<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Co-Registrants [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] 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 Rule 14a-11(c) or Rule 14a-12
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST (811-3950)
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST (811-4386)
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND (811-4983)
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST (811-4805)
VAN KAMPEN AMERICAN CAPITAL TRUST (811-4629)
VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND (811-4718)
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND (811-7571)
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND (811-1570)
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND (811-2423)
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND (811-2424)
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND (811-630)
VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND (811-919)
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND (811-4003)
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND (811-6127)
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND (811-1228)
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST (811-4424)
VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND (811-4491)
VAN KAMPEN AMERICAN CAPITAL PACE FUND (811-1792)
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND (811-8480)
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND (811-2482)
VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND (811-6421)
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME (811-6724)
(Names of Co-Registrants as Specified in Their Charters)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed per Exchange Act Rules 14a-6(i)(1) and 0-11.
[ ] Fee paid previously with preliminary materials.
<PAGE> 2
- April 1997 -
IMPORTANT NOTICE
TO VAN KAMPEN AMERICAN CAPITAL
MUTUAL FUND SHAREHOLDERS
QUESTIONS
& ANSWERS
- --------------------------------------------------------------------------------
Although we recommend that you read the complete Proxy Statement, for your
convenience, we have provided a brief overview of the issues to be voted on.
- --------------------------------------------------------------------------------
Q WHY AM I RECEIVING THIS PROXY STATEMENT?
A Morgan Stanley Group, Inc., the indirect corporate parent of your Fund's
investment adviser, has entered into an agreement to merge with and in to Dean
Witter, Discover & Co. Your Fund is seeking shareholder approval of a new
investment advisory agreement, to take effect following the merger. Certain
other proposals also are included in the Proxy Statement. Please refer to the
proxy statement for a detailed explanation of the proposed items.
Q HOW WILL THIS AFFECT MY ACCOUNT?
A You can expect the same level of management expertise and high-quality
shareholder service you've grown accustomed to. The new investment advisory
agreement between your Fund and its investment adviser will be substantially
similar to the Fund's current investment advisory agreement, except for certain
provisions added at the request of your trustees.
Q WILL MY VOTE MAKE A DIFFERENCE?
A Your vote is needed to ensure that the proposals can be acted upon. Your
immediate response on the enclosed proxy card(s) will help save on the costs of
any further solicitations for a shareholder vote. We encourage all
shareholders to participate in the governance of their Fund(s).
Q HOW DO THE TRUSTEES OF MY FUND SUGGEST THAT I VOTE?
A After careful consideration, the trustees of your Fund unanimously recommend
that you vote "FOR" each of the items proposed on the enclosed proxy card(s).
Q WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDERS MEETING?
A Morgan Stanley Group, Inc. or its affiliates will pay for those expenses
relating to the shareholder meeting.
Q WHO DO I CALL IF I HAVE QUESTIONS?
A We will be happy to answer your questions about the proxy solicitation.
Please call us at (1-800-421-5666 (TDD users call 1-800-772-8889) between
7:00 a.m. and 7:00 p.m. Central time, Monday through Friday.
Q Where do I mail my proxy card(s).
A You may use the enclosed postage paid envelope or mail your proxy card(s) to:
Proxy Tabulator
P.O. Box 9111
Hingham, MA 02043
<PAGE> 3
ABOUT THE PROXY CARD
Please vote on each issue using blue or black ink to mark an X in one of the
boxes provided on the proxy card.
APPROVAL OF NEW ADVISORY AGREEMENT--mark "For," "Against" or "Abstain"
ELECTION OF TRUSTEES (IF APPLICABLE)--mark "For," "Withhold" or "For All Except"
To withhold authority for any individual nominee, strike a line through the
nominee's name and mark the "For All Except" box.
RATIFICATION OF INDEPENDENT ACCOUNTANTS--mark "For," "Against" or "Abstain"
Sign, date and return the proxy card in the enclosed postage-paid envelope.
All registered owners of an account, as shown in the address, must sign the
card. When signing as attorney, trustee, executor, administrator, custodian,
guardian or corporate officer, please indicate your full title.
<TABLE>
<S><C>
SAMPLE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE VAN KAMPEN AMERICAN CAPITAL XXXXX TRUST
JOINT SPECIAL MEETING OF SHAREHOLDERS
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. The proposal to approve a new / / / / / / 3A. As to the proposal to ratify the / / / / / /
investment advisory agreement. selection of XXXXXXXXX to act as
FOR ALL the independent auditors of the
FOR WITHHOLD EXCEPT Fund for the fiscal year ending
/ / / / / / XXXX, 1997.
2. Authority to vote for the election
as Trustees the nominees
named below:
3B. As to the proposal to ratify the
XXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX selection of XXXXXXXXX to act as
the independent auditors of the
To withhold authority to vote for any individual nominee, Fund for the fiscal year ending
strike a line through the nominee's name and mark the XXXX, 1997.
"For All Except" box. Your shares will be voted for the
remaining nominee(s)
VAN KAMPEN AMERICAN CAPITAL
Please be sure to sign and date this Proxy. Date Mark box at right if comments or address change
have been noted on the reverse side of this card.
Shareholder sign here Co-owner sign here
RECORD DATE SHARES:
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
</TABLE>
<PAGE> 4
April 21, 1997
Dear Van Kampen American Capital Fund Shareholder:
The enclosed proxy statement relates to a joint meeting of the shareholders of
a number of Van Kampen American Capital funds. We are pleased to announce that
Morgan Stanley Group Inc., the indirect corporate parent of the investment
adviser of your Fund, has entered into a merger agreement with Dean Witter,
Discover & Co. Under the terms of the merger agreement, your Fund's investment
adviser will become an indirect subsidiary of the merged company, to be named
Morgan Stanley, Dean Witter, Discover & Co. Your Fund's investment adviser will
continue to provide the Fund with investment advisory and management services
following the merger.
The primary purpose of the shareholder meeting is to permit the shareholders
of each Fund to consider a new investment advisory agreement to take effect
following the merger. The new investment advisory agreement between your Fund
and its investment adviser will be substantially similar to the Fund's current
investment advisory agreement, except for certain provisions added at the
request of your trustees. The attached proxy statement seeks shareholder
approval on this and other items.
Your vote is important and your participation
in the governance of your Fund(s) does make a difference.
The proposals have been unanimously approved by the Board of Trustees of each
Fund, who recommend you vote "FOR" each of these proposals. YOUR IMMEDIATE
RESPONSE WILL HELP SAVE ON THE COSTS OF ADDITIONAL SOLICITATIONS. EACH FUND
VOTES SEPARATELY, SO PLEASE SIGN AND RETURN ALL OF YOUR FUND PROXY FORMS. We
look forward to your participation, and we thank you for your continued
confidence in Van Kampen American Capital.
PLEASE SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Sincerely,
Dennis J. McDonnell
President
<PAGE> 5
Dear Van Kampen American Capital Fund Shareholder:
Each proxy card enclosed in this envelope represents your voting privilege in
a separate Van Kampen American Capital Fund. We have grouped your proxy cards
together for your convenience and to reduce postage expenses.
The meeting date for your Van Kampen American Capital Fund is May 28, 1997.
Please sign all proxy cards and return them in the postage-paid envelope
included with this material.
We appreciate the prompt return of your proxy cards.
<PAGE> 6
VAN KAMPEN AMERICAN CAPITAL FUNDS
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 421-5666
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1997
Notice is hereby given to the holders of shares of beneficial interest, par
value $0.01 per share (collectively, the "Shares"), of each of the Van Kampen
American Capital Funds listed on Annex A (the "Funds") to the attached Proxy
Statement that a Joint Special Meeting of the Shareholders of the Funds (the
"Meeting") will be held at the offices of Van Kampen American Capital, Inc., One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, on Wednesday, May 28, 1997, at
10:00 a.m., for the following purposes:
1. For each Fund, to approve or disapprove a new investment
advisory agreement;
2. For each Fund, to elect [ ] trustees to serve until
their respective successors are duly elected and qualified;
3. Independent Public Accountants
3A. For each VK Fund (as defined in Annex A), to ratify or
reject the selection of KPMG Peat Marwick LLP as independent
public accountants for its current fiscal year;
3B. For each AC Fund (as defined in Annex A), to ratify or
reject the selection of Price Waterhouse LLP as independent
public accountants for its current fiscal year; and
4. To transact such other business as may properly come before
the Meeting.
Holders of record of the Shares of each Fund at the close of business on April
14, 1997 are entitled to notice of, and to vote at, the Meeting and any
adjournment thereof.
By order of the Board of Trustees
RONALD A. NYBERG,
Vice President and Secretary
April 21, 1997
<PAGE> 7
EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF
ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800) 421-5666 OR BY WRITING TO THE
RESPECTIVE FUND AT ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.
SHAREHOLDERS OF THE FUNDS ARE INVITED TO ATTEND THE MEETING IN PERSON. IF YOU
DO NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON
THE ENCLOSED PROXY CARD WITH RESPECT TO EACH FUND IN WHICH YOU WERE A
SHAREHOLDER AS OF THE RECORD DATE, DATE AND SIGN SUCH PROXY CARD(S), AND RETURN
IT (THEM) IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT
YOU MAIL YOUR PROXY PROMPTLY.
THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS THAT YOU CAST YOUR VOTE:
- FOR approval of each new investment advisory agreement;
- FOR each of the nominees for the Board of Trustees listed in the Proxy
Statement; and
- FOR ratification of the independent public accountants for the current
fiscal year of each Fund.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
<PAGE> 8
PROXY STATEMENT
VAN KAMPEN AMERICAN CAPITAL FUNDS
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 421-5666
JOINT SPECIAL MEETING OF SHAREHOLDERS
MAY 28, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Boards of Trustees (the "Trustees" or "Board of Trustees") of each of the Van
Kampen American Capital Funds listed on Annex A to this Proxy Statement (the
"Funds") of proxies to be voted at a Joint Special Meeting of Shareholders of
the Funds, and all adjournments thereof (the "Meeting"), to be held at the
offices of Van Kampen American Capital, Inc., One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, on Wednesday, May 28, 1997, at 10:00 a.m. The
approximate mailing date of this Proxy Statement and accompanying form of proxy
is April 21, 1997.
The primary purpose of the Meeting is to permit each Fund's shareholders to
consider a New Advisory Agreement (defined below) to take effect following the
consummation of the transactions contemplated by an Agreement and Plan of
Merger, dated as of February 4, 1997 (the "Merger Agreement"), between Dean
Witter, Discover & Co. ("Dean Witter Discover") and Morgan Stanley Group Inc.
("Morgan Stanley"), the indirect parent corporation of each Fund's investment
adviser. Pursuant to the Merger Agreement, each Fund's investment adviser will
become an indirect subsidiary of the merged company, which will be called Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD").
Participating in the Meeting are holders of common shares of beneficial
interest, par value $0.01 per share (collectively, the "Shares"), of each of the
Funds. The Meeting is scheduled as a joint meeting of the shareholders of the
Funds because the shareholders of the Funds are expected to consider and vote on
similar matters. The Board of Trustees has determined that the use of a joint
Proxy Statement for the Meeting is in the best interest of the shareholders of
the Funds. In the event that a shareholder of any Fund present at the Meeting
objects to the holding of a joint meeting and moves for an adjournment of the
meeting of such Fund to a time immediately after the Meeting so that such Fund's
meeting may be held separately, the persons named as proxies will vote in favor
of the adjournment.
Annex A lists the abbreviated names by which the Funds sometimes are referred
to in this Proxy Statement and groups the Funds into "AC Funds" and "VK Funds".
Please refer to Annex A for any questions you may have regarding whether your
Fund is participating at the Meeting, defined terms relating to the
<PAGE> 9
Funds and abbreviated Fund names. Other Van Kampen American Capital investment
companies not listed on Annex A will vote at separate shareholder meetings on
proposals substantially similar to the proposals in this Proxy Statement. They
will hold separate shareholder meetings because they are supervised by boards of
trustees that are not identical to the Board of Trustees of the Funds or their
shareholders will consider proposals which do not affect the Funds. If you are a
shareholder of Van Kampen American Capital investment companies not listed on
Annex A, you will receive one or more additional proxy statements relating to
such other shareholder meetings.
The following table summarizes each proposal to be presented at the Meeting
and the Funds solicited with respect to such proposal:
<TABLE>
<CAPTION>
PROPOSAL AFFECTED FUNDS
-------- --------------
<S> <C> <C>
1. Approval of New Advisory Agreement All Funds
2. Election of Trustees All Funds
3. Ratification of Independent Public
Accountants
3A. Ratification of KPMG Peat Marwick LLP VK Funds
3B. Ratification of Price Waterhouse LLP AC Funds
</TABLE>
EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF
ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800) 421-5666 OR BY WRITING TO THE
RESPECTIVE FUND AT ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.
VOTING
The Board of Trustees has fixed the close of business on April 14, 1997, as
the record date (the "Record Date") for the determination of holders of Shares
of each Fund entitled to vote at the Meeting. Shareholders of a Fund on the
Record Date will be entitled to one vote per Share with respect to each proposal
submitted to the shareholders of the Fund, with no Share having cumulative
voting rights.
The voting requirement for passage of a particular proposal depends on the
nature of the particular proposal. With respect to Proposal 1, the voting
requirement is the "vote of a majority of the outstanding voting securities",
which is defined under the 1940 Act, as the lesser of (i) 67% or more of the
voting securities of each respective Fund entitled to vote thereon present in
person or by proxy at the Meeting, if the holders of more than 50% of the
outstanding voting securities entitled to vote thereon are present in person or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of each respective Fund entitled to vote thereon. With
2
<PAGE> 10
respect to Proposal 2, the affirmative vote of a plurality of the Shares of a
Fund present in person or by proxy is necessary to elect each nominee to the
Board of Trustees of each Fund. With respect to Proposals 3A and 3B, the
affirmative vote of a majority of the Shares of a Fund present in person or by
proxy is necessary to ratify the selection of the independent public accountants
for such Fund.
The Board of Trustees of each Fund recommends that you cast your vote:
- FOR approval of each New Advisory Agreement;
- FOR each nominee for the Board of Trustees; and
- FOR ratification of the independent public accountants for the current
fiscal year of each Fund.
All Shares of a Fund affected by a proposal will vote together as a single
class on such proposal. An unfavorable vote on a proposal by the shareholders of
one Fund will not affect the implementation of such a proposal by another Fund,
if the proposal is approved by the shareholders of the other Fund. There is no
cumulative voting with respect to the election of Trustees.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon. Proxies received
prior to the Meeting on which no vote is indicated will be voted "for" each
proposal as to which it is entitled to vote. Abstentions do not constitute votes
"for" a proposal and are treated as votes "against" a proposal. Broker non-votes
(i.e., proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominees do
not have discretionary power) do not constitute votes "for" or "against" a
proposal and are disregarded in determining the "votes cast" when the voting
requirement for a proposal is based on achieving a percentage of the voting
securities entitled to vote present in person or by proxy at the meeting. Broker
non-votes do not constitute votes "for" and are treated as votes "against" when
the voting requirement for a proposal is based on achieving a percentage of the
outstanding voting securities entitled to vote. A majority of the outstanding
Shares entitled to vote on a proposal must be present in person or by proxy to
have a quorum to conduct business at the Meeting. Abstentions and broker
non-votes will be deemed present for quorum purposes.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the respective Fund a written notice of revocation, by
delivering a duly executed proxy bearing a later date or by attending the
Meeting and voting in person.
The Funds know of no business other than that mentioned in Proposals 1 through
3 of the Notice that will be presented for consideration at the Meeting. If any
other matters are properly presented, it is the intention of the persons named
on the
3
<PAGE> 11
enclosed proxy to vote proxies in accordance with their best judgment. In the
event a quorum is present at the Meeting but sufficient votes to approve any of
the proposals with respect to one or more Funds are not received, the persons
named as proxies may propose one or more adjournments of the Meeting of the
concerned Fund to permit further solicitation of proxies, provided they
determine that such an adjournment and additional solicitation is reasonable and
in the interest of shareholders based on a consideration of all relevant
factors, including the nature of the relevant proposal, the percentage of votes
then cast, the percentage of negative votes then cast, the nature of the
proposed solicitation activities and the nature of the reasons for such further
solicitation.
