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:
[ X ] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.149-11(c) or
Section 240.14a-12
- --------------------------------------------------------------------------------
High Income Advantage Trust III
(Name of Registrant(s) Specified in its Charter)
- --------------------------------------------------------------------------------
Lou Anne McInnis
(Name of Person(s) Filing Proxy Statement)
- --------------------------------------------------------------------------------
Payment of Filing Fee (check the appropriate box):
[ x ] No fee required.
[ ] 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:
- --------------------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated
and state how it was determined.
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Fee previously paid:
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[ ] 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.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
HIGH INCOME ADVANTAGE TRUST III
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 1, 1997
The Annual Meeting of Shareholders (the "Meeting") of HIGH INCOME ADVANTAGE
TRUST III (the "Trust"), an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts, will be held in the Career
Development Room, Sixty-First Floor, 2 World Trade Center, New York, New York
10048, on May 1, 1997, at 10:00 a.m., New York City time, for the following
purposes:
1. To elect four (4) Trustees, two (2) to serve until the 2000 Annual
Meeting, one (1) to serve until the Annual Meeting and one (1) to serve
until the Annual Meeting, or, in each case, until their successors shall
have been elected and qualified;
2. To approve or disapprove a new Investment Management Agreement
between the Trust and Dean Witter InterCapital Inc., a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC") in connection with the
proposed merger of Morgan Stanley Group Inc. with DWDC;
3. To ratify or reject the selection of Price Waterhouse LLP as the
Trust's independent accountants for the fiscal year ending January 31, 1998;
and
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Shareholders of record as of the close of business on March 12, 1997 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 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 2 and will
vote against any such adjournment those proxies required to be voted against
that proposal.
BARRY FINK
SECRETARY
March 17, 1997
New York, New York
IMPORTANT
YOU CAN HELP THE TRUST 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.
HIGH INCOME ADVANTAGE TRUST III
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
This statement is furnished in connection with the solicitation of proxies
by the Board of Trustees (the "Board" or "Trustees") of HIGH INCOME ADVANTAGE
TRUST III (the "Trust"), for use at the Annual Meeting of Shareholders of the
Trust to be held on May 1, 1997 (the "Meeting"), 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 set forth in the attached 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 to the Secretary
of the Trust, execution and delivery of a later dated proxy to the Secretary of
the Trust (if returned and received in time to be voted), or attendance and
voting at the Meeting. Attendance at the Meeting will not in and of itself
revoke a proxy.
Holders of shares of the Trust ("Shareholders") of record as of the close of
business on March 12, 1997, 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
March 12, 1997, there were outstanding shares of beneficial interest
of the Trust, all with $.01 par value. No person was known to own as much as 5%
of the outstanding shares of the Trust 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 first mailing of
this Proxy Statement is expected to be made on or about March 17, 1997.
The cost of soliciting proxies for the Meeting, consisting principally of
printing and mailing expenses, which is not expected to exceed $ , will be
borne by the Trust, except that costs relating to Proposal 2 will be borne by
Dean Witter, Discover & Co. ("DWDC"). The solicitation of proxies will be by
mail, which may be supplemented by solicitation by mail, telephone or otherwise
through Trustees, officers of the Trust or officers and regular employees of
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"), Dean
Witter Trust Company ("DWTC"), Dean Witter Services Company Inc. ("DWSC") and/or
employees of broker-dealers, including Dean Witter Reynolds Inc. ("DWR"),
without special compensation therefor. In addition, the Trust may employ William
F. Doring & Co. as proxy solicitor, the cost of which is not expected to exceed
$ and will be borne by DWDC. With respect to a telephone solicitation by
William F. Doring & Co., additional expenses would include $ per telephone
vote transacted, $ per outbound telephone contact and costs relating to
obtaining Shareholders' telephone numbers.
William F. Doring & Co. and DWTC may call Shareholders to ask if they would
be willing to have their votes recorded by telephone. The telephone voting
procedure is designed to authenticate Shareholders' identities, to allow
Shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that
2
their instructions have been recorded properly. No recommendation will be made
as to how a Shareholder should vote on any proposal other than to refer to the
recommendations of the Board. The Trust has been advised by counsel that these
procedures are consistent with the requirements of applicable law. Shareholders
voting by telephone will be asked for their social security number or other
identifying information and will be given an opportunity to authorize proxies to
vote their shares in accordance with their instructions. To ensure that the
Shareholders' instructions have been recorded correctly they will receive a
confirmation of their instructions in the mail. A special toll-free number will
be available in case the information contained in the confirmation is incorrect.
Although a Shareholder's vote may be taken by telephone, each Shareholder will
receive a copy of this Proxy Statement and may vote by mail using the enclosed
proxy card.
(1) ELECTION OF TRUSTEES
The number of Trustees has been fixed by the Trustees, pursuant to the
Trust's Declaration of Trust, as amended, at ten. There are presently eight
Trustees, two of whom (Michael Bozic and Charles A. Fiumefreddo) are standing
for election at this Meeting to serve until the 2000 Annual Meeting.
Additionally, two nominees to the Trust's Board of Trustees are standing for
election at the Meeting for the first time, one, if elected, to serve until the
Annual Meeting and, one, if elected, to serve until the Annual Meeting,
all in accordance with the Trust's Declaration of Trust, as amended.
Six of the current eight Trustees (Michael Bozic, Edwin J. Garn, John R.
