<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Co-Registrants /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Com-
mission 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 GLOBAL MANAGED ASSETS FUND (811-8286)
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST (811-4424)
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND (811-8480)
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST (811-4746)
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST (811-6220)
(Names of Co-Registrants as Specified in Their Charters)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per each Co-Registrant (an aggregate of $625 for the Co-Registrants
listed above) per Item 22(a)(2) of Schedule 14A.
/X/ Fee paid previously with preliminary materials.
<PAGE> 2
o SEPTEMBER 1996 o
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 Federal securities laws require a vote by each Fund's shareholders whenever
the Fund's investment adviser, or its parent corporation, is subject to a
change in control. Morgan Stanley Group Inc. and certain of its affiliates have
entered into an agreement to acquire the corporate parent of your Fund's
investment adviser, which may be considered a change of control. Items your
Fund is seeking shareholder approval on include:
o a new investment advisory agreement
o a new investment subadvisory agreement
o amendments to certain fundamental investment policies
o ratification of the independent public accountants
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
identical to the Fund's current investment advisory agreement, except for the
dates of execution, effectiveness and termination. The new investment
subadvisory agreement between your Fund's investment adviser and its subadviser
generally will be substantially identical to its current subadvisory agreement,
except for the dates of execution, effectiveness and termination. Shareholders
of Funds that retain John Govett & Co. Limited as a subadviser are being asked
to approve an interim subadvisory agreement with John Govett & Co. Limited that
will terminate on March 31, 1997 and a new subadvisory agreement with Morgan
Stanley Asset Management Inc. that would provide for a change of subadviser for
those Funds beginning on April 1, 1997 and for certain changes to their
subadvisory agreements as described in the proxy statement.
Q WILL MY VOTE MAKE A DIFFERENCE?
A Your vote is needed to ensure that the proposals can be acted upon.
Additionally, 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 DO I CALL IF I HAVE QUESTIONS?
A We will be happy to answer your questions about the proxy solicitation.
Please call us at 1-800-421-5666 (TDD users call 1-800-772-8889) between 7:00
a.m. and 7:00 p.m. Central time, Monday through Friday.
<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"
APPROVAL OF NEW SUBADVISORY AGREEMENT - mark "For," "Against" or "Abstain"
APPROVAL OF CHANGES IN CERTAIN FUNDAMENTAL INVESTMENT POLICIES - mark "For,"
"Against" or "Abstain"
RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS - mark
"For," "Against" or "Abstain"
OTHER BUSINESS - 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.
PROXY
VAN KAMPEN AMERICAN CAPITAL XXXXX FUND
JOINT SPECIAL MEETING OF SHAREHOLDERS
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
<TABLE>
<S><C>
1. THE PROPOSAL TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT. FOR / / AGAINST / / ABSTAIN / /
2. THE PROPOSAL TO APPROVE A NEW INVESTMENT SUBADVISORY AGREEMENT: FOR / / AGAINST / / ABSTAIN / /
2A. WITH MORGAN STANLEY ASSET MANAGEMENT INC.; FOR / / AGAINST / / ABSTAIN / /
2B. WITH JOHN GOVETT & CO. LIMITED; FOR / / AGAINST / / ABSTAIN / /
2C. WITH HINES INTERESTS, REALTY ADVISERS LIMITED; OR FOR / / AGAINST / / ABSTAIN / /
2D. WITH VAN KAMPEN AMERICAN CAPITAL ADVISERS, INC. FOR / / AGAINST / / ABSTAIN / /
3. THE PROPOSAL TO APPROVE CHANGES IN CERTAIN FUNDAMENTAL FOR / / AGAINST / / ABSTAIN / /
INVESTMENT POLICIES
4. THE PROPOSAL TO RATIFY PRICE WATERHOUSE LLP AS INDEPENDENT FOR / / AGAINST / / ABSTAIN / /
PUBLIC ACCOUNTANTS
5. TO ACT UPON ANY AND ALL OTHER BUSINESS.
</TABLE>
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
<PAGE> 4
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 October 25,
1996. 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> 5
September 6, 1996
Dear Van Kampen American Capital Fund Shareholder:
The enclosed proxy statement relates to a joint meeting of the shareholders of
seven of the Van Kampen American Capital Funds. We are pleased to announce that
VK/AC Holding, Inc., the corporate parent of the investment adviser of the
Funds, has entered into a merger agreement with Morgan Stanley Group Inc. and
certain of its affiliates. According to the merger agreement, your Fund's
investment adviser will become an indirect subsidiary of Morgan Stanley. Your
Fund's current 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 each Fund's
shareholders to consider a new investment advisory agreement to take effect
following the merger, as required by federal securities laws. The new investment
advisory agreement between your Fund and its investment adviser will be
substantially identical to the Fund's current investment advisory agreement,
except for the dates of execution, effectiveness and termination.
