<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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] 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 into Dean
Witter, Discover & Co. Your Fund is seeking shareholder approval on 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 1-800-341-2911 (TDD users call 1-800-421-2833) 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 9134
Hingham, MA 02043-9134
<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--mark "For" or "Withhold"
To withhold authority to vote for any individual nominee, write the nominee's
name on the line below.
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>
PROXY
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE VAN KAMPEN AMERICAN CAPITAL XXXXX FUND
JOINT SPECIAL MEETING OF SHAREHOLDERS
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. The proposal to approve a new / / / / / / 3. As to the proposal to ratify the / / / / / /
investment advisory agreement. selection of XXXXX to act as
the independent public accountants
FOR WITHHOLD for the Fund's current fiscal year.
/ / / /
2. Authority to vote for the election
as Trustees the nominees
named below:
XXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXXX, XXXXXXXXXXX,
XXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX
To withhold authority to vote for any individual nominee,
write the nominee's name on the line below.
-------------------------------------------------
Please be sure to sign and date this Proxy. Date
Shareholder sign here Co-owner sign here
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) 341-2911
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:
<TABLE>
<S> <C>
1. For each Fund, to approve 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 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 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.
</TABLE>
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) 341-2911 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) 341-2911
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 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>
- ---------------
* As defined in Annex A.
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) 341-2911 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 respect to Proposal 2,
the affirmative vote of a plurality of the Shares of a Fund
2
<PAGE> 10
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
a Fund will not affect such Fund's implementation of other proposals that
receive a favorable vote. 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
3
<PAGE> 11
matters are properly presented, it is the intention of the persons named on the
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 with respect to such proposal 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,
4
<PAGE> 12
real estate, project finance and other corporate finance advisory activities;
merchant banking and other principal investment activities; stock brokerage and
research 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. InterCapital and its wholly-owned
subsidiary, Dean Witter Services Company Inc., serve in various investment
management, advisory and administrative capacities to 102 investment companies
(the "InterCapital Fund") and other portfolios with net assets under management
of approximately $91.4 billion at March 31, 1997.
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.
5
<PAGE> 13
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.
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
currently 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 and is a nominee to the
Board of Trustees of each VK Fund as set forth in Proposal 2 below, 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
6
<PAGE> 14
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.
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
7
<PAGE> 15
received by Asset Management or any other direct or indirect majority-owned
subsidiary of VKAC Holding 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.
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 April 14, 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 paid 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 April 15, 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
8
<PAGE> 16
Advisory Corp. on April 15, 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. The material differences between the Current
Advisory Agreement and the New Advisory Agreement are described in this
paragraph. Each New 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 Board of
Trustees held a special telephone meeting on February 10, 1997, special
in-person meetings on March 14, 1997 and March 27, 1997 and a regular quarterly
meeting on April 14-15, 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 Board 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
9
<PAGE> 17
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.
In evaluating the New Advisory Agreements, the Board 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. The Board 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 as a result of
the Merger. The Board 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 Board 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 Board 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 Board 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
10
<PAGE> 18
use Morgan Stanley & Co., DWR and their affiliates for brokerage services. 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.
The Board 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 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 Board of Trustees, the composition
of the Boards of Trustees would comply with such condition.
The Board 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 Board 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
11
<PAGE> 19
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
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 other 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 VK Trust, 10 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. With respect to each AC Trust, 9 trustees are to be
elected at the Meeting to serve until reaching their designated retirement age
or until their successors are
12
<PAGE> 20
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.
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 Messrs. DeMartini and
Powell. 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. Mr. DeMartini's term on each Board of Trustees will commence on the later
of his election to the Board of Trustees at the Meeting or the consummation of
the Merger. If the Merger is not consummated, Mr. DeMartini will not join the
Board of Trustees.
Mr. Don G. Powell served on the Board of Trustees prior to August 15, 1996.
Mr. Powell is the Chief Executive Officer and President of VKAC. He is being
nominated to the Board of Trustees of each VK Fund, but he is not being
nominated to the Board of Trustees of the AC Funds so that the AC Funds may
maintain compliance with Section 15(f) of the 1940 Act. The Board of Trustees of
the AC Funds currently anticipates appointing Mr. Powell to the Board of
Trustees of the AC Funds when permissible under Section 15(f). The Board of
Trustees has determined that adding Mr. Powell to the Board of Trustees as
described herein is in the best interest of shareholders of each respective
Fund, in order to fill the vacancy created by the resignation of Mr. Dennis J.
McDonnell from the Board of Trustees, whose resignation will become effective
concurrent with the closing of the Merger.
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.
13
<PAGE> 21
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................. Private investor Co-founder, and prior to
1632 Morning Mountain Road August 1996, Chairman, Chief Executive
Raleigh, NC 27614 Officer and President, MDT Corporation (now
Date of Birth: 07/14/32 known as Getinge/Castle, Inc., a subsidiary
of Getinge Industrier AB), 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, 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: 10/12/52 Trust Company. Executive Vice President of
Dean Witter Discover. Member of Dean Witter
Discover Management Committee. Trustee of the
TCW/DW Funds. Director, National Healthcare
Resources, Inc. Formerly Vice Chairman of the
Board of the National Association of
Securities Dealers, Inc. Formerly Chairman of
the Board of The Nasdaq Stock Market, Inc.
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: 06/03/48 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.
</TABLE>
14
<PAGE> 22
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR EMPLOYMENT
NAME, ADDRESS AND AGE IN PAST 5 YEARS
--------------------- -----------------------------------
<S> <C>
Jack E. Nelson.................... President, 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 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.
Don G. Powell(+)*................. Chairman, President, Chief Executive
2800 Post Oak Blvd. Officer and a Director of VKAC. Chairman,
Houston, TX 77056 Chief Executive Officer and a Director of the
Date of Birth: 10/19/39 Distributor, the Advisers, Van Kampen
American Capital Management, Inc.
("Management Inc.") and Van Kampen American
Capital Advisors, Inc. ("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.
and Van Kampen American Capital Exchange
Corporation. 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
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, open-end investment companies
advised by Management Inc. and closed-end
investment companies advised by Advisory
Corp.
</TABLE>
15
<PAGE> 23
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR EMPLOYMENT
NAME, ADDRESS AND AGE IN PAST 5 YEARS
--------------------- -----------------------------------
<S> <C>
Jerome L. Robinson*............... President, 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, Pacesetter Software, a software
programming company specializing in white
collar productivity. Director, Panasia Bank.
Trustee of each of the funds in the Fund
Complex.
Phillip B. Rooney................. Private investor. Director, Illinois Tool
348 East Third Street Works, Inc., a manufacturing company;
Hinsdale, IL 60521 Director, The Servicemaster Company, a
Date of Birth: 07/08/44 business and consumer services company;
Director, Urban Shopping Centers Inc., a
retail mall management company; Director,
Stone Container Corp., a paper manufacturing
company. Trustee, University of Notre Dame.
Formerly, President and Chief Executive
Officer, WMX Technologies Inc., an
environmental services company, and prior to
that President and Chief Operating Officer,
WMX Technologies Inc. Trustee of each of the
funds in the Fund Complex.
Fernando Sisto.................... Professor Emeritus and, prior to
155 Hickory Lane 1995, Dean of the Graduate School, Stevens
Closter, NJ 07624 Institute of Technology. Director, Dynalysis
Date of Birth: 08/02/24 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.
</TABLE>
- ---------------
+ Nominee to the Board of Trustees of the VK Funds only.
* 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
16
<PAGE> 24
Funds by reason of his positions with Dean Witter Discover and its affiliates.
Mr. Powell is an interested person of the Advisers and the Funds by reason of
his positions with VKAC 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 April 14, 1997, certain nominees owned, directly or beneficially, the
number of Class A Shares of each Fund as set forth on Annex K to this Proxy
Statement. 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.
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, Nelson and Rooney. 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. During each Fund's 1996 fiscal year, the audit
committee and the brokerage committee of each Fund held between 1 and 3
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.
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
17
<PAGE> 25
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 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 their 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 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
18
<PAGE> 26
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 10 years of service
(including years of service prior to adoption of the retirement plan) 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. Each incumbent nominee to the Board of Trustees has served
as a member of the Board of Trustees since he or she was first appointed or
elected in the year set forth on Annex J to this Proxy Statement. 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.
19
<PAGE> 27
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) 2,500 104,875
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 the Board of Trustees and a nominee to the Board of
Trustees to be voted on by shareholders of the Funds at the Meeting. Mr.
Phillip B. Rooney also is a current member of the Board of Trustees and a
nominee to the Board of Trustees but is not included in the compensation
table because he did not serve on the Board of Trustees or receive any
compensation from the Funds prior to April 14, 1997. Mr. McDonnell, a trustee
for each Trust during all or a portion of each Fund's last fiscal year, and
Messrs. DeMartini and Powell are affiliated persons of the Advisers and are
not eligible for compensation or retirement benefits from the Funds. Mr.
McDonnell, currently a member of the Board of Trustees, intends to resign
from the Board of Trustees at the time of the Merger.
(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
20
<PAGE> 28
effective January 29, 1996. Messrs. Hilsman, Miller and Woodside retired
from the Board of Trustees on December 31, 1996.
(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 (including years of service prior to the
adoption of the retirement plan) 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. Each incumbent nominee to the Board
of Trustees has served as a member of the Board of Trustees since he or she
was first appointed or elected in the year set forth on Annex J to this
Proxy Statement.
(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 investment company'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
21
<PAGE> 29
by the 1940 Act, the Fund may invest in securities of those investment
companies 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, 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 BOARD OF
TRUSTEES OF EACH TRUST RECOMMENDS 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.
22
<PAGE> 30
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.
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.
23
<PAGE> 31
- ------------------------------------------------------------------------------
OTHER INFORMATION
- ------------------------------------------------------------------------------
DIRECTORS AND OFFICERS OF THE ADVISERS
The following table sets forth certain information concerning the principal
executive officers and directors of the Advisers.
DIRECTORS AND OFFICERS OF THE ADVISERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Dennis J. McDonnell..... President, Chief Operating Officer and a
One Parkview Plaza Director of the Advisers, Management Inc. and
Oakbrook Terrace, IL Advisors Inc. Executive Vice President and a
60181 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 closed-end investment
companies advised by Advisory Corp. President
and Trustee of the funds in the Fund Complex.
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,
Management Inc., Van Kampen American Capital
Trust Company, Van Kampen American Capital
Recordkeeping Services, Inc. and Van Kampen
American Capital Insurance Agency of
Illinois, Inc. Executive Vice President,
General Counsel and Assistant Secretary of
Advisors 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, other open-end
investment companies advised by Asset
Management, open-end investment companies
advised by Management Inc. 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.