Haire, Manuel H. Johnson, 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 "1940 Act"). Mr. and Mr. who have been nominated for
election at the Meeting, if elected, also will be Independent Trustees. The
other two current Trustees, Charles A. Fiumefreddo and Philip J. Purcell are
"interested persons" (as that term is defined in the 1940 Act) of the Trust and
InterCapital and thus are NOT Independent Trustees. The nominees for election as
Independent Trustees have been proposed by the Independent Trustees now serving.
All of the Trustees currently serving have been elected previously by the
Shareholders.
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: Michael
Bozic, , and Charles A. Fiumefreddo. 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 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 any
of said nominees would be unable or unwilling to accept nomination or election.
The election of each Trustee requires the approval of a majority of the shares
of the Trust represented and entitled to vote at the Meeting.
Pursuant to the provisions of the Declaration of Trust, 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 each of the
three classes will expire each year.
The Board previously determined that any nominee for election as Trustee
shall be standing for election as Trustee and serve as Trustee in one of the
three classes of Trustees as follows: Class I -- Messrs. Bozic, Fiumefreddo and
[ ]; Class II -- Messrs. Johnson, Schroeder and [ ]; and
Class III -- Messrs. Garn, Haire, Nugent and Purcell. Each nominee for Trustee
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, or any adjournment thereof.
In accordance with the above,
3
the Trustees in Class I are standing for election at this Meeting and, if
elected, will serve until the 2000 Annual Meeting or until their successors
shall have been elected and qualified, and, with respect to the new nominees,
one Trustee in Class and one Trustee in Class are standing for election at
the Meeting and, if elected, will serve until the and Annual Meetings,
respectively, or until their successors shall have been elected and qualified.
As a consequence of this method of election, the replacement of a majority of
the Board could be delayed for up to two years.
The following information regarding each of the nominees for election as
Trustee, and each of the members of the Board includes his principal occupations
and employment for at least the last five years, his age, shares of the Trust
owned, if any, as of March 12, 1997 (shown in parentheses), positions with the
Trust, and directorships or trusteeships in companies which file periodic
reports with the Securities and Exchange Commission, including the 84 investment
companies, including the Trust, for which InterCapital serves as investment
manager or investment adviser (referred to herein as the "Dean Witter Funds")
and the 14 investment companies for which InterCapital's wholly-owned
subsidiary, DWSC, serves as manager and TCW Funds Management, Inc. serves as
investment adviser (referred to herein as the "TCW/DW Funds").
The nominees for Trustee to be elected at this Meeting are:
MICHAEL BOZIC, Trustee since April, 1994; age 56; Chairman and Chief
Executive Officer of Levitz Furniture Corporation (since November, 1995);
Director or Trustee of the Dean Witter Funds; formerly President and Chief
Executive Officer of Hills Department Stores (May, 1991-July, 1995); formerly
variously Chairman, Chief Executive Officer, President and Chief Operating
Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck and Co.
("Sears"); Director of Eaglemark Financial Services, Inc., the United Negro
College Fund and Weirton Steel Corporation.
CHARLES A. FIUMEFREDDO, Trustee since July, 1991; age 63; Chairman, Chief
Executive Officer and Director of InterCapital, DWSC and Dean Witter
Distributors Inc. ("Distributors"); Executive Vice President and Director of
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 DWTC; Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and Director of DWDC (until
February, 1993).
[new person]
[new person]
4
The Trustees who are not standing for re-election at this Meeting are:
EDWIN JACOB (JAKE) GARN, Trustee since January, 1993; age 64; 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 Corporation (since January, 1993);
Director of Franklin Quest (time management systems) and John Alden Financial
Corp; member of the board of various civic and charitable organizations.
JOHN R. HAIRE, Trustee since December, 1988; age 72; 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; Chairman of the Audit
Committee and Chairman of the Committee of the Independent Trustees and Trustee
of the TCW/DW Funds; formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive Officer of Anchor Corporation, an
investment adviser (1964-1978); Director of Washington National Corporation
(insurance).
DR. MANUEL H. JOHNSON, Trustee since July, 1991; age 48; Senior Partner,
Johnson Smick International, Inc., a consulting firm; Co-Chairman and a founder
of the Group of Seven Council (G7C), an international economic commission;
Director or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
Director of NASDAQ (since June, 1995); Director of Greenwich Capital Markets,
Inc. (broker-dealer); Trustee of the Financial Accounting Foundation (oversight
organization for the FASB); 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, Trustee since July, 1991; age 60; General Partner,
Triumph Capital, L.P., a private investment partnership; Director or Trustee of
the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly Vice President,
Bankers Trust Company and BT Capital Corporation (1984-1988); director of
various business organizations.
PHILIP J. PURCELL, Trustee since April, 1994; age 53; 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 66; Retired; Director or
Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds; Director of
Citizens Utilities Company; formerly Executive Vice President and Chief
Investment Officer of The Home Insurance Company (August, 1991-September, 1995)
and formerly Chairman and Chief Investment Officer of Axe-Houghton Management
and the Axe-Houghton Funds (April, 1983-June, 1991).