Shareholders also will be asked to approve new subadvisory agreements at the
meeting. Your Fund's current subadviser will continue to serve as subadviser to
the Fund, except that the shareholders of the Funds that retain John Govett &
Co. Limited are being asked to approve an interim subadvisory agreement with
John Govett & Co. Limited that will terminate on March 31, 1997 and a
subadvisory agreement with Morgan Stanley Asset Management Inc. that would
provide for a change of subadvisers for those Funds beginning on April 1, 1997
and for certain changes to their subadvisory agreements described in the proxy
statement. The attached proxy statement seeks shareholder approval on these 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> 6
VAN KAMPEN AMERICAN CAPITAL FUNDS
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 421-5666
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 25, 1996
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 Friday, October 25, 1996,
at 2:00 p.m., for the following purposes:
1. For each Fund, to approve or disapprove a new investment advisory
agreement;
2. New Subadvisory Agreements
2A. For each of Global Equity Fund, Global Government Fund,
Global Managed Assets Fund and LIT Global Equity Portfolio, to
approve or disapprove an investment sub-advisory agreement
with Morgan Stanley Asset Management Inc.;
2B. For each of Global Equity Fund, Global Government Fund,
Global Managed Assets Fund and LIT Global Equity Portfolio, to
approve or disapprove interim investment subadvisory
agreements with John Govett & Co. Limited;
2C. For each of Real Estate Securities Fund and LIT Real Estate
Securities Portfolio, to approve or disapprove a new
investment subadvisory agreement with Hines Interests Realty
Advisers Limited Partnership;
2D. For High Yield Municipal Fund, to approve a new investment
subadvisory agreement with Van Kampen American Capital
Advisors, Inc.;
3. For each Fund, to approve or disapprove certain changes to its
fundamental investment policies with respect to investments in
other investment companies;
4. For each Fund, to ratify or reject the selection of Price
Waterhouse LLP as independent public accountants for its current
fiscal year; and
5. To transact such other business as may properly come before the
Meeting.
Holders of record of the Shares of each Fund at the close of business on
August 27, 1996 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
September 6, 1996
<PAGE> 7
EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF
ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800) 421-5666 OR BY WRITING TO THE
RESPECTIVE FUND AT ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.
SHAREHOLDERS OF THE FUNDS ARE INVITED TO ATTEND THE MEETING IN PERSON. IF YOU
DO NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON
THE ENCLOSED PROXY CARD WITH RESPECT TO EACH FUND IN WHICH YOU WERE A
SHAREHOLDER AS OF THE RECORD DATE, DATE AND SIGN SUCH PROXY CARD(S), AND RETURN
IT (THEM) IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT
YOU MAIL YOUR PROXY PROMPTLY.
THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS THAT YOU CAST YOUR VOTE:
- FOR approval of each new investment advisory agreement;
- FOR approval of each new investment subadvisory agreement;
- FOR approval of changes in certain fundamental investment policies of each
Fund relating to investments in other investment companies; and
- FOR the ratification of the selection of independent public accountants for
the current fiscal year of each Fund.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
<PAGE> 8
PROXY STATEMENT
VAN KAMPEN AMERICAN CAPITAL FUNDS
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 421-5666
JOINT SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 25, 1996
This Proxy Statement is furnished in connection with the solicitation by the
Board 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, and
all adjournments thereof (the "Meeting"), of the Funds, to be held at the
offices of Van Kampen American Capital, Inc., One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, on Friday, October 25, 1996, at 2:00 p.m. The
approximate mailing date of this Proxy Statement and accompanying form of proxy
is September 6, 1996.
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 June 21, 1996 (the "Merger Agreement"), among Morgan Stanley
Group Inc. ("Morgan Stanley"), MSAM Holdings II, Inc., MSAM Acquisition Inc. and
VK/AC Holding, Inc. ("VKAC Holding"), the indirect parent corporation of the
Funds' investment adviser. Pursuant to the Merger Agreement, the investment
adviser will become an indirect subsidiary of Morgan Stanley. The shareholder
vote on the New Advisory Agreements is required under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a result of Morgan Stanley's
contemplated acquisition of the investment adviser. Each Fund's New Advisory
Agreement is substantially identical to such Fund's Current Advisory Agreement
(defined below), except for the dates of execution, effectiveness and
termination.
Shareholders of each Fund also are being asked to approve a New Subadvisory
Agreement (defined below). The shareholder vote on the New Subadvisory
Agreements is required under the terms of the Current Subadvisory Agreements
(defined below), as a result of Morgan Stanley's contemplated acquisition of the
investment adviser.
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.
<PAGE> 9
The Boards of Trustees have 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. 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 Funds and abbreviated Fund names. The Van Kampen American
Capital investment companies not listed on Annex A will vote at separate
shareholder meetings on proposals substantially similar to Proposals 1 and 3 in
this Proxy Statement. They will hold separate shareholder meetings because their
shareholders do not vote on the subadvisory agreements. 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. Approval of New Subadvisory
Agreements
2A. Approval of Subadvisory Global Equity Fund
Agreements with Morgan Stanley Global Government Fund
Asset Management Inc. Global Managed Assets Fund
LIT Global Equity Portfolio
2B. Approval of Interim Subadvisory Global Equity Fund
Agreements with John Govett & Co. Global Government Fund
Limited Global Managed Assets Fund
LIT Global Equity Portfolio
2C. Approval of New Subadvisory Real Estate Securities Fund
Agreements with Hines Interests LIT Real Estate Securities
Realty Advisers Limited Portfolio
Partnership
2D. Approval of a New Subadvisory High Yield Municipal
Agreement with Van Kampen Portfolio
American Capital Advisors, Inc.
3. Amendment of Fundamental Investment All Funds
Policies
4. Ratification of Price Waterhouse LLP All Funds
as Independent Public Accountants
</TABLE>
EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF
ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST
2
<PAGE> 10
SHOULD BE DIRECTED TO THE VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800)
421-5666 OR BY WRITING TO THE RESPECTIVE FUND AT ONE PARKVIEW PLAZA, OAKBROOK
TERRACE, ILLINOIS 60181.
VOTING
The Board of Trustees has fixed the close of business on August 27, 1996, 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 Proposals 1, 2 and 3, the
"vote of a majority of the outstanding voting securities" is required, 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 4, an
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 approval of each New Subadvisory Agreement.
- FOR approval of changes in certain fundamental investment policies of each
Fund regarding investment in other investment companies.
- FOR the ratification of the selection of independent public accountants for
the current fiscal year of each Fund.
