Schedule 14A Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.149-11(c) or
Section 240.14a-12
Municipal Income Opportunities Trust II . . . . . . . . . . . . .
(Name of Registrant as Specified in its Charter)
LouAnne McInnis ..... . . . . . . . . . . . . . . . . . . . . .
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[ X ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(j)(1), or
14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(j)(3)
[ ] Fee computed on table below per Exchange Act Rules
14a-6(j)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2) Aggregate number of securities to which transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4) Proposed maximum aggregate value of transaction:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4) Date Filed:
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<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 1994
The Annual Meeting of Shareholders of MUNICIPAL INCOME OPPORTUNITIES
TRUST II (the "Trust"), an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts, will be held in the Conference
Center, Forty-Fourth Floor, 2 World Trade Center, New York, New York 10048, on
June 15, 1994 at 9:00 A.M., New York City time, for the following purposes:
1. To elect six (6) Trustees, one (1) to serve until the 1995
Annual Meeting, (1) one to serve until the 1996 Annual Meeting, and
four (4) to serve until the 1997 Annual Meeting or, in each case, until
their successors shall have been elected and qualified;
2. To approve or disapprove continuance of the currently
effective Investment Advisory Agreement between the Trust and Dean
Witter InterCapital Inc.;
3. To ratify or reject the selection of Price Waterhouse as the
Trust's independent accountants for the fiscal year ending February 28,
1995; and
4. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Shareholders of record as of the close of business on April 14, 1994
are entitled to notice of and to vote at the Meeting. If you cannot be present
in person, your management would greatly appreciate your filling in, signing
and returning the enclosed proxy promptly in the envelope provided for that
purpose.
In the event that the necessary quorum to transact business is not
obtained at the Meeting, the persons named as proxies may propose one or more
adjournments of the meeting for a total of not more than 60 days in the
aggregate to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of the holders of a majority of the Trust's shares
present in person or by proxy at the Meeting. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to vote
in favor of the proposal to approve continuance of the Investment Advisory
Agreement and will vote against any such adjournment those proxies required to
be voted against that proposal.
SHELDON CURTIS,
Secretary
April 21, 1994
New York, New York
===============================================================================
IMPORTANT
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE
UNABLE TO BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED
PROXY IN ORDER THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
===============================================================================
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 15, 1994
This statement is furnished in connection with the solicitation of
proxies by the Trustees of MUNICIPAL INCOME OPPORTUNITIES TRUST II (the
"Trust") for use at the Annual Meeting of Shareholders of the Trust to be held
on June 15, 1994, and at any adjournments thereof.
If the enclosed form of proxy is properly executed and returned in time
to be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted for each of the nominees for election as Trustee
and in favor of Proposals 2 and 3 as set forth in the Notice of Annual Meeting
of Shareholders. A proxy may be revoked at any time prior to its exercise by
any of the following: written notice of revocation, execution and delivery of a
later dated proxy to the Secretary of the Trust, or attendance and voting at
the Annual Meeting of Shareholders.
Shareholders as of the close of business on April 14, 1994, the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting, are entitled to one vote for each share held and a fractional vote
for a fractional share. On April 14, 1994 there were 20,737,707 shares of
beneficial interest of the Trust outstanding, all with $0.01 par value. No
person was known to own as much as 5% of the outstanding shares of the Trust on
that date. The Trustees and Officers of the Trust, together, owned less than 1%
of the Trust's outstanding shares on that date. The percentage ownership of
shares of the Trust changes from time to time depending on purchases and sales
by shareholders and the total number of shares outstanding.
The cost of soliciting proxies for this Annual Meeting of Shareholders,
consisting principally of printing and mailing expenses, will be borne by the
Trust. The solicitation of proxies will be by mail, which may be supplemented
by solicitation by mail, telephone or otherwise through Trustees, and officers
of the Trust and officers and regular employees of Dean Witter InterCapital
Inc. ("InterCapital" or the "Investment Adviser") without special compensation
therefor. The first mailing of this proxy statement is expected to be made on
or about April 21, 1994.
(1) ELECTION OF TRUSTEES
The number of Trustees has been fixed by the Trustees, pursuant to the
Trust's Declaration of Trust, at twelve. At the Meeting, six nominees are to be
elected to the Trust's Board of Trustees. There are presently twelve Trustees,
four of whom (Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo and John
E. Jeuck) are standing for election at this Meeting to serve until the 1997
Annual Meeting, one of whom (John L. Schroeder) is standing for election at
this Meeting to serve until the 1995 Annual Meeting, and one of whom (Philip J.
Purcell) is standing for election at this Meeting to serve until the 1996
Annual Meeting, in accordance with the Trust's Declaration of Trust, as
amended.
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Nine of the current twelve Trustees (Jack F. Bennett, Michael Bozic,
Edwin J. Garn, John R. Haire, John E. Jeuck, Manuel H. Johnson, Paul Kolton,
Michael E. Nugent and John L. Schroeder) are Independent Trustees, that is,
Trustees who are not "interested persons" of the Trust, as that term is defined
in the Investment Company Act of 1940, as amended (the "Act"). The nominees for
election as Trustees of the Trust have been proposed by the Trustees now
serving or, in the case of the nominees for positions as Independent Trustees,
by the Independent Trustees now serving. Messrs. Bozic, Purcell and Schroeder
were elected as Trustees of the Trust by the Trustees on April 8, 1994. All of
the other Trustees have been elected by the shareholders of the Trust.
The Board of Trustees has two committees--an Audit Committee and a
Committee of the Independent Trustees--consisting, in both cases, of the
Independent Trustees of the Trust. Mr. Haire serves as the Chairman of both
Committees. There are no nominating or compensation committees of the Trustees.
The functions of the Audit Committee are: recommendation to the
Trustees of the engagement or discharge of the independent accountants;
direction and supervision of investigations into matters within the scope of
the independent accountants' duties, including the power to retain outside
specialists; review with the independent accountants of the audit plan and
results of the auditing engagement; approval of each professional service,
audit and non-audit, provided by the independent accountants and other
accounting firms prior to the performance of such service; review of the
independence of the independent accountants; consideration of the range of
audit and nonaudit fees; and review of the adequacy of the Trust's system of
internal accounting controls.
The functions of the Committee of the Independent Trustees are:
recommendation to the full Board of approval of any management, advisory and/or
administration agreements; recommendation to the full Board of any underwriting
and/or distribution agreements; review of the fidelity bond and premium
allocation; review of errors and omissions, uncollectible items of deposit and
any other joint insurance policies and premium allocation; review of, and
monitoring of compliance with, procedures adopted pursuant to certain rules
promulgated under the Act and such other duties as the Independent Trustees
shall, from time to time, conclude are necessary to carry out their duties
under the Act.
The nominees of the Board of Trustees for election as Trustees are
listed below. It is the intention of the persons named in the enclosed form of
proxy to vote the shares represented by them for the election of these
nominees: Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo, John E.