</TABLE>
24
<PAGE> 32
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
William R. Rybak........ Executive Vice President and Chief Financial
One Parkview Plaza Officer of VKAC since February 1993.
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, Management Inc.
and Van Kampen American Capital Recordkeeping
Services, Inc. Executive Vice President and
Chief Financial Officer of Advisors Inc., Van
Kampen American Capital Exchange Corporation,
Van Kampen American Capital Trust Company,
ACCESS and Van Kampen American Capital
Insurance Agency of Illinois, Inc. Director
of Alliance Bancorp, a savings and loan
holding company, and prior to February 1997,
Chairman of the Board of Hinsdale Financial
Corp., a savings and loan holding company.
Peter W. Hegel.......... Executive Vice President of Advisory Corp.,
One Parkview Plaza Management Inc. and Advisors Inc. Executive
Oakbrook Terrace, IL Vice President and Director of Asset
60181 Management. Vice President of the funds in
the Fund Complex, open-end investment
companies advised by Management Inc. and
closed-end investment companies advised by
Advisory Corp.
Alan T. Sachtleben...... Executive Vice President of the Advisers and
2800 Post Oak Blvd. Management Inc. Executive Vice President and
Houston, TX 77056 Director of Advisors Inc. Vice President of
the funds in the Fund Complex and certain
open-end investment companies advised by
Asset Management.
</TABLE>
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
M. Robert Sullivan................... Assistant Controller
</TABLE>
25
<PAGE> 33
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. 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 Board 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. 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 (with the exception of the Foreign Securities Fund, the Life
Investment Trust and Small Capitalization 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
26
<PAGE> 34
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 (with the exception of the Foreign Securities Fund, the Life
Investment Trust and Small Capitalization Fund) may spend an aggregate amount of
up to 0.25% per year (0.15% for the Reserve Fund) of the average daily net
assets attributable to the Class A Shares (or, for Funds with only one class of
shares, such 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 (0.15% for the Reserve Fund) 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 (with the exception of the
Foreign Securities Fund, the Life Investment Trust and Small Capitalization
Fund) pays the Distributor the lesser of the balance of the 0.25% (0.15% for the
Reserve Fund) not paid to such financial intermediaries or the amount of the
Distributor's actual distribution related expenses.
Each Fund (with the exception of the Foreign Securities Fund, the Life
Investment Trust and Small Capitalization 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, each Fund may spend up to 0.25% per year
(0.15% for the Reserve Fund) 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 (with the exception of the Foreign Securities Fund, the Life
Investment Trust and Small Capitalization 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 (0.15% for the
27
<PAGE> 35
Reserve Fund) 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 (or, for
Funds with only one class of shares, such 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 a Fund's distribution expenses
are accounted for on a Fund-wide basis, a particular CDSC Share may pay
distribution expenses greater or less than the amount of the initial commission
(including carrying cost) paid by the Distributor with respect to such CDSC
Share.
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' 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 Board 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
28
<PAGE> 36
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
Fund's assets. The Board of Trustees of each Fund has approved an amendment to
each Fund's accounting services agreement whereby Advisory Corp. will assume
responsibility for providing accounting services currently provided by the
custodian of each Fund's assets. Each AC Fund is party to the Fund Accounting
Agreement, and currently receives, or as soon as practicable will receive, 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
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
As of April 4, 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. Shareholders who, to the
knowledge of the Funds, owned beneficially more than 5% of a class of a Fund's
outstanding Shares as of April 4, 1997 are set forth at Annex I hereto.
The number of each Fund's outstanding Shares as of April 14, 1997 is set forth
at Annex C hereto.
29
<PAGE> 37
- ------------------------------------------------------------------------------
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 $2,250,000.
- ------------------------------------------------------------------------------
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 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 Life Investment Trust:
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
Government Portfolio LIT Government Portfolio
Growth and Income Portfolio LIT Growth and Income 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>
- ------------
* An additional series of this Trust is voting at a separate meeting with
respect to the election of trustees of this Trust. The votes of the
shareholders of such other series will be aggregated with the votes of the
shareholders of the series voting at this Meeting when determining if a
nominee has received sufficient votes to be elected to the Board of Trustees.
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 Fund
Companies 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.
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.
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
INVESTMENT ADVISORY CORP. (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 INVESTMENT
ADVISORY CORP.
By:
--------------------------------
Name:
Title:
B2-5
<PAGE> 52
ANNEX C
The table below sets forth, for each investment company advised by Advisory
Corp. and Asset Management, the number of the investment company's outstanding
shares as of April 14, 1997, the investment company's net assets as of April 14,
1997 and the rate at which it compensates Advisory Corp. or Asset Management for
investment advisory services. Each fund for which Advisory Corp. or Asset
Management has waived or reduced its compensation are marked by an "*". There
can be no assurance that Advisory Corp. or Asset Management will continue such
waiver or reduction.
I. ADVISORY AGREEMENTS BETWEEN ADVISORY CORP. AND THE VK FUNDS
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSETS ANNUAL
OUTSTANDING AS OF AS OF ADVISORY FEE
FUNDS APRIL 14, 1997 APRIL 14, 1997 SCHEDULE
----- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
A. Van Kampen American Capital California Insured Tax Free
Fund....................................................... 9,646,097 $ 163,334,836 First $100 Million
.500%
Next $150 Million .450%
Next $250 Million .425%
Over $500 Million .400%
B. Van Kampen American Capital Insured Tax Free Income Fund.... 69,155,642 $1,289,795,159 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....... 60,457,824 $ 861,393,223 First $500 Million
.500%
Van Kampen American Capital Municipal Income Fund*.......... 64,107,315 $ 959,978,437 Over $500 Million .450%
Van Kampen American Capital Intermediate Term Municipal
Income Fund*............................................... 3,299,006 $ 33,196,241
Van Kampen American Capital Florida Insured Tax Free Income
Fund*...................................................... 2,884,810 $ 42,443,535
D. Van Kampen American Capital New Jersey Tax Free Income
Fund*...................................................... 1,204,064 $ 17,472,239 First $500 Million
.600%
Van Kampen American Capital New York Tax Free Income
Fund*...................................................... 1,373,760 $ 20,233,852 Over $500 Million .500%
Van Kampen American Capital Pennsylvania Tax Free Income
Fund....................................................... 15,696,014 $ 268,599,884
E. Van Kampen American Capital High Yield Fund*................ 40,814,295 $ 392,912,646 First $500 Million
.750%
Over $500 Million .650%
F. Van Kampen American Capital Short-Term Global Income Fund... 13,128,649 $ 97,896,782 .550%
</TABLE>
C-1
<PAGE> 53
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSETS ANNUAL
OUTSTANDING AS OF AS OF ADVISORY FEE
FUNDS APRIL 14, 1997 APRIL 14, 1997 SCHEDULE
----- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
G. Van Kampen American Capital Strategic Income Fund........... 9,257,872 $ 114,928,876 First $500 Million
.750%
Van Kampen American Capital Growth Fund..................... 6,567,983 $ 100,867,384 Next $500 Million .700%
Van Kampen American Capital Value Fund...................... 104,821 $ 1,269,204 Over $1 Billion .650%
Van Kampen American Capital Aggressive Growth Fund.......... 18,619,629 $ 152,058,318
H. Van Kampen American Capital Utility Fund.................... 8,741,353 $ 130,376,971 First $500 Million
.650%
Next $500 Million .600%
Over $1 Billion .550%
I. Van Kampen American Capital U.S. Government Fund............ 197,602,466 $2,787,212,993 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%
J. Van Kampen American Capital Tax Free Money Fund*............ 35,320,568 $ 35,295,356 First $500 Million
.500%
Next $500 Million .475%
Next $500 Million .425%
Over $1.5 Billion .375%
K. Van Kampen American Capital Great American Companies Fund... 101,964 $ 1,233,948 First $500 Million
.700%
Van Kampen American Capital Prospector Fund................. 104,019 $ 1,228,624 Next $500 Million .650%
L. Van Kampen American Capital Foreign Securities Fund......... 96,305 $ 949,974 N/A(1)
II. ADVISORY AGREEMENTS BETWEEN ASSET MANAGEMENT AND THE AC FUNDS
A. Van Kampen American Capital Corporate Bond Fund............. 23,032,612 $ 187,429,712 First $150 Million
.500%
Van Kampen American Capital Equity Income Fund.............. 186,035,496 $1,223,810,799 Next $100 Million .450%
Van Kampen American Capital Growth and Income Fund.......... 55,784,083 $ 851,135,534 Next $100 Million .400%
Van Kampen American Capital Reserve Fund.................... 695,945,171 $ 695,898,843 Over $350 Million .350%
</TABLE>
C-2
<PAGE> 54
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSETS ANNUAL
OUTSTANDING AS OF AS OF ADVISORY FEE
FUNDS APRIL 14, 1997 APRIL 14, 1997 SCHEDULE
----- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
B. Van Kampen American Capital Government Target Fund*......... 942,418 $ 13,981,050 .500%
C. Van Kampen American Capital Limited Maturity Government
Fund....................................................... 4,971,910 $ 59,772,543 First $1 Billion .500%
Next $1 Billion .475%
Next $1 Billion .450%
Next $1 Billion .400%
Over $4 Billion .350%