The executive officers of the Trust other than shown above are: Barry Fink,
Vice President, Secretary and General Counsel; Robert M. Scanlan, Vice
President; Joseph J. McAlinden, Vice President; Robert S. Giambrone, Vice
President; Peter M. Avelar, Vice President; and Thomas F. Caloia, Treasurer. In
addition, Jonathan R. Page and James F. Willison are Vice Presidents of the
Trust and Marilyn K. Cranney, Lou Anne D. McInnis, Ruth Rossi, Carsten Otto and
Frank Bruttomesso serve as Assistant Secretaries. Mr. Fink is 42 years old and
is currently First Vice President (since June, 1993), Secretary and General
Counsel (since February, 1997) of InterCapital and DWSC and (since August, 1996)
Assistant Secretary of DWR; he is also First Vice President, Assistant Secretary
and Assistant General Counsel of Distributors (since February, 1997). He was
previously Vice President, Assistant Secretary and Assistant General Counsel of
InterCapital and DWSC. Mr. Scanlan is 60 years old and is currently President
and Chief Operating Officer of InterCapital (since March, 1993) and DWSC; he is
also Executive Vice
5
President of Distributors and Executive Vice President and Director of DWTC. He
was previously Executive Vice President of InterCapital (July, 1992-March, 1993)
and prior thereto was Chairman of Harborview Group Inc. Mr. McAlinden is 54
years old and is currently Executive Vice President of InterCapital (since
April, 1996); he is also Chief Investment Officer of InterCapital and Director
of DWTC (since April, 1996). He was previously Senior Vice President of
InterCapital (June, 1995-April, 1996) and prior thereto was a Managing Director
at Dillon Read. Mr. Giambrone is 42 years old and is currently Senior Vice
President of InterCapital, DWSC, Distributors and DWTC (since August, 1995) and
Director of DWTC (since April, 1996). He was formerly a partner of KPMG Peat
Marwick, LLP. Mr. Avelar is 38 years old and is currently Senior Vice President
of InterCapital. Mr. Caloia is 51 years old and is currently First Vice
President and Assistant Treasurer of InterCapital and DWSC. Mr. Page is 50 years
old and is currently Senior Vice President of InterCapital. Mr. Willison is 53
years old and is currently Senior Vice President of InterCapital. Other than
Messrs. Scanlan, Giambrone and McAlinden, each of the above officers has been an
employee of InterCapital or DWR (formerly the corporate parent of InterCapital)
for over five years.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees currently consists of eight (8) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of this
Proxy Statement, there are a total of 84 Dean Witter Funds, comprised of 127
portfolios. As of February 28, 1997, the Dean Witter Funds had total net assets
of approximately $ billion and more than six million shareholders.
Six Trustees and the two new nominees (80% of the total number) have no
affiliation or business connection with InterCapital or any of its affiliated
persons and do not own any stock or other securities issued by InterCapital's
parent company, DWDC. The other two Trustees (the "Management Trustees") are
affiliated with InterCapital. For a period of at least three years after the
consummation of the merger between Morgan Stanley Group Inc. with DWDC, at least
75% of the members of the Board of Trustees of the Trust will be "interested
persons" (as defined in the 1940 Act) of InterCapital. Four of the six
Independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the current Independent Trustees serve as members of the Audit
Committee and the Committee of the Independent Trustees. Three of them also
serve as members of the Derivatives Committee. The Committees hold some meetings
at InterCapital's offices and some outside InterCapital. Management Trustees or
officers do not attend these meetings unless they are invited for purposes of
furnishing information or making a report. The Funds do not have any nominating
or compensation committees.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
distribution and underwriting agreements; continually
6
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
For the fiscal year ended January 31, 1997, the Board of Trustees of the
Trust held seven meetings, and the Audit Committee, the Committee of the
Independent Trustees and the Derivatives Committee of the Trust held two, ten
and three meetings, respectively. No Trustee attended fewer than 75% of the
meetings of the Board of Trustees, the Audit Committee, the Committee of the
Independent Trustees or the Derivatives Committee held while he served in such
positions.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee of the TCW/DW Funds. The current Committee Chairman has had more than
35 years experience as a senior executive in the investment company industry.
7
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Dean Witter Funds.
SHARE OWNERSHIP BY TRUSTEES
The Trustees have adopted a policy pursuant to which each Trustee and/or his
or her spouse is required to invest at least $25,000 in any of the Funds in the
Dean Witter Funds complex (and, if applicable, in the TCW/DW Funds complex) on
whose boards the Trustee serves. In addition, the policy contemplates that the
Trustees will, over time, increase their aggregate investment in the Funds above
the $25,000 minimum requirement. The Trustees may allocate their investments
among specific Funds in any manner they determine is appropriate based on their
individual investment objectives. As of the date of this Proxy Statement, each
Trustee is in compliance with the policy. Any future Trustee will be given a one
year period following his or her election within which to comply with the
foregoing. As of December 31, 1996, the total value of the investments by the
Trustees and/or their spouses in shares of the Dean Witter Funds (and, if
applicable, the TCW/DW Funds) was approximately $9.8 million.
As of the record date for this Meeting, the aggregate number of shares of
beneficial interest of the Trust owned by the Trust's officers and Trustees as a
group was less than 1 percent of the Trust's shares of beneficial interest
outstanding.
COMPENSATION OF INDEPENDENT TRUSTEES
The Trust pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Trust pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). The Trust also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Trust who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Trust.
8
The following table illustrates the compensation paid to the Trust's
Independent Trustees by the Trust for the fiscal year ended January 31, 1997.