Jeuck, Philip J. Purcell and John L. Schroeder. Should any of the nominees
become unable or unwilling to accept nomination or election, the persons named
in the proxy will exercise their voting power in favor of such person or
persons as the Board of Trustees may recommend. All of the nominees have
consented to being named in this proxy statement and to serve if elected. The
Trust knows no reason why said nominees would be unable or unwilling to accept
nomination or election. Trustees will be elected by a plurality of the votes
cast at the meeting.
Pursuant to the provisions of the Trust's Declaration of Trust
(Section 2.2, as amended), the nominees for election as Trustees are divided
into three separate classes, each class having a term of three years. The term
of office of one of the three classes will expire each year.
The Board of Trustees has determined that the nominees for election as
Trustee shall be standing for election as Trustee in each of the three classes
of Trustee as follows: Class I--Messrs. Bennett, Bozic, Fiumefreddo and Jeuck;
Class II--Messrs. Johnson, Kolton, Schroeder and Telling; and Class III--
Messrs. Garn, Haire, Nugent and Purcell. Each nominee for Trustee at any Annual
Meeting will, if elected, serve a term of up to approximately three years
running for the period assigned to that class and terminating at the date of
the Annual Meeting of Shareholders so designated by the Board of Trustees, or
any adjournment thereof. As a consequence of this method of election, the
replacement of a majority of the Board of Trustees could be delayed for up to
two years. As stated above, the Trustees in Class I are standing for election
at this Meeting and, if elected, will serve until the 1997 Annual Meeting or
until their successors shall have been
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<PAGE>
elected and qualified, one Trustee in Class II is standing for election at this
Meeting and, if elected, will serve until the 1995 Annual Meeting or until his
successor shall have been elected and qualified and one Trustee in Class III is
standing for election at this Meeting and, if elected, will serve until the
1996 Annual Meeting or until his successor shall have been elected and
qualified.
The following information regarding each of the nominees for election
as Trustee includes his principal occupations and employment for at least the
last five years, his age, shares of the Trust owned, if any, as of April 14,
1994 (shown in parentheses), positions with the Trust, and directorships (or
trusteeships) in other companies which file periodic reports with the
Securities and Exchange Commission, including other investment companies for
which InterCapital serves as investment manager or investment adviser, namely
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter American Value Fund, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Tax-Free Daily Income Trust, Dean Witter Natural Resource Development
Securities Inc., Dean Witter Dividend Growth Securities Inc., Dean Witter
Liquid Asset Fund Inc., Dean Witter Variable Investment Series, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Money Market
Trust, Dean Witter U.S. Government Securities Trust, Dean Witter World Wide
Investment Trust, Dean Witter Developing Growth Securities Trust, Dean Witter
California Tax-Free Income Fund, Dean Witter New York Tax-Free Income Fund,
Dean Witter Government Income Trust, Dean Witter Federal Securities Trust, High
Income Advantage Trust, Dean Witter Value-Added Market Series, Dean Witter
Utilities Fund, Municipal Income Trust, Municipal Income Trust II, Dean Witter
California Tax-Free Daily Income Trust, Dean Witter Managed Assets Trust, Dean
Witter Strategist Fund, High Income Advantage Trust II, Dean Witter Convertible
Securities Trust, Municipal Premium Income Trust, Dean Witter Intermediate
Income Securities, High Income Advantage Trust III, Dean Witter World Wide
Income Trust, Dean Witter Capital Growth Securities, Dean Witter New York
Municipal Money Market Trust, Dean Witter European Growth Fund Inc., Dean
Witter Precious Metals and Minerals Trust, Dean Witter Global Short-Term Income
Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State
Municipal Series Trust, InterCapital Insured Municipal Bond Trust, Dean Witter
Premier Income Trust, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Diversified Income Trust, Dean Witter Health Sciences Trust, Dean Witter
Retirement Series, Dean Witter Global Dividend Growth Securities, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Global Utilities Fund, InterCapital Quality Municipal Investment Trust,
InterCapital Quality Municipal Income Trust, InterCapital Insured Municipal
Trust, InterCapital Insured Municipal Income Trust, InterCapital California
Insured Municipal Income Trust, InterCapital Quality Municipal Securities,
InterCapital California Quality Municipal Securities, InterCapital New York
Quality Municipal Securities, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, Dean Witter Global
Utilities Fund, Municipal Income Opportunities Trust, Municipal Income Trust
III, Municipal Income Opportunities Trust III, Prime Income Trust, Active
Assets Money Trust, Active Assets Tax-Free Trust, Active Assets California Tax-
Free Trust and Active Assets Government Securities Trust (said investment
companies, together with the Trust, are referred to herein collectively as the
"Dean Witter Funds"), and investment companies for which InterCapital's wholly-
owned Subsidiary, Dean Witter Services Company Inc. ("DWSC"), serves as manager
and TCW Funds Management, Inc. serves as investment adviser, namely, TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Balanced Fund,
TCW/DW Small Cap Growth Fund, TCW/DW North American Intermediate Income Trust,
TCW/DW Term Trust 2000, TCW/DW Term Trust 2002, TCW/DW Term Trust 2003 and
TCW/DW Emerging Markets Opportunities Trust (the "TCW/DW Funds").
The nominees for Trustee to be elected at this Meeting are:
JACK F. BENNETT, Trustee since April, 1989; age 70; Retired; Director
or Trustee of the Dean Witter Funds; formerly Senior Vice President and
Director of Exxon Corporation (1975-January, 1989) and Under Secretary of the
U.S. Treasury for Monetary Affairs (1974-1975); Director of Philips Electronics
N.V., Tandem Computers Inc. and Massachusetts Mutual Insurance Company;
director or trustee of various not-for-profit and business organizations.
4
<PAGE>
MICHAEL BOZIC, Trustee since April, 1994; age 53; President and Chief
Executive Officer of Hills Department Stores (since May, 1991); formerly
Chairman and Chief Executive Officer (January, 1987-August, 1990) and President
and Chief Operating Officer (August, 1990-February, 1991) of the Sears
Merchandise Group of Sears, Roebuck and Co. ("Sears"); Director or Trustee of
the Dean Witter Funds; Director of Harley Davidson Credit Inc., the United
Negro College Fund and Domain Inc., (home decor retailer).
Charles A. FIUMEFREDDO,* Trustee since July, 1991; age 60; Chairman,
Chief Executive Officer and Director of InterCapital, DWSC and Dean Witter
Distributors Inc. ("Distributors"); Executive Vice President and Director of
Dean Witter Reynolds Inc. ("DWR"); Chairman, Director or Trustee, President and
Chief Executive Officer of the Dean Witter Funds; Chairman, Chief Executive
Officer and Trustee of the TCW/DW Funds; Chairman and Director of Dean Witter
Trust Company ("DWTC"); Director and/or officer of various Dean Witter,
Discover & Co. ("DWDC") subsidiaries; formerly Executive Vice President and
Director of DWDC (until February, 1993).