D. Van Kampen American Capital Government Securities Fund...... 231,890,794 $2,257,634,251 First $1 Billion .540%
Next $1 Billion .515%
Next $1 Billion .490%
Next $1 Billion .440%
Next $1 Billion .390%
Next $1 Billion .340%
Next $1 Billion .290%
Over $7 Billion .240%
E. Van Kampen American Capital Life Investment Trust Asset
Allocation Portfolio*...................................... 5,324,297 $ 57,913,862 First $500 Million
.500%
Van Kampen American Capital Life Investment Trust Domestic
Income Portfolio*.......................................... 2,016,709 $ 16,003,044 Next $500 Million .450%
Van Kampen American Capital Life Investment Trust Enterprise
Portfolio*................................................. 5,030,220 $ 80,704,506 Over $1 Billion .400%
Van Kampen American Capital Life Investment Trust Government
Portfolio*................................................. 6,284,543 $ 52,935,768
Van Kampen American Capital Life Investment Trust Growth &
Income Portfolio*.......................................... 156,976 $ 1,563,696
Van Kampen American Capital Life Investment Trust Money
Market Portfolio*.......................................... 23,758,755 $ 23,758,755
F. Van Kampen American Capital Comstock Fund................... 91,430,028 $1,276,401,194 First $1 Billion .500%
Van Kampen American Capital Enterprise Fund................. 110,441,458 $1,629,662,352 Next $1 Billion .450%
Van Kampen American Capital Pace Fund....................... 223,704,032 $2,646,295,913 Next $1 Billion .400%
Over $3 Billion .350%
G. Van Kampen American Capital U.S. Government Trust for
Income..................................................... 23,282,289 $ 185,587,365 .600%
H. Van Kampen American Capital Emerging Growth Fund............ 81,017,806 $2,494,327,277 First $350 Million
.575%
Next $350 Million .525%
Next $350 Million .475%
Over $1.05 Billion
.425%
</TABLE>
C-3
<PAGE> 55
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSETS ANNUAL
OUTSTANDING AS OF AS OF ADVISORY FEE
FUNDS APRIL 14, 1997 APRIL 14, 1997 SCHEDULE
----- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
I. Van Kampen American Capital Small Capitalization Fund....... 14,026,448 178,744,066 N/A(1)
J. Van Kampen American Capital Life Investment Trust Emerging
Growth Portfolio*.......................................... 368,876 $ 4,616,922 .700%
K. Van Kampen American Capital Real Estate Securities Fund..... 6,637,711 $ 83,760,952 1.00%
Van Kampen American Capital Life Investment Trust Real
Estate Securities Portfolio................................ 13,258,192 $ 191,417,324
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON SHARES PREFERRED SHARES
OUTSTANDING OUTSTANDING NET ASSETS
AS OF AS OF AS OF ANNUAL
APRIL 14, APRIL 14, APRIL 14, ADVISORY FEE
FUNDS 1997 1997 1997 SCHEDULE
----- ------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
III. ADVISORY AGREEMENTS BETWEEN ADVISORY CORP. AND
OTHER INVESTMENT COMPANIES
A. Van Kampen American Capital Investment Grade
Municipal Trust............................. 4,839,000 250 $ 74,199,561 .600%
Van Kampen American Capital Trust for Insured
Municipals.................................. 9,648,688 1,800 $244,564,209
Van Kampen American Capital Municipal Income
Trust....................................... 28,227,514 330 $438,770,639
Van Kampen American Capital California
Municipal Trust............................. 3,213,291 400 $ 52,394,670
B. Van Kampen American Capital Trust for
Investment Grade Municipals................. 27,013,149 5,300 $700,870,502 .650%
Van Kampen American Capital Trust for
Investment Grade California Municipals...... 4,619,242 900 $119,174,629
Van Kampen American Capital Trust for
Investment Grade New York Municipals........ 6,200,986 1,200 $160,490,070
Van Kampen American Capital Trust for
Investment Grade Pennsylvania Municipals.... 7,420,970 1,400 $192,003,872
Van Kampen American Capital Trust for
Investment Grade Florida Municipals......... 4,137,306 800 $109,036,402
Van Kampen American Capital Trust for
Investment Grade New Jersey Municipals...... 3,925,373 800 $104,436,247
Van Kampen American Capital Municipal
Opportunity Trust........................... 15,352,890 3,000 $391,978,159
Van Kampen American Capital Advantage
Municipal Income Trust...................... 19,106,785 3,800 $481,440,438
Van Kampen American Capital Advantage
Pennsylvania Municipal Income Trust......... 4,361,902 800 $110,907,277
Van Kampen American Capital New Jersey Value
Municipal Income Trust...................... 2,499,940 500 $ 60,084,869
Van Kampen American Capital Ohio Value
Municipal Income Trust...................... 1,681,438 300 $ 38,739,234
Van Kampen American Capital Massachusetts
Value Municipal Income Trust................ 2,658,295 500 $ 62,681,807
</TABLE>
C-4
<PAGE> 56
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON SHARES PREFERRED SHARES
OUTSTANDING OUTSTANDING NET ASSETS
AS OF AS OF AS OF ANNUAL
APRIL 14, APRIL 14, APRIL 14, ADVISORY FEE
FUNDS 1997 1997 1997 SCHEDULE
----- ------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Van Kampen American Capital New York Value
Municipal Income Trust...................... 4,291,172 800 $100,222,797
Van Kampen American Capital Strategic Sector
Municipal Trust............................. 10,806,700 1,900 $238,966,336
Van Kampen American Capital California Value
Municipal Income Trust...................... 6,029,844 1,200 $148,201,632 .650%
Van Kampen American Capital Pennsylvania
Value Municipal Income Trust................ 4,468,924 900 $109,501,090
Van Kampen American Capital Value Municipal
Income Trust................................ 23,555,115 4,500 $556,406,285
Van Kampen American Capital Florida Municipal
Opportunity Trust........................... 1,683,270 320 $ 22,936,086
Van Kampen American Capital Municipal
Opportunity Trust II........................ 11,681,211 2,300 $272,508,703
Van Kampen American Capital Advantage
Municipal Income Trust II................... 8,168,211 1,600 $187,500,134
C. Van Kampen American Capital Municipal
Trust....................................... 36,270,470 6,000 $873,341,104 .700%
Van Kampen American Capital California
Quality Municipal Trust..................... 9,623,295 1,500 $231,610,324
Van Kampen American Capital New York Quality
Municipal Trust............................. 5,655,638 900 $135,502,915
Van Kampen American Capital Pennsylvania
Quality Municipal Trust..................... 8,153,254 1,300 $198,976,007
Van Kampen American Capital Florida Quality
Municipal Trust............................. 6,484,566 1,000 $155,697,006
Van Kampen American Capital Ohio Quality
Municipal Trust............................. 4,212,910 700 $104,886,266
Van Kampen American Capital Select Sector
Municipal Trust............................. 4,682,128 1,360 $ 93,101,836
D. Van Kampen American Capital Intermediate Term
High Income Trust........................... 13,710,760 588 $142,802,100 .750%
Van Kampen American Capital Limited Term High
Income Trust................................ 8,109,000 900 $109,916,050
E. Van Kampen American Capital Prime Rate Income
Trust....................................... 598,473,607 N/A 5,970,030,121 First $4.0 Billion .950%
Next $3.5 Billion .900%
Next $2.5 Billion .875%
Over $10.0 Billion
.850%
</TABLE>
C-5
<PAGE> 57
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSETS
OUTSTANDING AS OF AS OF ADVISORY FEE
FUNDS APRIL 14, 1997 APRIL 14, 1997 SCHEDULE
----- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
IV. ADVISORY AGREEMENTS BETWEEN ASSET MANAGEMENT AND OTHER INVESTMENT COMPANIES
A. Van Kampen American Capital Bond Fund....................... 11,362,465 $ 224,186,869 First $150 Million
.500%
Van Kampen American Capital Convertible Securities Fund..... 3,241,824 $ 77,621,539 Next $100 Million .450%
Next $100 Million .400%
Over $350 Million .350%
B. Van Kampen American Capital Exchange Fund................... 300,139 $ 60,741,879 .500%
C. Smith Barney Series Fund Emerging Growth Portfolio.......... 16,723,146 $ 1,163,250 .750%
Van Kampen American Capital Global Government Securities
Fund....................................................... 12,171,885 $ 91,535,848
D. Van Kampen American Capital Global Managed Assets Fund...... 2,061,022 $ 20,785,486 1.00%
Van Kampen American Capital Global Equity Fund.............. 17,137,246 $ 241,129,462
Van Kampen American Capital Life Investment Trust Global
Equity Portfolio........................................... 235,439 $ 2,732,398
E. Common Sense Trust International Equity Fund................ 1,530,939 $ 25,259,996 1.00%
F. Van Kampen American Capital High Yield Municipal Fund....... 89,604,065 $ 989,077,793 First $300 Million
.600%
Next $300 Million .550%
Over $600 Million .500%
G. Van Kampen American Capital High Income Corporate Bond
Fund....................................................... 94,853,084 $ 601,707,636 First $150 Million
.625%
Next $150 Million .550%
Over $300 Million .500%
H. Van Kampen American Capital Harbor Fund..................... 29,961,766 $ 437,462,002 First $350 Million
.550%
Next $350 Million .500%
Next $350 Million .450%
Over $1.05 Billion
.400%
I. Van Kampen American Capital Income Trust.................... 15,290,019 $ 118,048,492 .650%
J. Mosher, Inc.*............................................... 1,905,282 $ 36,073,524 .450%
</TABLE>
C-6
<PAGE> 58
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSETS ANNUAL
OUTSTANDING AS OF AS OF ADVISORY FEE
FUNDS APRIL 14, 1997 APRIL 14, 1997 SCHEDULE
----- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
K. Common Sense Trust Municipal Bond Fund...................... 8,464,420 $ 114,606,174 First $1 Billion .600%
Next $1 Billion .550%
Next $1 Billion .500%
Over $3 Billion .450%
L. Common Sense Trust Growth Fund.............................. 184,961,484 $3,147,563,776 First $1 Billion .650%
Common Sense Trust Growth and Income Fund................... 63,637,961 $1,062,007,742 Next $1 Billion .600%
Common Sense Trust Emerging Growth Fund..................... 7,061,279 $ 117,766,995 Next $1 Billion .550%
Next $1 Billion .500%
Over $4 Billion .450%
M. Common Sense Trust Money Market Fund........................ 61,825,907 $ 61,825,660 First $2 Billion .500%
Next $2 Billion .475%
Over $4 Billion .450%
N. Common Sense Trust Government Fund.......................... 27,684,426 $ 278,580,795 First $1 Billion .600%
Next $1 Billion .550%
Next $1 Billion .500%
Next $1 Billion .450%
Next $1 Billion .400%
Over $5 Billion .350%
V. ADVISORY AGREEMENTS BETWEEN VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. AND THE EXPLORER INSTITUTIONAL FUNDS
A. Explorer Institutional Active Core Fund..................... 568,118 $ 5,584,177 First $1 Billion .300%
Explorer Institutional Limited Duration Fund................ 819,333 $ 8,118,017 Over $1 Billion .250%
</TABLE>
- -------------------------
(1) Fund does not charge on advisory fee; shares of the fund are held by other
funds advised by Advisory Corp. or Asset Management. Assets of the fund also
are reflected in the assets of such other funds.
