not exceeding
California Tax-Free Income Fund $500 million; 0.0525% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.050%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.0475% of the portion of the
daily net assets exceeding $1 billion but not exceeding $1.25
billion; and 0.045% of the portion of the daily net assets
exceeding $1.25 billion.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Convertible Securities Trust $750 million; 0.055% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.050% of
the portion of the daily net assets of the exceeding $1 billion
but not exceeding $1.5 billion; 0.0475% of the portion of the
daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.045% of the portion of the daily net assets
exceeding $2 billion but not exceeding $3 billion; and 0.0425%
of the portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.040% of the daily net assets.Diversified Income Trust
Morgan Stanley Dean Witter Federal 0.055% of the portion of the daily net assets not exceeding
Securities Trust $1 billion; 0.0525% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.050% of
the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.0475% of the portion of the daily
net assets exceeding $2 billion but not exceeding $2.5 billion;
0.045% of the portion of the daily net assets exceeding $2.5
billion but not exceeding $5 billion; 0.0425% of the portion of
the daily net assets exceeding $5 billion but not exceeding $7.5
billion; 0.040% of the portion of the daily net assets exceeding
$7.5 billion but not exceeding $10 billion; 0.0375% of the
portion of the daily net assets exceeding $10 billion but not
exceeding $12.5 billion; and 0.035% of the portion of the daily
net assets exceeding $12.5 billion.
Morgan Stanley Dean Witter Global 0.055% of the portion of the daily net assets not exceeding
Short-Term Income Fund Inc. $500 million; and 0.050% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Hawaii 0.035% of the daily net assets.
Municipal Trust
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter High 0.050% of the portion of the daily net assets not exceeding
Yield Securities Inc. $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $2 billion;
0.0325% of the portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and 0.030% of the portion
of daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Intermediate Income Securities $500 million; 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.040%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.030% of the portion of the
daily net assets exceeding $1 billion.
Morgan Stanley Dean Witter 0.035% of the daily net assets.
Intermediate Term
U.S. Treasury Trust
Morgan Stanley Dean Witter Limited 0.050% of the daily net assets.
Term Municipal Trust
Morgan Stanley Dean Witter 0.035% of the daily net assets.
Multi-State Municipal Series Trust
(10 Series)
Morgan Stanley Dean Witter New 0.055% of the portion of the daily net assets not exceeding
York Tax-Free Income Fund $500 million; and 0.0525% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.065% of the daily net assets.
Retirement Series- Intermediate
Income Securities Series
U.S. Government Securities Series 0.065% of the daily net assets.
Morgan Stanley Dean Witter Select 0.039% of the daily net assets.
Dimensions Investment
Series--North American
Government Securities Portfolio
Morgan Stanley Dean Witter Select 0.050% of the daily net assets.
Municipal Reinvestment Fund
Morgan Stanley Dean Witter 0.070% of the daily net assets.
Short-Term Bond Fund
Morgan Stanley Dean Witter 0.035% of the daily net assets.
Short-Term U.S. Treasury Trust
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley ean Witter 0.050% of the portion of the daily net assets not exceeding
Tax-Exempt Securities Trust $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.035% of the portion of the
daily net assets exceeding $1 billion but not exceeding $1.25
billion; .0325% of the portion of the daily net assets exceeding
$1.25 billion.
Morgan Stanley Dean Witter U.S. 0.050% of the portion of the daily net assets not exceeding $1
Government Securities Trust billion; 0.0475% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.045% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0425% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.040% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0375% of the portion of the daily
net assets exceeding $5 billion but not exceeding $7.5 billion;
0.035% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0325% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of the portion of the daily net assets
exceeding $12.5 billion.
Morgan Stanley Dean Witter
Variable Investment Series-
High Yield Portfolio 0.050% of the portion of the daily net assets not exceeding
$500 million; and 0.0425% of the daily net assets exceeding
$500 million.
Quality Income Plus Portfolio 0.050% of the portion of the daily the net assets up to $500
million; and 0.045% of the portion of the daily net assets
exceeds $500 million.
Morgan Stanley Dean Witter World 0.075% of the portion of the daily net assets up to $250 million;
Wide Income Trust 0.060% of the portion of the daily net assets exceeding $250
million but not exceeding $500 million; 0.050% of the portion
of the daily net assets of the exceeding $500 million but not
exceeding $750 milliion; 0.040% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; and
0.030% of the portion of the daily net assets exceeding $1
billion.