- ------------------------------------------------------------------------------
PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENTS
- ------------------------------------------------------------------------------
THE ADVISERS
Van Kampen American Capital Asset Management, Inc. ("Asset Management") acts
as investment adviser for each AC Fund. Van Kampen American Capital Investment
Advisory Corp. ("Advisory Corp.") acts as investment adviser for each VK Fund.
Asset Management and Advisory Corp. sometimes are referred to herein
collectively as the "Advisers" or individually as an "Adviser".
The Advisers currently are wholly-owned subsidiaries of Van Kampen American
Capital, Inc. ("VKAC"). VKAC is a wholly-owned subsidiary of VK/AC Holding, Inc.
("VKAC Holding"). VKAC Holding is a wholly-owned subsidiary of MSAM Holdings II,
Inc., which in turn is a wholly-owned subsidiary of Morgan Stanley. The
addresses of VKAC Holding, VKAC and the Advisers are One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 and 2800 Post Oak Blvd., Houston, Texas 77056.
Prior to December 1994, Asset Management provided investment advisory services
under the name American Capital Asset Management, Inc. Prior to January 1995,
Advisory Corp. provided investment advisory services under the name Van Kampen
Merritt Investment Advisory Corp.
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, Morgan Stanley Asset Management, Inc. a registered
investment adviser, and Morgan Stanley & Co. International Limited, provide a
wide range of financial services on a global basis. Their principal businesses
include: securities underwriting, distribution and trading; merger, acquisition,
restructuring, real estate, project finance and other corporate finance advisory
activities; merchant banking and other principal investment activities; stock
brokerage and research
4
<PAGE> 12
services; asset management; trading of foreign exchange and commodities as well
as derivatives on a broad range of asset categories, rates and indicies; real
estate advice, financing and investing; and global custody, securities clearance
services and securities lending.
INFORMATION CONCERNING DEAN WITTER DISCOVER
Dean Witter Discover is a diversified financial services company offering a
broad range of nationally marketed credit and investment products with a primary
focus on individual customers. Dean Witter Discover has two principal lines of
business: credit services and securities. Its credit services business consists
primarily of the issuance, marketing and servicing of general purpose credit
cards and the provision of transaction processing services, private-label credit
card services and real estate secured loans. It is the largest single issuer of
general purpose credit cards in the United States, as measured by number of
accounts and cardmembers, and the third largest originator and servicer of
credit card receivables, as measured by managed loans. Dean Witter Discover's
securities business is conducted primarily through its wholly-owned
subsidiaries, Dean Witter Reynolds Inc. ("DWR") and Dean Witter InterCapital
Inc. ("InterCapital"). DWR is a full-service securities firm offering a wide
variety of securities products to serve the investment needs of individual
clients through over 9,100 account executives located in 371 branch offices. DWR
is among the largest NYSE members and is a member of other major securities,
futures and options exchanges. InterCapital is a registered investment adviser
that, along with its subsidiaries, services investment companies, individual
accounts and institutional accounts. Investment companies serviced by
InterCapital include [ ] proprietary portfolios referred to herein as the
"InterCapital Funds".
THE MERGER
Pursuant to the Merger Agreement, Morgan Stanley will be merged (the "Merger")
with and into Dean Witter Discover and the surviving corporation will be named
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). Following the Merger,
each Adviser will be an indirect subsidiary of MSDWD.
Under the terms of the Merger Agreement, each of Morgan Stanley's common
shares will be converted into the right to receive 1.65 shares of MSDWD common
stock and each issued and outstanding share of Dean Witter Discover common stock
will thereafter represent one share of MSDWD common stock. Following the Merger,
Morgan Stanley's former shareholders will own approximately 45% and Dean Witter
Discover's former shareholders will own approximately 55% of the outstanding
shares of common stock of MSDWD.
The Merger is expected to be consummated in mid-1997 and is subject to certain
closing conditions, including certain regulatory approvals and the approval of
shareholders of both Morgan Stanley and Dean Witter Discover.
5
<PAGE> 13
Under the terms of the Merger Agreement, the Board of Directors of MSDWD
initially will consist of fourteen members, two of whom will be Morgan Stanley
insiders and two of whom will be Dean Witter Discover insiders. The remaining
ten directors will be independent directors, with Morgan Stanley and Dean Witter
Discover each nominating five of the ten. The Chairman and Chief Executive
Officer of MSDWD will be the current Chairman and Chief Executive Officer of
Dean Witter Discover, Phillip Purcell. The President and Chief Operating Officer
of MSDWD will be the current President of Morgan Stanley, John Mack.
The Advisers do not anticipate any reduction in the quality of services now
provided to the Funds, and do not expect that the Merger will result in any
material changes in the business of the Advisers or in the manner in which the
Advisers render services to the Funds. The Advisers also anticipate that neither
the Merger nor any ancillary transactions will have any adverse effect on the
Advisers' ability to fulfill their respective obligations under the New Advisory
Agreements (as defined below) or to operate their businesses in a manner
consistent with past business practices.
In connection with Morgan Stanley's purchase of VKAC Holding on October 31,
1996, certain officers of the Advisers, including Dennis J. McDonnell, who is a
member of the Board of Trustees, and Don G. Powell, who was a member of the
Board of Trustees prior to August 1996, entered into employment agreements with
VKAC Holding which expire from between 1998 and 2000. Certain of such officers,
including Messrs. McDonnell and Powell also were granted options to purchase
shares of common stock of Morgan Stanley which vest from 1999 to 2001. Certain
officers of the Advisers also entered into retention agreements with VKAC
Holding, which will remain in place following the consummation of the Merger.
The employment agreements and retention agreements are intended to assure that
the services of the officers are available to the Advisers (and thus to the
Funds) until such agreements expire. Finally, certain officers of the Advisers,
including Messrs. McDonnell and Powell, received preferred stock of Morgan
Stanley that is convertible into common stock of Morgan Stanley from 1997 to
2000. As a result of the Merger, such preferred stock shall be convertible into
common stock of MSDWD at the effective time of the Merger.
THE ADVISORY AGREEMENTS
In anticipation of the Merger, a majority of the Trustees of each Fund who are
not parties to the New Advisory Agreement or interested persons of any such
party ("Disinterested Trustees") approved a new investment advisory agreement
(the "New Advisory Agreement") between each Fund and its respective Adviser. The
holders of a majority of the outstanding voting securities (within the meaning
of the 1940 Act) of each Fund are being asked to approve its respective New
Advisory Agreement. See "The New Advisory Agreements" below.
6
<PAGE> 14
THE CURRENT ADVISORY AGREEMENTS. The Current Advisory Agreement for each AC
Fund was last approved by a majority of the Trustees, including a majority of
the Disinterested Trustees, voting in person at a meeting called for that
purpose on July 25, 1996 in connection with the acquisition of Asset
Management's corporate parent by Morgan Stanley. The Current Advisory Agreement
was last approved by shareholders of each AC Fund at a meeting held on October
25, 1996 relating to the acquisition of Asset Management's corporate parent by
Morgan Stanley.
The Current Advisory Agreement for each VK Fund was last approved by a
majority of the Trustees, including a majority of the Disinterested Trustees,
voting in person at a meeting called for that purpose on July 25, 1996 in
connection with the acquisition of Advisory Corp.'s corporate parent by Morgan
Stanley (except for the Current Advisory Agreement of the High Yield Fund which
was approved on January 23, 1997 and is reviewed by the Board of Trustees on a
quarterly basis). The Current Advisory Agreement was last approved by the
shareholders of each VK Fund at a meeting held on October 25, 1996 relating to
the acquisition of Advisory Corp.'s corporate parent by Morgan Stanley.
Each Current Advisory Agreement provides that the respective Adviser will
supply investment research and portfolio management, including the selection of
securities for each Fund to purchase, hold or sell and the selection of brokers
through whom that Fund's portfolio transactions are executed. The Adviser also
administers the business affairs of each Fund, furnishes offices, necessary
facilities and equipment, provides administrative services, and permits its
officers and employees to serve without compensation as Trustees and officers of
such Fund if duly elected to such positions.
Each Current Advisory Agreement provides that the Adviser shall not be liable
for any error of judgment or of law, or for any loss suffered by the particular
Fund in connection with the matters to which the Current Advisory Agreement
relates, except (i) in the case of the agreement between each VK Fund and
Advisory Corp., a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Advisory Corp. in the performance of its obligations
and duties, or by reason of its reckless disregard of its obligations and duties
under each Current Advisory Agreement, and (ii) in the case of the agreement
between each AC Fund and Asset Management, a loss resulting from willful
misfeasance, bad faith, negligence or reckless disregard of obligations or
duties on the part of Asset Management in the performance of its obligations and
duties under each Current Advisory Agreement.
The fees payable to Asset Management by the AC Funds are reduced by any
commissions, tender solicitation and other fees, brokerage or similar payments
received by Asset Management or any other direct or indirect majority-owned
subsidiary of Morgan Stanley in connection with the purchase or sale of
portfolio investments of the AC Funds, less expenses incurred by Asset
Management in connection with such activities.
7
<PAGE> 15
The Advisers' activities are subject to the review and supervision of the
Board of Trustees to which the Advisers render periodic reports with respect to
each Fund's investment activities. The Current Advisory Agreement may be
terminated by either party, at any time, without penalty, upon 60 days written
notice, and automatically terminates in the event of its assignment. In the case
of the AC Funds, the Current Advisory Agreement also terminates if either an AC
Fund or Asset Management goes into liquidation or a receiver is appointed with
respect to their assets or if either party breaches the Current Advisory
Agreement and fails to remedy the breach within 30 days of receiving notice
thereof from the other party.
The net assets of each of the Funds as of March 31, 1997, as well as other
investment companies sponsored by VKAC and advised by either of the Advisers,
and the rates of compensation to the respective Adviser are set forth at Annex C
hereto. Each respective Fund recognized net advisory expenses, for its most
recently completed fiscal year, in the amounts set forth at Annex D hereto.
Each Fund pays all other expenses incurred in its operation including, but not
limited to, direct charges relating to the purchase and sale of its portfolio
securities, interest charges, fees and expenses of outside legal counsel and
independent auditors, taxes and governmental fees, costs of share certificates
and any other expenses (including clerical expenses) of issuance, sale or
repurchase of its Shares, expenses in connection with its dividend reinvestment
plan, membership fees in trade associations, expenses of registering and
qualifying its Shares for sale under federal and state securities laws, expenses
of printing and distribution, expenses of filing reports and other documents
filed with governmental agencies, expenses of annual and special meetings of the
trustees and shareholders, fees and disbursements of the transfer agents,
custodians and sub-custodians, expenses of disbursing dividends and
distributions, fees, expenses and out-of-pocket costs of the trustees who are
not affiliated with the Adviser, insurance premiums, indemnification and other
expenses not expressly provided for in each Current Advisory Agreement, and any
extraordinary expenses of a nonrecurring nature. Each Fund also compensates its
Adviser, VKAC, the Distributor (defined below) and ACCESS (defined below) for
certain non-advisory services provided pursuant to agreements discussed below.
See "OTHER INFORMATION -- Non-Advisory Agreements" below.
THE NEW ADVISORY AGREEMENTS. The Board of Trustees approved a proposed New
Advisory Agreement between each AC Fund and Asset Management on March 27, 1997,
the form of which is attached hereto as Annex B-1. The Board of Trustees
approved a proposed New Advisory Agreement between each VK Fund and Advisory
Corp. on March 27, 1997, the form of which is attached hereto as Annex B-2.
The form of the proposed New Advisory Agreement between each Fund and its
respective Adviser is substantially similar to the Current Advisory Agreement
between such Fund and its Adviser, except as set forth in this paragraph. Each
New
8
<PAGE> 16
Advisory Agreement designates certain officers of the respective Adviser and the
officers of each Fund as essential personnel with respect to the operations of
the respective Fund. Under the terms of the New Advisory Agreement, an Adviser
may not make any material or significant personnel changes or replace any
essential personnel or materially change the responsibilities or duties of any
essential personnel prior to the first anniversary of the agreement without
first informing the Board of Trustees in a timely manner. Each New Advisory
Agreement also prohibits the respective Adviser from changing its name without
the prior consent of the Board of Trustees.
The investment advisory fee as a percentage of net assets payable by each Fund
will be the same under each New Advisory Agreement as under the Current Advisory
Agreement. If the investment advisory fee under each New Advisory Agreement had
been in effect for each Fund's most recently completed fiscal year, contractual
advisory fees payable to the respective Adviser by each Fund would have been
identical to those payable under each Current Advisory Agreement.
In connection with approving the New Advisory Agreements, the Boards of
Trustees held a special telephone meeting on February 10, 1997 and held special
in-person meetings on March 14, 1997 and March 27, 1997. At the meetings, the
Boards of Trustees considered the possible effects of the Merger upon VKAC, the
Advisers, Van Kampen American Capital Distributors, Inc., the distributor of the
Funds' shares (the "Distributor"), and ACCESS Investors Services, Inc., the
transfer agent for each of the Funds ("ACCESS"), and upon their ability to
provide investment advisory, distribution, transfer agency and other services to
each respective Fund. Representatives of Morgan Stanley, Dean Witter Discover
and VKAC attended one or more of the in-person meetings and represented to the
Boards of Trustees that (i) the VKAC family of funds will be maintained and
operated as a separate mutual fund complex and will not be consolidated with
Dean Witter Discover's InterCapital Funds, and (ii) VKAC, the Advisers, the
Distributor and ACCESS will be maintained separate from their counterparts in
the InterCapital Fund complex and will be operated for the benefit of the Funds
and other investment companies sponsored by VKAC. The representatives of Morgan
Stanley, Dean Witter Discover and VKAC also stated that (i) the Funds will
continue to be distributed by the Distributor through third-party broker-dealers
and, following the Merger, also will be distributed through Dean Witter
Discover's broker-dealers on a proprietary basis, and (ii) the InterCapital
Funds will continue to be distributed solely through Dean Witter Discover
broker-dealers on a proprietary basis. The representatives of Morgan Stanley and
Dean Witter Discover also described the financial and other resources available
to VKAC and its affiliates, after giving effect to the Merger, to secure for
each Fund quality investment research, investment advice, distribution, transfer
agency and other client services.
9
<PAGE> 17
In evaluating the New Advisory Agreements, the Boards of Trustees took into
account that each Fund's Current Advisory Agreement and its New Advisory
Agreement, including the terms relating to the services to be provided
thereunder by the Adviser and the fees and expenses payable by each Fund, are
substantially similar, except for those provisions added to each New Advisory
Agreement at the request of the Trustees (see The Advisory Agreements -- The New
Advisory Agreements above). The Boards of Trustees considered the skills and
capabilities of the Advisers, the representations of Morgan Stanley, Dean Witter
Discover and VKAC described above and the representations of officers of Morgan
Stanley and Dean Witter Discover that no material change was planned in the
current management or facilities of the Advisers. The Boards of Trustees also
considered the reputation, expertise and resources of Morgan Stanley and Dean
Witter Discover and their affiliates in domestic and international financial
markets. The Boards of Trustees considered the continued employment of members
of senior management of the Advisers, the Distributor and ACCESS pursuant to
current and future employment and retention agreements to be important to help
assure the continuity of the personnel primarily responsible for maintaining the
quality of investment advisory and other services for the Funds. The Board of
Trustees also considered the affect of certain shares of preferred stock of
Morgan Stanley owned by senior management of the Advisers becoming immediately
convertible into common stock of Morgan Stanley at the time of the Merger. The
Trustees considered the possible benefits the Advisers may receive as a result
of the Merger, including the continued use, to the extent permitted by law, of
Morgan Stanley & Co., DWR and their affiliates for brokerage services.