C-7
<PAGE> 59
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 BROKERAGE
FUND TRANSFER LEGAL COMMISSIONS COMMISSIONS
ADVISORY ACCOUNTING AGENCY SERVICES DISTRIBUTION PAID TO MORGAN PAID TO DEAN
FUND EXPENSES EXPENSES EXPENSES EXPENSES EXPENSES STANLEY & CO. WITTER DISCOVER
---- -------- ---------- -------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund...... $ 0 $ 385 $ 1,000 $ 1,000 $ 11,061 $ 0 $ 0
California Fund............. 827,860 7,137 142,144 9,921 216,201 8,400 0
Comstock Fund............... 5,983,251 222,891 2,078,620 0 484,220 371,741 11,760
Corporate Bond Fund......... 963,864 89,220 364,328 0 252,265 0 0
Emerging Growth Fund........ 9,143,675 39,313 5,238,180 0 5,255,550 757,606 14,788
Enterprise Fund............. 6,853,356 262,389 2,759,215 0 2,214,987 318,283 5,013
Equity Income Fund.......... 3,774,666 185,780 1,895,725 0 4,372,359 149,176 5,142
Florida Fund................ 0 0 8,356 0 129,984 4,375 0
Foreign Securities Fund..... 0 2,100 0 0 0 0 0
Government Securities....... 13,463,409 404,459 4,263,998 0 2,289,150 0 0
Government Target Fund...... 75,986 54,874 14,186 0 11,197 0 0
Great American Companies
Fund....................... 0 0 0 0 0 0 0
Growth Fund................. 0 0 0 0 0 0 0
Growth and Income Fund...... 2,617,996 146,686 1,606,832 0 1,392,573 139,997 5,790
High Yield Fund............. 2,614,970 11,346 421,377 14,316 583,043 0 0
Insured Fund................ 6,928,017 43,872 1,272,835 28,317 749,998 43,400 0
Intermediate Term Municipal
Fund....................... 176,896 4,026 35,575 7,818 126,042 0 0
LIT Asset Allocation
Portfolio.................. 202,129 51,837 323 0 0 10,732 330
LIT Domestic Income
Portfolio.................. 0 44,328 14,950 0 0 0 0
LIT Emerging Growth
Portfolio.................. 0 0 0 0 0 0 0
LIT Enterprise Portfolio.... 303,111 19,674 15,010 0 0 18,166 180
LIT Government Portfolio.... 200,221 55,531 15,000 0 0 0 0
</TABLE>
D-1
<PAGE> 60
<TABLE>
<CAPTION>
BROKERAGE BROKERAGE
FUND TRANSFER LEGAL COMMISSIONS COMMISSIONS
ADVISORY ACCOUNTING AGENCY SERVICES DISTRIBUTION PAID TO MORGAN PAID TO DEAN
FUND EXPENSES EXPENSES EXPENSES EXPENSES EXPENSES STANLEY & CO. WITTER DISCOVER
---- -------- ---------- -------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIT Growth and Income
Portfolio.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
LIT Money Market
Portfolio.................. 0 14,374 15,000 0 0 0 0
LIT Real Estate Portfolio... 357,225 44,869 1,205 0 0 0 0
Limited Maturity Government
Fund....................... 352,304 67,058 140,024 0 257,574 0 0
Municipal Income Fund....... 4,825,272 49,112 892,049 27,869 1,584,593 173,152 0
New Jersey Fund............. 0 0 0 0 59,354 0 0
New York Fund............... 0 0 320 6,549 75,324 0 0
Pace Fund................... 11,589,844 351,270 4,762,121 0 476,067 2,484,565 11,783
Pennsylvania Fund........... 1,665,021 9,882 250,106 12,310 370,499 350 63
Prospector Fund............. 0 0 0 0 0 0 0
Real Estate Fund............ 312,156 58,843 115,264 0 156,444 0 0
Reserve Fund................ 1,842,244 127,090 1,280,376 0 286,460 0 0
Short-Term Global Fund...... 882,054 9,854 269,440 14,341 736,701 0 0
Small Capitalization Fund... 0 90,363 14,798 0 0 0 0
Strategic Income Fund....... 927,893 4,957 128,307 7,984 427,261 0 7,788
Tax Free High Income Fund... 3,953,376 18,563 673,935 27,130 1,163,249 21,427 0
Tax Free Money Fund......... 0 920 25,448 3,866 15,877 0 0
Utility Fund................ 1,009,003 12,320 217,097 9,237 683,105 90,371 0
U.S. Government Fund........ 16,225,091 57,836 3,400,777 57,017 3,370,908 0 140,035
U.S. Government Trust for
Income..................... 1,520,100 91,255 321,627 0 1,540,873 0 0
Value Fund.................. 0 0 0 0 0 0 0
</TABLE>
D-2
<PAGE> 61
ANNEX E
1996 AGGREGATE COMPENSATION FROM EACH TRUST AND 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>
AC FUNDS
Comstock Fund................. 12/31 $ 3,292 $ 0 $ 490 $2,570 $2,570 $2,570 $ 3,292 $ 3,292 $ 590
Corporate Bond Fund........... 8/31 1,035 440 400 895 1,010 1,010 1,010 1,010 760
Emerging Growth Fund.......... 8/31 3,155 600 1,870 2,625 3,090 2,980 3,090 3,090 2,300
Enterprise Fund............... 12/31 3,532 0 520 2,760 2,760 2,760 3,532 3,532 640
Equity Income Fund............ 12/31 2,742 0 400 2,120 2,120 2,120 2,742 2,742 490
Government Securities Fund.... 12/31 6,722 0 1,020 5,350 5,350 5,350 6,722 6,722 1,240
Government Target Fund........ 8/31 820 180 480 710 800 800 800 800 600
Growth and Income Fund........ 11/30 2,012 0 600 1,500 1,500 1,500 1,942 2,012 740
Life Investment Trust:
LIT Asset Allocation
Portfolio.................. 12/31 1,627 0 170 1,035 1,035 1,035 1,627 1,627 210
LIT Domestic Income
Portfolio.................. 12/31 1,577 0 160 995 995 995 1,577 1,577 200
LIT Emerging Growth
Portfolio.................. 12/31 1,487 0 150 925 925 925 1,487 1,487 180
LIT Enterprise Portfolio..... 12/31 1,677 0 180 1,075 1,075 1,075 1,677 1,677 220
LIT Global Equity
Portfolio*................. 12/31 925 0 150 925 925 925 925 925 180
LIT Government Portfolio..... 12/31 1,637 0 170 1,045 1,045 1,045 1,637 1,637 210
LIT Growth and Income
Portfolio.................. 12/31 0 0 0 0 0 0 0 0 0
LIT Money Market Portfolio... 12/31 1,577 0 160 995 995 995 1,577 1,577 200
LIT Real Estate Portfolio.... 12/31 1,527 0 150 955 955 955 1,527 1,527 190
Life Investment Trust
Total.................... 12,034 0 1,290 7,950 7,950 7,950 12,034 12,034 1,590
Limited Maturity Government
Fund......................... 12/31 1,302 0 180 950 950 950 1,302 1,302 220
Pace Fund..................... 6/30 4,575 1,020 2,750 3,565 4,470 4,470 4,470 4,470 3,370
Real Estate Fund.............. 12/31 1,577 0 160 995 995 995 1,577 1,577 200
Reserve Fund.................. 5/31 1,575 780 820 870 1,615 1,010 950 1,010 1,580
Small Capitalization Fund..... 10/31 1,050 0 430 1,050 1,050 1,050 1,050 1,050 530
U.S. Government Trust for
Income....................... 9/30 1,180 0 490 1,180 1,180 1,180 1,180 1,180 600
VK FUNDS
U.S. Government Trust:
U.S. Government Fund......... 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
<CAPTION>
TRUSTEE
------------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
AC FUNDS
Comstock Fund................. $2,570 $ 590 $2,570 $ 3,292 $2,570
Corporate Bond Fund........... 1,010 510 1,010 1,010 1,010
Emerging Growth Fund.......... 3,090 1,510 3,160 3,090 3,090
Enterprise Fund............... 2,760 640 2,760 3,532 2,760
Equity Income Fund............ 2,120 490 2,120 2,742 2,120
Government Securities Fund.... 5,350 1,240 5,350 6,722 5,350
Government Target Fund........ 800 400 800 800 800
Growth and Income Fund........ 1,500 360 1,140 2,012 1,500
Life Investment Trust:
LIT Asset Allocation
Portfolio.................. 1,160 210 1,035 1,627 1,035
LIT Domestic Income
Portfolio.................. 1,120 200 995 1,577 995
LIT Emerging Growth
Portfolio.................. 1,150 180 925 1,487 925
LIT Enterprise Portfolio..... 1,200 220 1,075 1,677 1,075
LIT Global Equity
Portfolio*................. 925 180 925 925 925
LIT Government Portfolio..... 1,170 210 1,045 1,637 1,045
LIT Growth and Income
Portfolio.................. 0 0 0 0 0
LIT Money Market Portfolio... 1,120 200 995 1,577 995
LIT Real Estate Portfolio.... 1,840 190 955 1,527 955
Life Investment Trust
Total.................... 9,685 1,590 7,950 12,034 7,950
Limited Maturity Government
Fund......................... 950 220 950 1,302 950
Pace Fund..................... 4,470 3,370 4,470 4,470 4,470
Real Estate Fund.............. 1,120 200 995 1,577 995
Reserve Fund.................. 1,010 1,615 1,750 1,010 1,510
Small Capitalization Fund..... 1,050 530 1,050 1,050 1,050
U.S. Government Trust for
Income....................... 1,180 600 1,180 1,180 1,180
VK FUNDS
U.S. Government Trust:
U.S. Government Fund......... 3,125 750 3,125 3,125 3,125
</TABLE>
E-1
<PAGE> 62
<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>
Tax Free Trust:
Insured Fund................. 12/31 $ 3,125 $ 0 $ 625 $3,125 $3,125 $3,125 $ 3,125 $ 3,125 $ 750
Tax Free High Income Fund.... 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
California Fund.............. 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
Municipal Income Fund........ 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
Intermediate Term Municipal
Fund....................... 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
Florida Fund................. 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
New Jersey Fund.............. 12/31 625 0 0 625 625 625 625 625 125
New York Fund................ 12/31 625 0 0 625 625 625 625 625 125
Tax Free Trust Total....... 20,000 0 3,750 20,000 20,000 20,000 20,000 20,000 4,750
VKAC Trust:
High Yield Fund.............. 6/30 3,000 750 2,000 3,000 3,000 3,250 3,250 3,250 2,250
Short-Term Global Fund....... 6/30 3,000 750 2,000 3,000 3,000 3,250 3,250 3,250 2,250
Strategic Income Fund........ 6/30 3,000 750 2,000 3,000 3,000 3,250 3,250 3,250 2,250
VKAC Trust Total........... 9,000 2,250 6,000 9,000 9,000 9,750 9,750 9,750 6,750
Equity Trust:
Utility Fund................. 6/30 3,000 750 2,000 3,000 3,000 3,250 3,250 3,250 2,250
Value Fund................... 6/30 500 0 0 500 500 500 500 500 250
Great American Companies
Fund....................... 6/30 500 0 0 500 500 500 500 500 250
Growth Fund.................. 6/30 500 0 0 500 500 500 500 500 250
Prospector Fund.............. 6/30 500 0 0 500 500 500 500 500 250
Aggressive Growth Fund....... 6/30 250 0 0 250 250 250 0 250 0
Equity Trust Total......... 5,250 750 2,000 5,250 5,250 5,500 5,250 5,500 3,250
Pennsylvania Fund............. 12/31 3,125 0 625 3,125 3,125 3,125 3,125 3,125 750
Tax Free Money Fund........... 6/30 3,000 750 2,000 3,000 3,000 3,250 3,250 3,250 2,250
Foreign Securities Fund....... 12/31 0 0 0 250 250 250 0 0 0
<CAPTION>
TRUSTEE
------------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Tax Free Trust:
Insured Fund................. $3,125 $ 750 $3,125 $ 3,125 $3,125
Tax Free High Income Fund.... 3,125 750 3,125 3,125 3,125
California Fund.............. 3,125 750 3,125 3,125 3,125
Municipal Income Fund........ 3,125 750 3,125 3,125 3,125
Intermediate Term Municipal
Fund....................... 3,125 750 3,125 3,125 3,125
Florida Fund................. 3,125 750 3,125 3,125 3,125
New Jersey Fund.............. 625 125 625 625 625
New York Fund................ 625 125 625 625 625
Tax Free Trust Total....... 20,000 4,750 20,000 20,000 20,000
VKAC Trust:
High Yield Fund.............. 3,250 2,250 3,000 3,250 3,000
Short-Term Global Fund....... 3,250 2,250 3,000 3,250 3,000
Strategic Income Fund........ 3,250 2,250 3,000 3,250 3,000
VKAC Trust Total........... 9,750 6,750 9,000 9,750 9,000
Equity Trust:
Utility Fund................. 3,250 2,250 3,000 3,250 3,000
Value Fund................... 500 250 500 500 500
Great American Companies
Fund....................... 500 250 500 500 500
Growth Fund.................. 500 250 500 500 500
Prospector Fund.............. 500 250 500 500 500
Aggressive Growth Fund....... 250 0 250 250 250
Equity Trust Total......... 5,500 3,250 5,250 5,500 5,250
Pennsylvania Fund............. 3,125 750 3,125 3,125 3,125
Tax Free Money Fund........... 0 2,250 3,000 3,250 3,000
Foreign Securities Fund....... 0 0 250 0 250
</TABLE>
- ---------------
* This portfolio of the Life Investment Trust is participating in a separate
meeting.