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Worldwide High Income Fund
EQUITY FUNDS
Morgan Stanley Dean Witter 0.0625% of the portion of the daily net assets not exceeding
American Value Fund $250 million; 0.050% of the portion of the daily net assets
exceeding $250 million but not exceeding $2.25 billion; 0.0475%
of the portion of the daily net assets exceeding $2.25 billion
but not exceeding $3.5 billion; 0.0450% of the portion of the
daily net assets exceeding 3.5 billion but not exceeding 4.5
billion; and 0.0425% of the portion of the daily net assets
exceeding $4.5 billion.
</TABLE>
B-3
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.060% of the daily net assets.
Balanced Growth Fund
Morgan Stanley Dean Witter Capital 0.075% of the portion of the daily net assets not exceeding
Appreciation Fund $500 million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Capital 0.065% of the portion of the daily net assets not exceeding
Growth Securities $500 million; 0.055% of the portion exceeding $500 million but
not exceeding $1 billion; 0.050% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; and
0.0475% of the portion of the daily net assets exceeding $1.5
billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Developing Growth Securities $500 million; and 0.0475% of the portion of the daily net assets
Trust exceeding $500 million.
Morgan Stanley Dean Witter 0.0625% of the portion of the daily net assets not exceeding
Dividend Growth Securities Inc. $250 million; 0.050% of the portion of the daily net assets
exceeding $250 million but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets exceeding $1 billion but not
exceeding $2 billion; 0.045% of the portion of the daily net
assets exceeding $2 billion but not exceeding $3 billion;
0.0425% of the portion of the daily net assets exceeding $3
billion but not exceeding $4 billion; 0.040% of the portion of
the daily net assets exceeding $4 billion but not exceeding $5
billion; 0.0375% of the portion of the daily net assets exceeding
$5 billion but not exceeding $6 billion; 0.035% of the portion of
the daily net assets exceeding $6 billion but not exceeding $8
billion; 0.0325% of the portion of the daily net assets exceeding
$8 billion but not exceeding $10 billion; 0.030% of the portion
of the daily net assets exceeding $10 billion but not exceeding
$15 billion; and 0.0275% of the portion of the daily net assets
exceeding $15 billion.
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
European Growth Fund Inc. $500 million; 0.057% of the portion of the daily net assets
exceeding $500 million but not exceeding $2 billion; and
0.054% of the portion of the daily net assets exceeding $2
billion.
Morgan Stanley Dean Witter 0.075% of the daily net assets.
Financial Services Trust
Morgan Stanley Dean Witter Fund
of Funds-
Domestic Portfolio None
International Portfolio None
Dean Witter Global Asset 0.070% of the daily net assets.
Allocation Fund
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Global 0.075% of the portion of the daily net assets not exceeding$1
Dividend Growth Securities billion; 0.0725% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.070% of the portion
of the daily net assets exceeding $1.5 billion but not
exceeding$2.5 billion; 0.0675% of the portion of the daily net
assets exceeding $2.5 billion but not exceeding $3.5 billion;
0.0650% of the portion of the daily net assets exceeding $3.5
billion but not exceeding $4.5 billion; and 0.0625% of the
portion of the daily net assets exceeding $4.5 billion.
Morgan Stanley Dean Witter Global 0.065% of the portion of the daily net assets not exceeding
Utilities Fund $500 million; and 0.0625% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Health 0.10% of the portion of daily net assets not exceeding $500
Sciences Trust million; and 0.095% of the portion of daily net assets exceeding
$500 million.
Morgan Stanley Dean Witter Income 0.075% of the portion of the net assets not exceeding $500
Builder Fund million; and 0.0725% of the portion of daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets not exceeding
Information Fund $500 million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.075% of the daily net assets.
International SmallCap Fund
Morgan Stanley Dean Witter Japan 0.060% of the daily net assets.
Fund
Morgan Stanley Dean Witter Market 0.075% of the daily net assets.
Leader Trust
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets not exceeding
Mid-Cap Growth Fund $500 million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Natural 0.0625% of the portion of the daily net assets not exceeding
Resource Development Securities $250 million and 0.050% of the portion of the daily net assets
Inc. exceeding $250 million.
Morgan Stanley Dean Witter Pacific 0.060% of the portion of the daily net assets not exceeding $1
Growth Fund Inc. billion; 0.057% of the portion of the daily net assets exceeding
$1 billion but not exceeding $2 billion; and 0.054% of the
portion of the daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter 0.080% of the daily net assets.
Precious Metals and Minerals Trust
Dean Witter Retirement Series-
American Value Series 0.085% of the daily net assets.
Capital Growth Series 0.085% of the daily net assets.