The Boards of Trustees considered the affects on the Funds of the Advisers
becoming affiliated persons of MSDWD. Following the Merger, the 1940 Act will
prohibit or impose certain conditions on the ability of the Funds to engage in
certain transactions with MSDWD and its affiliates. For example, absent
exemptive relief, the Funds will be prohibited from purchasing securities from
Morgan Stanley & Co. or DWR, both of which will be wholly-owned broker-dealer
subsidiaries of MSDWD, in transactions in which Morgan Stanley & Co. or DWR acts
as a principal, and the Funds will have to satisfy certain conditions in order
to engage in securities transactions in which Morgan Stanley & Co. or DWR act as
a broker or to purchase securities in an underwritten offering in which Morgan
Stanley & Co. or DWR is acting as an underwriter. In this connection, management
of the Advisers represented to the Boards of Trustees that they do not believe
these prohibitions or conditions will have a material affect on the management
or performance of the Funds and, to the extent permitted by applicable law, VKAC
anticipates that the Funds will continue to use Morgan Stanley & Co., DWR and
their affiliates for brokerage services.
The Boards of Trustees were advised that Section 15(f) of the 1940 Act is
still applicable to the Advisers as a result of Morgan Stanley's previous
acquisition of the Advisers' parent corporation on October 31, 1996. Section
15(f) of the 1940
10
<PAGE> 18
Act permits, in the context of a change in control of an investment adviser to a
registered investment company, the receipt by such investment adviser, or any of
its affiliated persons, of an amount of benefit in connection with such sale,
provided two conditions are satisfied. First, an "unfair burden" must not be
imposed on the investment company for which the investment adviser acts in such
capacity as a result of the sale of such interest, or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair
burden," as defined in the 1940 Act, includes any arrangement during the
two-year period after the transaction whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory and other services), or from any person in connection
with the purchase or sale of securities or other property to, from or on behalf
of the investment company (other than ordinary fees for bona fide principal
underwriting services). Management of Morgan Stanley, Dean Witter Discover and
VKAC are aware of no circumstances arising from the Merger, preparatory
transactions to the Merger or any potential financing that might result in the
imposition of an "unfair burden" on the Funds.
The second condition of Section 15(f) is that during the three-year period
immediately following a transaction to which Section 15(f) is applicable, at
least 75% of the subject investment company's board of directors must not be
"interested persons" (as defined in the 1940 Act) of the investment company's
investment adviser or predecessor adviser. The composition of the Board of
Trustees currently complies with such condition and, if each of the nominees set
forth in Proposal 2 below is elected to the Boards of Trustees, the composition
of the Boards of Trustees would comply with such condition.
The Boards of Trustees, including the Disinterested Trustees, concluded that
if the Merger occurs, entry by each respective Fund into a New Advisory
Agreement would be in the best interest of each Fund and the shareholders of
each Fund. The Boards of Trustees of each Fund, including the Disinterested
Trustees, unanimously approved the New Advisory Agreement for each Fund and
recommended each such agreement for approval by the shareholders of the
respective Fund at the Meeting. The New Advisory Agreement would take effect
upon the later to occur of (i) the obtaining of shareholder approval or (ii) the
closing of the Merger. Each New Advisory Agreement will continue in effect until
May 31, 1999 and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In the event that shareholders of a Fund do not approve the New Advisory
Agreement with respect to a Fund and the Merger is consummated, the Board of
Trustees of such Fund would seek to obtain for the Fund interim investment
advisory services at the lesser of cost or the current fee rate either from the
11
<PAGE> 19
respective Adviser or from another advisory organization. Thereafter, the Board
of Trustees of such Fund would either negotiate a new investment advisory
agreement with an advisory organization selected by the Board of Trustees or
make appropriate arrangements, in either event subject to approval of the
shareholders of such Fund. In the event the Merger is not consummated, the
Advisers would continue to serve as investment adviser of the Funds pursuant to
the terms of the Current Advisory Agreement.
SHAREHOLDER APPROVAL
To become effective, each New Advisory Agreement must be approved by the vote
of a majority of the outstanding voting securities of the respective Fund. The
"vote of a majority of the outstanding voting securities" is defined under the
1940 Act as the lesser of (i) 67% or more of the Shares of the respective Fund
entitled to vote thereon present in person or by proxy at the Meeting if the
holders of more than 50% of such outstanding Shares are present in person or
represented by proxy; or (ii) more than 50% of such outstanding Shares of the
respective Fund entitled to vote thereon. Each New Advisory Agreement was
unanimously approved by the Board of Trustees after consideration of all factors
which they determined to be relevant to their deliberations, including those
discussed above. The Board of Trustees also unanimously determined to submit
each New Advisory Agreement for consideration by the shareholders of the
respective Fund. THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS A VOTE "FOR"
APPROVAL OF THE NEW ADVISORY AGREEMENT.
- ------------------------------------------------------------------------------
PROPOSAL 2: ELECTION OF TRUSTEES
- ------------------------------------------------------------------------------
Each Fund is organized as a series of a Delaware business trust (the "Delaware
Trusts"), except that the Pennsylvania Fund is organized for tax purposes as a
Pennsylvania trust (the "Pennsylvania Trust") (collectively, the Delaware Trusts
and the Pennsylvania Trust are referred to herein as the "Trusts"). With respect
to each Trust, [ ] trustees are to be elected at the Meeting to serve until
reaching their designated retirement age or until their successors are duly
elected and qualified. The election of each nominee to the Board of Trustees of
a Trust requires the affirmative vote of a plurality of all the Shares of such
Trust present in person or by proxy. The shareholders of all of the series of a
Trust will vote together as a single class to elect the trustees of the
respective Trust. Those Trusts comprised of more than one series are indicated
as such on Annex A hereto. It is the intention of the persons named in the
enclosed proxy to vote the Shares represented by them for the election of each
nominee listed below unless the proxy is marked otherwise.
12
<PAGE> 20
THE TRUSTEES
Each of the nominees to the Board of Trustees listed below has served as a
member of the Board of Trustees since his or her initial election or appointment
to the Board of Trustees as set forth in Annex J, except that Mr. Richard M.
DeMartini has not previously served on the Board of Trustees. The Board of
Trustees has determined that adding Mr. DeMartini to the Board of Trustees is in
the best interest of shareholders of each respective Fund following the Merger.
The Board of Trustees believes that adding Mr. DeMartini to the Board of
Trustees will benefit the Funds because of his knowledge of, and experience
with, Dean Witter Discover and the InterCapital Funds.
With respect to each Trust, each nominee named below has agreed to serve as a
trustee if elected; however, should any nominee(s) become unable or unwilling to
accept nomination or election, the proxies will be voted for one or more
substitute nominee(s) designated by the present Board of Trustees.
The following table sets forth the names, addresses, ages, principal
occupations and other information regarding the Trustee nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR EMPLOYMENT
NAME, ADDRESS AND AGE IN PAST 5 YEARS
--------------------- -----------------------------------
<S> <C>
J. Miles Branagan................. Co-founder, and prior to July 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and
Raleigh, NC 27614 President of Getinge/Castle, Inc. (formerly
Date of Birth: 07/14/32 known as MDT Corporation), a company which
develops, manufactures, markets and services
medical and scientific equipment. Trustee of
each of the funds in the Fund Complex
(defined below).
Richard M. DeMartini*............. President and Chief Operating
Two World Trade Center Officer of Dean Witter Capital, a division of
66th Floor DWR. Director of DWR, Intercapital, Dean
New York, NY 10048 Witter Distributors, Inc. and Dean Witter
Date of Birth: Trust Company. Executive Vice President of
Dean Witter Discover. Member of Dean Witter
Discover Management Committee. Trustee of the
TCW/DW Funds. Formerly Vice Chairman of the
Board of the National Association of
Securities Dealers, Inc. Formerly Chairman of
the Board of NASDAQ Market, Inc.
</TABLE>
13
<PAGE> 21
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR EMPLOYMENT
NAME, ADDRESS AND AGE IN PAST 5 YEARS
--------------------- -----------------------------------
<S> <C>
Linda Hutton Heagy................ Partner, Ray & Berndtson, Inc.
Sears Tower an executive recruiting and management
233 South Wacker Drive consulting firm. Formerly, Executive Vice
Suite 4020 President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive
Date of Birth: 06/03/49 Vice President of La Salle National Bank.
Trustee of each of the funds in the Fund
Complex.
R. Craig Kennedy.................. President and Director, German Marshall
11 DuPont Circle, N.W. Fund of the United States. Formerly,
Washington, D.C. 20036 advisor to the Dennis Trading Group Inc.
Date of Birth: 02/29/52 Prior to 1992, President and Chief Executive
Officer, Director and Member of the
Investment Committee of the Joyce Foundation,
a private foundation. Trustee of each of the
funds in the Fund Complex.
Jack E. Nelson.................... President of Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser. President
Date of Birth: 02/13/36 of Nelson Ivest Brokerage Services Inc., a
member of the National Association of
Securities Dealers, Inc. ("NASD") and
Securities Investors Protection Corp.
("SIPC"). Trustee of each of the funds in the
Fund Complex.
Jerome L. Robinson*............... President of Robinson Technical Products
115 River Road Corporation, a manufacturer and processor of
Edgewater, NJ 07020 welding alloys, supplies and equipment.
Date of Birth: 10/10/22 Director of Pacesetter Software, a software
programming company specializing in white
collar productivity. Director of Panasia
Bank. Trustee of each of the funds in the
Fund Complex.
</TABLE>
14
<PAGE> 22
<TABLE>
<S> <C>
Fernando Sisto................... Professor Emeritus and, prior to
155 Hickory Lane 1995, Dean of the Graduate School, Stevens
Closter, NJ 07624 Institute of Technology. Director of
Date of Birth: 08/02/24 Dynalysis of Princeton, a firm engaged in
engineering research. Trustee of each of the
funds in the Fund Complex.
Wayne W. Whalen*................. Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex,
Date of Birth: 08/22/39 open-end funds advised by Van Kampen American
Capital Management, Inc. and closed-end funds
advised by Advisory Corp. Trustee of each of
the funds in the Fund Complex, open-end funds
advised by Van Kampen Capital Management,
Inc. and closed-end funds advised by Advisory
Corp.
[ADD OTHER NOMINEES, IF ANY]
</TABLE>
- ---------------
* Such trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. De Martini is an interested person of the Advisers and
the Funds by reason of his positions with Dean Witter Discover and its
affiliates. Mr. Whalen is an interested person of the Funds by reason of his
firm currently acting as legal counsel to the Funds and is an interested
person of Asset Management with respect to certain AC Funds by reason of his
firm in the past acting as legal counsel to Asset Management. Mr. Robinson is
an interested person of the Tax Free Money Fund by reason of his owning more
than 5% of such Fund's outstanding Shares.
As of March 31, 1997, certain nominees owned, directly or beneficially, the
number of Class A Shares of each Fund as set forth in the table below. Nominees
who do not own any Shares of the Funds have been omitted from the table. Funds
which are not owned by any nominees also have been omitted from the table. As of
March 31, 1997, no nominee owned any Class B Shares or Class C Shares of any
Fund.
15
<PAGE> 23
CLASS A SHARES OWNED BY TRUSTEES(1)
<TABLE>
<CAPTION>
FUND
NAME BRANAGAN HEAGY KENNEDY NELSON ROBINSON SISTO WHALEN
---- -------- ----- ------- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- ---------------
(1)Except for the Tax Free Money Fund, the trustees and officers as a group
owned less than 1% of the outstanding Shares of each Fund. With respect to
the Tax Free Money Fund, Mr. Robinson owns shares, or approximately
% of such fund's outstanding shares.
[Describe any purchases of shares of VKAC, Morgan Stanley or Dean Witter
Discover by nominees during Funds most recent fiscal years.]
During each Fund's respective fiscal year ended in 1996, the Board of Trustees
held between 5 and 9 meetings for each Fund. All of the incumbent nominees to
the Board of Trustees attended at least 75% of the meetings of the respective
Board of Trustees and all committee meetings thereof of which such trustee was a
member during the period of such Trustee's service for each Fund's 1996 fiscal
year. During each Fund's 1996 fiscal year, the Fund had no standing committees
other than an audit committee, a brokerage committee and a retirement plan
committee.
Each Fund's audit committee currently consists of Messrs. Kennedy, Robinson
and Sisto. The audit committee makes recommendations to the Board concerning the
selection of the Fund's independent public accountants, reviews with such
accountants the scope and results of the Fund's annual audit and considers any
comments that the accountants may have regarding the Fund's financial statements
or books of account. Each Fund's brokerage committee currently consists of Ms.
Heagy and Messrs. Branagan and Nelson. The brokerage committee reviews the
Fund's allocation of brokerage transactions and soft-dollar practices. Each
Fund's retirement plan committee currently consists of Ms. Heagy and Messrs.
Kennedy and Nelson. The retirement plan committee is responsible for reviewing
the terms of each Fund's retirement plan and reviews any administrative matters
that arise with respect thereto. The Disinterested Trustees also are responsible
for the annual review of each Fund's investment advisory agreement and any other
matters requiring the approval of the Disinterested Trustees under the 1940 Act.
During each Fund's 1996 fiscal year, the audit committee and the brokerage
committee of each Fund held between [one to two] meetings. The retirement plan
committee does not meet on a regular basis, but does meet on an ad hoc basis as
necessary to administer the retirement plan.
16
<PAGE> 24
The Trustees of each Fund who are not "interested persons" of such Fund (as
defined by the 1940 Act) are required to select and nominate such non-interested
Trustees and are prepared to review nominations from shareholders to fill any
vacancies in trusteeships. Nominations from shareholders should be in writing
and addressed to the non-interested Trustees at the respective Trust's office.
The non-interested Trustees of each Fund expect to be able to identify from
their own resources an ample number of qualified candidates.
Each of the foregoing trustees holds the same position with each of the funds
in the Fund Complex (defined below). As of December 31, 1996, there were 51
funds in the Fund Complex. Each trustee who is not an affiliated person of
Advisory Corp., Asset Management, the Distributor, VKAC or Morgan Stanley (each
a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting
fees for services to the funds in the Fund Complex. Each fund in the Fund
Complex provides a deferred compensation plan to its Non-Affiliated Trustees
that allows trustees to defer receipt of his or her compensation and earn a
return on such deferred amounts based upon the return of the common shares of
the funds in the Fund Complex as more fully described below. Each fund in the
Fund Complex also provides a retirement plan to its Non-Affiliated Trustees that
provides Non-Affiliated Trustees with compensation after retirement, provided
that certain eligibility requirements are met as more fully described below.
The compensation of each Non-Affiliated Trustee from the AC Funds includes an
annual retainer in an amount equal to $35,000 per calendar year, due in four
quarterly installments on the first business day of each calendar quarter. The
AC Funds pay each Non-Affiliated Trustee a per meeting fee in the amount of
$2,000 per regular quarterly meeting attended by the Non-Affiliated Trustee, due
on the date of such meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee.
Payment of the annual retainer and the regular meeting fee is allocated among
the AC Funds (i) 50% on the basis of the relative net assets of each AC Fund to
the aggregate net assets of all the AC Funds and (ii) 50% equally to each AC
Fund, in each case as of the last business day of the preceding calendar
quarter. Each AC Fund which is the subject of a special meeting of the trustees
generally pays each Non-Affiliated Trustee a per meeting fee in the amount of
$125 per special meeting attended by the Non-Affiliated Trustee, due on the date
of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee
in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.
The compensation of each Non-Affiliated Trustee from each VK Fund includes an
annual retainer in an amount equal to $2,500 per calendar year, due in four
quarterly installments on the first business day of each calendar quarter. Each
Non-Affiliated Trustee receives a per meeting fee from each VK Fund in the
amount of $125 per regular quarterly meeting attended by the Non-Affiliated
Trustee, due on
17
<PAGE> 25
the date of such meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee. Each
Non-Affiliated Trustee receives a per meeting fee from each VK Fund in the
amount of $125 per special meeting attended by the Non-Affiliated Trustee, due
on the date of such meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.