E-2
<PAGE> 63
ANNEX F
1996 AGGREGATE COMPENSATION DEFERRED FOR 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>
AC FUNDS
Comstock Fund...................... 12/31 $1,522 $ 0 $ 490 $2,160 $0 $1,180 $3,292 $3,292 $ 590
Corporate Bond Fund................ 8/31 0 230 400 600 0 750 750 750 250
Emerging Growth Fund............... 8/31 0 600 1,270 1,910 0 2,360 2,360 2,360 790
Enterprise Fund.................... 12/31 1,612 0 520 2,280 0 1,280 3,532 3,532 640
Equity Income Fund................. 12/31 1,272 0 400 1,760 0 980 2,742 2,742 490
Government Securities Fund......... 12/31 3,002 0 1,020 4,470 0 2,480 6,722 6,722 1,240
Government Target Fund............. 8/31 0 180 320 480 0 600 600 600 200
Growth and Income Fund............. 11/30 1,022 0 600 1,290 0 1,120 1,942 2,012 380
Life Investment Trust:
LIT Asset Allocation Portfolio.... 12/31 997 0 170 750 0 420 3,532 3,532 210
LIT Domestic Income Portfolio..... 12/31 977 0 160 710 0 400 1,577 1,577 200
LIT Emerging Growth Portfolio..... 12/31 947 0 150 670 0 360 1,487 1,487 180
LIT Enterprise Portfolio.......... 12/31 1,017 0 180 790 0 440 1,677 1,677 220
LIT Global Equity Portfolio*...... 12/31 947 0 150 670 0 360 1,487 1,487 180
LIT Government Portfolio.......... 12/31 1,007 0 170 760 0 420 1,637 1,637 210
LIT Growth and Income Portfolio... 12/31 0 0 0 0 0 0 0 0 0
LIT Money Market Portfolio........ 12/31 977 0 160 710 0 400 1,577 1,577 200
LIT Real Estate Portfolio......... 12/31 957 0 150 670 0 380 1,527 1,527 190
Life Investment Trust Total:.... 7,826 0 1,290 5,730 0 3,180 14,501 14,501 1,590
Limited Maturity Government Fund... 12/31 642 0 180 790 0 440 1,302 1,302 220
Pace Fund.......................... 6/30 0 1,020 1,830 2,730 0 3,340 3,340 3,340 1,100
<CAPTION>
TRUSTEE
----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
AC FUNDS
Comstock Fund...................... $2,570 $0 $ 0 $3,292 $0
Corporate Bond Fund................ 750 0 210 750 0
Emerging Growth Fund............... 2,360 0 670 2,360 0
Enterprise Fund.................... 2,760 0 0 3,532 0
Equity Income Fund................. 2,120 0 0 2,742 0
Government Securities Fund......... 5,350 0 0 6,722 0
Government Target Fund............. 600 0 0 600 0
Growth and Income Fund............. 1,500 0 0 2,012 0
Life Investment Trust:
LIT Asset Allocation Portfolio.... 1,160 0 0 1,627 0
LIT Domestic Income Portfolio..... 1,120 0 0 1,577 0
LIT Emerging Growth Portfolio..... 1,050 0 0 1,487 0
LIT Enterprise Portfolio.......... 1,200 0 0 1,677 0
LIT Global Equity Portfolio*...... 1,050 0 0 1,487 0
LIT Government Portfolio.......... 1,170 0 0 1,637 0
LIT Growth and Income Portfolio... 0 0 0 0 0
LIT Money Market Portfolio........ 1,120 0 0 1,577 0
LIT Real Estate Portfolio......... 1,080 0 0 1,527 0
Life Investment Trust Total:.... 8,950 0 0 12,596 0
Limited Maturity Government Fund... 950 0 0 1,302 0
Pace Fund.......................... 3,340 0 920 3,340 0
</TABLE>
F-1
<PAGE> 64
<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>
Real Estate Fund............ 12/31 $ 977 $ 0 $ 160 $ 710 $ 0 $ 400 $ 1,577 $ 1,577 $ 200
Reserve Fund................ 5/31 0 780 570 570 0 700 700 700 370
Small Capitalization Fund... 10/31 0 0 430 850 0 790 1,050 1,050 260
U.S. Government Trust for
Income..................... 9/30 0 0 490 970 0 890 1,180 1,180 290
VK FUNDS
U.S. Government Trust:
U.S. Government Fund....... 12/31 875 0 625 2,500 0 1,500 625 625 750
Tax Free Trust:
Insured Fund............... 12/31 875 0 625 2,500 0 1,500 3,125 3,125 0
Tax Free High Income Fund.. 12/31 875 0 625 2,500 0 1,500 3,125 3,125 0
California Fund............ 12/31 875 0 625 2,500 0 1,500 3,125 3,125 0
Municipal Income Fund...... 12/31 875 0 625 2,500 0 1,500 3,125 3,125 0
Intermediate Term Municipal
Fund..................... 12/31 875 0 625 2,500 0 1,500 3,125 3,125 0
Florida Fund............... 12/31 875 0 625 2,500 0 1,500 3,125 3,125 0
New Jersey Fund............ 12/31 250 0 0 0 0 250 625 625 0
New York Fund.............. 12/31 250 0 0 0 0 250 625 625 0
Tax Free Trust Total..... 5,750 0 3,750 15,000 0 9,500 20,000 20,000 0
<CAPTION>
TRUSTEE
------------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Real Estate Fund............ $ 1,120 $ 0 $ 0 $ 1,577 $0
Reserve Fund................ 700 0 0 700 0
Small Capitalization Fund... 1,050 0 0 1,050 0
U.S. Government Trust for
Income..................... 1,180 0 0 1,180 0
VK FUNDS
U.S. Government Trust:
U.S. Government Fund....... 625 0 0 625 0
Tax Free Trust:
Insured Fund............... 3,125 0 0 3,125 0
Tax Free High Income Fund.. 3,125 0 0 3,125 0
California Fund............ 1,500 0 0 3,125 0
Municipal Income Fund...... 3,125 0 0 3,125 0
Intermediate Term Municipal
Fund..................... 3,125 0 0 3,125 0
Florida Fund............... 3,125 0 0 3,125 0
New Jersey Fund............ 625 0 0 625 0
New York Fund.............. 250 0 0 250 0
Tax Free Trust Total..... 18,000 0 0 19,625 0
</TABLE>
F-2
<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>
VKAC Trust:
High Yield Fund.................. 6/30 $ 0 $ 0 $2,000 $1,250 $0 $3,250 $3,250 $3,250 $1,500
Short-Term Global Fund........... 6/30 0 0 2,000 1,250 0 3,250 3,250 3,250 1,500
Strategic Income Fund............ 6/30 0 0 2,000 1,250 0 3,250 3,250 3,250 1,500
VKAC Trust Total............... 0 0 6,000 3,750 0 9,750 9,750 9,750 4,500
Equity Trust:
Utility Fund..................... 6/30 0 0 2,000 1,250 0 3,250 3,250 3,250 1,500
Value Fund....................... 6/30 0 0 0 0 0 500 500 500 250
Great American Companies Fund.... 6/30 0 0 0 0 0 500 500 500 250
Growth Fund...................... 6/30 0 0 0 0 0 500 500 500 250
Prospector Fund.................. 6/30 0 0 0 0 0 500 500 500 250
Aggressive Growth Fund........... 6/30 0 0 0 0 0 0 0 0 0
Equity Trust Total............. 0 0 2,000 1,250 0 5,250 5,250 5,250 2,500
Pennsylvania Fund................. 12/31 875 0 0 2,500 0 1,500 3,125 3,125 0
Tax Free Money Fund............... 6/30 0 0 1,375 1,250 0 3,250 3,250 3,250 0
Foreign Securities Fund........... 12/31 0 0 0 0 0 0 0 0 0
<CAPTION>
TRUSTEE
----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
VKAC Trust:
High Yield Fund.................. $3,250 $0 $ 0 $3,250 $0
Short-Term Global Fund........... 3,250 0 0 3,250 0
Strategic Income Fund............ 3,250 0 0 3,250 0
VKAC Trust Total............... 9,750 0 0 9,750 0
Equity Trust:
Utility Fund..................... 3,250 0 0 3,250 0
Value Fund....................... 500 0 0 500 0
Great American Companies Fund.... 500 0 0 500 0
Growth Fund...................... 500 0 0 500 0
Prospector Fund.................. 500 0 0 500 0
Aggressive Growth Fund........... 0 0 0 0 0
Equity Trust Total............. 5,250 0 0 5,250 0
Pennsylvania Fund................. 3,125 0 0 3,125 0
Tax Free Money Fund............... 0 0 0 3,250 0
Foreign Securities Fund........... 0 0 0 0 0
</TABLE>
- -------------------------
* This portfolio of the Life Investment Trust is participating at a separate
meeting.