All Shares of a Fund affected by a proposal will vote together as a single
class on such proposal. An unfavorable vote on a proposal by the shareholders of
one Fund will not affect the implementation of such a proposal by another Fund,
if the proposal is approved by the shareholders of the other Fund.
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
3
<PAGE> 11
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
4 of the Notice that will be presented for consideration at the Meeting. If any
other matters are properly presented, it is the intention of the persons named
on the enclosed proxy to vote proxies in accordance with their best judgment. In
the event a quorum is present at the Meeting but sufficient votes to approve any
of the proposals with respect to one or more Funds are not received, the persons
named as proxies may propose one or more adjournments of the Meeting of the
concerned Fund to permit further solicitation of proxies, provided they
determine that such an adjournment and additional solicitation is reasonable and
in the interest of shareholders based on a consideration of all relevant
factors, including the nature of the relevant proposal, the percentage of votes
then cast, the percentage of negative votes then cast, the nature of the
proposed solicitation activities and the nature of the reasons for such further
solicitation.
- - - ------------------------------------------------------------------------------
PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENTS
- - - ------------------------------------------------------------------------------
THE ADVISER
Van Kampen American Capital Asset Management, Inc. ("Asset Management" or the
"Adviser") acts as investment adviser for each Fund. Asset Management has acted
as investment adviser for each Fund since each Fund commenced its investment
operations. Prior to December 1994, the Adviser provided investment advisory
services under the name "American Capital Asset Management, Inc."
The Adviser currently is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VKAC Holding,
which in turn is controlled, through the ownership of a substantial majority of
its common stock, by The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is managed
by Clayton, Dubilier & Rice, Inc., a New York based private investment firm. The
General Partner of C&D L.P. is Clayton & Dubilier Associates IV
4
<PAGE> 12
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of VKAC own, in the
aggregate, approximately 6% of the common stock of VKAC Holding and have the
right to acquire, upon the exercise of options (whether or not vested),
approximately an additional 12% of the common stock of VKAC Holding. Currently,
and after giving effect to the exercise of such options, no officer or trustee
of the Funds owns or would own 5% of more of the common stock of VKAC Holding.
The addresses of VKAC Holding, VKAC and the Adviser are One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 and 2800 Post Oak Blvd., Houston, Texas 77056.
INFORMATION CONCERNING MORGAN STANLEY
Morgan Stanley and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer and investment adviser, and Morgan Stanley
International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange, commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; and global custody, securities clearance
services and securities lending. Morgan Stanley Asset Management Inc. ("MSAM")
also is a wholly-owned subsidiary of Morgan Stanley. As of June 30, 1996, MSAM,
together with its affiliated investment advisory companies, had approximately
$103.5 billion of assets under management and fiduciary advice.
THE ACQUISITION
Pursuant to the Merger Agreement, MSAM Acquisition Inc. will be merged with
and into VKAC Holding and VKAC Holding will be the surviving corporation (the
"Acquisition"). Following the Acquisition, VKAC Holding and the Adviser will be
indirect subsidiaries of Morgan Stanley.
The Adviser anticipates that the consummation of the Acquisition will occur by
the end of November 1996, provided that a number of conditions set forth in the
Merger Agreement are met or waived. The conditions require, among other things,
that as of the closing the shareholders of certain investment companies
(including the Funds) and investors in certain accounts advised by the Advisers
and their affiliates, which investment companies and accounts have aggregate
assets in excess of a specified minimum amount, have approved new investment
advisory agreements or have consented to the assignment of existing investment
advisory agreements. At the closing, MSAM Acquisition Inc. will pay
approximately $740 million
5
<PAGE> 13
(based on VKAC's long-term debt outstanding as of July 31, 1996) in cash to the
stockholders of VKAC Holding (excluding certain management stockholders), and to
persons owning options to purchase stock of VKAC Holding, subject to certain
purchase price adjustments set forth in the Merger Agreement. As of July 31,
1996, VKAC had long-term debt outstanding of approximately $410 million. To the
extent that pre-tax income of VKAC prior to the closing of the Acquisition
permits the repayment of its long-term debt, the purchase price for the equity
interests in VKAC Holding will be increased by the amount of long-term debt
repaid. The purchase price also is subject to certain adjustments based, among
other things, on assets under management of VKAC and its subsidiaries at the
time of closing. The Adviser also contemplates that, as part of the Acquisition,
certain officers and directors of VKAC Holding and its affiliates will
contribute to MSAM Holdings II, Inc. their existing shares of common stock of
VKAC Holding in exchange for approximately $25 million of shares of preferred
stock of MSAM Holdings II, Inc. which, in turn, will be exchangeable into common
stock, par value $1.00 per share, of Morgan Stanley at specified times over a
four year period. Such shares of preferred stock will represent, in the
aggregate, 5% of the combined voting power in MSAM Holdings II, Inc., the
remainder of which will be indirectly owned by Morgan Stanley.
VKAC Holding will engage in certain preparatory transactions prior to the
Acquisition, including the distribution to stockholders of VKAC Holding of (i)
all of VKAC Holding's investment in McCarthy, Crisanti & Maffei, Inc., a
wholly-owned subsidiary engaged in the business of distributing research and
financial information, (ii) all of VKAC Holding's investment in Hansberger
Global Investors, Inc. ("HGI"), a company in which VKAC Holding made a minority
investment in May 1996, and (iii) certain related cash amounts.
There is no financing condition to the closing of the Acquisition. VKAC has
been advised by Morgan Stanley that, as of August 30, 1996, no determination has
been made whether any additional indebtedness will be incurred by Morgan Stanley
and its affiliates or VKAC and its affiliates in connection with the
Acquisition. In addition, the disposition of VKAC's outstanding long-term
indebtedness (including its bank loans and senior notes) in connection with the
Acquisition had not yet been determined.