TRUST COMPENSATION
AGGREGATE
NAME OF COMPENSATION
INDEPENDENT TRUSTEE FROM THE TRUST
- -------------------------------------------------------------- ---------------
Michael Bozic................................................. $1,800
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,700
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,800
John L. Schroeder............................................. 1,800
The following table illustrates the compensation paid to the Trust's
Independent Trustees for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
FOR SERVICE AS
CHAIRMAN OF FOR SERVICE
COMMITTEES OF AS
INDEPENDENT CHAIRMAN OF TOTAL CASH
FOR SERVICE DIRECTORS/ COMMITTEES OF COMPENSATION
AS DIRECTOR OR TRUSTEES AND INDEPENDENT FOR SERVICES
TRUSTEE AND FOR SERVICE AS AUDIT TRUSTEES TO
COMMITTEE MEMBER TRUSTEE AND COMMITTEES OF AND AUDIT 82 DEAN
OF 82 DEAN COMMITTEE MEMBER 82 COMMITTEES OF WITTER
NAME OF WITTER OF 14 TCW/DW DEAN WITTER 14 FUNDS AND 14
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
As of the date of this Proxy Statement, 57 of the Dean Witter Funds, not
including the Trust, have adopted a retirement program under which an
Independent Trustee who retires after serving for at least five years (or such
lesser period as may be determined by the Board) as an Independent Director or
Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Trustee referred to as
an "Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Trustee
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to
9
a maximum of 50.0% after ten years of service. The foregoing percentages may be
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are not secured or funded by the Adopting
Funds.
The following table illustrates the retirement benefits accrued to the
Trust's Independent Trustees by the 57 Dean Witter Funds (not including the
Trust) for the year ended December 31, 1996, and the estimated retirement
benefits for the Trust's Independent Trustees, to commence upon their
retirement, from the 57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
RETIREMENT ESTIMATED
BENEFITS ANNUAL
ACCRUED AS BENEFITS
ESTIMATED EXPENSES UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED ------------------------------ -----------------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
NAME OF RETIREMENT ELIGIBLE ADOPTING FROM THE ADOPTING
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION BY THE TRUST FUNDS TRUST FUNDS
- --------------------------- ---------------- ---------------- ------- ------------- ------------- -------------
Michael Bozic.............. 10 50.0% $ 20,147 $ 51,325
Edwin J. Garn.............. 10 50.0 27,772 51,325
John R. Haire.............. 10 50.0 46,952 129,550
Dr. Manuel H. Johnson...... 10 50.0 10,926 51,325
Michael E. Nugent.......... 10 50.0 19,217 51,325
John L. Schroeder.......... 8 41.7 38,700 42,771
- ---------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR ALL OF THE
TRUSTEES NOMINATED FOR ELECTION.
(2) APPROVAL OR DISAPPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT
BACKGROUND
InterCapital currently serves as investment manager of the Trust pursuant to
an investment management agreement entered into by the Trust and InterCapital
(the "Current Agreement"), and in that capacity provides investment advisory and
certain other services to the Trust. InterCapital is a wholly-owned subsidiary
of DWDC. The approval of a new investment management agreement between the Trust
and InterCapital (the "New Agreement") is being sought in connection with the
proposed merger of Morgan Stanley Group Inc. ("Morgan Stanley") and DWDC (the
"Merger").
10
INFORMATION CONCERNING MORGAN STANLEY
Morgan Stanley and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer and investment adviser, and Morgan Stanley
International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange, commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; and global custody, securities clearance
services and securities lending.
THE MERGER
Pursuant to the terms of the Merger, Morgan Stanley will be merged with and
into DWDC with the surviving corporation to be named Morgan Stanley, Dean
Witter, Discover & Co. Following the Merger, InterCapital will be a direct
wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Under the terms of the Merger, each share of Morgan Stanley common stock
will be exchanged for 1.65 shares of DWDC common stock. Following the Merger,
Morgan Stanley's shareholders will own approximately 45% and DWDC's shareholders
will own approximately 55% of the outstanding shares of common stock of Morgan
Stanley, Dean Witter, Discover & Co.
The Merger is expected to be completed in mid-1997.
The Board of Directors of Morgan Stanley, Dean Witter, Discover & Co. will
consist of fourteen members, two of which will be Morgan Stanley insiders and
two of which will be DWDC insiders. The remaining ten directors will be outside
directors, with Morgan Stanley and DWDC each designating five of the ten. The
Chairman and Chief Executive Officer of Morgan Stanley, Dean Witter, Discover &
Co. will be Philip J. Purcell who is the current Chairman and Chief Executive
Officer of DWDC. The President and Chief Operating Officer of Morgan Stanley,
Dean Witter, Discover & Co. will be the current President of Morgan Stanley,
John Mack.
The Merger is subject to certain closing conditions, including certain
regulatory approvals and the approval of shareholders of both DWDC and Morgan
Stanley.
APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT
In order to assure continuity of investment management services to the Trust
after the Merger, the Board met in person for the purpose of considering whether
it would be in the best interests of the Trust and its Shareholders to enter
into a New Agreement between the Trust and the Investment Manager which would
become effective upon the later of Shareholder approval of the New Agreement or
consummation of the Merger. At its meeting, and for the reasons discussed below
(see "The Board's Consideration"), the Board, including each of the Independent
Trustees, unanimously approved the New Agreement and recommended its approval by
Shareholders.