DR. JOHN E. JEUCK, Trustee since April, 1989; age 77; Retired; Director
or Trustee of the Dean Witter Funds; formerly Robert Law Professor of Business
Administration, Graduate School of Business, University of Chicago (until July,
1989); Business consultant.
PHILIP J. PURCELL,* Trustee since April, 1994, age 50; Chairman of the
Board of Directors and Chief Executive Officer of DWDC, DWR and Novus Credit
Services Inc.; Director of InterCapital, DWSC and Distributors; Director or
Trustee of the Dean Witter Funds; Director and/or officer of various DWDC
Subsidiaries.
JOHN L. SCHROEDER, Trustee since April, 1994; age 63; Executive Vice
President and Chief Investment Officer of The Home Insurance Company (since
August, 1991); Director or Trustee of the Dean Witter Funds; Director of
Citizens Utilities Company; formerly Chairman and Chief Investment Officer of
Axe-Houghton Management and the Axe-Houghton Funds (April, 1983-June, 1991) and
President of USF&G Financial Services, Inc. (June, 1990-June, 1991).
The Trustees who are not standing for reelection at this Meeting are:
EDWIN JACOB (JAKE) GARN, age 61; Director or Trustee of the Dean Witter
Funds; formerly United States Senator (R-Utah) (1974-1992) and Chairman, Senate
Banking Committee (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-
1974); formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Chemical Corporation (since January, 1993); Member of the
board of various civic and charitable organizations.
JOHN R. HAIRE, Trustee since April, 1989; age 69; Chairman of the Audit
Committee and Chairman of the Committee of the Independent Directors or
Trustees and Director or Trustee of the Dean Witter Funds; Trustee of the
TCW/DW Funds; formerly President, Council for Aid to Education (1978-October,
1989) and Chairman and Chief Executive Officer of Anchor Corporation, an
investment adviser (1964-1978); Director of Washington National Corporation
(insurance) and Bowne & Co., Inc. (printing).
DR. MANUEL H. JOHNSON, Trustee since July, 1991; age 45; Senior
Partner, Johnson Smick International, Inc., a consulting firm (since June,
1985); Koch Professor of International Economics and Director of the Center for
Global Market Studies at George Mason University (since September, 1990);
Director or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds; Co-
Chairman and a founder of the Group of Seven Council (G7C), an international
economic commission (since September, 1990); Director of Greenwich Capital
Markets, Inc. (broker-dealer); formerly Vice Chairman of the Board of Governors
of the Federal Reserve System (February, 1986-August, 1990) and Assistant
Secretary of the U.S. Treasury (1982-1986).
- ----------
*Messrs. Fiumefreddo, Purcell and Telling may be deemed "interested
persons" of the Trust and its Investment Adviser as defined in Section 2(a)(19)
of the Act, due to their affiliation with the Investment Adviser and/or its
affiliated companies.
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<PAGE>
PAUL KOLTON, Trustee since April, 1989; age 70; Director or Trustee of
the Dean Witter Funds; Chairman of the Audit Committee and Chairman of the
Committee of the Independent Trustees and Trustee of the TCW/DW Funds; formerly
Chairman of Financial Accounting Standards Advisory Council; formerly Chairman
and Chief Executive Officer of the American Stock Exchange; Director of UCC
Investors Holding Inc. (Uniroyal Chemical Company, Inc.); director or trustee
of various not-for-profit organizations.
MICHAEL E. NUGENT, Trustee since July, 1991; age 58; General Partner,
Triumph Capital, L.P., a private investment partnership (since April, 1988);
Director or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
formerly Vice President, Bankers Trust Company and BT Capital Corporation
(September, 1984-March, 1988); Director of various business organizations.
EDWARD R. TELLING,* Trustee since April, 1989; age 75; retired;
Director or Trustee of the Dean Witter Funds; formerly Chairman of the Board of
Directors and Chief Executive Officer (1978-1985) and President (from January,
1981-March, 1982 and from February, 1984-August, 1984) of Sears; formerly
Director of Sears.
The executive officers of the Trust are: Sheldon Curtis, Vice
President, Secretary and General Counsel; Robert M. Scanlan, Vice President;
David A. Hughey, Vice President; Edmund C. Puckhaber, Vice President; James F.
Willison, Vice President; and Thomas F. Caloia, Treasurer. In addition, Joseph
Arcieri and Katherine M. Stromberg are Vice Presidents of the Trust and Marilyn
K. Cranney, Barry Fink, Lawrence S. Lafer, Lou Anne D. McInnis and Ruth Rossi
serve as Assistant Secretaries. Mr. Curtis is 62 years old and is currently
Senior Vice President, Secretary and General Counsel of InterCapital and DWSC
and Assistant Secretary of DWR and DWDC; he is also Senior Vice President,
Assistant Secretary and Assistant General Counsel of Distributors and Senior
Vice President and Secretary of DWTC. Mr. Scanlan is 58 years old and is
currently President and Chief Operating Officer of InterCapital (since March,
1993) and DWSC; he is also Executive Vice President of Distributors and
Executive Vice President and Director of DWTC. He was previously Executive Vice
President of InterCapital (November, 1990-March, 1993) and prior thereto was
Chairman of Harborview Group, Inc. Mr. Hughey is 62 years old and is currently
Executive Vice President and Chief Administrative Officer of InterCapital and
DWSC; he is also Executive Vice President and Chief Administrative Officer of
Distributors and DWTC as well as a Director of DWTC. He was previously
President of DWTC (October, 1989--March, 1993). Mr. Puckhaber is 54 years old
and is currently Executive Vice President of InterCapital (since January,
1991). Mr. Willison is 50 years old and is currently Senior Vice President of
InterCapital. Mr. Caloia is 47 years old and is currently First Vice President
and Assistant Treasurer of InterCapital and DWSC. Mr. Arcieri is 45 years old
and is currently Vice President of InterCapital. Ms. Stromberg is 45 years old
and is currently Vice President of InterCapital (since April, 1992). She was
formerly a portfolio manager with InterCapital (October, 1991--April, 1992) and
Vice President of Kidder Peabody Asset Management (October, 1985--October,
1991). Other than Mr. Scanlan and Ms. Stromberg, each of the above officers has
been an employee of InterCapital or DWR (formerly the corporate parent of
InterCapital) for over five years.
Messrs. Fiumefreddo, Purcell and Telling, Trustees of the Trust, and
officers of the Trust own securities of DWDC which in the aggregate constitute
less than 1% of the securities of each class outstanding.
Each of the Independent Trustees is paid by the Trust an annual
retainer fee of $1,200 plus $50 for each meeting of the Board of Trustees, the
Audit Committee or the Committee of the Independent Trustees attended by the
Trustee in person (the Trust pays the Chairman of the Audit Committee an
additional annual fee
- ----------
*Messrs. Fiumefreddo, Purcell and Telling may be deemed "interested
persons" of the Trust and its Investment Adviser as defined in Section 2(a)(19)
of the Act, due to their affiliation with the Investment Adviser and/or its
affiliated companies.