The operating revenue of VKAC and its subsidiaries for the fiscal year ended
December 31, 1995, less expenses for the same period, was more than adequate to
service VKAC's outstanding debt. VKAC prepaid $80 million of its long-term debt
in 1995, and has continued to make debt prepayments during 1996. VKAC Holding
and VKAC believe, based on the earnings experience of VKAC and its subsidiaries,
that after the Acquisition the operating revenue of VKAC and its subsidiaries
should be more than sufficient to service their debt and that VKAC and its
subsidiaries should be able to conduct their respective operations as now
conducted and as proposed to be conducted.
6
<PAGE> 14
The Merger Agreement does not contemplate any changes, other than changes in
the ordinary course of business, in the management or operation of the Adviser
relating to the Funds, the Adviser's personnel managing the Funds or other
services or business activities of the Funds. The Acquisition is not expected to
result in material changes in the business, corporate structure or composition
of the senior management or personnel of the Adviser, or in the manner in which
the Adviser renders its services to the Funds (except with respect to the Global
Funds (defined below) as described in Proposal 2A). Morgan Stanley has agreed in
the Merger Agreement that, for a period of two years from the date of the
Acquisition, it will cause the Adviser to provide compensation and employee
benefits which are substantially comparable in the aggregate to those presently
provided. The Adviser does not anticipate that the Acquisition or any ancillary
transactions will cause a reduction in the quality of services now provided to
the Funds by the Adviser, or have any adverse effect on the Adviser's ability to
fulfill its obligations under the New Advisory Agreements or to operate its
business in a manner consistent with past business practices.
Certain officers of the Adviser, including Dennis J. McDonnell who is a member
of the Board of Trustees and Don G. Powell who was a member of the Board of
Trustees prior to August 1996, previously entered into employment agreements
with VKAC Holding which expire from between 1997 and 2000. Certain officers of
the Adviser also previously entered into retention agreements with VKAC Holding,
which will remain in place for two years following the consummation of the
Acquisition. The Merger Agreement contemplates that Morgan Stanley will, and
will cause VKAC Holding to, honor such employment and retention agreements. The
employment agreements and retention agreements are intended to assure that the
services of the officers are available to the Adviser (and thus to the Funds)
for a remaining term of two to four years. As described above, certain officers
and employees of VKAC and the Adviser, including Mr. McDonnell and Mr. Powell,
are expected to contribute their existing shares of common stock of VKAC Holding
to MSAM Holdings II, Inc. in exchange for approximately $25 million of preferred
stock in MSAM Holdings II, Inc. which, in turn, will be exchangeable into common
stock, par value $1.00 per share, of Morgan Stanley at specified times over a
four year period. Such shares of preferred stock will represent, in the
aggregate, 5% of the combined voting power in MSAM Holdings II, Inc.
THE ADVISORY AGREEMENTS
Consummation of the Acquisition may constitute an "assignment" (as defined in
the 1940 Act) of the investment advisory agreement currently in effect between
each Fund and the Adviser (the "Current Advisory Agreement"). As required by the
1940 Act, the Current Advisory Agreement provides for its automatic termination
in the event of an assignment. See "The Current Advisory Agreements" below.
7
<PAGE> 15
In anticipation of the Acquisition and in order for the Adviser to continue to
serve as investment adviser to the Funds after consummation of the Acquisition,
a new investment advisory agreement (the "New Advisory Agreement") between each
Fund and the Adviser must be approved (i) by 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") and (ii) by holders of a majority of
the outstanding voting securities (within the meaning of the 1940 Act) of each
Fund. See "The New Advisory Agreements" below.
THE CURRENT ADVISORY AGREEMENTS. The Current Advisory Agreement for each 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
May 10, 1995, to continue the Current Advisory Agreement for a period of two
years. The Current Advisory Agreement was last approved by shareholders of each
Fund at a meeting held on December 16, 1994 relating to the acquisition of the
Adviser's corporate parent by The Van Kampen Merritt Companies, Inc., except
that Asset Management, as sole shareholder, approved the Current Advisory
Agreement for the LIT Global Equity Portfolio and LIT Real Estate Securities
Portfolio on June 30, 1995, in connection with the organization of each such
Fund.
Each Current Advisory Agreement provides that the 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, except that the
Adviser is permitted to delegate certain of the foregoing responsibilities for
each Fund to a subadviser pursuant to a subadvisory agreement approved by the
Board of Trustees. 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 a loss resulting from willful misfeasance, bad faith, negligence
or reckless disregard of obligations or duties under each Current Advisory
Agreement.
The fee payable to the Adviser by each Fund is 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 VKAC
Holding in connection with the purchase or sale of portfolio investments of the
Funds, less expenses incurred by the Adviser in connection with such activities.
The Adviser's activities are subject to the review and supervision of the
Board of Trustees to which the Adviser renders periodic reports with respect to
each Fund's investment activities. The Current Advisory Agreement may be
terminated by
8
<PAGE> 16
either party, at any time, without penalty, upon 60 days written notice, and
automatically terminates in the event of its assignment. The Current Advisory
Agreement also terminates if either a Fund or the Adviser 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 August 27, 1996, as well as other
investment companies sponsored by VKAC and advised by the Adviser and the rates
of compensation paid thereto are set forth at Annex D hereto. Each respective
Fund recognized net advisory expenses, for its most recently completed fiscal
year, in the amounts set forth at Annex E 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 Van
Kampen American Capital Investment Advisory Corp. ("Advisory Corp."), 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 foregoing summary of the Current Advisory Agreement between each
respective Fund and the Adviser is qualified by reference to the form of New
Advisory Agreement attached to this Proxy Statement as Annex B, which has been
marked to show changes from such Current Advisory Agreement.