The trustees approved an aggregate compensation cap with respect to funds in
the Fund Complex of $84,000 per Non-Affiliated Trustee per year (excluding any
retirement benefits) for the period July 22, 1995 through December 31, 1996,
subject to the net assets and the number of funds in the Fund Complex as of July
21, 1995 and certain other exceptions. For the calendar year ended December 31,
1996, certain trustees received aggregate compensation from the funds in the
Fund Complex over $84,000 due to compensation received but not subject to the
cap, including compensation from new funds added to the Fund Complex after July
22, 1995 and certain special meetings in 1996. In addition, each of Advisory
Corp. or Asset Management, as the case may be, agreed to reimburse each fund in
the Fund Complex through December 31, 1996 for any increase in the aggregate
trustee's compensation over the aggregate compensation paid by such fund in its
1994 fiscal year, provided that if a fund did not exist for the entire 1994
fiscal year appropriate adjustments will be made.
Each Non-Affiliated Trustee generally can elect to defer receipt of all or a
portion of the compensation earned by such Non-Affiliated Trustee until
retirement. Amounts deferred are retained by the respective Fund and earn a rate
of return determined by reference to the return on the common shares of such
Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such Non-Affiliated
Trustee had invested in one or more funds in the Fund Complex, including the
Funds. To the extent permitted by the 1940 Act, each Fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order to
match the deferred compensation obligation. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of the respective Fund.
Each Fund has adopted a retirement plan. Under the retirement plan, a Non-
Affiliated Trustee who is receiving trustee's compensation from a Fund prior to
such Non-Affiliated Trustee's retirement, has at least ten years of service and
retires at or after attaining the age of 60, is eligible to receive a retirement
benefit equal to $2,500 per year for each of the ten years following such
trustee's retirement. Trustees retiring prior to the age of 60 or with fewer
than 10 years but more than 5 years of service may receive reduced retirement
benefits from a Fund. The retirement plan contains a Fund Complex retirement
benefit cap of $60,000 per year. Asset Management has reimbursed the AC Funds
for expenses related to the retirement plan through December 31, 1996.
18
<PAGE> 26
Additional information regarding compensation and benefits for trustees is set
forth below. As indicated in the notes accompanying the table, the amounts
relate to either the respective Fund's most recently completed fiscal year or
the Fund Complex' most recently completed calendar year ended December 31, 1996.
1996 COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED MAXIMUM BEFORE DEFERRAL
COMPENSATION BENEFITS ACCRUED AS ANNUAL BENEFITS FROM FROM FUND
BEFORE DEFERRAL PART OF FUND EACH FUND UPON COMPLEX PAID TO
NAME(1) FROM EACH FUND EXPENSES RETIREMENT(4) TRUSTEE(5)
------- --------------- --------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan* (2) (3) $2,500 $104,875
Dr. Richard E. Caruso (2) (3) -0- -0-
Philip P. Gaughan (2) (3) 2,000 16,875
Linda Hutton Heagy* (2) (3) 2,500 104,895
Dr. Roger Hilsman (2) (3) 2,500 103,750
R. Craig Kennedy* (2) (3) 2,500 104,875
Donald C. Miller (2) (3) 2,500 104,875
Jack E. Nelson* (2) (3) 2,500 97,875
David Rees (2) (3) 2,500 22,000
Jerome L. Robinson* (2) (3) 2,500 101,625
Lawrence J. Sheehan (2) (3) -0- 22,000
Dr. Fernando Sisto* (2) (3) 2,500 104,875
Wayne W. Whalen* (2) (3) 2,500 104,875
William S. Woodside (2) (3) 2,500 104,875
</TABLE>
- ---------------
* Currently a member of each Board of Trustees and a nominee to each Board of
Trustees to be voted on by shareholders of the Funds at the Meeting.
(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the most
recently completed fiscal year of one or more of the Funds. Mr. Caruso was
removed from the Board of Trustees effective September 7, 1995. Messrs.
Gaughan and Rees retired from the Board of Trustees on January 26, 1996 and
January 29, 1996, respectively. Mr. Sheehan was removed from the Board of
Trustees effective January 29, 1996. Messrs. Hilsman, Miller and Woodside
retired from the Board of Trustees on December 31, 1996. Messrs. McDonnell
and Powell, trustees for each Trust during all or a portion of each Fund's
last fiscal year, and Mr. DeMartini, nominee for each Trust, are affiliated
persons of the Advisers and are not eligible for compensation or retirement
benefits from the Funds. Mr. Don G. Powell resigned from the Board of
Trustees on August 15, 1996. Mr. McDonnell, currently a member of the Boards
of Trustees, effective at the
19
<PAGE> 27
time of the Merger is not standing for election to the Boards of Trustees at
the Meeting.
(2) The Aggregate Compensation before Deferral from each Fund during its 1996
fiscal year is shown in Annex E. Certain trustees deferred all or a portion
of their 1996 Aggregate Compensation from each Fund as shown in Annex F. The
cumulative deferred compensation (including interest) from each Fund at the
end of its last fiscal year is shown in Annex G. The deferred compensation
plan is described above the 1996 Compensation Table. Amounts deferred are
retained by the respective Fund and earn a rate of return determined by
reference to either the return on the common shares of such Fund or other
funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee, with the same economic effect as if such Non-Affiliated Trustee had
invested in one or more funds in the Fund Complex, including the Funds. To
the extent permitted by the 1940 Act, each Fund may invest in securities of
those funds selected by the Non-Affiliated Trustees in order to match the
deferred compensation obligation.
(3) The retirement benefits accrued per Fund as part of such Fund's expenses
during its 1996 fiscal year are shown in Annex H. The Retirement Plan is
described above the 1996 Compensation Table.
(4) This is the estimated maximum annual benefits payable per Fund in each year
of the 10-year period commencing in the year of such trustee's retirement
from such Fund assuming: the trustee has 10 or more years of service on the
Board of the respective Fund and retires at or after attaining the age of
60. Trustees retiring prior to the age of 60 or with fewer than 10 years of
service for the respective Fund may receive reduced retirement benefits from
such Fund. The actual annual benefit may be less if the trustee is subject
to the Fund Complex retirement benefit cap or if the trustee is not fully
vested at the time of retirement.
(5) The amounts shown in this column represent the aggregate compensation paid
by all 51 of the investment companies advised by Asset Management or
Advisory Corp. that have the same members on each fund's Board of Trustees
as of December 31, 1996 (the "Fund Complex"), before deferral by the
trustees under the deferred compensation plan. Certain trustees deferred all
or a portion of their aggregate compensation from the Fund Complex during
the calendar year ended December 31, 1996. The deferred compensation earns a
rate of return determined by reference to the return on the shares of the
funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee, with the same economic effect as if such Non-Affiliated Trustee had
invested in one or more funds in the Fund Complex, including the Funds. To
the extent permitted by the 1940 Act, the Fund may invest in securities of
those funds selected by the Non-Affiliated Trustees in order to match the
deferred compensation obligation. The trustees' Fund Complex compensation
cap covered the period July 22, 1995 through December 31,
20
<PAGE> 28
1996. For the calendar year ended December 31, 1996, certain trustees
received compensation over $84,000 in the aggregate due to compensation
received but not subject to the cap, including compensation from new funds
added to the Fund Complex after July 22, 1995 and certain special meetings
in 1996. Asset Management, Advisory Corp. and their affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. McDonnell, Powell and Whalen, the trustees were not
trustees of such investment companies. Combining the Fund Complex with other
investment companies advised by Asset Management, Advisory Corp. and their
affiliates, Mr. Whalen received Total Compensation of $243,375 during the
calendar year ended December 31, 1996.
Following the Meeting, the Funds do not contemplate holding regular meetings
of shareholders to elect trustees or otherwise. When an investment company does
not hold regular annual meetings, it is the position of the staff of the SEC and
a policy of each Trust that holders of record of two-thirds of the outstanding
shares of such trusts may file a declaration in writing or may vote at a special
meeting for the purpose of removing a trustee. The Board will be required to
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any trustee when requested in writing to do so by the
record holders of not less than 10% of the total outstanding shares of such
Trust. In addition, the Board will comply with the requirements of Section 16(c)
of the 1940 Act with respect to communications with shareholders.
SHAREHOLDER APPROVAL
The affirmative vote of a plurality of the Shares of a Trust present in person
or by proxy is required to elect the nominees to such Trust. THE BOARDS OF
TRUSTEES OF EACH TRUST RECOMMEND A VOTE "FOR" EACH OF THE NOMINEES.
- ------------------------------------------------------------------------------
PROPOSAL 3A: RATIFICATION OF INDEPENDENT PUBLIC
ACCOUNTANTS FOR VK FUNDS
- ------------------------------------------------------------------------------
The Board of Trustees of each VK Fund, including a majority of the Trustees
who are not "interested persons" of each Fund (as defined by the 1940 Act), has
selected the firm of KPMG Peat Marwick LLP, independent public accountants, to
examine the financial statements for the current fiscal year of each VK Fund.
Each VK Fund knows of no direct or indirect financial interest of such firm in
such VK Fund. The appointment is subject to ratification or rejection by the
shareholders of each VK Fund.
21
<PAGE> 29
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting and will be available to respond to questions from shareholders and will
have the opportunity to make a statement if they so desire.
SHAREHOLDER APPROVAL
The shareholders of each VK Fund, voting with respect to such VK Fund as a
single class, are entitled to vote on this proposal. An affirmative vote of a
majority of the Shares of each VK Fund present in person or by proxy and voting
is required to ratify the selection of the independent public accountants for
such VK Fund. THE BOARD OF TRUSTEES OF EACH VK FUND RECOMMENDS A VOTE "FOR"
RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
CURRENT FISCAL YEAR OF EACH VK FUND.
- ------------------------------------------------------------------------------
PROPOSAL 3B: RATIFICATION OF INDEPENDENT PUBLIC
ACCOUNTANTS FOR AC FUNDS
- ------------------------------------------------------------------------------
The Board of Trustee of each AC Fund, including a majority of the Trustees who
are not "interested persons" of each Fund (as defined by the 1940 Act), has
selected the firm of Price Waterhouse LLP, independent public accountants, to
examine the financial statements for the current fiscal year of each AC Fund.
Each AC Fund knows of no direct or indirect financial interest of such firm in
such AC Funds. The appointment is subject to ratification or rejection by the
shareholders of each AC Fund. It is expected that Price Waterhouse LLP will also
act as independent public accountants for VKAC Holding, VKAC, Advisory Corp.,
Asset Management, the Distributor (defined below) and ACCESS (defined below).
Representatives of Price Waterhouse LLP are expected to be present at the
Meeting and will be available to respond to questions from shareholders and will
have the opportunity to make a statement if they so desire.
SHAREHOLDER APPROVAL
The shareholders of each AC Fund, voting with respect to such AC Fund as a
single class, are entitled to vote on this proposal. An affirmative vote of a
majority of the Shares of each AC Fund present in person or by proxy and voting
is required to ratify the selection of the independent public accountants for
such AC Fund. THE BOARD OF TRUSTEES OF EACH AC FUND RECOMMENDS A VOTE "FOR"
RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
CURRENT FISCAL YEAR OF EACH AC FUND.
22
<PAGE> 30
- ------------------------------------------------------------------------------
OTHER INFORMATION
- ------------------------------------------------------------------------------
DIRECTORS AND OFFICERS OF THE ADVISERS
The following table sets forth certain information concerning the principal
executive officers and directors of each of the Advisers.
DIRECTORS AND OFFICERS OF THE ADVISERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Don G. Powell........... Chairman, President, Chief Executive Officer
2800 Post Oak Blvd. and a Director of VKAC; Chairman, Chief
Houston, TX 77056 Executive Officer and a Director of the
Distributor, the Advisers, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc.
Chairman and a Director of ACCESS Van Kampen
American Capital Recordkeeping Services, Inc.
and Van Kampen American Capital Trust
Company. Chairman, President and a Director
of Van Kampen American Capital Services,
Inc., Van Kampen American Capital Exchange
Corporation and American Capital Contractual
Services, Inc. Prior to November, 1996,
President Chief Executive Officer and a
Director of VKAC Holding. President, Chief
Executive Officer and a Trustee/Director of
certain open-end investment companies and
closed-end investment companies advised by
the Asset Management. Chairman of the Board
of Governors and the Executive Committee of
the Investment Company Institute. Prior to
July 1996, President, Chief Executive Officer
and a Trustee/Director of the funds in the
Fund Complex and certain closed-end
investment companies advised by Advisory
Corp.
Dennis J. McDonnell..... President, Chief Operating Officer and a
One Parkview Plaza Director of the Advisers, Van Kampen American
Oakbrook Terrace, IL Capital Advisors, Inc. and Van Kampen
60181 American Capital Management, Inc. Executive
Vice President and a Director of VKAC.
Director of MCM Group, Inc., McCarthy,
Crisanti & Maffei, Inc., MCM Asia Pacific
Company, Limited and MCM (Europe) Limited.
Prior to November, 1996, Executive Vice
President and a Director of VKAC Holding.
President, Chairman of the Board and Trustee
of certain closed-end investment companies
advised by Advisory Corp. Executive Vice
president and, prior to [ ], 1997,
Trustee of the funds in the Fund Complex.
</TABLE>
23
<PAGE> 31
<TABLE>
<S> <C>
Ronald A. Nyberg........Executive Vice President, General Counsel and
One Parkview Plaza Secretary of VKAC. Executive Vice President,
Oakbrook Terrace, IL General Counsel, Assistant Secretary and a
60181 Director of the Distributor, the Advisers,
Van Kampen American Capital Management, Inc.,
Van Kampen American Capital Trust Company,
Van Kampen American Capital Record Keeping
Services, Inc. and Van Kampen American
Capital Insurance Agency of Illinois, Inc.
Executive Vice President, General Counsel and
Assistant Secretary of Van Kampen American
Capital Advisors, Inc., American Capital
Contractual Services, Inc., Van Kampen
American Capital Exchange Corporation, ACCESS
and, Van Kampen American Capital Services,
Inc. Prior to November 1996, Executive Vice
President, General Counsel and Secretary of
VKAC Holding. Vice President and Secretary of
the funds, in the Fund Complex and certain
open-end investment companies and closed-end
investment companies advised by the Advisers.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute.
William R. Rybak........Executive Vice President and Chief Financial
One Parkview Plaza Officer of VKAC since February 1993, and
Oakbrook Terrace, IL Treasurer of VKAC Holding through December
60181 1993 and Executive Vice President and Chief
Financial Officer of VKAC Holding through
October 1996. Executive Vice President, Chief
Financial Officer and a Director of the
Distributor, the Advisers, Van Kampen
American Capital Management, Inc. Van Kampen
American Capital Recordkeeping Services, Inc.
and Van Kampen Capital Insurance Agency of
Illinois, Inc. Executive Vice President and
Chief Financial Officer of the Van Kampen
American Capital Advisors, Inc., Van Kampen
American Capital Exchange Corporation, Van
Kampen American Capital Trust Company,
ACCESS, and American Capital Contractual
Services, Inc. Executive Vice President,
Chief Financial Officer and Treasurer of
American Capital Shareholders Corporation
[Director of Alliance Bancorp, a savings and
loan holding company, and prior to [ ]
1997, Chairman of the Board of Hinsdale
Financial Corp., a savings and loan holding
company.]
Peter W. Hegel..........Executive Vice President of the Advisers and
One Parkview Plaza Van Kampen American Capital Management, Inc.
Oakbrook Terrace, IL Vice President of the funds in the Fund
60181 Complex and certain closed-end investment
companies advised by Advisory Corp.
Alan T. Sachtleben......Executive Vice President of the Advisers and
2800 Post Oak Blvd. Van Kampen American Capital Advisors, Inc.
Houston, TX 77056 Vice President of the funds in the Fund
Complex and certain open-end investment
companies advised by Asset Management.
</TABLE>
24
<PAGE> 32
The following table sets forth the trustees and officers of the Funds who are
also officers of the Advisers.