Dividend Growth Series 0.075% of the daily net assets.
Global Equity Series 0.10% of the daily net assets.
Strategist Series 0.085% of the daily net assets.
Utilities Series 0.075% of the daily net assets.
Value Added Market Series 0.050% of the daily net assets.
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Select
Dimensions Investment Series--
American Value Portfolio 0.0625% of the daily net assets.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Diversified Income Portfolio 0.040% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding
$500 million; and 0.050% of the portion of the daily net assets
exceeding $500 million.
Emerging Markets Portfolio 0.075% of the daily net assets.
Global Equity Portfolio 0.10% of the daily net assets.
Growth Portfolio 0.048% of the daily net assets.
Mid-Cap Growth Portfolio 0.075% of the daily net assets
Utilities Portfolio 0.065% of the daily net assets.
Value-Added Market Portfolio 0.050% of the daily net assets.
Morgan Stanley Dean Witter Special 0.075% of the daily net assets.
Value Fund
Morgan Stanley Dean Witter 0.060% of the portion of the daily net assets not exceeding
Strategist Fund $500 million; 0.055% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.050% of
the portion of the daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not exceeding $2.0 billion; and
0.045% of the portion of the daily net assets exceeding $2.0
billion.
Morgan Stanley Dean Witter 0.040% of the daily net assets.
S&P 500 Index Fund
Morgan Stanley Dean Witter 0.065% of the portion of the daily net assets not exceeding
Utilities Fund $500 million; 0.055% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0525% of
the portion of the daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.050% of the portion of the daily net
assets exceeding $1.5 billion but not exceeding $2.5 billion;
0.0475% of the portion of the daily net assets exceeding $2.5
billion but not exceeding $3.5 billion; 0.045% of the portion of
the daily net assets exceeding $3.5 but not exceeding $5 billion;
and 0.0425% of the daily net assets exceeding $5 billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Value-Added Market Series $500 million; 0.45% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0425% of
the portion of the daily net assets exceeding $1.0 billion but
not exceeding $2.0 billion; and 0.040% of the portion of the
daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter
Variable Investment Series-
Capital Appreciation Portfolio 0.075% of the daily net assets.
Capital Growth Portfolio 0.065% of the daily net assets.
Competitive Edge "Best Ideas" 0.065% of the daily net assets.
Portfolio
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C>
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding
$500 million; and 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets exceeding $1.0 billion but
not exceeding $2.0 billion; and 0.045% of the portion of the
daily net assets exceeding $2 billion.
Equity Portfolio 0.050% of the net assets of the portion of the daily net assets
not exceeding $1 billion; and 0.0475% of the portion of the
daily net assets exceeding $1 billion.
European Growth Portfolio 0.060% of the portion of the daily net assets not exceeding
$500 million; and 0.057% of the portion of the daily net assets
exceeding $500 million.
Income Builder Portfolio 0.075% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the daily net assets.
Utilities Portfolio 0.065% of the portion of the daily net assets not exceeding
$500 million and 0.055% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter 0.065% of the portion of the daily net assets not exceeding $1.5
Competitive Edge Fund, "Best billion; and 0.0625% of the portion of the daily net assets
Ideas" Portfolio exceeding $1.5 billion.
Morgan Stanley Dean Witter 0.051% of the daily net assets.
Equity Fund
Morgan Stanley Dean Witter 0.048% of the portion of daily net assets not exceeding $750
Growth Fund million; 0.045% of the portion of daily net assets exceeding
$750 million but not exceeding $1.5 billion; and 0.042% of the
portion of daily net assets exceeding $1.5 billion.
Morgan Stanley Dean Witter 0.075 of the daily net assets.
Mid-Cap Dividend Growth Fund
MONEY MARKET FUNDS
Active Assets Trusts: 0.050% of the portion of the daily net assets not exceeding
(1) Active Assets Money Trust $500 million; 0.0425% of the portion of the daily net assets
(2) Active Assets Tax-Free Trust exceeding $500 million but not exceeding $750 million; 0.0375%
(3) Active Assets California of the portion of the daily net assets exceeding $750 million
Tax-Free Trust but not exceeding $1 billion; 0.035% of the portion of the daily
(4) Active Assets Government net assets exceeding $1 billion but not exceeding $1.5 billion;
Securities Trust 0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
</TABLE>
B-7
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
California Tax-Free Daily $500 million; 0.0425% of the portion of the daily net assets
Income Trust exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the daily net assets
exceeding $3 billion.