THE TERMS OF THE NEW AGREEMENT, INCLUDING FEES PAYABLE BY THE TRUST
THEREUNDER, ARE IDENTICAL, IN ALL MATERIAL RESPECTS, TO THOSE OF THE CURRENT
AGREEMENT, EXCEPT FOR THE DATES OF EFFECTIVENESS AND EXPIRATION. The terms of
the Current Agreement are fully described under "The Current Investment
Management Agreement" below. If approved by Shareholders, the New Agreement will
continue in effect for an initial term expiring April 30, 1999 and will continue
in effect from year to year thereafter if such continuance is approved by the
Board or by a majority of the outstanding voting securities (as defined below)
of the Trust and, in either event, by the vote cast in person of a majority of
the Independent Trustees. In the event that Shareholders of the Trust do not
11
approve a New Agreement, the Current Agreement will remain in effect and the
Board will take such action, if any, as it deems to be in the best interests of
the Trust and its Shareholders, which may include proposing that Shareholders
approve an agreement in lieu of the New Agreement. In the event that the Merger
is not consummated, the Investment Manager will continue to provide services to
the Trust in accordance with the terms of the Current Agreement for such periods
as may be approved at least annually by the Board, including a majority of the
Independent Trustees of the Trust.
REQUIRED VOTE
The New Agreement cannot be implemented unless approved at the Meeting, or
any adjournment thereof, by a majority of the outstanding voting securities of
the Trust. Such a majority means the affirmative vote of the holders of (a) 67%
or more of the shares of the Trust present, in person or by proxy, at the
Meeting, if the holders of more than 50% of the outstanding shares are so
present, or (b) more than 50% of the outstanding shares of the Trust, whichever
is less.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
NEW INVESTMENT MANAGEMENT AGREEMENT.
THE BOARD'S CONSIDERATION
At a special meeting of the Committee of the Independent Trustees of the
Trust held on February 20, 1997, at which each of the Independent Trustees of
the Trust was present, and a meeting of the full Board on February 21, 1997, the
Trustees evaluated the New Agreement (the form of which is attached hereto as an
Exhibit). Prior to and during the meeting, the Independent Trustees requested
and received all information they deemed necessary to enable them to determine
whether the New Agreement is in the best interests of the Trust and its
Shareholders. They were assisted in their review and deliberations by
independent legal counsel. In determining whether to approve the New Agreement,
the Trustees assessed the implications of the Merger for the Investment Manager
and its ability to continue to provide services to the Trust of the same scope
and quality as are presently provided. In particular, the Trustees inquired as
to the impact of the Merger on the Investment Manager's personnel, management,
facilities and financial capabilities and received assurances in this regard
from senior management of DWDC and the Investment Manager that the Merger would
not adversely affect the Investment Manager's ability to fulfill its obligations
under its agreement with the Trust or to operate its business in a manner
consistent with past practices. In addition, the Trustees considered the effects
of the Investment Manager and Morgan Stanley becoming affiliated persons of each
other. Following the Merger, the 1940 Act will prohibit or impose certain
conditions on the ability of the Trust to engage in certain transactions with
Morgan Stanley and its affiliates. For example, absent exemptive relief, the
Trust will be prohibited from purchasing securities from Morgan Stanley & Co., a
wholly-owned broker-dealer subsidiary of Morgan Stanley, in transactions in
which Morgan Stanley & Co. acts as principal, and the Trust will have to satisfy
certain conditions in order to engage in securities transactions in which Morgan
Stanley & Co. acts as a broker or to purchase securities in an underwritten
offering in which Morgan Stanley & Co. acts as an underwriter. In this
connection, senior management of the Investment Manager represented to the
Trustees that they do not believe these prohibitions or conditions will have a
material effect on the management or performance of the Trust.
The Trustees also considered that the New Agreement is identical, in all
material respects, to the Current Agreement (other than the dates of
effectiveness and termination).
Based upon the Trustees' review and the evaluations of the materials they
received, and after consideration of all factors deemed relevant to them, the
Trustees, including all of the Independent Trustees, determined that the
12
New Agreement is in the best interests of the Trust and its Shareholders.
ACCORDINGLY, THE BOARD, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, APPROVED THE
NEW AGREEMENT AND VOTED TO RECOMMEND APPROVAL BY SHAREHOLDERS OF THE TRUST.
THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
The Current Agreement provides that the Investment Manager shall obtain and
evaluate such information and advice relating to the economy, securities and
commodity markets and securities and commodities as it deems necessary or useful
to discharge its duties under the Current Agreement, and that it shall
continuously supervise the management of the assets of the Trust in a manner
consistent with the investment objectives and policies of the Trust and subject
to such other limitations and directions as the Board may, from time to time,
prescribe.
The Current Agreement provides that the Investment Manager shall
continuously manage the assets of the Trust in a manner consistent with the
Trust's investment objectives. The Investment Manager has authority to place
orders for the purchase and sale of portfolio securities on behalf of the Trust
without prior approval of the Trustees. The Trustees review the investment
portfolio at their regular meetings. In addition, the Investment Manager pays
the compensation of the officers of the Trust and provides the Trust with office
space and equipment and such clerical help and bookkeeping services and
telephone service, heat, light, power and other utilities. The Investment
Manager also pays for the services of personnel in connection with the pricing
of the Trust's shares and the preparation of prospectuses, proxy statements and
reports required to be filed with the 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 return for its investment services and the expenses which the
Investment Manager assumes under the Current Agreement, the Trust pays the
Investment Manager compensation which is computed weekly and payable monthly and
which is determined by applying the following annual rates to the Trust's weekly
net assets: 0.75% of the portion of the average weekly net assets not exceeding
$250 million; 0.60% of the portion of average weekly net assets exceeding $250
million and not exceeding $500 million; 0.50% of the portion of average weekly
net assets exceeding $500 million and not exceeding $750 million; 0.40% of the
portion of average weekly net assets exceeding $750 million and not exceeding $1
billion; and 0.30% of the portion of average weekly net assets exceeding $1
billion. This fee is higher than that paid by most other investment companies.