<TABLE>
<CAPTION>
NAME POSITIONS WITH THE FUNDS
---- ------------------------
<S> <C>
Dennis J. McDonnell.................. President
Peter W. Hegel....................... Vice President
Curtis W. Morell..................... Vice President and Chief Accounting Officer
Ronald A. Nyberg..................... Vice President and Secretary
Alan T. Sachtleben................... Vice President
Paul R. Wolkenberg................... Vice President
Edward C. Wood III................... Vice President and Chief Financial Officer
John L. Sullivan..................... Treasurer
Tanya M. Loden....................... Controller
Nicholas Dalmaso..................... Assistant Secretary
Huey P. Falgout, Jr.................. Assistant Secretary
Scott E. Martin...................... Assistant Secretary
Weston B. Wetherell.................. Assistant Secretary
Steven M. Hill....................... Assistant Treasurer
Robert Sullivan...................... Assistant Controller
</TABLE>
The officers of the Funds serve for one year or until their respective
successors are chosen and qualified. The Funds' officers receive no compensation
from the Funds, but are all officers of the Advisers, the Distributor, VKAC or
their affiliates and receive compensation in such capacities.
NON-ADVISORY AGREEMENTS
In connection with the Board of Trustee's review and approval of the New
Advisory Agreements as described above, the Board of Trustees reviewed and
approved certain other agreements with the Advisers, VKAC, the Distributor and
ACCESS Investor Services, Inc., the transfer agent for each Fund and an
affiliate of the Advisers ("ACCESS"). These agreements do not need to be voted
on by the shareholders of the Funds at the Meeting. The Advisers currently
anticipate that the services provided to the Funds pursuant to these agreements
will continue to be provided after the proposed New Advisory Agreements are
approved.
Distribution Agreement, Distribution Plan and Service Plan. Each Fund has
entered into a distribution agreement with the Distributor pursuant to which the
Distributor, as principal underwriter, purchases shares for resale to the
public, either directly or through securities dealers. In connection with their
consideration of the Merger, the Boards of Trustees considered the affects of
the Merger on the Distributor and the ability of the Distributor to continue
distributing the shares of the Funds. The new distribution agreement between
each Fund and the Distributor is substantially similar to the current
distribution agreement, except that the new distribution agreement designates
certain officers of the Distributor and the officers of the Fund to be essential
personnel with respect to the operations of the Fund.
25
<PAGE> 33
The Distributor may not make any material or significant personnel changes or
replace any essential personnel or materially change the responsibilities or
duties of any essential personnel prior to the first anniversary of the
agreement without first informing the Board of Trustees in a timely manner. In
addition, the Distributor may not distribute shares of any investment companies
other than the Funds without the prior approval of the Board of Trustees. The
Distributor may not change its name without the prior consent of the Board of
Trustees. Under each distribution agreement, each Fund paid the Distributor the
amount set forth Annex D hereto for its most recently completed fiscal year.
Each Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
Each Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may pay to the Distributor a portion of the Fund's average daily
net assets attributable to each class of shares in connection with distribution
of the respective class of shares and in connection with the provision of
ongoing services to shareholders of each class. The Distribution Plan and the
Service Plan are implemented through an agreement with the Distributor. The
Distributor has entered into sub-agreements with certain members of the NASD who
are acting as securities dealers, as well as NASD members or eligible
non-members who are acting as brokers or agents. The Funds have entered into
similar agreements with financial intermediaries who are acting as brokers that
may provide for their customers or clients certain services or assistance. The
agreements between the Distributor and certain brokers, dealers and agents and
the agreements between the Funds and certain financial intermediaries, which
agreements implement the Distribution Plan and the Service Plan, are referred to
herein collectively as the "Selling Agreements." Brokers, dealers and financial
intermediaries that have entered into Selling Agreements with the Distributor
and sell shares of the Fund are referred to herein as "financial
intermediaries."
Each Fund may spend an aggregate amount of up to 0.25% per year of the average
daily net assets attributable to the Class A Shares of the respective Fund
pursuant to the Distribution Plan and the Service Plan. From such amount, each
Fund may spend up to the full 0.25% per year of its average daily net assets
attributable to the Class A Shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by financial intermediaries and in connection with the
maintenance of shareholders' accounts. Each Fund pays the Distributor the lesser
of the balance of the 0.25% not paid to such financial intermediaries or the
amount of the Distributor's actual distribution related expenses.
Each Fund may spend up to 0.75% per year of its average daily net assets
attributable to its Class B Shares pursuant to the Distribution Plan. In
addition,
26
<PAGE> 34
each Fund may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class B Shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by financial intermediaries and in connection with the
maintenance of such shareholders' accounts.
Each Fund may spend up to 0.75% per year of the average daily net assets
attributable to its Class C Shares pursuant to the Distribution Plan. From such
amount, the Fund, or the Distributor as agent for the Fund, pays financial
intermediaries in connection with the distribution of the Class C Shares up to
0.75% of the Fund's average daily net assets attributable to Class C Shares
maintained in the Fund more than one year by such financial intermediary's
customers. In addition, each Fund may spend up to 0.25% per year of the
respective Fund's average daily net assets attributable to the Class C Shares
pursuant to the Service Plan in connection with the ongoing provision of
services to holders of such shares by the Distributor and by financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
Amounts payable to the Distributor with respect to the Class A Shares under
the Distribution Plan in a given year may not fully reimburse the Distributor
for its actual distribution-related expenses during such year. In such event,
with respect to the Class A Shares, there is no carryover of such reimbursement
obligations to succeeding years.
The Distributor's actual expenses with respect to Class B Shares and Class C
Shares sold subject to a contingent deferred sales charge ("CDSC Shares") for
any given year may exceed the amounts payable to the Distributor with respect to
the CDSC Shares under the Distribution Plan, the Service Plan and payments
received pursuant to the contingent deferred sales charge. In such event, with
respect to the CDSC Shares, any unreimbursed expenses will be carried forward
and paid by the Fund (up to the amount of the actual expenses incurred) in
future years so long as such Distribution Plan is in effect. Except as mandated
by applicable law, the Funds do not impose any limit with respect to the number
of years into the future that such unreimbursed distribution expenses may be
carried forward (on a Fund level basis). Because such expenses are accounted for
on a Fund-wide basis, a particular CDSC Share may be greater or less than the
amount of the initial commission (including carrying cost) paid by the
Distributor with respect to such CDSC Share.
The address of the Distributor is One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Following the Merger, the Advisers will be affiliates of Morgan Stanley & Co.
and DWR, each a registered broker-dealer. The amount of commissions paid by each
Fund to Morgan Stanley & Co. and DWR, if any, during its most recently completed
fiscal year is set forth on Annex D to this Proxy Statement.
27
<PAGE> 35
Transfer Agency Agreement. Each Fund has entered into a Transfer Agency
Agreement with ACCESS pursuant to which ACCESS provides transfer agency and
dividend disbursing services for such Fund. The address of ACCESS is 7501
Tiffany Springs Parkway, Kansas City, Missouri 64153. For its services, ACCESS
charges each Fund a fee that is determined in accordance with a cost allocation
model developed in conjunction with, and periodically reviewed by, Coopers &
Lybrand LLP. The model allocates among the Funds ACCESS's cost of providing the
Funds with transfer agency services, plus a profit margin approved by the Board
of Trustees. The allocation is based upon a number of factors including the
number of shareholder accounts per Fund, the number and type of shareholder
transactions experienced by each Fund and other factors. Under the Transfer
Agency Agreement, each Fund paid ACCESS the amount set forth at Annex D hereto
for its most recently completed fiscal year. In connection with their
consideration of the Merger, the Boards of Trustees considered the effects of
the Merger on ACCESS and the ability of ACCESS to continue to provide transfer
agency and dividend disbursing services to the Funds. The new Transfer Agency
Agreement between the Funds and ACCESS is substantially similar to the current
Transfer Agency Agreement, except that the new Transfer Agency Agreement
designates certain officers of the transfer agent and the officers of the Fund
to be essential personnel. ACCESS may not make any material or significant
personnel changes or replace any essential personnel or materially change their
duties and responsibilities prior to the first anniversary of the agreement
without first informing the Board of Trustees in a timely manner.
Fund Accounting Agreement. Each Fund has entered into an accounting services
agreement with [Advisory Corp.] pursuant to which [Advisory Corp.] provides
accounting services supplementary to those provided by the custodian of each VK
Fund's assets. The Board of Trustees of each VK Fund [recently approved] an
amendment to each VK Fund's accounting services agreement whereby Advisory Corp.
will assume responsibility for providing accounting services currently provided
by the custodian of each VK Fund's assets, and it is currently anticipated that
Advisory Corp. will assume responsibility for providing such services for each
VK Fund no later than May 1, 1997. Each AC Fund is party to the Fund Accounting
Agreement, and currently receives all accounting services through Advisory Corp.
Each Fund shares equally, together with the other mutual funds advised and
distributed by the Advisers and the Distributor, respectively, in 25% of the
cost of providing such services, with the remaining 75% of such cost being paid
by each Fund based proportionally upon their respective net assets. Under the
Fund Accounting Agreements, each Fund paid Advisory Corp. the amount set forth
at Annex D hereto for its most recently completed fiscal year.
Legal Services Agreement. Each VK Fund has entered into a Legal Services
Agreement pursuant to which VKAC provides legal services, including without
limitation maintenance of the VK Funds' minute books and records, preparation
28
<PAGE> 36
and oversight of the VK Funds' regulatory reports, and other information
provided to shareholders, as well as responding to day-to-day legal issues.
Payment by each VK Fund for such services is made on a cost basis for the
employment of personnel as well as the overhead and equipment necessary to
render such services. Under the Legal Services Agreement, each VK Fund paid VKAC
the amount set forth at Annex D hereto for its most recently completed fiscal
year. VKAC also provides legal services for the AC Funds, which do not currently
reimburse VKAC for the provision of such services. VKAC allocates 50% of its
costs equally to each Fund and the remaining 50% of such costs are allocated to
specific Funds based on specific time allocations, or in the event services are
attributable only to types of investment companies (i.e. closed-end or
open-end), the relative amount of time spent on each type of investment
companies and then further allocated among Funds of that type based upon their
respective net asset values.
SHAREHOLDER INFORMATION
The number of each Fund's outstanding Shares as of March 31, 1997 is set forth
at Annex C hereto. As of [ ], 1997, the "interested persons" of each
Fund, as a group, owned an aggregate of less than 5% of the outstanding shares
of each Fund, except for the Tax Free Money Fund, in which Mr. Robinson, a
trustee of such Fund, owns more than 5% of such Fund's outstanding shares.
The persons who, to the knowledge of the Funds, owned beneficially more than
5% of a class of a Fund's outstanding Shares as of [ ], 1997 are set
forth at Annex I hereto.
- ------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------
Morgan Stanley or its affiliates will pay the expense of preparing, printing
and mailing the enclosed form of proxy, the accompanying Notice and this Proxy
Statement. In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph, facsimile or personal
interview by representatives of the Funds, the Advisers or VKAC, or by dealers
or their representatives or by First Data Investor Services Group, a
solicitation firm located in Boston, Massachusetts that has been engaged to
assist in proxy solicitations at an estimated cost of approximately
$[ ].
- ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ------------------------------------------------------------------------------
As a general matter, each Fund does not hold regular annual meetings of
shareholders. Any shareholder who wishes to submit proposals for consideration
at a meeting of such shareholder's Fund should send such proposal to the
respective Fund at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. To be
considered for presentation at a shareholders' meeting, rules promulgated by the
SEC require that, among other things, a shareholder's proposal must be received
at the offices of
29
<PAGE> 37
such Fund a reasonable time before a solicitation is made. Timely submission of
a proposal does not necessarily mean that such proposal will be included.
- ------------------------------------------------------------------------------
GENERAL
- ------------------------------------------------------------------------------
Management of each Fund does not intend to present and does not have reason to
believe that others will present any other items of business at the Meeting.
However, if other matters are properly presented to the Meeting for a vote, the
proxies will be voted upon such matters in accordance with the judgment of the
persons acting under the proxies.
A list of shareholders of each Fund entitled to be present and vote at the
Meeting will be available at the offices of the respective Fund, One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, for inspection by any shareholder
during regular business hours for ten days prior to the date of the Meeting.
Failure of a quorum to be present at the Meeting for any Fund may necessitate
adjournment and may subject such Fund to additional expense.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
RONALD A. NYBERG,
Vice President and Secretary
April 21, 1997
30
<PAGE> 38
ANNEX A
VAN KAMPEN AMERICAN CAPITAL FUNDS
The following list sets forth the Van Kampen American Capital mutual funds
(the "Funds") participating in the Joint Special Meeting of Shareholders to be
held at the offices of Van Kampen American Capital, Inc., One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 on Wednesday, May 28, 1997, at 10:00 a.m. Those
Funds listed under the heading "AC Funds" have entered into an investment
advisory agreement with Van Kampen American Capital Asset Management, Inc. Those
Funds listed under the heading "VK Funds" have entered into an investment
advisory agreement with Van Kampen American Capital Investment Advisory Corp.
Each Fund is organized as a series of a Delaware business trust (the "Delaware
Trusts"), except that the Pennsylvania Fund is organized as a Pennsylvania trust
(the "Pennsylvania Trust") (collectively, the Delaware Trusts and the
Pennsylvania Trust are referred to herein as the "Trusts"). The name in the left
hand column below is the legal name for each Trust and each Fund and the name in
the right hand column below is the abbreviated name as used in the Proxy
Statement. The Fund's abbreviated name and the Trust's abbreviated name for
purposes of this proxy are the same unless such Trust has multiple series or has
names of series that differ from the Trust name.
A-1
<PAGE> 39
AC FUNDS
<TABLE>
<CAPTION>
LEGAL NAME ABBREVIATED NAME
---------- ----------------
<S> <C>
Van Kampen American Capital Comstock Fund Comstock Fund
Van Kampen American Capital Corporate Bond Fund Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund Emerging Growth Fund
Van Kampen American Capital Enterprise Fund Enterprise Fund
Van Kampen American Capital Equity Income Fund Equity Income Fund
Van Kampen American Capital Government Securities Government Securities Fund
Fund
Van Kampen American Capital Government Target Fund Government Target Fund
Van Kampen American Capital Growth and Income Fund Growth and Income Fund
Van Kampen American Capital Life Investment Trust: Life Investment Trust
Asset Allocation Portfolio LIT Asset Allocation Portfolio
Domestic Income Portfolio LIT Domestic Income Portfolio
Emerging Growth Portfolio LIT Emerging Growth Portfolio
Enterprise Portfolio LIT Enterprise Portfolio
Growth and Income Portfolio LIT Growth and Income Portfolio
Government Portfolio LIT Government Portfolio
Money Market Portfolio LIT Money Market Portfolio
Real Estate Securities Portfolio LIT Real Estate Portfolio
Van Kampen American Capital Limited Maturity Limited Maturity Government
Government Fund Fund
Van Kampen American Capital Pace Fund Pace Fund
Van Kampen American Capital Real Estate Securities Real Estate Fund
Fund
Van Kampen American Capital Reserve Fund Reserve Fund
Van Kampen American Capital Small Capitalization Small Capitalization Fund
Fund
Van Kampen American Capital U.S. Government Trust U.S. Government Trust for
for Income Income
</TABLE>
A-2
<PAGE> 40
VK FUNDS
<TABLE>
<CAPTION>
LEGAL NAME ABBREVIATED NAME
---------- ----------------
<S> <C>
Van Kampen American Capital U.S. Government Trust: U.S. Government Trust
Van Kampen American Capital U.S. Government U.S. Government Fund
Fund
Van Kampen American Capital Tax Free Trust: Tax Free Trust
Van Kampen American Capital Insured Tax Free Insured Fund
Income Fund
Van Kampen American Capital Tax Free High Tax Free High Income Fund
Income Fund
Van Kampen American Capital California Insured California Fund
Tax Free Fund
Van Kampen American Capital Municipal Income Municipal Income Fund
Fund
Van Kampen American Capital Intermediate Term Intermediate Term Municipal
Municipal Income Fund Fund
Van Kampen American Capital Florida Insured Tax Florida Fund
Free Income Fund
Van Kampen American Capital New Jersey Tax Free New Jersey Fund
Income Fund
Van Kampen American Capital New York Tax Free New York Fund
Income Fund
Van Kampen American Capital Trust: VKAC Trust
Van Kampen American Capital High Yield Fund High Yield Fund
Van Kampen American Capital Short-Term Global Short-Term Global Fund
Income Fund
Van Kampen American Capital Strategic Income Strategic Income Fund
Fund
Van Kampen American Capital Equity Trust: Equity Trust
Van Kampen American Capital Utility Fund Utility Fund
Van Kampen American Capital Value Fund Value Fund
Van Kampen American Capital Great American Great American Companies
Companies Fund Fund
Van Kampen American Capital Growth Fund Growth Fund
Van Kampen American Capital Prospector Fund Prospector Fund
Van Kampen American Capital Aggressive Growth Aggressive Growth Fund
Fund
Van Kampen American Capital Pennsylvania Tax Pennsylvania Fund
Free Income Fund
Van Kampen American Capital Tax Free Money Fund Tax Free Money Fund
Van Kampen American Capital Foreign Securities Foreign Securities Fund
Fund
</TABLE>
A-3
<PAGE> 41
ANNEX B-1
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this [DATE], by and between VAN KAMPEN
AMERICAN CAPITAL FUND, a Delaware business trust
(hereinafter referred to as the "FUND"), and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC., a Delaware corporation (hereinafter referred to as the
"ADVISER").