THE NEW ADVISORY AGREEMENTS. The Board of Trustees approved a proposed New
Advisory Agreement between each Fund and the Adviser on July 25, 1996, the form
of which is attached hereto as Annex B. The form of the proposed New Advisory
Agreement is substantially identical to the Current Advisory Agreement between
each Fund and the Adviser, except for the dates of execution, effectiveness and
termination.
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
9
<PAGE> 17
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, advisory fees paid to the respective Adviser by each Fund would have been
identical to those paid under each Current Advisory Agreement.
The Board of Trustees of each Fund held a joint meeting on July 25, 1996, at
which meeting the Trustees, including the Disinterested Trustees, concluded that
if the Acquisition 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 Acquisition. Each New Advisory Agreement will continue in effect
until May 30, 1997 and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In evaluating the New Advisory Agreements, the Boards of Trustees of the Funds
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 such Fund, are
substantially identical, except for the dates of execution, effectiveness and
termination. The Trustees also considered other possible benefits to the Adviser
and Morgan Stanley that may result from the Acquisition, including the continued
use, to the extent permitted by law, of Morgan Stanley & Co. and its affiliates
for brokerage services and the possible retention of MSAM as a subadviser to
certain of the Funds.
The Boards of Trustees also considered the terms of the Merger Agreement and
the possible effects of the Acquisition upon VKAC's and the Adviser's
organization and upon the ability of the Adviser to provide advisory services to
each respective Fund. The Boards of Trustees considered the skills and
capabilities of the Adviser and the representations of Morgan Stanley that no
material change was planned in the current management or facilities of the
Adviser. In this regard, representatives of Morgan Stanley met with the Boards
of Trustees at the joint board meeting at which time such representatives
described the resources available to VKAC and the Adviser, after giving effect
to the Acquisition, to secure for each Fund quality investment research,
investment advice and other client services. The Board considered the financial
resources of Morgan Stanley and Morgan Stanley's representation to the Board
that it will provide sufficient capital to support the operations of the
Adviser. The Board of Trustees also considered the reputation, expertise and
resources of Morgan Stanley and its affiliates in domestic and international
financial markets. The Boards of Trustees considered the continued
10
<PAGE> 18
employment of members of senior management of the Adviser and VKAC pursuant to
employment and retention agreements and the incentives provided to such members
and other key employees of the Adviser and VKAC, to be important to help to
assure continuity of the personnel primarily responsible for maintaining the
quality of investment advisory and other services for the Funds.
The Boards of Trustees considered the effects on the Funds of the Adviser
becoming affiliated persons of Morgan Stanley. Following the Acquisition, the
1940 Act will prohibit or impose certain conditions on the ability of the Funds
to engage in certain transactions with Morgan Stanley and its affiliates. For
example, absent exemptive relief, the Funds will be prohibited from purchasing
securities from Morgan Stanley & Co., a wholly-owned broker-dealer subsidiary of
Morgan Stanley, in transactions in which Morgan Stanley & Co. acts as a
principal, and the Funds will have to satisfy certain conditions in order to
engage in securities transactions in which Morgan Stanley & Co. acts as a broker
or to purchase securities in an underwritten offering in which Morgan Stanley &
Co. is acting as an underwriter. In this connection, management of the Adviser
represented to the Boards of Trustees that they do not believe these
prohibitions or conditions will have a material effect on the management or
performance of the Funds.
The Boards of Trustees were advised that Section 15(f) of the 1940 Act is
applicable to the Acquisition. 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, as
long as 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 each Fund is aware of no circumstances arising from the
Acquisition, preparatory transactions to the Acquisition or any potential
financing that might result in the imposition of an "unfair burden" on the
Funds. Moreover, Morgan Stanley has agreed in the Merger Agreement that, upon
consummation of the Acquisition, it will take no action which would have the
effect, directly or indirectly, of violating any of the provisions of Section
15(f) of the 1940 Act in
11
<PAGE> 19
respect of the Acquisition. In this regard, the Merger Agreement provides that
Morgan Stanley will use its reasonable best efforts to assure that (i) no
"unfair burden" will be imposed on any Fund as a result of the transactions
contemplated by the Merger Agreement and (ii) except as provided in the Merger
Agreement, the investment advisory fees paid by the Funds will not be increased
for a period of two years from the closing of the Acquisition and that, during
such period, advisory fee waivers shall not be permitted to expire except in
accordance with their terms. An adviser may permit a voluntary fee waiver
unilaterally adopted by it to expire at any time and no assurance can be given
that voluntary waivers will not be permitted to expire during the two year
period. During the two year period following the Acquisition, the Adviser does
not intend to change its policies with respect to the circumstances under which
voluntary fee waivers may be permitted to expire. Following the Acquisition, to
the extent permitted by applicable law, VKAC anticipates that the Funds will
continue to use Morgan Stanley & Co. and its affiliates for brokerage services.
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 current composition of the Board
of Trustees of each Fund would be in compliance with such condition subsequent
to the Acquisition.
Based upon its review, the Boards of Trustees concluded that the New Advisory
Agreement is in the best interest of each respective Fund and such Fund's
shareholders. Accordingly, after consideration of the above factors, and such
other factors and information that it deemed relevant, the Board of Trustees of
each Fund, including the Disinterested Trustees, unanimously approved the New
Advisory Agreement and voted to recommend its approval to the shareholders of
the respective Fund.