Pursuant to the Current Agreement, the Trust accrued to the Investment Manager
total compensation of $610,239 during the fiscal year ended January 31, 1997.
The net assets of the Trust totalled $78,706,900 at January 31, 1997.
Under the Current Agreement, the Trust is obligated to bear all of the costs
and expenses of its operation, except those specifically assumed by the
Investment Manager, 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 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
disbursements of counsel) and the costs and expense of preparing, 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 Investment Manager or any corporate affiliate of the Investment Manager;
all expenses incident
13
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 Investment Manager); 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 Current Agreement.
The Current Agreement was initially approved by the Board on October 30,
1992, and by the Shareholders at a Special Meeting of Shareholders held on
January 13, 1993. The Current Agreement was last approved by the Shareholders as
a routine matter at their Annual Meeting held on June 27, 1996.
The Current Agreement had an initial term ending April 30, 1994 and provides
that, after the initial period of effectiveness, it will continue in effect from
year to year thereafter provided such continuance is approved at least annually
by vote of a majority, as defined in the Act, of the outstanding voting
securities of the Trust or by the Trustees of the Trust, and, in either event,
by the vote cast in person by a majority of the Trustees who are not parties to
the Current Agreement or "interested persons" of any such party (as defined in
the 1940 Act) at a meeting called for the purpose of voting on such approval.
The Current Agreement's most recent continuation until April 30, 1997 was
approved by the Trustees, including a majority of the Independent Trustees at a
Meeting of the Trustees held on April 17, 1996, called for the purpose of
approving the Current Agreement.
The Current Agreement also provides that it may be terminated at a any time
by the Investment Manager, the Trustees 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.
The administrative services called for under the Current Agreement are
performed by DWSC, a wholly-owned subsidiary of InterCapital, pursuant to a
Services Agreement between InterCapital and DWSC.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. is the Trust's investment manager.
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 DWDC, a balanced financial services organization providing a broad
range of nationally marketed credit and investment products.
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 and Chief Operating Officer of Dean Witter
Capital, Executive Vice President of DWDC and Director of DWR, Distributors,
InterCapital, DWSC and DWTC; James F. Higgins, President and Chief Operating
Officer of Dean Witter Financial, Executive Vice President of DWDC and Director
of DWR, Distributors, InterCapital, DWSC and DWTC; Charles A. Fiumefreddo,
Executive Vice President and Director of DWR, Chairman of the Board of
Directors, Chief Executive Officer and Director of InterCapital, DWSC and
Distributors and Chairman of the Board of Directors and Director of DWTC;
Christine A. Edwards, Executive Vice President, Secretary and General Counsel of
DWDC, Executive Vice President, Secretary, General Counsel and Director of DWR,
Executive Vice President,
14
Secretary, Chief Legal Officer and Director of Distributors and Director of
InterCapital and DWSC; and Thomas C. Schneider, Executive Vice President and
Chief Financial Officer of DWDC and Executive Vice President, Chief Financial
Officer and Director of DWR, Distributors, InterCapital and DWSC.
The business address of the foregoing Directors and Executive Officer is Two
World Trade Center, New York, New York 10048. DWDC has its offices at Two World
Trade Center, New York, New York 10048.
InterCapital and its wholly-owned subsidiary, 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 which have
similar investment objectives to that of the Trust, and sets forth the fees
payable by such companies, including the Trust, and their net assets as of March
12, 1997.
During the fiscal year ended January 31, 1997, the Trust accrued to DWTC,
the Trust's Transfer Agent and an affiliate of the Investment Manager, transfer
agency fees of $43,845.
AFFILIATED BROKER
Because DWR and InterCapital are under the common control of DWDC, DWR is an
affiliated broker of InterCapital. For the fiscal year ended January 31, 1997,
the Trust paid no brokerage commissions to DWR.
(3) RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Trustees have unanimously selected the firm of Price Waterhouse LLP as
the Trust's independent accountants for the fiscal year ending January 31, 1998.
Price Waterhouse LLP 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 LLP is expected to be present at the
Meeting and will be available to make a statement and to respond to appropriate
questions of Shareholders.
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 LLP as the independent accountants for the Trust.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS RATIFY THE
SELECTION OF PRICE WATERHOUSE LLP 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 2 and will
vote against any such adjournment those proxies required to be voted against
that proposal.
Abstentions and, if applicable, broker "non-votes" will not count as votes
in favor of any of the proposals, and broker "non-votes" will not be deemed to
be present at the Meeting for purposes of determining whether a
15
particular proposal to be voted upon has been approved. Broker "non-votes" are
shares held in street name for which the broker indicates that instructions have
not been received from the beneficial owners or other persons entitled to vote
and for which the broker does not have discretionary voting authority.
SHAREHOLDERS PROPOSALS
Proposals of security holders intended to be presented at the next Annual
Meeting of Shareholders must be received no later than [December , 1997] for
inclusion in the proxy statement for that meeting. The mere submission of a
proposal does not guarantee its inclusion in the proxy materials or its
presentation at the meeting. Certain rules under the federal securities laws
must be met.
REPORTS TO SHAREHOLDERS
THE TRUST'S ANNUAL REPORT, FOR THE FISCAL YEAR ENDED JANUARY 31, 1996, AND
ITS MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, HAVE BEEN
PREVIOUSLY SENT TO SHAREHOLDERS AND ARE AVAILABLE WITHOUT CHARGE UPON REQUEST
FROM ADRIENNE RYAN-PINTO AT DEAN WITTER TRUST COMPANY, HARBORSIDE FINANCIAL
CENTER, PLAZA TWO, JERSEY CITY, NEW JERSEY 07311 (TELEPHONE 1-800-869-NEWS)
(TOLL-FREE).