The FUND and the ADVISER agree as follows:
(1) SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the control, direction and supervision of the FUND's
Trustees and in conformity with applicable laws, the FUND's Agreement and
Declaration of Trust ("Declaration of Trust"), By-laws, registration statements,
prospectus and stated investment objectives, policies and restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by
way of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing
of routine legal services except for services provided by outside counsel to
the FUND selected by the Trustees, and the supervision of the FUND's Treasurer
and the personnel working under his direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND trustee and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution
B1-1
<PAGE> 42
available and shall maintain records adequate to demonstrate compliance with
this requirement. Subject to prior authorization by the FUND's Trustees of
appropriate policies and procedures, the ADVISER may, to the extent authorized
by law, cause the FUND to pay a broker or dealer that provides brokerage and
research services to the ADVISER an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. In the event
of such authorization and to the extent authorized by law, the ADVISER shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its trustees and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office space,
facilities, and equipment used by the Treasurer and such personnel in the
performance of their normal duties for the FUND which consist of maintenance of
the accounts, books and other documents which constitute the record forming the
basis for the FUND's financial statements, preparation of such financial
statements and other FUND documents and reports of a financial nature required
by federal and state laws, and participation in the production of the FUND's
registration statement, prospectuses, proxy solicitation materials and reports
to shareholders; (v) fees of outside counsel to and of independent accountants
of the FUND selected by the Trustees; (vi) custodian, registrar and shareholder
service agent fees and expenses; (vii) expenses related to the repurchase or
redemption of its shares including expenses related to a program of periodic
repurchases or redemptions; (viii) expenses related to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto; (ix)
fees and related expenses of registering and qualifying the FUND and its shares
for distribution under state and federal securities laws; (x) expenses of
printing and mailing of registration statements, prospectuses, reports, notices
and proxy solicitation materials of the FUND; (xi) all other expenses incidental
to holding meetings of the FUND's shareholders including proxy solicitations
therefor; (xii) expenses for servicing shareholder accounts; (xiii) insurance
premiums for fidelity coverage and errors and omissions insurance; (xiv) dues
for the FUND's membership in trade associations approved by the Trustees; and
(xv) such nonrecurring expenses as may arise, including those associated with
actions, suits or proceedings to which the FUND is a party and the legal
obligation which the FUND may have to indemnify its officers and trustees with
respect thereto. To the extent that any of the foregoing expenses are allocated
B1-2
<PAGE> 43
between the FUND and any other party, such allocations shall be pursuant to
methods approved by the Trustees.
For a period of one year commencing on the effective date of this Agreement,
the ADVISER and the FUND agree that the retention of (i) the chief executive
officer, president, chief financial officer and secretary of the ADVISER and
(ii) each director, officer and employee of the ADVISER or any of its Affiliates
(as defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
who serves as an officer of the FUND each person referred to in (i) or (ii)
hereinafter being referred to as an "Essential Person"), in his or her current
capacities, is in the best interest of the FUND and the FUND'S shareholders. In
connection with the ADVISER'S acceptance of employment hereunder, the ADVISER
hereby agrees and covenants for itself and on behalf of its Affiliates that
neither the ADVISER nor any of its Affiliates shall make any material or
significant personnel changes or replace or seek to replace any Essential Person
or cause to be replaced any Essential Person, in each case without first
informing the Board of Trustees of the FUND in a timely manner. In addition,
neither the ADVISER nor any Affiliate of the ADVISER shall change or seek to
change or cause to be changed, in any material respect, the duties and
responsibilities of any Essential Person, in each case without first informing
the Board of Trustees of the FUND in a timely manner.
(2) ROLE OF ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (the "1940
Act"), any of the shareholders, trustees, officers and employees of the FUND may
be a shareholder, trustee, director, officer or employee of, or be otherwise
interested in, the ADVISER, and in any person controlled by or under common
control with the ADVISER, and the ADVISER, and any person controlled by or under
common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, neither the ADVISER nor any subadviser shall be subject to
liability to the FUND, or to any shareholder of the FUND, for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
B1-3
<PAGE> 44
(3) COMPENSATION PAYABLE TO ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed at
the following annual rate:
[advisory fee schedule]
Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month calculated in the
manner provided in the FUND's Declaration of Trust. Such fee shall be payable
for each calendar month as soon as practicable after the end of that month.
The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall
be reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the FUND, less any direct expenses
incurred by such person, in connection with obtaining such commissions, fees,
brokerage or similar payments. The ADVISER shall use its best efforts to
recapture all available tender offer solicitation fees and exchange offer fees
in connection with the FUND's portfolio transactions and shall advise the
Trustees of any other commissions, fees, brokerage or similar payments which may
be possible for the ADVISER or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc. to receive in connection with the FUND's
portfolio transactions or other arrangements which may benefit the FUND.
In the event that the ordinary business expenses of the FUND for any fiscal
year should exceed the most restrictive expense limitation applicable in the
states where the FUND's shares are qualified for sale, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess. The
Adviser's compensation shall be so reduced by a reduction or a refund thereof,
at the time such compensation is payable after the end of each calendar month
during such fiscal year of the FUND, and if such amount should exceed such
monthly compensation, the ADVISER shall pay the FUND an amount sufficient to
make up the deficiency, subject to readjustment during the FUND's fiscal year.
For purposes of this paragraph, all ordinary business expenses of the FUND shall
include the investment advisory fee and other operating expenses paid by the
FUND except (i) for interest and taxes; (ii) brokerage commissions; (iii) as a
result of litigation in connection with a suit involving a claim for recovery by
the FUND; (iv) as a result of litigation involving a defense against a liability
asserted against the FUND, provided that, if the ADVISER made the decision or
took the actions which resulted in such claim, it acted in good faith without
negligence or misconduct; (v) any indemnification paid by the FUND to its
officers and trustees and the ADVISER in accordance with applicable state and
federal laws as a result
B1-4
<PAGE> 45
of such litigation; and (vi) amounts paid to Van Kampen American Capital
Distributors, Inc., the distributor of the FUND's shares, in connection with a
distribution plan adopted by the FUND's Trustees pursuant to Rule 12b-1 under
the Investment Company Act of 1940.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4) BOOKS AND RECORDS
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any of
such records upon the FUND's request. The ADVISER further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the Act.
(5) DURATION OF AGREEMENT
This Agreement shall become effective of the date hereof, and shall remain in
full force until May 31, 1999 unless sooner terminated as hereinafter provided.
This Agreement shall continue in force from year to year thereafter, but only so
long as such continuance is approved at least annually by the vote of a majority
of the FUND's Trustees who are not parties to this Agreement or interested
persons of any such parties, cast in person at a meeting called for the purpose
of voting on such approval, and by a vote of a majority of the FUND's Trustees
or a majority of the FUND's outstanding voting securities.
This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the FUND's Trustees, by vote of a
majority of the FUND's outstanding voting securities, or by the ADVISER, on 60
days' written notice, or upon such shorter notice as may be mutually agreed
upon. Such termination shall be without payment of any penalty.
(6) MISCELLANEOUS PROVISIONS
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the 1940 Act and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted to either the ADVISER or the FUND by the Securities and Exchange
Commission (the "Commission"), or such interpretive positions as may be taken by
the Commission or its staff, under the 1940 Act, and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the Rules and Regulations thereunder.
B1-5
<PAGE> 46
The execution of this Agreement has been authorized by the FUND's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Fund or the
Trustees of the FUND as Trustees and not individually and that the obligations
of this Agreement are not binding upon any of the Trustees, officers or
shareholders of the FUND individually but are binding only upon the assets and
property of the FUND. A Certificate of Trust in respect of the Fund is on file
with the Secretary of State of Delaware.
In connection with its employment hereunder, the ADVISER hereby agrees and
covenants not to change its name without the prior consent of the Board of
Trustees of the FUND.
The parties hereto each have caused this Agreement to be signed in duplicate
on its behalf by its duly authorized officer on the above date.
VAN KAMPEN
AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
VAN KAMPEN
AMERICAN CAPITAL
[ ] FUND
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
B1-6
<PAGE> 47
ANNEX B-2
FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT, dated as of , 1997 (the
"Agreement"), by and between VAN KAMPEN AMERICAN CAPITAL , a
Delaware business trust (the "Trust"), on behalf of its series, VAN KAMPEN
AMERICAN CAPITAL FUND (the "Fund") and VAN KAMPEN AMERICAN CAPITAL
(the "Adviser"), a Delaware corporation.
1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and conditions set
forth herein, the Fund hereby employs the Adviser to act as the investment
adviser for and to manage the investment and reinvestment of the assets of the
Fund in accordance with the Fund's investment objective and policies and
limitations, and to administer its affairs to the extent requested by, and
subject to the review and supervision of, the Board of Trustees of the Fund for
the period and upon the terms herein set forth. The investment of funds shall be
subject to all applicable restrictions of applicable law and of the Declaration
of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of
the Fund as may from time to time be in force and delivered or made available to
the Adviser.
(b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to the Board of Trustees of the Fund, and to permit any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
(c) ESSENTIAL PERSONNEL. For a period of one year commencing on the effective
date of this Agreement, the Adviser and the Fund agree that the retention of (i)
the chief executive officer, president, chief financial officer and secretary of
the Adviser and (ii) each director, officer and employee of the Adviser or any
of its Affiliates (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) who serves as an officer of the Fund (each person referred to
in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his
or her current capacities, is in the best interest of the Fund and the Fund's
shareholders. In
B2-1
<PAGE> 48
connection with the Adviser's acceptance of employment hereunder, the Adviser
hereby agrees and covenants for itself and on behalf of its Affiliates that
neither the Adviser nor any of its Affiliates shall make any material or
significant personnel changes or replace or seek to replace any Essential Person
or cause to be replaced any Essential Person, in each case without first
informing the Board of Trustees of the Fund in a timely manner. In addition,
neither the Adviser nor any Affiliate of the Adviser shall change or seek to
change or cause to be changed, in any material respect, the duties and
responsibilities of any Essential Person, in each case without first informing
the Board of Trustees of the Fund in a timely manner.
(d) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an independent
contractor under this Agreement and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed as agent of the Fund.
(e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund under
this Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. (a) FEE. For the services and facilities described in Section 1, the Fund
will accrue daily and pay to the Adviser at the end of each calendar month an
investment management fee computed based on a fee rate (expressed as a
percentage per annum) applied to the average daily net assets of the Fund as
follows:
<TABLE>
<CAPTION>
FEE PERCENT
PER ANNUM OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
------------- -------------
<S> <C>
</TABLE>
(b) EXPENSE LIMITATION. The Adviser's compensation for any fiscal year of the
Fund shall be reduced by the amount, if any, by which the Fund's expense for
such fiscal year exceeds the most restrictive applicable expense limitation in
any jurisdiction in which the Fund's shares are qualified for offer and sale, as
such limitations set forth in the most recent notice thereof furnished by the
Adviser to the Fund. For purposes of this paragraph there shall be excluded from
computation of the Fund's expenses any amount borne directly or indirectly by
the Fund which is permitted to be excluded from the computation of such
limitation by such statute or regulatory authority. If for any month expenses of
the Fund properly included in such calculation exceed 1/12 of the amount
permitted annually by the most restrictive applicable expense limitation, the
payment to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the total net expense
for the month will not exceed 1/12 of such
B2-2
<PAGE> 49
amount. As of the end of the Fund's fiscal year, however, the computations and
payments shall be readjusted so that the aggregate compensation payable to the
Adviser for the year is equal to the fee set forth in subsection (a) of this
Section 2, diminished to the extent necessary so that the expenses for the year
do not exceed those permitted by the applicable expense limitation.
(c) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund shall be
calculated as of on each day the Exchange is open for trading or
such other time or times as the trustees may determine in accordance with the
provisions of applicable law and the Declaration of Trust and By-Laws of the
Trust, and resolutions of the Board of Trustees of the Fund as from time to time
in force. For the purpose of the foregoing computations, on each such day when
net asset value is not calculated, the net asset value of a share of beneficial
interest of the Fund shall be deemed to be the net asset value of such share as
of the close of business of the last day on which such calculation was made.
(d) PRORATION. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
3. EXPENSES. In addition to the fee of the Adviser, the Fund shall assume and
pay any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian and for calculating the net asset value of the
Fund as provided above. The Adviser shall not be required to pay, and the Fund
shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Adviser and other than those who are interested persons of the distributor of
the Fund but not of the Adviser, if the distributor has agreed to pay such
compensation), charges and expenses of independent accountants, of legal counsel
and of any transfer or dividend disbursing agent, costs of acquiring and
disposing of portfolio securities, cost of listing shares of the New York Stock
Exchange or other exchange, interest (if any) on obligations incurred by the
Fund, costs of share certificates, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
shareholders, costs of registering shares of the Fund under the federal
securities laws, miscellaneous expenses and all taxes and fees to federal, state
or other governmental agencies on account of the registration of securities
issued by the Fund, filing of corporate documents or otherwise. The Fund shall
not pay or incur any obligation for any management or administrative expenses
for which the Fund intends to seek reimbursement from the Adviser without first
obtaining the written approval of the Adviser. The Adviser shall arrange, if
desired by the Fund, for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of the Fund if duly
elected or appointed to such
B2-3
<PAGE> 50
positions and subject to their individual consent and to any limitations imposed
by the law.
4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it is
understood that trustees, officers, shareholders and agents of the Fund are or
may be interested in the Adviser as directors, officers, shareholders, agents or
otherwise and that the directors, officers, shareholders and agents of the
Adviser may be interested in the Fund as trustees, officers, shareholders,
agents or otherwise.
5. LIABILITY. The Adviser shall not be liable for any error of judgment or of
law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) TERM. This Agreement shall become effective on the date hereof and
shall remain in full force until May 31, 1999 unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only for so long as such continuance is specifically approved as
least annually, in the manner required by the 1940 Act.
(b) TERMINATION. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time without the payment
of any penalty by the Fund or by the Adviser on sixty (60) days written notice
to the other party. The Fund may effect termination by action of the Board of
Trustees or by vote of a majority of the outstanding shares of stock of the
Fund, accompanied by appropriate notice. This Agreement may be terminated at any
time without the payment of any penalty and without advance notice by the Board
of Trustees or by vote of a majority of the outstanding shares of the Fund in
the event that it shall have been established by a court of competent
jurisdiction that the Adviser or any officer or director of the Adviser has
taken any action which results in a breach of the covenants of the Adviser set
forth herein.
(c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not affect
the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
thereby affected.
8. NOTICES. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
B2-4
<PAGE> 51
9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided by
Section 8.1 of the Declaration of Trust of the Trust, (i) this Agreement has
been executed by officers of the Trust in their capacity as officers, and not
individually, and (ii) the shareholders, trustees, officers, employees and other
agents of the Trust and the Fund shall not personally be bound by or liable
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder and that any such resort may
only be had upon the assets and property of the Fund.