In the event that shareholders of a Fund do not approve the New Advisory
Agreement with respect to a Fund and the Acquisition 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
Adviser or from another advisory organization. Thereafter, the Board of Trustees
of such Fund would either negotiate a new investment advisory agreement with an
advisory organization selected by the Board of Trustees or make appropriate
arrangements, in either event subject to approval of the shareholders of such
Fund. In the event the Acquisition is not consummated, the Adviser would
continue to serve as investment adviser of the Funds pursuant to the terms of
the Current Advisory Agreement.
12
<PAGE> 20
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 the vote of (i) 67% or more of the Shares of the
respective Fund entitled to vote thereon present 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 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: APPROVAL OF NEW SUBADVISORY AGREEMENTS
- - - ------------------------------------------------------------------------------
Asset Management has entered into subadvisory agreements (the "Current
Subadvisory Agreements") in connection with providing investment advisory
services to each of the Funds. Consummation of the Acquisition described in
Proposal 1 may be deemed to cause an "assignment" (as defined in the 1940 Act)
of the Current Subadvisory Agreements. Each of the Current Subadvisory
Agreements provides for its automatic termination in the event of its
assignment, as required by the 1940 Act, and also provides for its termination
in the event of the termination of its corresponding advisory agreement. In
anticipation of the Acquisition, the shareholders of such Funds are being asked
to approve new subadvisory agreements (the "New Subadvisory Agreements") between
Asset Management and the subadvisers as follows:
<TABLE>
<CAPTION>
PROPOSAL FUNDS ADVISER SUBADVISER
- - - -------- -------------------------- ----------- --------------------------
<S> <C> <C> <C>
2A. Global Equity Fund Asset Morgan Stanley Asset
Global Government Fund Management Management Inc. (beginning
Global Managed Assets Fund on April 1, 1997)
LIT Global Equity
Portfolio
2B. Global Equity Fund Asset John Govett & Co. Limited
Global Government Fund Management (through March 31, 1997)
Global Managed Assets Fund
LIT Global Equity
Portfolio
2C. Real Estate Securities Asset Hines Interests Realty
Fund Management Advisers Limited
LIT Real Estate Securities Partnership
Portfolio
2D. High Yield Municipal Fund Asset Van Kampen American
Management Capital Advisors, Inc.
</TABLE>
13
<PAGE> 21
Except as described below under Proposal 2A, the New Subadvisory Agreements
between Asset Management and the respective subadviser will be substantially
identical to the Current Subadvisory Agreements, except for dates of execution,
effectiveness and termination.
- - - ------------------------------------------------------------------------------
PROPOSAL 2A: APPROVAL OF SUBADVISORY AGREEMENTS WITH
MORGAN STANLEY ASSET MANAGEMENT INC.
- - - ------------------------------------------------------------------------------
Asset Management acts as investment adviser to each of Global Equity Fund,
Global Government Fund, Global Managed Assets Fund and LIT Global Equity
Portfolio (collectively, the "Global Funds"). In connection with providing
investment advisory services to the Global Funds, Asset Management currently
retains John Govett & Co. Limited to provide investment subadvisory services
with respect to each Global Fund's investments in foreign securities. In light
of the Acquisition described in Proposal 1, Asset Management has recommended to
the Board of Trustees that MSAM replace Govett as subadviser to each of the
Global Funds. Asset Management also has recommended that MSAM not replace Govett
until April 1, 1997, in order to provide for an orderly transition between
subadvisers. The Current Govett Subadvisory Agreement (defined below) and the
Interim Govett Subadvisory Agreement (defined below) sometimes referred to in
this Proposal 2A are described in greater detail below under Proposal 2B.
MSAM
MSAM is a wholly-owned subsidiary of Morgan Stanley, and after the Acquisition
will be an affiliate of the Advisers. MSAM currently is investment adviser to
four registered open-end investment companies, consisting of an aggregate of 43
portfolios, and 14 closed-end investment companies. As of June 30, 1996, MSAM,
together with its affiliated investment advisory companies, had approximately
$103.5 billion of assets under management and fiduciary advice. MSAM emphasizes
a global investment strategy and benefits from research coverage of a broad
spectrum of investment opportunities worldwide and draws upon the capabilities
of its asset management specialists located in various offices throughout the
world, including New York, London, Tokyo, Singapore, Bombay, Hong Kong, Milan
and Sydney. MSAM also draws upon the research capabilities of Morgan Stanley and
its other affiliates as well as the research and investment ideas of other
companies whose brokerage services MSAM utilizes. The other mutual funds with
investment objectives similar to the Global Funds for which MSAM acts as
investment adviser or investment subadviser are listed on Annex F to this Proxy
Statement together with their advisory fee rates and net assets as of August 31,
1996. MSAM's address is 1221 Avenue of the Americas, New York, New York, 10020.
14
<PAGE> 22
THE MSAM SUBADVISORY AGREEMENT
The Boards of Trustees of the Global Funds approved the proposed MSAM
Subadvisory Agreements between Asset Management and MSAM at a meeting called for
that purpose on August 15, 1996. The MSAM Subadvisory Agreements would take
effect upon the later to occur of (i) the obtaining of shareholder approval or
(ii) the closing of the Acquisition. The MSAM Subadvisory Agreements provide
that from such date through March 31, 1997, MSAM will consult with Asset
Management and Govett regarding the Global Funds' investment portfolios and
operations in order to provide for the orderly transition of subadvisory
services from Govett to MSAM. During this period, MSAM will not provide Asset
Management, Govett or the Funds with investment subadvisory services or make
recommendations with respect to the execution of portfolio trades and will not
receive any investment subadvisory or other fees.
The MSAM Subadvisory Agreements also provide that, beginning on April 1, 1997,
MSAM will provide Asset Management and each Global Fund with investment
subadvisory services regarding investments in securities and also will select
broker-dealers in connection with the purchase and sale of foreign securities.