Morgan Stanley Dean Witter Liquid 0.050% of the portion of the daily net assets not exceeding
Asset Fund Inc. $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.35 billion;
0.0325% of the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.030% of the portion of
the daily net assets exceeding $1.75 billion but not exceeding
$2.15 billion; 0.0275% of the portion of the daily net assets
exceeding $2.15 billion but not exceeding $2.5 billion; 0.025%of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not exceeding $17.5 billion;
and 0.0248% of the portion of the daily net assets exceeding
$17.5 billion.
Morgan Stanley Dean Witter New 0.050% of the portion of the daily net assets not exceeding
York Municipal Money $500 million; 0.0425% of the portion of the daily net assets
Market Trust exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Dean Witter Retirement Series-
Liquid Asset Series 0.050% of the daily net assets.
U.S. Government Money 0.050% of the daily net assets.
Market Series
Morgan Stanley Dean Witter Select
Dimensions Investment Series-
Money Market Portfolio 0.050% of the daily net assets.
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding
Tax-Free Daily Income Trust $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter U.S. 0.050% of the portion of the daily net assets not exceeding
Government Money Market Trust $500 million; 0.0425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.0375%
of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily
net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter 0.050% of the daily net assets.
Variable Investment Series-
Money Market Portfolio
</TABLE>
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:
CLOSED-END FUNDS
<TABLE>
<S> <C>
Dean Witter Government 0.060% of the average weekly net assets.
IncomeTrust
High Income Advantage Trust 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of average weekly net assets exceeding
$750 million and not exceeding $1 billion; and 0.030% of the
portion of average weekly net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of average weekly net assets exceeding
$750 million and not exceeding $1 billion; and 0.030% of the
portion of average weekly net assets exceeding $1 billion.
</TABLE>
B-9
<PAGE>
<TABLE>
<S> <C>
High Income Advantage Trust III 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of the average weekly net assets
exceeding $750 million and not exceeding $1 billion; and
0.030% of the portion of average weekly net assets exceeding
$1 billion.
InterCapital Income Securities Inc. 0.050% of the average weekly net assets.
InterCapital Insured Municipal 0.035% of the average weekly net assets.
Bond Trust
InterCapital Insured Municipal Trust 0.035% of the average weekly net assets.
InterCapital Insured Municipal 0.035% of the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% of the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% of the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% of the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% of the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% of the average weekly net assets.
Securities
InterCapital California Quality 0.035% of the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% of the average weekly net assets.
Securities
InterCapital Insured California 0.035% of the average weekly net assets.
Municipal Securities
</TABLE>
B-10
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 35 to the Registration Statement on Form N-1A
(the "Registration Statement") of our report dated October 7, 1998, relating
to the financial statements and financial highlights of Morgan Stanley Dean
Witter Liquid Asset Fund Inc., formerly 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.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
October 19, 1998
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
(16) The Fund's current yield for the seven days ending
August 31, 1998
(A-B) x 365/N
(1.000985 -1) x 365/7 = 5.14%
The Fund's effective annualized yield for the seven days ending
August 31, 1998
365/N
A - 1
365/7
1.000985 - 1 = 5.27%
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
(1.000985 -1) x 365/7
= 5.14%
((1.000985) ^ 52.14285714-1)
= 5.27%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MORGAN STANLEY 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-98 $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ----------- ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
22-Sep-75 427.63 $52,763 $263,815 $527,630
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 15,468,152,517
<INVESTMENTS-AT-VALUE> 15,468,152,517
<RECEIVABLES> 24,085,818
<ASSETS-OTHER> 281,935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,492,520,270
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 171,166,665
<TOTAL-LIABILITIES> 171,166,665
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,320,660,909
<SHARES-COMMON-STOCK> 15,321,332,103
<SHARES-COMMON-PRIOR> 13,165,896,012
<ACCUMULATED-NII-CURRENT> 692,696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,321,353,605
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 803,199,716
<OTHER-INCOME> 0
<EXPENSES-NET> 86,059,522
<NET-INVESTMENT-INCOME> 717,140,194
<REALIZED-GAINS-CURRENT> 22,513
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 717,162,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 717,132,845
<DISTRIBUTIONS-OF-GAINS> 22,513
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,113,580,761
<NUMBER-OF-SHARES-REDEEMED> (41,673,576,337)
<SHARES-REINVESTED> 715,431,667
<NET-CHANGE-IN-ASSETS> 2,155,443,440
<ACCUMULATED-NII-PRIOR> 685,347
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38,009,366
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 86,059,522
<AVERAGE-NET-ASSETS> 13,945,928,542
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.052)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