F-3
<PAGE> 66
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>
AC FUNDS
Comstock Fund................. 12/31 $1,513 $ 6,022 $1,082 $2,827 $ 0 $1,180 $ 1,513 $ 3,553 $39,408
Corporate Bond Fund........... 8/31 377 5,040 403 596 0 746 1,238 1,229 19,434
Emerging Growth Fund.......... 8/31 911 13,431 1,416 7,239 0 2,724 3,634 3,609 2,570
Enterprise Fund............... 12/31 1,602 14,933 1,174 3,028 0 2,319 3,814 3,793 41,238
Equity Income Fund............ 12/31 1,264 8,122 819 2,219 0 1,656 2,952 2,935 19,977
Government Securities Fund.... 12/31 2,985 33,278 1,922 5,301 0 3,899 7,261 7,220 92,319
Government Target Fund........ 8/31 328 3,886 328 491 0 614 1,018 1,011 808
Growth and Income Fund........ 11/30 1,016 7,709 6,527 1,749 0 1,319 2,700 2,955 20,520
Life Investment Trust:
LIT Asset Allocation
Portfolio.................. 12/31 993 5,401 354 951 0 716 1,717 1,709 4,798
LIT Domestic Income
Portfolio.................. 12/31 973 4,473 310 860 0 648 1,662 1,655 3,974
LIT Emerging Growth
Portfolio.................. 12/31 943 0 326 843 0 618 1,566 1,559 187
LIT Enterprise Portfolio..... 12/31 1,013 6,273 409 1,050 0 802 1,773 1,765 6,032
LIT Global Equity
Portfolio*................. 12/31 943 0 320 840 0 618 1,567 1,559 187
LIT Government Portfolio..... 12/31 1,003 4,422 317 891 0 658 1,726 1,719 6,650
LIT Growth and Income
Portfolio.................. 12/31 0 0 0 0 0 0 0 0 0
LIT Money Market Portfolio... 12/31 973 3,951 303 828 0 629 1,663 1,656 6,067
LIT Real Estate Portfolio.... 12/31 953 0 389 1,029 0 797 1,614 1,606 198
Life Investment Trust
Total.................... 7,794 24,520 2,728 7,292 0 5,486 13,288 13,228 28,093
<CAPTION>
TRUSTEE
-------------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
AC FUNDS
Comstock Fund................. $2,491 $ 0 $26,812 $ 3,575 $ 0
Corporate Bond Fund........... 719 0 8,850 1,248 0
Emerging Growth Fund.......... 2,255 0 24,587 3,665 0
Enterprise Fund............... 2,678 0 25,272 3,838 0
Equity Income Fund............ 2,056 0 12,940 2,969 0
Government Securities Fund.... 5,198 0 51,081 7,305 0
Government Target Fund........ 1,026 0 448 1,026 0
Growth and Income Fund........ 1,946 0 1,350 2,762 0
Life Investment Trust:
LIT Asset Allocation
Portfolio.................. 1,133 0 6,506 1,725 0
LIT Domestic Income
Portfolio.................. 1,095 0 5,479 1,670 0
LIT Emerging Growth
Portfolio.................. 1,026 0 0 1,573 0
LIT Enterprise Portfolio..... 1,169 0 7,898 1,782 0
LIT Global Equity
Portfolio*................. 1,026 0 0 1,573 0
LIT Government Portfolio..... 1,144 0 5,615 1,734 0
LIT Growth and Income
Portfolio.................. 0 0 0 0 0
LIT Money Market Portfolio... 1,096 0 4,988 1,671 0
LIT Real Estate Portfolio.... 1,054 0 0 1,621 0
Life Investment Trust
Total.................... 8,743 0 30,486 13,349 0
</TABLE>
G-1
<PAGE> 67
<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>
Limited Maturity Government
Fund......................... 12/31 $ 638 $ 4,604 $ 337 $ 928 $ 0 $ 687 $1,367 $1,389 $ 6,233
Pace Fund..................... 6/30 0 28,129 1,933 2,906 0 3,543 3,543 3,543 66,306
Real Estate Fund.............. 12/31 973 1,912 416 1,072 0 854 1,669 1,662 208
Reserve Fund.................. 5/31 0 6,245 576 576 0 707 707 707 33,196
Small Capitalization Fund..... 10/31 263 1,479 461 905 0 853 1,430 1,422 267
U.S. Government Trust for
Income....................... 9/30 417 4,262 501 978 0 902 1,728 1,718 298
VK FUNDS
U.S. Government Trust:
U.S. Government Fund......... 12/31 864 0 3,486 3,412 0 7,792 9,083 9,476 2,477
Tax Free Trust:
Insured Fund................. 12/31 864 0 3,486 3,412 0 7,792 9,083 9,476 0
Tax Free High Income Fund.... 12/31 864 0 3,486 3,412 0 7,792 9,083 9,476 0
California Fund.............. 12/31 864 0 3,486 3,412 0 7,792 9,083 9,476 0
Municipal Income Fund........ 12/31 864 0 3,486 3,412 0 7,792 9,083 9,083 0
Intermediate Term Municipal
Fund....................... 12/31 864 0 3,486 3,412 0 7,792 9,083 9,476 0
Florida Fund................. 12/31 864 0 1,628 3,412 0 4,228 5,766 5,912 0
New Jersey Fund.............. 12/31 247 0 518 0 0 2,053 2,323 2,436 0
New York Fund................ 12/31 247 0 518 0 0 2,053 2,323 2,436 0
Tax Free Trust Total....... 5,678 0 20,094 20,472 0 47,294 55,827 57,771 0
<CAPTION>
TRUSTEE
------------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Limited Maturity Government
Fund......................... $ 923 $ 0 $ 5,594 $1,405 $ 0
Pace Fund..................... 3,543 0 43,829 3,543 0
Real Estate Fund.............. 1,092 0 1,019 1,677 0
Reserve Fund.................. 707 0 6,093 707 0
Small Capitalization Fund..... 1,015 0 1,350 1,440 0
U.S. Government Trust for
Income....................... 1,144 0 3,982 1,740 0
VK FUNDS
U.S. Government Trust:
U.S. Government Fund......... 8,925 0 0 7,967 0
Tax Free Trust:
Insured Fund................. 8,925 0 0 7,967 0
Tax Free High Income Fund.... 8,925 0 0 7,967 0
California Fund.............. 8,925 0 0 7,967 0
Municipal Income Fund........ 8,925 0 0 7,967 0
Intermediate Term Municipal
Fund....................... 8,925 0 0 7,967 0
Florida Fund................. 5,648 0 0 5,486 0
New Jersey Fund.............. 2,287 0 0 1,974 0
New York Fund................ 2,287 0 0 1,974 0
Tax Free Trust Total....... 54,847 0 0 49,269 0
</TABLE>
G-2
<PAGE> 68
<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>
VKAC Trust:
High Yield Fund........... 6/30 $ 0 $ 0 $ 4,012 $ 1,279 $ 0 $ 7,078 $ 6,729 $ 7,078 $2,258
Short-Term Global Fund.... 6/30 0 0 4,012 1,279 0 7,078 6,729 7,078 2,293
Strategic Income Fund..... 6/30 0 0 4,012 1,279 0 7,078 6,729 7,078 2,293
VKAC Trust Total........ 0 0 12,036 3,837 0 21,234 20,187 21,234 6,844
Equity Trust:
Utility Fund.............. 6/30 0 0 4,012 1,279 0 7,078 6,729 7,078 2,293
Value Fund................ 6/30 0 0 0 0 0 516 510 516 261
Great American Companies
Fund.................... 6/30 0 0 0 0 0 516 510 516 261
Growth Fund............... 6/30 0 0 0 0 0 516 510 516 261
Prospector Fund........... 6/30 0 0 0 0 0 516 510 516 261
Aggressive Growth Fund.... 6/30 0 0 0 0 0 0 0 0 0
Equity Trust Total...... 0 0 4,012 1,279 0 9,142 8,769 9,142 3,337
Pennsylvania Fund.......... 12/31 864 0 2,941 3,412 0 7,792 9,083 9,476 0
Tax Free Money Fund........ 6/30 0 0 3,385 1,279 0 7,078 6,729 7,078 0
Foreign Securities Fund.... 12/31 0 0 0 0 0 0 0 0 0
<CAPTION>
TRUSTEE
------------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
VKAC Trust:
High Yield Fund........... $ 6,818 $ 0 $ 0 $ 5,565 $ 0
Short-Term Global Fund.... 6,818 0 0 5,565 0
Strategic Income Fund..... 6,818 0 0 5,565 0
VKAC Trust Total........ 20,454 0 0 16,695 0
Equity Trust:
Utility Fund.............. 6,818 0 0 5,565 0
Value Fund................ 511 0 0 511 0
Great American Companies
Fund.................... 511 0 0 511 0
Growth Fund............... 511 0 0 511 0
Prospector Fund........... 511 0 0 511 0
Aggressive Growth Fund.... 0 0 0 0 0
Equity Trust Total...... 8,862 0 0 7,609 0
Pennsylvania Fund.......... 8,925 0 0 7,967 0
Tax Free Money Fund........ 0 0 0 5,565 0
Foreign Securities Fund.... 0 0 0 0 0
</TABLE>
- ---------------
* This portfolio of the Life Investment Trust is participating at a separate
meeting.
G-3
<PAGE> 69
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>
AC FUNDS
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
Government Securities Fund..... 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
Growth and Income Fund......... 11/30 570 0 0 64 2,913 42 0 269 2,370
Life Investment Trust:
LIT Asset Allocation
Portfolio................... 12/31 629 0 0 71 3,906 47 0 297 2,346
LIT Domestic Income
Portfolio................... 12/31 629 0 0 71 3,906 47 0 297 2,346
LIT Emerging Growth
Portfolio................... 12/31 578 0 0 70 0 46 0 292 0
LIT Enterprise Portfolio...... 12/31 629 0 0 71 3,772 47 0 297 2,608
LIT Global Equity
Portfolio*.................. 12/31 578 0 0 70 0 46 0 292 0
LIT Government Portfolio...... 12/31 629 0 0 71 3,772 47 0 297 2,608
LIT Growth and Income
Portfolio................... 12/31 0 0 0 0 0 0 0 0 0
LIT Money Market Portfolio.... 12/31 629 0 0 71 3,772 47 0 297 2,608
LIT Real Estate Portfolio..... 12/31 578 0 0 70 0 46 0 292 0
Life Investment Trust
Total..................... 4,879 0 0 565 19,128 373 0 2,361 12,516
Limited Maturity Government
Fund.......................... 12/31 629 0 0 71 3,772 47 0 297 2,608
Pace Fund...................... 6/30 281 0 0 31 1,445 20 0 131 1,185
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
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
AC FUNDS
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
Government Securities Fund..... 0 0 1,297 200 3,772
Government Target Fund......... 0 0 0 0 0
Growth and Income Fund......... 0 0 1,144 183 3,422
Life Investment Trust:
LIT Asset Allocation
Portfolio................... 0 0 1,325 202 3,906
LIT Domestic Income
Portfolio................... 0 0 1,325 202 3,906
LIT Emerging Growth
Portfolio................... 0 0 917 197 0
LIT Enterprise Portfolio...... 0 0 1,315 201 3,772
LIT Global Equity
Portfolio*.................. 0 0 917 197 0
LIT Government Portfolio...... 0 0 1,315 201 3,772
LIT Growth and Income
Portfolio................... 0 0 0 0 0
LIT Money Market Portfolio.... 0 0 1,315 201 3,772
LIT Real Estate Portfolio..... 0 0 917 197 0
Life Investment Trust
Total..................... 0 0 9,346 1,598 19,128
Limited Maturity Government
Fund.......................... 0 0 1,315 201 3,772
Pace Fund...................... 0 0 568 89 1,691
Real Estate Fund............... 0 0 1,018 198 0
Reserve Fund................... 0 0 453 73 1,349
</TABLE>
* Asset Management has reimbursed each AC Fund for expenses related to the
retirement plan through December 31, 1996.