INTEREST OF CERTAIN PERSONS
DWDC, InterCapital, DWR, DWSC and certain of their respective Directors,
Officers, and employees, including persons who are Trustees or Officers of the
Trust, may be deemed to have an interest in certain of the proposals described
in this Proxy Statement to the extent that certain of such companies and their
affiliates have contractual and other arrangements, described elsewhere in this
Proxy Statement, pursuant to which they are paid fees by the Trust, and certain
of those individuals are compensated for performing services relating to the
Trust and may also own shares of DWDC. Such companies and persons may thus be
deemed to derive benefits from the approvals by Shareholders of such proposals.
OTHER BUSINESS
The management of the Trust 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 the intention of the persons named in the enclosed form of proxy,
or their substitutes, to vote all shares that they are entitled to vote on any
such matter, utilizing such proxy in accordance with their best judgment on such
matters.
By Order of the Board of Trustees
BARRY FINK
SECRETARY
16
APPENDIX
InterCapital serves as investment manager to the Trust and the other
investment companies listed below which have similar investment objectives to
those of the Trust. Set forth below is a chart showing the net assets of each
such investment company as of March 12, 1997 and the investment management fees
rate(s) applicable to such investment company.
NET ASSETS CURRENT INVESTMENT
AS OF 03/12/97 MANAGEMENT FEE RATE(S)
-------------- -----------------------------
1. DEAN WITTER HIGH YIELD SECURITIES INC.*.............................. $ 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 U.S. GOVERNMENT SECURITIES TRUST*........................ $ 0.50% on assets up to $1
billion, scaled down at
various asset levels to 0.30%
on assets over $12.5 billion
3. DEAN WITTER CONVERTIBLE SECURITIES TRUST*............................ $ 0.60% on assets up to $750
million, scaled down at
various asset levels to
0.425% on assets over $3
billion
4. DEAN WITTER FEDERAL SECURITIES TRUST*................................ $ 0.55% on assets up to $1
billion, scaled down at
various asset levels to 0.35%
on assets over $12.5 billion
5. INTERCAPITAL INCOME SECURITIES INC.**................................ $ 0.50%
6. HIGH INCOME ADVANTAGE TRUST**........................................ $ 0.75% on assets up to $250
million, scaled down at
various asset levels to 0.30%
on assets over $1 billion
7. HIGH INCOME ADVANTAGE TRUST II**..................................... $ 0.75% on assets up to $250
million, scaled down at
various asset levels to 0.30%
on assets over $1 billion
8. HIGH INCOME ADVANTAGE TRUST III**.................................... $ 0.75% on assets up to $250
million, scaled down at
various asset levels to 0.30%
on assets over $1 billion
9. DEAN WITTER INTERMEDIATE INCOME SECURITIES*.......................... $ 0.60% on assets up to $500
million, scaled down at
various asset levels to 0.30%
on assets over $1 billion
10. DEAN WITTER WORLD WIDE INCOME TRUST*................................. $ 0.75% on assets up to $250
million, scaled down at
various asset levels to 0.30%
on assets over $1 billion
11. DEAN WITTER GOVERNMENT INCOME TRUST**................................ $ 0.60%
12. DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.*...................... $ 0.55% on assets up to $500
million and 0.50% on assets
over $500 million
13. DEAN WITTER PREMIER INCOME TRUST*.................................... $ 0.50% (of which 40% is paid
to a Sub-Adviser)
14. DEAN WITTER SHORT-TERM U.S. TREASURY TRUST*.......................... $ 0.35%
15. DEAN WITTER DIVERSIFIED INCOME TRUST*................................ $ 0.40%
A-1
NET ASSETS CURRENT INVESTMENT
AS OF 03/12/97 MANAGEMENT FEE RATE(S)
-------------- -----------------------------
16. DEAN WITTER SHORT-TERM BOND FUND*.................................... $ 0.70%(1)
17. DEAN WITTER HIGH INCOME SECURITIES*.................................. $ 0.50% on assets up to $500
million and 0.425% on assets
over $500 million.
18. PRIME INCOME TRUST**................................................. $ 0.90% on assets up to $500
million and 0.85% on assets
over $500 million
19. DEAN WITTER BALANCED INCOME FUND*.................................... $ 0.60%
20. DEAN WITTER RETIREMENT SERIES:*
(a) U.S. GOVERNMENT SECURITIES SERIES................................ $ 0.65% (2)
(b) INTERMEDIATE INCOME SECURITIES SERIES............................ $ 0.65% (2)
21. DEAN WITTER VARIABLE INVESTMENT SERIES:***
(a) QUALITY INCOME PLUS PORTFOLIO.................................... $ 0.50% on assets up to $500
million and 0.45% on assets
over $500 million
(b) HIGH YIELD PORTFOLIO............................................. $ 0.50%
22. DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:***
(a) DIVERSIFIED INCOME PORTFOLIO..................................... $ 0.40%
(b)NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO.................... $ 0.65% (of which 40% is paid
to a Sub-Adviser)
23. DEAN WITTER INTERMEDIATE TERM U.S. TREASURY TRUST*................... $ 0.35%(3)
- ---------------
* Open-end investment company.
** Closed-end investment company.
*** Open-end investment company offered only to life insurance companies in
connection with variable annuity and/or variable life insurance contracts.