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<PAGE>
of $1,000 and pays the Chairman of the Committee of Independent Trustees an
additional annual fee of $2,400, in each case inclusive of the Committee
meeting fees), together with any out-of-pocket expenses incurred in connection
with attendance at any such meetings. The Trust has adopted a retirement
program under which an Independent Trustee who retires after a minimum required
period of service would be entitled to retirement payments upon reaching the
eligible retirement date (normally, after attaining age 72) based upon length
of service and computed as a percentage of one-fifth of the total compensation
earned by such Trustee for service to the Trust in the five-year period prior
to the date of the Trustee's retirement. For the fiscal year ended February 28,
1994, the Trust accrued a total of $20,674 in Trustees' fees and expenses and a
total of $11,637 in benefits under the retirement program to seven Trustees.
The Trust pays no remuneration to any Trustee who is not an Independent Trustee
or to any of the Trust's officers. During the fiscal year ended February 28,
1994 the Board of Trustees held four meetings, the Audit Committee of the Board
and the Committee of the Independent Trustees, which are presently comprised of
the eight Independent Trustees, held three meetings and ten meetings,
respectively. No Independent Trustee attended fewer than 75% of the meetings of
the Board of Trustees, the Audit Committee, and the Committee of the
Independent Trustees held while he served in such positions.
(2) APPROVAL OR DISAPPROVAL OF CURRENTLY
EFFECTIVE INVESTMENT ADVISORY AGREEMENT
The Trust's investments are managed by Dean Witter InterCapital Inc.
(referred to herein as the "Investment Adviser" or "InterCapital"), pursuant to
an Investment Advisory Agreement dated June 30, 1993 (referred to herein as the
"Advisory Agreement") which took effect upon the distribution by Sears
to its shareholders of all the common shares of DWDC (the parent company of
InterCapital) then owned by Sears. The Advisory Agreement was approved by the
Board of Trustees on October 30, 1992 and by the shareholders of the Trust at a
special meeting of shareholders held on February 25, 1993. The Advisory
Agreement was approved for an initial term ending April 30, 1994. The present
Advisory Agreement supersedes an earlier advisory agreement also approved by
shareholders on February 25, 1993 in connection with the assumption by
InterCapital of the investment advisory activities previously performed by
another investment adviser and which took effect on March 1, 1993. The terms of
the Advisory Agreement are described below. The Agreement's continuation until
April 30, 1995 was approved by the Trustees, including a majority of the
Independent Trustees, at a meeting of the Board held on April 8, 1994. In the
event shareholders do not approve continuance of the Advisory Agreement by the
required majority vote at the forthcoming meeting or any adjournment thereof,
the Board of Trustees of the Trust will take such action as it deems to be in
the best interest of the Trust and its shareholders, which may include calling
a special meeting of shareholders to vote on a new investment advisory
agreement.
In considering whether or not to approve the Advisory Agreement, the
Board of Trustees reviewed the terms of the agreement and considered all
materials and information deemed relevant to its determination. Among other
things, the Board considered the nature and scope of services to be rendered,
the quality of the Adviser's services and personnel, and the appropriateness of
the fees that are paid under the Advisory Agreement. Based upon its review, the
Board of Trustees, including all of the Independent Trustees, determined that
the approval of the Advisory Agreement was in the best interests of the Trust
and its shareholders.
The favorable vote of a majority of the outstanding voting securities
of the Trust is required for the approval of the Advisory Agreement. Such a
majority is defined in the Act as the lesser of: (a) 67% or more of the shares
present at the Meeting, if the holders of more than 50% of the outstanding
shares of the Trust are present or represented by proxy, or (b) more than 50%
of the outstanding shares.
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<PAGE>
THE INDEPENDENT TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS
APPROVE THE ADVISORY AGREEMENT.
THE ADVISORY AGREEMENT
The Advisory Agreement provides that the Investment Adviser shall
continously manage the assets of the Trust in a manner consistent with the
Trust's investment objectives. The Investment Adviser 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 Trust in a manner consistent with its investment objectives
and policies. In addition, the Investment Adviser pays the compensation of all
personnel, including officers of the Trust, who are its employees. The Adviser
has authority to place orders for the purchase and sale of portfolio securities
on behalf of the Trust without prior approval of its Trustees. The Trustees
review the investment portfolio at their regular meetings.
In return for its investment services and the expenses which the
Investment Adviser assumes under the Advisory Agreement, the Trust pays the
Investment Adviser compensation which is computed weekly and payable monthly
and which is determined by applying the annual rate of 0.50% to the Trust's
average weekly net assets. Pursuant to the Advisory Agreement, the Trust
accrued to the Investment Adviser total compensation of $926,777 during the
fiscal year ended February 28, 1994. The net assets of the Trust totalled
$181,336,289 at February 28, 1994.
Under the Advisory Agreement, the Trust is obligated to bear all of the
costs and expenses of its operation, except those specifically assumed by the
Investment Adviser, including, without limitation: charges and expenses of any
registrar, custodian or depository appointed by the Trust for the safekeeping
of its cash, portfolio securities or commodities and other property, and any
stock transfer or dividend agent or agents appointed by the Trust; brokers'
commissions chargeable to the Trust in connection with portfolio securities
transactions to which the Trust is a party; all taxes, including securities or
commodities issuance and transfer taxes, and fees payable by the Trust to
Federal, state or other governmental agencies; costs and expenses of engraving
or printing of certificates representing shares of the Trust; all costs and
expenses in connection with registration and maintenance of registration of the
Trust and of its shares with the Securities and Exchange Commission and various
states and other jurisdictions (including filing fees and legal fees and dis
bursements of counsel); the costs and expense of preparation, printing,
including typesetting, and distributing prospectuses for such purposes; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing proxy statements and reports to shareholders; fees and travel expenses
of Trustees or members of any advisory board or committee who are not employees
of the Trust's Administrator or Investment Adviser or any of their corporate
affiliates; all expenses incident to the payment of any dividend or
distribution program; charges and expenses of any outside pricing services;
charges and expenses of legal counsel, including counsel to the Independent
Trustees of the Trust, and independent accountants in connection with any
matter relating to the Trust (not including compensation or expenses of
attorneys employed by the Trust's Administrator or Investment Adviser);
membership dues of industry associations; interest payable on Trust borrowings;
fees and expenses incident to the listing of the Trust's shares on any stock
exchange; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Trust which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims, liabilities, litigation
costs and any indemnification related thereto); and all other charges and costs
of the Trust's operations unless otherwise explicitly provided in the Advisory
Agreement.
The Advisory Agreement also provides that it may be terminated at any
time by the Investment Adviser, the Trus tees of the Trust or by a vote of a
majority of the outstanding voting securities of the Trust, in each instance
without the payment of any penalty, on thirty days notice and will
automatically terminate upon any assignment.