In this connection, the MSAM Subadvisory Agreements provide that MSAM will
provide Asset Management and each Global Fund (i) investment advice with respect
to all or such portion of each Global Fund's assets as determined from time to
time by Asset Management and MSAM; (ii) economic, statistical and research
information and advice, including advice on the allocation of investments among
countries, relating to all or such portion of each Global Fund's assets as MSAM
and Asset Management shall from time to time determine; (iii) recommendations as
to the voting of proxies solicited by or with respect to securities under MSAM's
supervision; and (iv) an investment program with respect to securities and
recommendations as to what securities shall be purchased, sold or exchanged, and
in what portion, if any, of the securities shall be held in money market
instruments. MSAM and Asset Management determine the securities to be purchased
and sold by each Global Fund and place orders for the purchase, sale and
exchange of securities under their respective supervision with broker-dealers
and to give instructions to each Global Fund's custodian and sub-custodians in
connection with such transactions. Asset Management and MSAM will allocate
between them at least quarterly the amount of each Global Fund's assets to be
invested in United States and foreign securities markets.
The proposed MSAM Subadvisory Agreement differs from the Current Govett
Subadvisory Agreement and the Interim Govett Subadvisory Agreement in that the
proposed MSAM Subadvisory Agreement permits, but does not require, Asset
Management and MSAM to allocate to MSAM responsibility for selecting investments
in domestic securities as well as foreign securities. The Current Govett
Subadvisory Agreement and the proposed Interim Govett Subadvisory Agreement
15
<PAGE> 23
limit the subadviser's responsibility solely to selecting investments in foreign
securities. Asset Management and MSAM currently intend, however, that Asset
Management will allocate to MSAM responsibility only for subadvisory services
and the selection of brokers dealers for the purchase and sale of foreign
securities, and not domestic securities, so that MSAM initially will provide
only those services currently provided by Govett. Any change in such policy
would require the approval of the Board of Trustees of the respective Global
Fund, but not its shareholders.
Pursuant to each MSAM Subadvisory Agreement, Asset Management will pay MSAM a
monthly fee equal to half of the net advisory fees received by Asset Management
from the respective Global Fund. This subadvisory fee is identical to the
subadvisory fee paid by Asset Management to Govett under each of the Current
Govett Subadvisory Agreements and the proposed Interim Govett Subadvisory
Agreements. If the investment subadvisory fees under the MSAM Subadvisory
Agreements had been in effect for each Global Fund's most recently completed
fiscal year, subadvisory fees paid to MSAM by Asset Management would have been
identical to those paid under the respective Current Govett Subadvisory
Agreements.
Each MSAM Subadvisory Agreement will continue in effect until May 1998, and
thereafter for successive annual periods as long as such continuance is approved
in accordance with the 1940 Act.
The foregoing description of the proposed MSAM Subadvisory Agreements is
qualified in its entirety by reference to the form of the MSAM Subadvisory
Agreement attached to this Proxy Statement as Annex C-1.
DELIBERATIONS OF THE BOARDS OF TRUSTEES
The Boards of Trustees of the Global Funds held a meeting on July 25, 1996
together with the Boards of Trustees of each of the other Funds. The purpose of
the meeting was to consider approval of the Funds' investment advisory
agreements in anticipation of the Acquisition. The Boards of Trustees'
deliberations regarding Morgan Stanley's acquisition of the Advisers and the
related approval of new investment advisory agreements in connection therewith
is discussed above in Proposal 1.
At the July 25, 1996 meeting, representatives of VKAC discussed with the
Trustees Morgan Stanley's expertise with respect to global asset management and
the potential administrative benefits that may be available to the Advisers and
the Global Funds if the subadviser to the Global Funds was an affiliate of the
Advisers. The Trustees agreed to consider a proposal to replace Govett with
MSAM, but deferred consideration of such proposal to a later date.
The Boards of Trustees of the Global Funds met on August 15, 1996 to consider
the proposal to replace Govett with MSAM. At the meeting, Asset Management
recommended that MSAM replace Govett as subadviser to each of the Global
16
<PAGE> 24
Funds after March 31, 1997 (the termination date of the proposed Interim Govett
Subadvisory Agreement) and that, during the intervening period of time, MSAM
consult with Govett in order to provide for an orderly transition between
subadvisers. In order to assist the Trustees in their deliberations,
representatives of MSAM and Asset Management were present at the meeting to
discuss the global asset management capabilities of MSAM and to discuss the
potential benefits resulting from MSAM being an affiliate of Asset Management.
In evaluating the proposed MSAM Subadvisory Agreements, the Boards of Trustees
reviewed the terms and provisions of the proposed MSAM Subadvisory Agreements
and the services to be provided thereunder, which terms, provisions and services
are substantially similar to the terms, provisions and services of the Current
Govett Subadvisory Agreements and the proposed Interim Govett Subadvisory
Agreements, except that MSAM also may provide subadvisory services with respect
to domestic securities if approved by the Board of Trustees. In this connection,
the Trustees considered that the fees payable by Asset Management to MSAM under
the MSAM Subadvisory Agreements will be identical to the fees payable by Asset
Management to Govett under the Current Govett Subadvisory Agreements and the
proposed Interim Govett Subadvisory Agreements. The Trustees also considered the
possible benefits to MSAM, Asset Management and Morgan Stanley that may result
from the Acquisition and entering into the MSAM Subadvisory Agreements,
including the continued use, to the extent permitted by law, of Morgan Stanley &
Co. and its affiliates for brokerage services.
The Boards of Trustees considered the reputation, expertise and resources of
MSAM and its affiliates with respect to global asset management and evaluated
MSAM's management and the persons that would be responsible for the day-to-day
management of the Global Funds portfolios. In this connection, the Trustees
considered the performance of mutual funds advised by MSAM that have investment
objectives similar to the investment objectives of the Global Funds and the
investment advisory fees and expenses of MSAM in connection therewith.