(1) InterCapital has undertaken, from January 1, 1997 through April 30, 1997, to
assume all operating expenses of Dean Witter Short-Term Bond Fund (except
for any brokerage fees) and to waive the compensation provided for in its
investment management agreement with that company.
(2) InterCapital has undertaken, until July 31, 1997, to continue to assume all
operating expenses of the Series of Dean Witter Retirement Series (except
for brokerage fees and a portion of organizational expenses) and to waive
the compensation provided for each Series in its investment management
agreement with that company in respect of each Series to the extent that
such expenses and compensation on an annualized basis exceed 1.0% of the
average daily net assets of the pertinent Series.
(3) InterCapital has undertaken to assume all operating expenses of Dean Witter
Intermediate Term U.S. Treasury Trust (except for any 12b-1 fees and
brokerage expenses) and to waive the compensation provided for in its
investment management agreement with that company until such time as that
company has $50 million of net assets or until March 31, 1997, whichever
occurs first.
A-2
EXHIBIT
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the day of , 1997 by and between High
Income Advantage Trust III, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (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 a closed-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 hereafter 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 Trustees, 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 and commodities markets and securities and commodities 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 and commodities 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 agencies). 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.
EX-1
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.
The4.Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the officers
and employees, if any, of the Fund, and provide such office space, facilities
and equipment and such clerical help and bookkeeping services as the Fund shall
reasonably require in the conduct of its business. The Investment Manager shall
also bear the cost of telephone service, heat, light, power and other utilities
provided to the Fund.
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 or commodities 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 transactions to
which the Fund is a party; all taxes, including securities or commodities
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
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 and the costs and expenses 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 Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to the payment of any dividend or distribution program;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the Trustees
of the Fund who are not interested persons (as defined in the Act) of the Fund
or the Investment Manager, and of independent accountants, in connection with
any matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; fees and expenses incident to the listing
of the Fund's shares on any stock exchange; postage; insurance premiums on
property or personnel (including officers and Trustees) 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.
For6.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 average weekly net assets: 0.75% of the portion of
the average weekly net assets not exceeding $250 million; 0.60% of the portion
of average weekly net assets exceeding $250 million and not exceeding $500
million; 0.50% of the portion of average weekly net assets exceeding $500
million and not exceeding $750 million; 0.40% of the portion of average weekly
net assets exceeding $750 million and not exceeding $1 billion; and 0.30% of the
portion of average weekly net assets exceeding $1 billion. Except as hereinafter
set forth, compensation under this Agreement shall be calculated and accrued
weekly and paid monthly by applying the annual rates to the average weekly net
assets of the Fund determined as of the close of the last business day of each
week. At the request of the Investment Manager, compensation hereunder shall be
calculated and accrued at more frequent intervals in a manner consistent with
the calculation of fees on a weekly
EX-2
basis. 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.
The7.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.
8.
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 Trustee,
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.
9.
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 Trustees of the
Fund; provided that in either event such continuance is also approved annually
by the vote of a majority of the Trustees 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
Trustees 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 (to the extent required by the Act and the rules
thereunder) unless such automatic terminations 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.
10.
This Agreement may be amended by the parties without the vote or consent
of the 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.
11.
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
12.
The Declaration of Trust establishing High Income Advantage Trust III,
dated November 23, 1988, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name High Income Advantage
Trust III refers to the Trustees under the Declaration collectively as Trustees,
but not as individuals or personally; and no Trustee, shareholder, officer,
employee or agent of High Income Advantage Trust III shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said High Income Advantage Trust III, but the Trust Estate only shall
be liable.
EX-3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
HIGH INCOME ADVANTAGE TRUST III
By
................................................
Attest:
...............................................
DEAN WITTER INTERCAPITAL INC.
By
................................................
Attest:
...............................................
EX-4
HIGH INCOME ADVANTAGE TRUST III
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Robert M. Scanlan, Barry Fink, and Joseph J.
McAlinden, 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 High
Income Advantage Trust III on May 1, 1997, at 10:00 a.m., New York City time,
and at any adjournment thereof, on the proposals set forth in the Notice of
Meeting dated _________ , 1997 as follows:
(CONTINUED ON REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
``FOR'' THE TRUSTEES AND THE PROPOSALS SET FORTH ON THE REVERSE HEREOF AND AS
RECOMMENDED BY THE BOARD OF TRUSTEES.
IMPORTANT --- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
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/X/ PLEASE MARK VOTES AS IN THE EXAMPLE USING BLACK OR BLUE INK
FOR ALL
FOR WITHHOLD EXCEPT
1. Election of four (4) Trustees: / / / / / /
Michael Bozic, Charles A. Fiumefreddo
If you wish to withhold authority for any particular nominee, mark the
``For All Except'' Box and strike a line through the nominee's name.
FOR AGAINST ABSTAIN
2. Approval of New Investment Management / / / / / /
Agreement with Dean Witter InterCapital
Inc. in connection with proposed merger.
FOR AGAINST ABSTAIN
3. Ratification of appointment of Price / / / / / /
Waterhouse LLP as independent accoun-
tants.
Please make sure to sign and date
this Proxy using black or blue ink. Date________________
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
Shareholder sign in the box above Co-Owner (if any) sign in the box above
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION
HIGH INCOME ADVANTAGE TRUST III
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SEND IN YOUR PROXY............TODAY!
YOU ARE URGED TO DATE AND SIGN THE ATTACHED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. THIS WILL HELP SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO
SHAREHOLDERS WHO HAVE NOT RESPONDED.
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