8
<PAGE>
INVESTMENT ADVISER
Dean Witter InterCapital Inc. is the Trust's investment adviser.
InterCapital maintains its offices at Two World Trade Center, New York, New
York 10048. InterCapital, which was incorporated in July, 1992, is a wholly-
owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a balanced financial
services organization providing a broad range of nationally marketed credit and
investment products. In an internal reorganization which took place in January,
1993, InterCapital assumed the investment advisory, management and
administrative activities previously performed by the InterCapital Division of
DWR.
InterCapital's wholly-owned subsidiary, DWSC serves as the
Administrator of the Trust and receives from the Trust compensation which is
computed weekly and payable monthly and which is determined by applying the
annual rate of 0.30% to the Trust's weekly net assets. Prior to December 31,
1993, InterCapital served as Administrator of the Trust and received
compensation at the same annual rate. For the fiscal year ended February 28,
1994, the Trust accrued to InterCapital and to DWDC, pursuant to an
Administration Agreement, total compensation of $555,962.
The Principal Executive Officer and Directors of InterCapital, and
their principal occupations, are:
Philip J. Purcell, Chairman of the Board of Directors and Chief
Executive Officer of DWDC and DWR and Director of InterCapital, DWSC and
Distributors; Richard M. DeMartini, President, Chief Operating Officer of Dean
Witter Capital and Director of DWR, Distributors, InterCapital and DWSC; James
F. Higgins, President, Chief Operating Officer of Dean Witter Financial and
Director of DWR, Distributors, InterCapital and DWSC; Charles A. Fiumefreddo,
Executive Vice President and Director of DWR and Chairman of the Board of
Directors and Chief Executive Officer of InterCapital, DWSC and Distributors;
Christine A. Edwards, Executive Vice President, Secretary, General Counsel and
Director of DWR and Distributors, and Director of InterCapital and DWSC; and
Thomas C. Schneider, Executive Vice President, Chief Financial Officer and
Director of DWR, Distributors, InterCapital and DWSC.
The business address of the foregoing Directors and Executive Officers
is Two World Trade Center, New York, New York 10048.
InterCapital and DWSC, serve in various investment management,
advisory, management and administrative capacities to investment companies and
pension plans and other institutional and individual investors. The Appendix
lists the investment companies for which InterCapital provides investment
management or investment advisory services and sets forth the net assets of and
the fees payable by such companies.
DWDC has its offices at Two World Trade Center, New York, New York
10048. There are various lawsuits pending against DWDC involving material
amounts which, in the opinion of its management, will be resolved with no
material effect on the consolidated financial position of the company.
During the fiscal year ended February 28, 1994, the Trust accrued to
Dean Witter Trust Company, the Trust's Transfer Agent and an affiliate of the
Investment Adviser, transfer agency fees of $11,453.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees, the
Investment Adviser is responsible for decisions to buy and sell securities and
futures contracts for the Trust, the selection of brokers and dealers to effect
the transactions, and the negotiation of brokerage commissions, if any.
Purchases of portfolio securities are made from dealers, underwriters and
issuers; sales, if any, prior to maturity, are made to dealers and issuers. The
Trust does not normally incur brokerage commission expenses on such
transactions. In accordance with its investment policies, the Trust's principal
investments are in debt securities which are gen-
9
<PAGE>
erally traded in the over-the-counter market on a "net" basis with dealers
acting as principal for their own accounts without charging a stated
commission, although the price of the security usually includes a profit to the
dealer. Options and futures transactions will usually be effected through a
broker and a commission will be charged. Securities purchased in underwritten
offerings include a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. The Trust may also purchase certain money
market instruments directly from an issuer, in which case no commissions or
discounts are paid.
The policy of the Trust regarding purchases and sales of securities for
its portfolio is that primary consideration will be given to obtaining the most
favorable price and efficient execution of transactions. In seeking to
implement the Trust's policy, the Investment Adviser will effect transactions
with those dealers who the Investment Adviser believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Adviser believes such price and execution can be obtained from more
than one dealer, it may give consideration to placing portfolio transactions
with those dealers who also furnish research and other services to the Trust or
the Investment Adviser. 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 investments; wire services; and appraisals or evaluations of portfolio
securities. In transactions effected with a dealer, acting as principal, who
furnishes research services to the Trust, the Trust will not purchase
securities at a higher price or sell securities at a lower price than would be
the case if the dealer had not furnished such services.
The information and services received by the Investment Adviser from
brokers and dealers may be of benefit to the Investment Adviser in the
management of accounts of some or all of its other clients and may not in all
cases benefit the Trust directly. While such services are useful and important
in supplementing its own research and facilities, the Investment Adviser
believes the value of such services is not determinable and does not
significantly reduce its expenses. The Trust does not reduce the management fee
it pays to the Investment Adviser by any amount that may be attributable to the
value of such services. During the fiscal year ended on February 28, 1994, the
Trust did not pay any brokerage commissions. During the same period, the
portfolio turnover rate of the Trust was 6%.
Consistent with the policies described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio transactions
for the Trust, the commissions, fees or other remuneration received by DWR must
be reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow DWR to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker
in a commensurate arm's-length transaction. Furthermore, the Trustees of the
Trust, including a majority of the Independent Trustees, have adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to DWR are consistent with the foregoing standard.
(3) RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Trustees have unanimously selected the firm of Price Waterhouse as
the Trust's independent accountants for the fiscal year ending February 28,
1995. Price Waterhouse has been the independent accountants for the Trust since
its inception, and has no direct or indirect financial interest in the Trust.
A representative of Price Waterhouse is expected to be present at the
Annual Meeting of Shareholders and will be available to make a statement, if he
or she so desires, and to respond to appropriate questions of shareholders.
10
<PAGE>
The affirmative vote of the holders of a majority of the shares
represented and entitled to vote at the Annual Meeting is required for
ratification of the selection of Price Waterhouse as the independent
accountants for the Trust. Abstentions and broker "non-votes" will have the
same effect as a vote against the proposal.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS RATIFY THE
SELECTION OF PRICE WATERHOUSE AS THE INDEPENDENT ACCOUNTANTS FOR THE TRUST.
ADDITIONAL INFORMATION
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Meeting, the
persons named as proxies may propose one or more adjournments of the Meeting
for a total of not more than 60 days in the aggregate to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the Trust's shares present in person or by
proxy at the Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of Proposal
Two and will vote against any such adjournment those proxies required to be
voted against that proposal.
SHAREHOLDER PROPOSALS
Proposals of security holders intended to be presented at the next
Annual Meeting of Shareholders must be received no later than February 23, 1995
for inclusion in the proxy statement and proxy for that meeting.
OTHER BUSINESS
The management knows of no other matters which may be presented at the
Meeting. However, if any matters not now known properly come before the
Meeting, it is intended that the persons named in the attached form of proxy,
or their substitutes, will vote such proxy in accordance with their judgment on
such matters.