H-1
<PAGE> 70
<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>
Small Capitalization Fund.......... 10/31 477 0 0 57 0 37 0 237 0
U.S. Government Trust for Income... 9/30 447 0 0 51 1,934 33 0 212 0
VK FUNDS
U.S. Government Trust:*
U.S. Government Fund.............. 12/31 499 0 2,169 56 0 48 3,589 404 0
Tax Free Trust:
Insured Fund...................... 12/31 499 0 2,086 56 0 48 3,503 394 0
Tax Free High Income Fund......... 12/31 499 0 2,039 56 0 48 3,532 383 0
California Fund................... 12/31 499 0 1,950 56 0 47 3,440 373 0
Municipal Income Fund............. 12/31 499 0 1,454 56 0 46 2,766 315 0
Intermediate Term Municipal
Fund............................ 12/31 499 0 0 56 0 41 0 259 0
Florida Fund...................... 12/31 578 0 0 70 0 50 0 304 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
Tax Free Trust Total............ 4,229 0 7,529 490 0 380 13,241 2,636 0
VKAC Trust:
High Yield Fund................... 6/30 499 0 2,001 56 0 44 3,585 346 0
Short-Term Global Fund............ 6/30 499 0 1,569 56 0 43 2,848 303 0
Strategic Income Fund............. 6/30 499 0 0 56 0 41 0 259 0
VKAC Trust Total................ 1,497 0 3,570 168 0 128 6,433 908 0
Equity Trust:
Utility Fund...................... 6/30 499 0 0 56 0 41 0 260 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>
Small Capitalization Fund.......... 0 0 908 160 0
U.S. Government Trust for Income... 0 0 920 145 1,934
VK FUNDS
U.S. Government Trust:*
U.S. Government Fund.............. 2,520 0 861 292 0
Tax Free Trust:
Insured Fund...................... 2,490 0 861 283 0
Tax Free High Income Fund......... 2,472 0 861 272 0
California Fund................... 2,439 0 861 265 0
Municipal Income Fund............. 2,346 0 861 219 0
Intermediate Term Municipal
Fund............................ 1,918 0 861 177 0
Florida Fund...................... 0 0 917 206 0
New Jersey Fund................... 0 0 917 206 0
New York Fund..................... 0 0 917 206 0
Tax Free Trust Total............ 11,665 0 7,056 1,834 0
VKAC Trust:
High Yield Fund................... 2,458 0 861 265 0
Short-Term Global Fund............ 2,395 0 861 225 0
Strategic Income Fund............. 2,060 0 861 190 0
VKAC Trust Total................ 6,913 0 2,583 680 0
Equity Trust:
Utility Fund...................... 2,065 0 861 190 0
Value Fund........................ 0 0 404 88 0
</TABLE>
* Asset Management has reimbursed each AC Fund for expenses related to the
retirement plan through December 31, 1996.
H-2
<PAGE> 71
<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>
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
Prospector Fund.................... 6/30 255 0 0 31 0 20 0 129 0
Aggressive Growth Fund............. 6/30 41 0 0 5 0 3 0 21 0
Equity Trust Total............... 1,560 0 0 185 0 124 0 797 0
Pennsylvania Fund................... 12/31 499 0 1,858 56 0 47 3,555 350 0
Tax Free Money Fund................. 6/30 499 0 2,244 56 0 45 3,830 369 0
Foreign Securities Fund............. 12/31 252 0 0 28 0 18 0 133 0
<CAPTION>
TRUSTEE
-----------------------------------------------
FUND NAME ROBINSON SHEEHAN SISTO WHALEN WOODSIDE
--------- -------- ------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Great American Companies Fund...... 0 0 404 88 0
Growth Fund........................ 0 0 404 88 0
Prospector Fund.................... 0 0 404 88 0
Aggressive Growth Fund............. 0 0 71 14 0
Equity Trust Total............... 2,065 0 2,548 556 0
Pennsylvania Fund................... 2,405 0 861 247 0
Tax Free Money Fund................. 0 0 861 284 0
Foreign Securities Fund............. 0 0 439 93 0
</TABLE>
* Asset Management has reimbursed each AC Fund for expenses related to the
retirement plan through December 31, 1996.
+ This portfolio of the Life Investment Trust is participating at a separate
meeting.
H-3
<PAGE> 72
ANNEX I
5% BENEFICIAL OWNERS
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
SHORT-TERM GLOBAL FUND Xerox Financial Services 1,337,724.035 10.10%
Life Insurance Company
1 Tower Ln #3000
Villa Park, IL 60181-4644
STRATEGIC INCOME FUND MLPF&S for the sole benefit 642,343.000 6.95%
of its customers
Attn Fund Administration
4800 Deer Lake Dr E
Fl 3
Jacksonville, FL 32246-6484
VALUE FUND Van Kampen American Capital 101,366.965 96.70%
Attn Dominick Cogliandro
One Chase Manhattan Plaza
37th Floor
New York, NY 10005
GREAT AMERICAN COMPANIES Van Kampen American Capital 101,566.069 99.61%
FUND Attn: Dominick Cogliandro
One Chase Manhattan Plaza,
37th Floor
New York, NY 10005
PROSPECTOR FUND Van Kampen American Capital 104,018.788 100%
Attn Dominick Cogliandro
One Chase Manhattan Plaza
37th Floor
New York, NY 10005
TAX FREE MONEY FUND Jerome L. Robinson 4,051,043.270 12.00%
C/O Robinson Tech Products
Corp Re:
Merchants Bank of New York
PO Box 350-115 River Rd
Edgewater, NJ 07020-1007
FOREIGN SECURITIES FUND Common Sense Trust Growth 46,878.506 48.68%
Fund C/O State Street Bank &
Trust
PO Box 1713
Boston, MA 02105-1713
I-1
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
AM CAP Pace Fund Inc 39,426.351 40.94%
C/O State Street Bank &
Trust
PO Box 1713
Boston, MA 02105-1713
Van Kampen American Capital 10,000.00 10.38%
Attn: Dominick Cogliandro
One Chase Manhattan Plaza
37th Floor
New York, NY 10005
ENTERPRISE FUND Bean & Co. 5,723,640.574 5.08%
First Pennsylvania Bank NA
C/O FPS Services
ATTN TAC
PO Box 61503
King of Prussia, PA
19406-0903
EQUITY INCOME FUND MLPF&S for the sole benefit 1,006,450.000 11.37%
of its customers
Attn Fund Administration
4800 Deer Lake Dr E Fl 3
Jacksonville, FL 32246-6484
GOVERNMENT SECURITIES FUND MLPF&S for the sole benefit 11,987,991.000 5.15%
of its customers
Attn Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
GOVERNMENT TARGET FUND Amalgamated Bk of NY Cust 331,629.892 35.18%
TWU-NYC Pri Bus Lines Pen Pl
Amivest Corp Discretionary
Investmnet Mor
PO Box 0370 Cooper Stat
New York, NY 10276-0370
Amalgamated Bk of NY Cust 75,331.267 7.99%
Elevator Div Ret Benefit Pl
Amivest Corp Discretionary
Investmnet Mgr
PO Box 0370
New York, NY 10276-0370
I-2
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
Amalgamated Bk of NY Cust NY 74,478.649 7.90%
City Hotel Trades Council &
Hotel Assoc Pen Pl Amivest
Corp Discretionary Invest
Mgr
PO Box 0370
New York, NY 10276-0370
Amalgamated Bk of Marble 51,187.464 5.43%
Industry Trust Fund Amivest
Discretionary Investmnet Mgr
PO Box 0370 Cooper Stat
New York, NY 10276-0370
LIT ASSET ALLOCATION Nationwide Life Insurance Co 2,963,445.001 55.06%
PORTFOLIO Nationwide Variable
Account-3
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
Nationwide Life Insurance Co 2,163,177.408 40.19%
Nationwide VLI Separate
Account
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
LIT DOMESTIC INCOME Nationwide Life Insurance Co 1,169,249.321 54.68%
PORTFOLIO Nationwide Variable
Account-3
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH
American General Life Ins Co 601,973.116 28.15%
Separate Account D
Attn James A Totten
PO Box 1591
Houston, TX 77251-1591
Nationwide Life Insurance Co 257,364.774 12.04%
Nationwide VLI Separate
Account
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
I-3
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
LIT EMERGING GROWTH Nationwide Life Insurance Co 183,089.350 51.07%
PORTFOLIO Nationwide Variable
Account-3
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
Nationwide Life Insurance Co 138,952.378 38.76%
Nationwide VLI Separate
Account
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
Van Kampen American Capital 36,437.860 10.16%
Generations Variable
Annuities
7501 NW Tiffany Springs Pky
Kansas City, MO 64153-1386
LIT ENTERPRISE PORTFOLIO Nationwide Life Insurance Co 2,130,741.684 42.24%
Nationwide Variable
Account-3
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
Nationwide Life Insurance Co 1,7662,536.273 34.94%
Nationwide VLI Separate
Account
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
American General Life Ins Co 770,999.725 15.29%
Separate Account D
Attn James A Totten
PO Box 1591
Houston, TX 77251-1591
American General Life Ins Co 354,084.399 7.02%
Separate Account D Variety
Plus
Attn James A Totten
PO Box 1591
Houston, TX 77251-1591
I-4
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
LIT GOVERNMENT PORTFOLIO Nationwide Life Insurance Co 5,485,477.942 87.01%
Nationwide VLI Separate
Account
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, Oh 43218-2029
Nationwide Life Insurance Co 658,578.414 10.45%
Nationwide Variable
Account-3
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
LIT GROWTH AND INCOME Van Kampen American Capital 50,021.246 34.68%
PORTFOLIO Distributors Inc.