10. GOVERNING LAW. All questions concerning the validity, meaning and effect
of this Agreement shall be determined in accordance with the laws (without
giving effect to the conflict-of-law principles thereof) of the State of
Delaware applicable to contracts made and to be performed in that state.
11. NAME. In connection with its employment hereunder, the Adviser hereby
agrees and covenants not to change its name without the prior consent of the
Board of Trustees of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN AMERICAN
CAPITAL
on behalf of its series
---------------
By:
--------------------------------
Name:
Title:
VAN KAMPEN AMERICAN
CAPITAL [ ] FUND
By:
--------------------------------
Name:
Title:
B2-5
<PAGE> 52
ANNEX C
The table below sets forth, for each investment company advised by Advisory
Corp. and Management, Inc., such fund's net assets and the rate at which it
compensates Advisory Corp. and Management, Inc. for investment advisory
services. Funds for which Advisory Corp. has waived or reduced its compensation
are marked by an "*". There can be no assurance that Advisory Corp. will
continue such waiver or reduction.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON SHARES PREFERRED SHARES
OUTSTANDING OUTSTANDING NET ASSETS
AS OF AS OF AS OF ANNUAL
MARCH 31, MARCH 31, MARCH 31, ADVISORY FEE
FUNDS 1997 1997 1997 SCHEDULE
----- ------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
I. ADVISORY AGREEMENTS BETWEEN ADVISORY CORP. AND
THE CLOSED-END FUNDS
A. Investment Grade Municipal Trust............. 250 $ 74,737,632 .600%
Trust for Insured Municipals................. 1,800 $246,247,231
Municipal Income Trust....................... 330 $441,595,824
California Municipal Trust................... 400 $ 52,733,080
B. Trust for Investment Grade Municipals........ 5,300 $ .650%
Trust for Investment Grade California
Municipals.................................. 900 $
Trust for Investment Grade New York
Municipals.................................. 1,200 $
Trust for Investment Grade Pennsylvania
Municipals.................................. 1,400 $
Trust for Investment Grade Florida
Municipals.................................. 800 $
Trust for Investment Grade New Jersey
Municipals.................................. 800 $
Municipal Opportunity Trust.................. 3,000 $
Advantage Municipal Income Trust............. 3,800 $
Advantage Pennsylvania Municipal Income
Trust....................................... 800 $
New Jersey Value Municipal Income Trust...... 500 $
Ohio Value Municipal Income Trust............ 300 $
Massachusetts Value Municipal Income Trust... 500 $
New York Value Municipal Income Trust........ 800 $
Strategic Sector Municipal Trust............. 1,900 $
</TABLE>
C-1
<PAGE> 53
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON SHARES PREFERRED SHARES
OUTSTANDING OUTSTANDING NET ASSETS
AS OF AS OF AS OF ANNUAL
MARCH 31, MARCH 31, MARCH 31, ADVISORY FEE
FUNDS 1997 1997 1997 SCHEDULE
----- ------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
California Value Municipal Income Trust...... 1,200 $
Pennsylvania Value Municipal Income Trust.... 900 $
Value Municipal Income Trust................. 4,500 $
Florida Municipal Opportunity Trust.......... 320 $
Municipal Opportunity Trust II............... 2,300 $
Advantage Municipal Income Trust II.......... 1,600 $
C. Municipal Trust.............................. 6,000 $ .700%
California Quality Municipal Trust........... 1,500 $
New York Quality Municipal Trust............. 900 $
Pennsylvania Quality Municipal Trust......... 1,300 $
Florida Quality Municipal Trust.............. 1,000 $
Ohio Quality Municipal Trust................. 700 $
Select Sector Municipal Trust................ 1,360 $
D. VIT or Intermediate Term High Income Trust... 588 $ .750%
VLT or Limited Term High Income Trust........ 900 $
E. Prime Rate Income Trust...................... N/A $ First $4.0 Billion
.950%
Next $3.5 Billion .900%
Next $2.5 Billion .875%
Over $10.0 Billion
.850%
II. ADVISORY AGREEMENTS BETWEEN ADVISORY CORP. AND OTHER INVESTMENT COMPANIES
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF ANNUAL
MARCH 31, MARCH 31, ADVISORY FEE
FUNDS 1997 1997 SCHEDULE
----- -------------- -------------- -----------------------
<S> <C> <C> <C> <C> <C>
A. Van Kampen American Capital California Insured Tax Free
Fund[*]..................................................... $ First $100 Million
.500%
Next $150 Million .450%
Next $250 Million .425%
Over $500 Million .400%
</TABLE>
C-2
<PAGE> 54
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF ANNUAL
MARCH 31, MARCH 31, ADVISORY FEE
FUNDS 1997 1997 SCHEDULE
----- ----------- ---------- ------------
<S> <C> <C> <C> <C>
B. Van Kampen American Capital Insured Tax Free Income Fund.... $ First $500 Million
.525%
$ Next $500 Million .500%
$ Next $500 Million .475%
$ Over $1.5 Billion .450%
C. Van Kampen American Capital Tax Free High Income Fund....... $ First $500 Million
.500%
Van Kampen American Capital Municipal Income Fund*.......... $ Over $500 Million .450%
Van Kampen American Capital Intermediate Term Municipal
Income Fund*...............................................
Van Kampen American Capital Florida Insured Tax Free Income
Fund*......................................................
D. Van Kampen American Capital New Jersey Tax Free Income
Fund*...................................................... $ First $500 Million
.600%
Van Kampen American Capital New York Tax Free Income
Fund*...................................................... $ Over $500 Million .500%
Van Kampen American Capital Pennsylvania Tax Free Income
Fund.......................................................
E. Van Kampen American Capital High Yield Fund*................ $ First $500 Million
.750%
Over $500 Million .650%
F. Van Kampen American Capital Short-Term Global Income Fund... $ .550%
G. Van Kampen American Capital Strategic Income Fund........... $ First $500 Million
.750%
Van Kampen American Capital Growth Fund..................... 6,483,066 $ Next $500 Million .700%
Van Kampen American Capital Value Fund...................... 104,821 $ Over $1 Billion .650%
Van Kampen American Capital Aggressive Growth Fund.......... 18,325,585 $
H. Van Kampen American Capital Utility Fund.................... $ First $500 Million
.650%
Next $500 Million .600%
Over $1 Billion .550%
</TABLE>
C-3
<PAGE> 55
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF ANNUAL
MARCH 31, MARCH 31, ADVISORY FEE
FUNDS 1997 1997 SCHEDULE
----- ----------- ---------- ------------
<S> <C> <C> <C> <C>
I. Van Kampen American Capital Balanced Fund*.................. $ First $500 Million
.700%
Over $500 Million .650%
J. U.S. Government Fund........................................ $ First $500 Million
.550%
Next $500 Million .525%
Next $2 Billion .500%
Next $2 Billion .475%
Next $2 Billion .450%
Next $2 Billion .425%
Next $2 Billion .400%
K. Tax Free Money Fund*........................................ $ First $500 Million
.500%
Next $500 Million .475%
Next $500 Million .425%
Over $1.5 Billion .375%
L. Great American Companies Fund............................... 101,964 $ First $500 Million
.700%
Prospector Fund............................................. 104,019 $ Next $500 Million .650%
M. Foreign Securities Fund..................................... 96,305 $ N/A
III. ADVISORY AGREEMENTS BETWEEN VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. AND THE EXPLORER FUNDS
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF ANNUAL
MARCH 31, MARCH 31, ADVISORY FEE
FUNDS 1997 1997 SCHEDULE
----- -------------- -------------- -----------------------
<S> <C> <C> <C> <C>
A. Active Core Fund............................................ 568,118 $ First $1 Billion .300%
Limited Duration Fund....................................... 819,333 $ Over $1 Billion .250%
</TABLE>
C-4
<PAGE> 56
ANNEX D
The following table sets forth amounts paid by each Fund during its most
recently completed fiscal year pursuant to its investment advisory, fund
accounting, transfer agency, legal services and distribution agreements and
brokerage commissions to Morgan Stanley & Co., Dean Witter Discover and their
affiliates.
<TABLE>
<CAPTION>
BROKERAGE
COMMISSIONS
PAID TO MORGAN
FUND TRANSFER LEGAL STANLEY & CO.
ADVISORY ACCOUNTING AGENCY SERVICES DISTRIBUTION AND DEAN
FUND EXPENSES EXPENSES EXPENSES EXPENSES EXPENSES WITTER DISCOVER
---- -------- ---------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund......... $
California Fund................
Comstock Fund..................
Corporate Bond Fund............
Emerging Growth Fund...........
Enterprise Fund................
Equity Income Fund.............
Florida Fund...................
Foreign Securities Fund........
Government Securities..........
Government Target Fund.........
Great American Companies
Fund..........................
Growth Fund....................
Growth and Income Fund.........
High Yield Fund................
Insured Fund...................
Intermediate Term Municipal
Fund..........................
LIT Asset Allocation Fund......
LIT Domestic Income Fund.......
LIT Emerging Growth Fund.......
LIT Enterprise Fund............
LIT Government Fund............
</TABLE>
D-1
<PAGE> 57
<TABLE>
<CAPTION>
BROKERAGE
FUND TRANSFER LEGAL COMMISSIONS
ADVISORY ACCOUNTING AGENCY SERVICES DISTRIBUTION PAID TO MORGAN
FUND EXPENSES EXPENSES EXPENSES EXPENSES EXPENSES STANLEY & CO.
---- -------- ---------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
LIT Growth and Income Fund......
LIT Money Market Fund...........
LIT Real Estate Fund............
Limited Maturity Government
Fund...........................
Municipal Income Fund...........
New Jersey Fund.................
New York Fund...................
Pace Fund.......................
Pennsylvania Fund...............
Prospector Fund.................
Real Estate Fund................
Reserve Fund....................
Short-Term Global Fund..........
Small Capitalization Fund.......
Strategic Income Fund...........
Tax Free High Income Fund.......
Tax Free Money Fund.............
Utility Fund....................
U.S. Government Fund............
U.S. Government Trust for
Income.........................
Value Fund......................
</TABLE>
D-2
<PAGE> 58
ANNEX E
1996 AGGREGATE COMPENSATION FROM EACH FUND
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
FUND NAME YEAR-END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- -------- -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. 6/30 $ $ $ $ $ $ $ $ $
California Fund.................... 12/31
Comstock Fund...................... 12/31
Corporate Bond Fund................ 8/31
Emerging Growth Fund............... 8/31
Enterprise Fund.................... 12/31
Equity Income Fund................. 12/31
Florida Fund....................... 12/31
Foreign Securities Fund............ 12/31
Government Securities.............. 12/31
Government Target Fund............. 8/31
Great American Companies Fund...... 6/30
Growth Fund........................ 6/30
Growth and Income Fund............. 11/30
High Yield Fund.................... 6/30
Insured Fund....................... 12/31
Intermediate Term Municipal Fund... 12/31
LIT Asset Allocation Fund.......... 12/31
LIT Domestic Income Fund........... 12/31
LIT Emerging Growth Fund........... 12/31
LIT Enterprise Fund................ 12/31
LIT Government Fund................ 12/31
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. $ $ $ $ $
California Fund....................
Comstock Fund......................
Corporate Bond Fund................
Emerging Growth Fund...............
Enterprise Fund....................
Equity Income Fund.................
Florida Fund.......................
Foreign Securities Fund............
Government Securities..............
Government Target Fund.............
Great American Companies Fund......
Growth Fund........................
Growth and Income Fund.............
High Yield Fund....................
Insured Fund.......................
Intermediate Term Municipal Fund...
LIT Asset Allocation Fund..........
LIT Domestic Income Fund...........
LIT Emerging Growth Fund...........
LIT Enterprise Fund................
LIT Government Fund................
</TABLE>
E-1
<PAGE> 59
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
FUND NAME YEAR-END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- -------- -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIT Growth and Income Fund......... 12/31
LIT Money Market Fund.............. 12/31
LIT Real Estate Fund............... 12/31
Limited Maturity Government Fund... 12/31
Municipal Income Fund.............. 12/31
New Jersey Fund.................... 12/31
New York Fund...................... 12/31
Pace Fund.......................... 6/30
Pennsylvania Fund.................. 12/31
Prospector Fund.................... 6/30
Real Estate Fund................... 12/31
Reserve Fund....................... 5/31
Short-Term Global Fund............. 6/30
Small Capitalization Fund.......... 10/31
Strategic Income Fund.............. 6/30
Tax Free High Income Fund.......... 12/31
Tax Free Money Fund................ 6/30
Utility Fund....................... 6/30
U.S. Government Fund............... 12/31
U.S. Government Trust for Income... 9/30
Value Fund......................... 6/30
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
LIT Growth and Income Fund.........
LIT Money Market Fund..............
LIT Real Estate Fund...............
Limited Maturity Government Fund...
Municipal Income Fund..............
New Jersey Fund....................
New York Fund......................
Pace Fund..........................
Pennsylvania Fund..................
Prospector Fund....................
Real Estate Fund...................
Reserve Fund.......................
Short-Term Global Fund.............
Small Capitalization Fund..........
Strategic Income Fund..............
Tax Free High Income Fund..........
Tax Free Money Fund................
Utility Fund.......................
U.S. Government Fund...............
U.S. Government Trust for Income...
Value Fund.........................
</TABLE>
E-2
<PAGE> 60
ANNEX F
1996 AGGREGATE COMPENSATION DEFERRED FOR EACH FUND
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
YEAR
FUND NAME END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- ------ -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. 6/30 $ $ $ $ $ $ $ $ $
California Fund.................... 12/31
Comstock Fund...................... 12/31
Corporate Bond Fund................ 8/31
Emerging Growth Fund............... 8/31
Enterprise Fund.................... 12/31
Equity Income Fund................. 12/31
Florida Fund....................... 12/31
Foreign Securities Fund............ 12/31
Government Securities.............. 12/31
Government Target Fund............. 8/31
Great American Companies Fund...... 6/30
Growth Fund........................ 6/30
Growth and Income Fund............. 11/30
High Yield Fund.................... 6/30
Insured Fund....................... 12/31
Intermediate Term Municipal Fund... 12/31
LIT Asset Allocation Fund.......... 12/31
LIT Domestic Income Fund........... 12/31
LIT Emerging Growth Fund........... 12/31
LIT Enterprise Fund................ 12/31
LIT Government Fund................ 12/31
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. $ $ $ $ $
California Fund....................
Comstock Fund......................
Corporate Bond Fund................
Emerging Growth Fund...............
Enterprise Fund....................
Equity Income Fund.................
Florida Fund.......................
Foreign Securities Fund............
Government Securities..............
Government Target Fund.............
Great American Companies Fund......
Growth Fund........................
Growth and Income Fund.............
High Yield Fund....................
Insured Fund.......................
Intermediate Term Municipal Fund...
LIT Asset Allocation Fund..........
LIT Domestic Income Fund...........
LIT Emerging Growth Fund...........
LIT Enterprise Fund................
LIT Government Fund................
</TABLE>
F-1
<PAGE> 61
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
FUND NAME YEAR-END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- -------- -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIT Growth and Income Fund......... 12/31
LIT Money Market Fund.............. 12/31
LIT Real Estate Fund............... 12/31
Limited Maturity Government Fund... 12/31
Municipal Income Fund.............. 12/31
New Jersey Fund.................... 12/31
New York Fund...................... 12/31
Pace Fund.......................... 6/30
Pennsylvania Fund.................. 12/31
Prospector Fund.................... 6/30
Real Estate Fund................... 12/31
Reserve Fund....................... 5/31
Short-Term Global Fund............. 6/30
Small Capitalization Fund.......... 10/31
Strategic Income Fund.............. 6/30
Tax Free High Income Fund.......... 12/31
Tax Free Money Fund................ 6/30
Utility Fund....................... 6/30
U.S. Government Fund............... 12/31
U.S. Government Trust for Income... 9/30
Value Fund......................... 6/30
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
LIT Growth and Income Fund.........
LIT Money Market Fund..............
LIT Real Estate Fund...............
Limited Maturity Government Fund...
Municipal Income Fund..............