FINANCIAL STATEMENT OF INVESTMENT ADVISER
The balance sheet of the Investment Adviser, annexed hereto as an
Exhibit, is required by Rule 20a-2 under the Act. THIS IS NOT A FINANCIAL
STATEMENT OF THE TRUST. The Trust's financial statements are set forth in its
Annual Report for the fiscal year ended February 28, 1994, copies of which were
previously sent to Shareholders.
By Order of the Trustees
SHELDON CURTIS
Secretary
11
<PAGE>
APPENDIX
InterCapital serves as investment manager or investment adviser to the
following investment companies, with the net assets shown as of April 14, 1994:
(1) Dean Witter High Yield Securities Inc., with assets of
approximately $551 million, for an investment management fee at an annual rate
of 0.50% on assets up to $500 million, scaled down at various asset levels to
0.30% on assets over $3 billion; (2) Dean Witter Liquid Asset Fund Inc., with
assets of approximately $8.8 billion, for an investment management fee at an
annual rate of 0.50% on assets up to $500 million, scaled down at various asset
levels to 0.248% on assets over $17.5 billion; (3) Dean Witter Tax-Exempt
Securities Trust, with assets of approximately $1.5 billion, for an investment
management fee at an annual rate of 0.50% on assets up to $500 million, scaled
down at various assets levels to 0.325% on assets over $1.25 billion; (4) Dean
Witter Tax-Free Daily Income Trust, with assets of approximately $638 million,
for an investment management fee at an annual rate of 0.50% on assets up to
$500 million, scaled down at various asset levels to 0.25% on assets over $3
billion; (5) Dean Witter American Value Fund, with assets of approximately $.4
billion, for an investment management fee at an annual rate of 0.625% on assets
up to $250 million and 0.50% on assets over $250 million; (6) Dean Witter
Dividend Growth Securities Inc., with assets of approximately $6.5 billion, for
an investment management fee at an annual rate of 0.625% on assets up to $250
million, scaled down at various asset levels to 0.325% on assets over $8
billion; (7) Dean Witter Variable Investment Series, with assets of
approximately $2.5 billion, for an investment management fee at an annual rate
of 1.0% (of which 40% is paid to a Sub-Adviser) of the net assets of each of
the European Growth Portfolio and the Pacific Growth Portfolio, 0.75% of the
net assets of the Global Dividend Growth Portfolio, 0.65% of the net assets of
the Capital Growth Portfolio, 0.65% of the net assets of the Utilities
Portfolio up to $500 million and 0.55% of the net assets of the Portfolio over
$500 million, 0.625% of the net assets of the Dividend Growth Portfolio up to
$500 million and 0.50% of the net assets of the Portfolio over $500 million,
and 0.50% of the net assets of each of the other five Portfolios; (8) Dean
Witter Select Municipal Reinvestment Fund, with assets of approximately $92
million, for an investment management fee at an annual rate of 0.50%; (9)
Active Assets Money Trust, with assets of approximately $4.2 billion, for an
investment management fee at an annual rate of 0.50% on assets up to $500
million, scaled down at various asset levels to 0.25% on assets over $3
billion; (10) Active Assets Tax-Free Trust, with assets of approximately $1.5
billion, for an investment management fee at an annual rate of 0.50% on assets
up to $500 million, scaled down at various asset levels to 0.25% on assets over
$3 billion; (11) Active Assets California Tax-Free Trust, with assets of
approximately $296 million, for an investment management fee of 0.50% on assets
up to $500 million, scaled down at various levels to 0.25% on assets over $3
billion; (12) Active Assets Government Securities Trust, with assets of
approximately $532 million, for an investment management fee at an annual rate
of 0.50% on assets up to $500 million, scaled down at various asset levels to
0.25% on assets over $3 billion; (13) Dean Witter Natural Resource Development
Securities Inc., with assets of approximately $136 million, for an investment
management fee at an annual rate of 0.625% on assets up to $250 million and
0.50% on assets over $250 million; (14) Dean Witter U.S. Government Money
Market Trust, with assets of approximately $80 million, for an investment
management fee at an annual rate of 0.50% on assets up to $500 million, scaled
down at various asset levels to 0.25% on assets over $3 billion; (15) Dean
Witter Developing Growth Securities Trust, with assets of approximately $310
million, for an investment management fee at an annual rate of 0.50% on assets
up to $500 million and 0.475% on assets over $500 million; (16) Dean Witter
U.S. Government Securities Trust, with assets of approximately $11 billion, for
an investment management fee at an annual rate of 0.50% on assets up to $1
billion, scaled down at various asset levels to 0.30% on assets over $12.5
billion; (17) Dean Witter California Tax-Free Income Fund, with assets of
approximately $1.1 billion, for an investment management fee at an annual rate
of 0.55% on assets up to $500 million, scaled down at various asset levels to
0.475% on assets over $1 billion; (18) Dean Witter New York Tax-Free Income
Fund, with assets of approximately $229 million, for an investment management
fee at an annual rate of 0.55% on assets up to $500 million and 0.525% on
assets over $500 million; (19) Dean Witter Convertible Securities Trust, with
assets of approximately $199 million, for an investment management fee at an
annual rate of 0.60% on assets up to $750 million, scaled down
I-1
<PAGE>
at various asset levels to 0.425% on assets over $3 billion; (20) Dean Witter
Federal Securities Trust, with assets of approximately $969 million, for an
investment management fee at an annual rate of 0.55% on assets up to $1
billion, scaled down at various asset levels to 0.35% on assets over $12.5
billion; (21) InterCapital Income Securities Inc., with assets of approximately
$216 million, for an investment management fee at an annual rate of 0.50%; (22)
Dean Witter Value-Added Market Series, with assets of approximately $345
million, for an investment management fee at an annual rate of 0.50% on assets
up to $500 million and 0.45% on assets over $500 million; (23) Dean Witter
Utilities Fund, with assets of approximately $3.4 billion, for an investment
management fee at an annual rate of 0.65% on assets up to $500 million, scaled
down at various asset levels to 0.425% on assets over $5 billion; (24) Dean
Witter California Tax-Free Daily Income Trust, with assets of approximately
$275 million, for an investment management fee at an annual rate of 0.50% on
assets up to $500 million, scaled down at various asset levels to 0.25% on
assets over $3 billion; (25) Dean Witter Managed Assets Trust, with assets of
approximately $267 million, for an investment management fee at an annual rate
of 0.60% on assets up to $500 million and 0.55% on assets over $500 million;
(26) High Income Advantage Trust, with assets of approximately $181 million,
for an investment management fee at an annual rate of 0.75% on assets up to
$250 million, scaled down at various asset levels to 0.30% on assets over $1
billion; (27) High Income Advantage Trust II, with assets of approximately $241
million, for an investment management fee at an annual rate of 0.75% on assets
up to $250 million, scaled down at various asset levels to 0.30% on assets over
$1 billion; (28) High Income Advantage Trust III, with assets of approximately
$93 million, for an investment management fee at an annual rate of 0.75% on
assets up to $250 million, scaled down at various asset levels to 0.30% on
assets over $1 billion; (29) Dean Witter Strategist Fund, with assets of
approximately $802 million, for an investment management fee at an annual rate
of 0.60% on assets up to $500 million, scaled down at various asset levels to
0.50% on assets over $1 billion; (30) Dean Witter Intermediate Income
Securities, with assets of approximately $248 million, for an investment