Attn: Dominick Cogliandro
One Chase Manhattan Plaza
37th Fl
New York, NY 10005-1401
Van Kampen American Capital 94,205.961 65.32%
Generations Variable
Annuities
7501 NW Tiffany Springs Pky
Kansas City, MO 64153-1386
LIT MONEY MARKET PORTFOLIO Nationwide Life Insurance Co 9,412,694.490 39.72%
Nationwide VLI Separate
Account
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
Nationwide Life Insurance Co 8,752,698.710 36.93%
Nationwide Variable
Account-3
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
American General Life Ins Co 4,810,616.720 20.30%
Separate Account D
Attn: James A Totten
PO Box 1591
Houston, TX 77251-1591
I-5
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
LIT REAL ESTATE PORTFOLIO Nationwide Life Insurance Co 12,661,070.141 94.76%
Nationwide Variable Account
II
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
LIMITED MATURITY GOVERNMENT MLPF&S for the sole benefit 318,087.000 6.58%
FUND of its customers
Attn Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
REAL ESTATE FUND MLPF&S for the sole benefit 622,399.000 9.57%
of its customers
Attn Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
RESERVE FUND PNC Bank 27,889,082.680 5.15%
Collective Investment Funds
One Oliver PLZ
P3-POLV-25-1
210 6th Ave.
Pittsburgh, PA 15222-2602
SMALL CAPITALIZATION FUND Common Sense Trust Growth 7,485,349.928 53.37%
Fund
C/O State Street Bank &
Trust
PO Box 1713
Boston, MA 02105-1713
AM CAP Pace Fund Inc 6,210,404.410 44.28%
C/O State Street Bank &
Trust
PO Box 1713
Boston, MA 02105-1713
U.S. GOVERNMENT TRUST FOR MLPF&S for the sole benefit 1,896,622.742 8.08%
INCOME of its customers
Attn: Fund Administration
4800 Deer Lake Dr E 3rd FL
Jacksonville, FL 32246-6484
</TABLE>
I-6
<PAGE> 75
ANNEX J
The table below sets forth the year in which each of the incumbent nominees to
the Board of Trustees initially was elected or appointed to the Board of
Trustees.
<TABLE>
<CAPTION>
AC FUNDS
------------------------------------------------------------------------------
FUND NAME BRANAGAN HEAGY(1) KENNEDY NELSON ROONEY(1) ROBINSON SISTO WHALEN
--------- -------- -------- ------- ------ --------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Fund........ 1991 1995 1995 1995 1997 1995 1979 1995
Corporate Bond
Fund............... 1991 1995 1995 1995 1997 1995 1978 1995
Emerging Growth
Fund............... 1991 1995 1995 1995 1997 1995 1978 1995
Enterprise Fund...... 1991 1995 1995 1995 1997 1995 1980 1995
Equity Income Fund... 1991 1995 1995 1995 1997 1995 1978 1995
Government Securities
Fund............... 1991 1995 1995 1995 1997 1995 1984 1995
Government Target
Fund............... 1991 1995 1995 1995 1997 1995 1979 1995
Growth and Income
Fund............... 1991 1995 1995 1995 1997 1995 1978 1995
Life Investment Trust:
- ------------------------------
LIT Asset
Allocation
Portfolio........ 1991 1995 1995 1995 1997 1995 1987 1995
LIT Domestic Income
Portfolio........ 1991 1995 1995 1995 1997 1995 1987 1995
LIT Emerging Growth
Portfolio........ 1995 1995 1995 1995 1997 1995 1995 1995
LIT Enterprise
Portfolio........ 1991 1995 1995 1995 1997 1995 1986 1995
LIT Global Equity
Portfolio*....... 1995 1995 1995 1995 1997 1995 1995 1995
LIT Government
Portfolio........ 1991 1995 1995 1995 1997 1995 1986 1995
LIT Growth and
Income
Portfolio........ 1995 1995 1995 1995 1997 1995 1995 1995
LIT Money Market
Portfolio........ 1991 1995 1995 1995 1997 1995 1986 1995
LIT Real Estate
Portfolio........ 1995 1995 1995 1995 1997 1995 1995 1995
Limited Maturity
Government Fund.... 1991 1995 1995 1995 1997 1995 1985 1995
Pace Fund............ 1991 1995 1995 1995 1997 1995 1980 1995
Real Estate Fund..... 1994 1995 1995 1995 1997 1995 1994 1995
Reserve Fund......... 1991 1995 1995 1995 1997 1995 1978 1995
Small Capitalization
Fund............... 1993 1995 1995 1995 1997 1995 1993 1995
U.S. Government Trust
for Income......... 1992 1995 1995 1995 1997 1995 1992 1995
</TABLE>
J-1
<PAGE> 76
<TABLE>
<CAPTION>
VK FUNDS
------------------------------------------------------------------------------
FUND NAME BRANAGAN HEAGY(1) KENNEDY NELSON ROONEY(1) ROBINSON SISTO WHALEN
--------- -------- -------- ------- ------ --------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT TRUST:
U.S. Government
Fund............. 1995 1995 1993 1988 1997 1992 1995 1988
Tax Free Trust:
Insured Fund....... 1995 1995 1993 1984 1997 1992 1995 1984
Tax Free High
Income Fund...... 1995 1995 1993 1985 1997 1992 1995 1985
California Fund.... 1995 1995 1993 1985 1997 1992 1995 1985
Municipal Income
Fund............. 1995 1995 1993 1990 1997 1992 1995 1990
Intermediate Term
Municipal Fund... 1995 1995 1993 1993 1997 1993 1995 1993
Florida Fund....... 1995 1995 1994 1994 1997 1994 1995 1994
New Jersey Fund.... 1995 1995 1994 1994 1997 1994 1995 1994
New York Fund...... 1995 1995 1994 1994 1997 1994 1995 1994
VKAC Trust:
High Yield Fund.... 1995 1995 1993 1986 1997 1992 1995 1986
Short-Term Global
Fund............. 1995 1995 1993 1990 1997 1992 1995 1990
Strategic Income
Fund............. 1995 1995 1993 1993 1997 1993 1995 1993
EQUITY TRUST:
Utility Fund....... 1995 1995 1993 1993 1997 1993 1995 1993
Value Fund......... 1995 1995 1995 1995 1997 1995 1995 1995
Great American
Companies Fund... 1995 1995 1995 1995 1997 1995 1995 1995
Growth Fund........ 1995 1995 1995 1995 1997 1995 1995 1995
Prospector Fund.... 1995 1995 1995 1995 1997 1995 1995 1995
Aggressive Growth
Fund............. 1996 1996 1996 1996 1997 1996 1996 1996
Pennsylvania Fund.... 1995 1995 1993 1987 1997 1992 1995 1987
Tax Free Money Fund.. 1995 1995 1993 1986 1997 1988 1995 1986
Foreign Securities
Fund............... 1996 1996 1996 1996 1997 1996 1996 1996
</TABLE>
- ---------------
* This portfolio of the Life Investment Trust is participating in a separate
meeting.
(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. Mr. Rooney was
appointed by the Trustees to the Board in 1997 in order to fill a vacancy
created by the retirement of a former trustee and has not been previously
elected by shareholders. Each of the other incumbent trustees was last
elected by shareholders of the respective Trust at a joint meeting of
shareholders held on July 21, 1995.
J-2
<PAGE> 77
ANNEX K
The table below sets forth the number of shares of each Fund owned directly or
beneficially by the nominees to the Board of Trustees as of April 14, 1997.
Nominees who do not own any Shares have been omitted from the table. Funds which
are not owned by any nominees also have been omitted from the table.
<TABLE>
<CAPTION>
FUND NAME BRANAGAN HEAGY KENNEDY MCDONNELL NELSON ROBINSON SISTO WHALEN
--------- -------- ----- ------- --------- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund...... 124 0 0 0 242 0 7,127 552
Comstock Fund............... 55 0 0 0 141 0 837 331
Corporate Bond Fund......... 141 0 0 0 0 0 2,115 747
Emerging Growth Fund........ 44 80 0 0 62 0 3,326 145
Enterprise Fund............. 76 169 0 0 132 0 11,406 1,032
Equity Income Fund.......... 184 379 186 1,864 299 0 911 1,076
Government Securities
Fund....................... 30,021 257 0 0 0 0 4,493 513
Growth and Income Fund...... 74 164 473 0 205 1,066 837 115
Growth Fund................. 0 0 0 3,008 0 0 296 1,204
High Yield Fund............. 104 0 127 2,030 0 500 0 5,071
Insured Tax Free Income
Fund....................... 10,402 0 0 251 0 507 0 632
Intermediate Term Municipal
Income Fund................ 99 0 0 1,101 0 0 0 220
Limited Maturity Government
Fund....................... 24,648 0 90 192 0 881 0 173
Municipal Income Fund....... 13,083 167 0 499 0 504 268 3,428
Pace Fund................... 78 0 0 0 166 0 0 386
Real Estate Fund............ 109 198 0 0 158 0 0 372
Reserve Fund................ 0 2,500 1,089 2,610 101 0 115,722 4,567
Short-Term Global Income
Fund....................... 134 0 151 512 0 500 0 818
Strategic Income Fund....... 80 0 102 682 0 0 0 205
Tax Free High Income Fund... 70 0 0 4,958 0 500 0 514
Tax Free Money Fund......... 0 0 0 2,306 0 4,051,043 0 833
U.S. Government Fund........ 70 0 79 1,110 0 500 0 1,503
U.S. Government Trust for
Income..................... 107 0 0 0 0 0 0 0
Utility Fund................ 78 0 83 411 132 0 0 167
</TABLE>
K-1
<PAGE> 78
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.
<PAGE> 79
----A WEALTH OF KNOWLEDGE * A KNOWLEDGE OF WEALTH(TM)----
VAN KAMPEN AMERICAN CAPITAL
JOE
<PAGE> 80
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE FORM OF PROXY
VAN KAMPEN AMERICAN CAPITAL XXXXXXXXXX FUND
JOINT SPECIAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of shares of VAN KAMPEN AMERICAN CAPITAL
XXXXXXXXXX Fund (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 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
named below: FOR WITHHOLD
[ ] [ ]
XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX,
XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX, XXXXXXX
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME ON THE LINE BELOW.
------------------------------------------------------------
3. To ratify or reject, as specified below, the selection of independent public
accountants for its current fiscal year:
(a) The proposal to ratify XXXXXX as independent public
accountants for the Fund's current fiscal year; FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) The proposal to ratify XXXXXX as independent public
accountants for the Fund's current fiscal year; FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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.