New Jersey Fund....................
New York Fund......................
Pace Fund..........................
Pennsylvania Fund..................
Prospector Fund....................
Real Estate Fund...................
Reserve Fund.......................
Short-Term Global Fund.............
Small Capitalization Fund..........
Strategic Income Fund..............
Tax Free High Income Fund..........
Tax Free Money Fund................
Utility Fund.......................
U.S. Government Fund...............
U.S. Government Trust for Income...
Value Fund.........................
</TABLE>
F-2
<PAGE> 62
ANNEX G
CUMULATIVE COMPENSATION DEFERRED (PLUS INTEREST) FROM EACH FUND
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
FUND NAME YEAR-END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- -------- -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. 6/30 $ $ $ $ $ $ $ $ $
California Fund.................... 12/31
Comstock Fund...................... 12/31
Corporate Bond Fund................ 8/31
Emerging Growth Fund............... 8/31
Enterprise Fund.................... 12/31
Equity Income Fund................. 12/31
Florida Fund....................... 12/31
Foreign Securities Fund............ 12/31
Government Securities.............. 12/31
Government Target Fund............. 8/31
Great American Companies Fund...... 6/30
Growth Fund........................ 6/30
Growth and Income Fund............. 11/30
High Yield Fund.................... 6/30
Insured Fund....................... 12/31
Intermediate Term Municipal Fund... 12/31
LIT Asset Allocation Fund.......... 12/31
LIT Domestic Income Fund........... 12/31
LIT Emerging Growth Fund........... 12/31
LIT Enterprise Fund................ 12/31
LIT Government Fund................ 12/31
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. $ $ $ $ $
California Fund....................
Comstock Fund......................
Corporate Bond Fund................
Emerging Growth Fund...............
Enterprise Fund....................
Equity Income Fund.................
Florida Fund.......................
Foreign Securities Fund............
Government Securities..............
Government Target Fund.............
Great American Companies Fund......
Growth Fund........................
Growth and Income Fund.............
High Yield Fund....................
Insured Fund.......................
Intermediate Term Municipal Fund...
LIT Asset Allocation Fund..........
LIT Domestic Income Fund...........
LIT Emerging Growth Fund...........
LIT Enterprise Fund................
LIT Government Fund................
</TABLE>
G-1
<PAGE> 63
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
FUND NAME YEAR-END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- -------- -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIT Growth and Income Fund......... 12/31
LIT Money Market Fund.............. 12/31
LIT Real Estate Fund............... 12/31
Limited Maturity Government Fund... 12/31
Municipal Income Fund.............. 12/31
New Jersey Fund.................... 12/31
New York Fund...................... 12/31
Pace Fund.......................... 6/30
Pennsylvania Fund.................. 12/31
Prospector Fund.................... 6/30
Real Estate Fund................... 12/31
Reserve Fund....................... 5/31
Short-Term Global Fund............. 6/30
Small Capitalization Fund.......... 10/31
Strategic Income Fund.............. 6/30
Tax Free High Income Fund.......... 12/31
Tax Free Money Fund................ 6/30
Utility Fund....................... 6/30
U.S. Government Fund............... 12/31
U.S. Government Trust for Income... 9/30
Value Fund......................... 6/30
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
LIT Growth and Income Fund.........
LIT Money Market Fund..............
LIT Real Estate Fund...............
Limited Maturity Government Fund...
Municipal Income Fund..............
New Jersey Fund....................
New York Fund......................
Pace Fund..........................
Pennsylvania Fund..................
Prospector Fund....................
Real Estate Fund...................
Reserve Fund.......................
Short-Term Global Fund.............
Small Capitalization Fund..........
Strategic Income Fund..............
Tax Free High Income Fund..........
Tax Free Money Fund................
Utility Fund.......................
U.S. Government Fund...............
U.S. Government Trust for Income...
Value Fund.........................
</TABLE>
G-2
<PAGE> 64
ANNEX H
1996 RETIREMENT BENEFITS ACCRUED AS PART OF FUND EXPENSES
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
YEAR-
FUND NAME END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- ------ -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. 6/30 $ 41 $ 0 $ 0 $ 5 $ 0 $ 3 $ 0 $ 21 $ 0
California Fund.................... 12/31 499 0 1,950 56 0 47 3,440 373 0
Comstock Fund...................... 12/31 629 0 0 71 3,209 47 0 297 2,607
Corporate Bond Fund................ 8/31 395 0 0 45 2,030 30 0 186 1,659
Emerging Growth Fund............... 8/31 395 0 0 45 2,030 30 0 186 1,659
Enterprise Fund.................... 12/31 629 0 0 71 3,209 47 0 297 2,607
Equity Income Fund................. 12/31 629 0 0 71 3,209 47 0 297 2,607
Florida Fund....................... 12/31 578 0 0 70 0 50 0 304 0
Foreign Securities Fund............ 12/31 252 0 0 28 0 18 0 133 0
Government Securities.............. 12/31 629 0 0 71 3,567 47 0 297 2,607
Government Target Fund............. 8/31 0 0 0 0 0 0 0 0 0
Great American Companies Fund...... 6/30 255 0 0 31 0 20 0 129 0
Growth Fund........................ 6/30 255 0 0 31 0 20 0 129 0
Growth and Income Fund............. 11/30 570 0 0 64 2,913 42 0 269 2,370
High Yield Fund.................... 6/30 499 0 2,001 56 0 44 3,585 346 0
Insured Fund....................... 12/31 499 0 2,086 56 0 48 3,503 394 0
Intermediate Term Municipal Fund... 12/31 499 0 0 56 0 41 0 259 0
LIT Asset Allocation Fund.......... 12/31 629 0 0 71 3,906 47 0 297 2,346
LIT Domestic Income Fund........... 12/31 629 0 0 71 3,906 47 0 297 2,346
LIT Emerging Growth Fund........... 12/31 578 0 0 70 0 46 0 292 0
LIT Enterprise Fund................ 12/31 629 0 0 71 3,772 47 0 297 2,608
LIT Government Fund................ 12/31 629 0 0 71 3,772 47 0 297 2,608
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund............. $ 0 $ 0 $ 71 $ 14 $ 0
California Fund.................... 2,439 0 861 265 0
Comstock Fund...................... 0 0 1,260 203 3,772
Corporate Bond Fund................ 0 0 797 124 2,379
Emerging Growth Fund............... 0 0 797 124 2,379
Enterprise Fund.................... 0 0 1,260 203 3,772
Equity Income Fund................. 0 0 1,260 203 3,772
Florida Fund....................... 0 0 917 206 0
Foreign Securities Fund............ 0 0 439 93 0
Government Securities.............. 0 0 1,297 200 3,772
Government Target Fund............. 0 0 0 0 0
Great American Companies Fund...... 0 0 404 88 0
Growth Fund........................ 0 0 404 88 0
Growth and Income Fund............. 0 0 1,144 183 3,422
High Yield Fund.................... 2,458 0 861 265 0
Insured Fund....................... 2,490 0 861 283 0
Intermediate Term Municipal Fund... 1,918 0 861 177 0
LIT Asset Allocation Fund.......... 0 0 1,325 202 3,906
LIT Domestic Income Fund........... 0 0 1,325 202 3,906
LIT Emerging Growth Fund........... 0 0 917 197 0
LIT Enterprise Fund................ 0 0 1,315 201 3,772
LIT Government Fund................ 0 0 1,315 201 3,772
</TABLE>
H-1
<PAGE> 65
<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------------------------------------------------------
FISCAL
FUND NAME YEAR-END BRANAGAN CARUSO GAUGHAN HEAGY HILSMAN KENNEDY MILLER NELSON REES
--------- -------- -------- ------ ------- ----- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIT Growth and Income Fund......... 12/31 0 0 0 0 0 0 0 0 0
LIT Money Market Fund.............. 12/31 629 0 0 71 3,772 47 0 297 2,608
LIT Real Estate Fund............... 12/31 578 0 0 70 0 46 0 292 0
Limited Maturity Government Fund... 12/31 629 0 0 71 3,772 47 0 297 2,608
Municipal Income Fund.............. 12/31 499 0 1,454 56 0 46 2,766 315 0
New Jersey Fund.................... 12/31 578 0 0 70 0 50 0 304 0
New York Fund...................... 12/31 578 0 0 70 0 50 0 304 0
Pace Fund.......................... 6/30 281 0 0 31 1,445 20 0 131 1,185
Pennsylvania Fund.................. 12/31 499 0 1,858 56 0 47 3,555 350 0
Prospector Fund.................... 6/30 255 0 0 31 0 20 0 129 0
Real Estate Fund................... 12/31 583 0 0 70 0 46 0 292 0
Reserve Fund....................... 5/31 224 0 0 25 1,154 16 0 104 948
Short-Term Global Fund............. 6/30 499 0 1,569 56 0 43 2,848 303 0
Small Capitalization Fund.......... 10/31 477 0 0 57 0 37 0 237 0
Strategic Income Fund.............. 6/30 499 0 0 56 0 41 0 259 0
Tax Free High Income Fund.......... 12/31 499 0 2,039 56 0 48 3,532 383 0
Tax Free Money Fund................ 6/30 499 0 2,244 56 0 45 3,830 369 0
Utility Fund....................... 6/30 499 0 0 56 0 41 0 260 0
U.S. Government Fund............... 12/31 499 0 2,169 56 0 48 3,589 404 0
U.S. Government Trust for Income... 9/30 447 0 0 51 1,934 33 0 212 0
Value Fund......................... 6/30 255 0 0 31 0 20 0 129 0
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
LIT Growth and Income Fund......... 0 0 0 0 0
LIT Money Market Fund.............. 0 0 1,315 201 3,772
LIT Real Estate Fund............... 0 0 917 197 0
Limited Maturity Government Fund... 0 0 1,315 201 3,772
Municipal Income Fund.............. 2,346 0 861 219 0
New Jersey Fund.................... 0 0 917 206 0
New York Fund...................... 0 0 917 206 0
Pace Fund.......................... 0 0 568 89 1,691
Pennsylvania Fund.................. 2,405 0 861 247 0
Prospector Fund.................... 0 0 404 88 0
Real Estate Fund................... 0 0 1,018 198 0
Reserve Fund....................... 0 0 453 73 1,349
Short-Term Global Fund............. 2,395 0 861 225 0
Small Capitalization Fund.......... 0 0 908 160 0
Strategic Income Fund.............. 2,060 0 861 190 0
Tax Free High Income Fund.......... 2,472 0 861 272 0
Tax Free Money Fund................ 0 0 861 284 0
Utility Fund....................... 2,065 0 861 190 0
U.S. Government Fund............... 2,520 0 861 292 0
U.S. Government Trust for Income... 0 0 920 145 1,934
Value Fund......................... 0 0 404 88 0
</TABLE>
H-2
<PAGE> 66
ANNEX I
LIST OF 5% BENEFICIAL OWNERS
(AS OF [ , 1997])
<TABLE>
<CAPTION>
FUND NAME AND NAME AND ADDRESS OF AMOUNT OF PERCENT OF
CLASS OF SHARES BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
--------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
</TABLE>
I-1
<TABLE>
<CAPTION>
FUND NAME AND NAME AND ADDRESS OF AMOUNT OF PERCENT OF
CLASS OF SHARES BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
--------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
I-2
</TABLE>
<PAGE> 67
ANNEX J
<TABLE>
<CAPTION>
TRUST BRANAGAN HEAGY(1) KENNEDY NELSON ROBINSON SISTO WHALEN
----- -------- -------- ------- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Comstock Fund........... 1991 1995 1995 1995 1995 1979 1995
Corporate Bond Fund..... 1991 1995 1995 1995 1995 1978 1995
Emerging Growth Fund.... 1991 1995 1995 1995 1995 1978 1995
Enterprise Fund......... 1991 1995 1995 1995 1995 1980 1995
Equity Income Fund...... 1991 1995 1995 1995 1995 1978 1995
Government Securities
Fund.................. 1991 1995 1995 1995 1995 1984 1995
Government Target
Fund.................. 1991 1995 1995 1995 1995 1979 1995
Growth & Income Fund.... 1991 1995 1995 1995 1995 1978 1995
Life Investment Trust... 1991 1995 1995 1995 1995 1985 1995
Limited Maturity
Government Fund....... 1991 1995 1995 1995 1995 1985 1995
Pace Fund............... 1991 1995 1995 1995 1995 1980 1995
Real Estate Fund........ 1994 1995 1995 1995 1995 1994 1995
Reserve Fund............ [ ] 1995 1995 1995 1995 [ ] 1995
Small Capitalization
Fund.................. 1993 1995 1995 1995 1995 1993 1995
U.S. Government Trust
for Income............ 1992 1995 1995 1995 1995 1992 1995
U.S. Government Trust... 1995 1995 1993 1988 1992 1995 1988
Tax Free Trust.......... 1995 1995 1993 1985 1992 1995 1985
Pennsylvania Fund....... 1995 1995 1993 1987 1992 1995 1987
VKAC Trust.............. 1995 1995 1993 1986 1992 1995 1986
Equity Trust............ 1995 1995 1993 1988 1992 1995 1988
Tax Free Money Fund..... 1995 1995 1993 1986 1988 1995 1986
Foreign Securities
Fund..................
</TABLE>
- ---------------
(1) Ms. Heagy was appointed by the Trustees to the Board in 1995 in order to
fill a vacancy created by an increase in the number of trustees of the Fund
and has not been previously elected by shareholders. Each of the other
incumbent trustees was last approved by shareholders of the respective Trust
at a joint meeting of shareholders held on July 21, 1995.
<PAGE> 68
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE FORM OF PROXY
VAN KAMPEN AMERICAN CAPITAL XXXXXXXXXX TRUST
JOINT SPECIAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of XXXXXX shares of VAN KAMPEN AMERICAN
CAPITAL XXXXXXXXXX Fund, [a series of] a Delaware business trust
(the "Fund"), hereby appoints Dennis J. McDonnell, Ronald A.
Nyberg and Edward C. Wood III, and each of them, with full power
of substitution and revocation, as proxies to represent the
undersigned at the Joint Meeting of Shareholders to be held at
the offices of Van Kampen American Capital, Inc., One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, on Wednesday, May 28,
1997 at 10:00 a.m., and any and all adjournments thereof (the
"Meeting"), and thereat to vote all XXXXXX shares which the
undersigned would be entitled to vote, with all powers the
undersigned would possess if personally present, in accordance
with the following instructions.
Account No. No. of Shares Proxy No.
<TABLE>
<S> <C> <C> <C> <C>
1. The proposal to approve a new investment advisory agreement; FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Authority to vote for the election as Trustees, the nominees FOR ALL
named below: FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX,
XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL TRUSTEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME AND MARK THE "FOR
ALL EXCEPT" BOX. YOUR SHARES WILL BE VOTED FOR THE REMAINING
TRUSTEES.
3A. The proposal to ratify XXXXXX as independent auditors for FOR AGAINST ABSTAIN
the Fund's current fiscal year; [ ] [ ] [ ]
3B. The proposal to ratify XXXXXX as independent auditors for FOR AGAINST ABSTAIN
the Fund's current fiscal year; [ ] [ ] [ ]
4. To transact such other business as may properly come before
the Meeting.
</TABLE>
If more than one of the proxies, or their substitutes, are
present at the Meeting or any adjournment thereof, they jointly
(or, if only one is present and voting then that one) shall have
authority and may exercise all powers granted hereby. This Proxy,
when properly executed, will be voted in accordance with the
instructions marked hereon by the undersigned. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" EACH OF THE
PROPOSALS DESCRIBED HEREIN AND IN THE DISCRETION OF THE PROXIES
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING
NOTICE OF MEETING AND PROXY STATEMENT FOR THE MEETING TO BE HELD
ON MAY 28, 1997.
Date , 1997
----------------
----------------------------
Shareholder signature
----------------------------
Co-owner signature (if
applicable)
Please sign this Proxy
exactly as your name or
names appear on the books of
the Fund. When signing as
attorney, trustee, executor,
administrator, custodian,
guardian or corporate
officer, please give full
title. If shares are held
jointly, each holder should
sign.