management fee at an annual rate of 0.60% on assets up to $500 million, scaled
down at various asset levels to 0.30% on assets over $1 billion; (31) Dean
Witter World Wide Income Trust, with assets of approximately $220 million, for
an investment management fee at an annual rate of 0.75% on assets up to $250
million, scaled down at various asset levels to 0.30% on assets over $1
billion; (32) Dean Witter Government Income Trust, with assets of approximately
$512 million, for an investment management fee at an annual rate of 0.60%; (33)
Dean Witter New York Municipal Money Market Trust, with assets of approximately
$43 million, for an investment management fee at an annual rate of 0.50% on
assets up to $500 million, scaled down at various asset levels to 0.25% on
assets over $3 billion; (34) Dean Witter European Growth Fund Inc., with assets
of approximately $636 million, for an investment management fee at an annual
rate of 1.0% on assets up to $500 million and 0.95% on assets over $500 million
(of which 40% is paid to a Sub-Adviser); (35) Dean Witter Capital Growth
Securities, with assets of approximately $527 million, for an investment
management fee at an annual rate of 0.65% on assets up to $500 million, scaled
down at various asset levels to 0.475% on assets over $1.5 billion; (36) Dean
Witter Precious Metals and Minerals Trust, with assets of approximately $70
million, for an investment management fee at an annual rate of 0.80%; (37) Dean
Witter Global Short-Term Income Fund Inc., with assets of approximately $237
million, for an investment management fee at an annual rate of 0.55% on assets
up to $500 million and 0.50% on assets over $500 million; (38) Dean Witter
Pacific Growth Fund Inc., with assets of approximately $1.2 billion, for an
investment management fee at an annual rate of 1.0% on assets up to $1 billion
and 0.95% on assets over $1 billion (of which 40% is paid to a Sub-Adviser);
(39) InterCapital Insured Municipal Bond Trust, with assets of approximately
$118 million, for an investment management fee at an annual rate of 0.35%; (40)
InterCapital Quality Municipal Investment Trust, with assets of approximately
$415 million, for an investment management fee at an annual rate of 0.35%; (41)
InterCapital Insured Municipal Trust, with assets of approximately $534
million, for an investment management fee at an annual rate of 0.35%; (42)
InterCapital Quality Municipal Income Trust, with assets of approximately $842
million, for an investment management fee at an annual rate of 0.35%; (43) Dean
Witter Multi-State Municipal Series Trust, with assets of approximately $462
million, for an investment management fee at an annual rate of 0.35% of the net
assets of each Series; (44) Dean Witter Premier Income Trust, with assets of
approximately $59 million, for an investment management fee at
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<PAGE>
an annual rate of 0.50% (of which 40% is paid to a Sub-Adviser); (45) Dean
Witter Short-Term U.S. Treasury Trust, with assets of approximately $572
million, for an investment management fee at an annual rate of 0.35%; (46) Dean
Witter Diversified Income Trust, with assets of approximately $323 million, for
an investment management fee at an annual rate of 0.40%; (47) Dean Witter
Health Sciences Trust, with assets of approximately $262 million, for an
investment management fee at an annual rate of 1.0%; (48) Dean Witter
Retirement Series, with assets of approximately $29 million, for an investment
management fee at an annual rate of 1.0% of the net assets of the Global Equity
Series, 0.85% of the net assets of each of the American Value Series, the
Capital Growth Series and the Strategist Series, 0.75% of the net assets of
each of the Dividend Growth Series and the Utilities Series, 0.65% of the net
assets of each of the U.S. Government Securities Series and the Intermediate
Income Securities Series, and 0.50% of the net assets of each of the Liquid
Asset Series, the U.S. Government Money Market Series and the Value-Added
Market Series; (49) InterCapital Insured Municipal Income Trust, with assets of
approximately $697 million, for an investment management fee at an annual rate
of 0.35%; (50) InterCapital California Insured Municipal Income Trust, with
assets of approximately $274 million, for an investment management fee at an
annual rate of 0.35%; (51) Dean Witter Global Dividend Growth Securities, with
assets of approximately $1.2 billion, for an investment management fee at an
annual rate of 0.75%; (52) InterCapital Quality Municipal Securities, with
assets of approximately $454 million, for an investment management fee at an
annual rate of 0.35%; (53) InterCapital California Quality Municipal
Securities, with assets of approximately $36 million, for an investment
management fee at an annual rate of 0.35%; (54) InterCapital New York Quality
Municipal Securities, with assets of approximately $107 million, for an
investment management fee at an annual rate of 0.35%; (55) Dean Witter Limited
Term Municipal Trust, with assets of approximately $159 million, for an
investment management fee at an annual rate of 0.50%; (56) Dean Witter Short-
Term Bond Fund, with assets of approximately $43 million, for an investment
management fee at an annual rate of 0.70%; (57) InterCapital Insured Municipal
Securities, with assets of approximately $143 million, for an investment
management fee at an annual rate of 0.35%; (58) InterCapital Insured California
Municipal Securities, with assets of approximately $63 million, for an
investment management fee at an annual rate of 0.35%; (59) Municipal Income
Trust, with assets of approximately $334 million, for an investment advisory
fee at an annual rate of 0.35% on assets up to $250 million and 0.25% on assets
over $250 million; (60) Municipal Income Trust II, with assets of approximately
$291 million, for an investment advisory fee at an annual rate of 0.40% on
assets up to $250 million and 0.30% on assets over $250 million; (61) Municipal
Income Trust III, with assets of approximately $64 million, for an investment
advisory fee at an annual rate of 0.40% on assets up to $250 million and 0.30%
on assets over $250 million; (62) Municipal Income Opportunities Trust, with
assets of approximately $180 million, for an investment advisory fee at an
annual rate of 0.50%; (63) Municipal Income Opportunities Trust II, with assets
of approximately $177 million, for an investment advisory fee at an annual rate
of 0.50%; (64) Municipal Income Opportunities Trust III, with assets of
approximately $107 million, for an investment advisory fee at an annual rate of
0.50%; (65) Municipal Premium Income Trust, with assets of approximately $391
million, for an investment advisory fee at an annual rate of 0.40%; (66) Prime
Income Trust, with assets of approximately $269 million, for an investment
advisory fee at an annual rate of 0.90% on assets up to $500 million and 0.85%
on assets over $500 million; and (67) Dean Witter Global Utilities Fund, a new
investment company, for an investment management fee at an annual rate of
0.65%. InterCapital also serves as Investment Adviser of Dean Witter World Wide
Investment Trust and Dean Witter World Wide Investment Fund, along with Daiwa
International Capital Management Corp. and NatWest Investment Management
Limited. Dean Witter World Wide Investment Trust had assets of approximately
$502 million and InterCapital receives an Investment Adviser's fee at an annual
rate of 0.55% of the Trust's daily net assets up to $500 million and 0.5225% of
the Trust's daily net assets over $500 million. Shares of Dean Witter World
Wide Investment Fund, an investment company organized under the laws of
Luxembourg, are not offered for purchase in the United States or to American
citizens outside of the United States. InterCapital also serves as sub-adviser
to Templeton Global Opportunities Trust, with assets of approximately $441
million, for which it receives a fee of 0.25% per annum.
I-3
<PAGE>
EXHIBIT
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of
Dean Witter InterCapital Inc.:
We have audited the accompanying balance sheet of Dean Witter
InterCapital Inc. (the "Company") (a wholly-owned subsidiary of Dean Witter,
Discover & Co.) as of December 31, 1993. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of Dean Witter InterCapital Inc. at December
31, 1993 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
February 28, 1994
A-1
<PAGE>
<TABLE>
DEAN WITTER INTERCAPITAL, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(IN THOUSANDS)
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents........................................ $ 57,810
Management and administration fees receivable.................... 27,010
Investments...................................................... 7,644
Office facilities, at cost (less accumulated depreciation
and amortization of $5,122)..................................... 3,892
Other assets..................................................... 18,176
--------
$114,532
========
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S EQUITY
<S> <C>
Income taxes payable (Note 3).................................... $ 45,545
Dividends payable................................................ 12,662
Accrued compensation and employee benefits....................... 12,337
Payable to affiliate............................................. 4,000
Other liabilities................................................ 14,988
--------
Total liabilities........................................... 89,532
--------
Stockholder's equity:
Common stock, $.01 par value;
1,000 shares authorized and outstanding......................... --
Additional paid-in capital...................................... 10,000
Retained earnings............................................... 15,000
--------
Total stockholder's equity.................................. 25,000
--------
$114,532
========
See notes to consolidated balance sheet.
</TABLE>
A-2
<PAGE>
DEAN WITTER INTERCAPITAL INC.
NOTES TO CONSOLIDATED BALANCE SHEET
1. INTRODUCTION AND BASIS OF PRESENTATION
The consolidated balance sheet includes the accounts of Dean Witter
InterCapital Inc. and its wholly-owned subsidiaries (the "Company"). The
Company is wholly-owned by Dean Witter, Discover & Co. ("DWDC"), which was
formerly a subsidiary of Sears, Roebuck and Co. ("Sears"). All material
intercompany balances and transactions with its subsidiaries have been
eliminated.
On March 1, 1993, DWDC completed an initial public offering of 33.8
million shares of its common stock at $27 per share. This transaction had the
effect of reducing Sears ownership in DWDC to 80.1 percent. On June 30, 1993,
Sears divested its remaining ownership of DWDC's common stock by means of a
special dividend to Sears shareholders.
On December 22, 1993, Dean Witter Reynolds Inc. ("DWR") transferred the
net assets of the Company in the form of a dividend to DWDC. Prior to December
22, 1993, the Company was wholly-owned by DWR, a wholly-owned subsidiary of
DWDC.
The Company is a registered investment adviser under the Investment
Advisers Act of 1940. The Company sponsors and performs management and
administrative services for mutual funds, principally those sold by DWR ("DWR
funds"). The Company also performs such services for individual, institutional,
trust and estate accounts.
The Company commenced operations in January 1993 and assumed the
advisory business of DWR.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents consist of highly liquid investments not held for
resale with maturities, when purchased, of three months or less.
Fixed assets are generally depreciated utilizing accelerated methods
over useful lives of five to eight years. Leasehold improvements are amortized
over the lesser of the lease term or useful life.
3. INCOME TAXES
The Company provides deferred income taxes which result from recording
certain transactions in different years for tax and financial reporting
purposes.
Payments for income taxes are limited to those which would result from
the Company filing a separate federal income tax return.
The Company has available net operating loss carryforwards at December
31, 1993 in the amount of $112,200,000 which begin to expire in 2002.
4. RELATED PARTY TRANSACTIONS
Certain administrative services are provided by DWR which are
reimbursed by the Company.
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<PAGE>
5. EMPLOYEE BENEFIT PLANS
Substantially all employees are covered by a non-contributory defined
benefit pension plan sponsored by DWR. Pension benefits are based on length of
service and average annual compensation.
Certain employees are covered by postretirement plans sponsored by DWR
that provide medical and life insurance for retirees and eligible dependents.
Eligibility for retiree medical and life benefits is generally based on a
combination of age and years of service at retirement.
The Company reimburses DWR for pension and other postretirement benefit
expenses.
6. LITIGATION
The Company has been named as a defendant in various lawsuits. It is
the opinion of management, after consultation with outside counsel, that the
resolution of such suits will not have a material adverse effect on the
consolidated financial condition of the Company.
7. FINANCIAL INSTRUMENTS FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is required to develop estimates
of fair value.
Substantially all financial instruments on the Company's consolidated
balance sheet are carried at fair value or at amounts which approximate fair
value.
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<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
ANNUAL MEETING OF SHAREHOLDERS--JUNE 15, 1994
PROXY
The undersigned hereby appoints SHELDON CURTIS, EDMUND C. PUCKHABER, ROBERT M.
SCANLAN, or any of them, proxies, each with the power of substitution, to vote
on behalf of the undersigned at the Annual Meeting of Shareholders of Municipal
Income Opportunities Trust II on June 15, 1994 at 9:00 A.M., New York City
time, and at any adjournment thereof, on the proposals set forth in the Notice
of Meeting dated April 21, 1994 as follows:
THIS PROXY IS SOLICITED BY THE TRUSTEES. IF NO SPECIFICATION IS MADE ON THE
REVERSE SIDE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR TRUSTEE AND FOR THE
PROPOSALS.
(Continued, and to be dated and signed on reverse side.)
PLEASE MARK BOXES [ ] OR [X] IN BLUE OR BLACK INK.
1. ELECTION OF TRUSTEES:
[ ] FOR ALL NOMINEES
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
(to vote for all nominees listed below)
Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo, John E. Jeuck,
Philip J. Purcell, John L. Schroeder
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- -------------------------------------------------------------------------------
2. APPROVAL OF INVESTMENT ADVISORY AGREEMENT:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
128
and in their discretion in the transaction of any other business which may
properly come before the meeting.
Please sign personally. If the share is
registered in more than one name, each joint
owner or each fiduciary should sign
personally. Only authorized officers should
sign for corporations.
Dated ....................................
..........................................
Signature
..........................................
Signature
IMPORTANT: PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE.