The Trustees considered other benefits potentially available to the Global
Funds and their shareholders as a result of MSAM being affiliated with Asset
Management, including the greater access Asset Management will have to MSAM's
management, potentially better communication between Asset Management and MSAM
and potentially better coordination between Asset Management and MSAM in seeking
to achieve the investment objective of each of the Global Funds.
Based upon their review, the Boards of Trustees concluded that the proposed
MSAM Subadvisory Agreements are in the best interests of each Global Fund and
the shareholders of each Global Fund. Accordingly, after consideration of the
above factors and such other factors and information that they deemed relevant
to their deliberations, the Board of Trustees of each Global Fund, including the
Disinterested Trustees, unanimously approved the MSAM Subadvisory Agreement for
each
17
<PAGE> 25
respective Global Fund and recommended each such agreement for approval by the
shareholders of the respective Global Fund at the Meeting.
In the event the shareholders of a Global Fund do not approve the MSAM
Subadvisory Agreement but do approve the Interim Govett Subadvisory Agreement
and the Acquisition is consummated, Govett would continue to serve as subadviser
to the Global Funds through March 31, 1997 and may serve as subadviser beyond
such date if approved by the Board of Trustees. In the event shareholders of a
Global Fund do not approve either the MSAM Subadvisory Agreement or the Interim
Govett Subadvisory Agreement, Asset Management and the Board of Trustees would
seek to obtain for the respective Global Fund interim investment advisory
services at the lesser of cost or the current fee rate either from MSAM, Govett
or another subadviser. Thereafter, Asset Management and the Board of Trustees
would either negotiate a new subadvisory agreement with a new subadviser or make
appropriate arrangements, in either event subject to the approval of the
shareholders of such Global Fund. In the event the Acquisition is not
consummated, it is contemplated that Govett would continue to serve as
subadviser to each of the Global Funds pursuant to the terms of the Current
Govett Subadvisory Agreement pending a review of such circumstances by the Board
of Trustees.
SHAREHOLDER APPROVAL
To become effective, each MSAM Subadvisory Agreement must be approved by the
vote of a majority of the outstanding voting securities of the respective Global
Fund. The "vote of a majority of the outstanding voting securities" is defined
under the 1940 Act as the lesser of the vote of (i) 67% or more of the Shares of
the respective Global Fund entitled to vote thereon present 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 Global Fund entitled to vote thereon. Each MSAM Subadvisory Agreement
was 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 MSAM
Subadvisory Agreement for consideration by the shareholders of the respective
Global Fund. THE BOARD OF TRUSTEES OF EACH GLOBAL FUND RECOMMENDS A VOTE "FOR"
APPROVAL OF THE MSAM SUBADVISORY AGREEMENTS.
- - - ------------------------------------------------------------------------------
PROPOSAL 2B: APPROVAL OF INTERIM SUBADVISORY AGREEMENTS WITH JOHN GOVETT &
COMPANY LIMITED
- - - ------------------------------------------------------------------------------
Asset Management has entered into subadvisory agreements (the "Current Govett
Subadvisory Agreements") with Govett in connection with providing investment
advisory services to the Global Funds. Govett has acted as subadviser
18
<PAGE> 26
for LIT Global Equity Portfolio since it commenced investment operations and for
each other Global Fund since December 16, 1994. Shareholders of the Global Funds
are being asked to approve Interim Govett Subadvisory Agreements in order to
provide for the orderly transition of investment advisory services to MSAM (see
Proposal 2A above) because, under the federal securities laws, the Acquisition
may be deemed to terminate the Current Govett Subadvisory Agreement.
GOVETT
Govett is a United Kingdom based investment management company and a
wholly-owned subsidiary of John Govett Holdings Limited, located at 4
Battlebridge Lane, London, U.K. SE1 2HR. On a fully diluted basis, AIB Group
Holdings (U.K.) Limited, Bankcentre-Britain, Uxbridge, Middlesex UB8 1SA ("AIB
Group") owns 75% of John Govett Holdings Limited. The other owners of John
Govett Holdings Limited, on a fully diluted basis, are members of management
(20%) and Govett Oriental Investment Trust (5%). AIB Group is a wholly-owned
subsidiary of AIB, which is a publicly held bank headquartered in Bankcentre,
Ballsbridge, Dublin 4, Ireland.
Govett's executive officers, together with their principal occupations, are
listed below. The address of each executive officer is Shackleton House, 4
Battle Bridge Lane, London, UK SE1 2HR.
<TABLE>
<CAPTION>
NAME POSITION WITH GOVETT AND PRINCIPAL OCCUPATION
- - - ------------------------------- ---------------------------------------------
<S> <C>
Kevin T. Pakenham.............. Co-Chairman, Chief Executive Officer and
Director
Charles A. Fowler.............. Co-Chairman and Director
Peter S.L. Pejacsevich......... Chief Investment Officer and Director
Brian M. Lee................... Managing Director of Operations and Director
</TABLE>
The other mutual funds advised or subadvised by Govett that have investment
objectives similar to the investment objectives of the Global Funds are listed
on Annex G to this Proxy Statement together with their advisory fee rates and
net assets as of August 27, 1996.
THE CURRENT GOVETT SUBADVISORY AGREEMENTS
The Boards of Trustees of the Global Funds, including the Independent
Trustees, last approved the Current Govett Subadvisory Agreements for the Global
Funds on January 26, 1996. The Trustees voted in person at a meeting called for
the purpose of, among other things, considering the continuation of the Current
Govett Subadvisory Agreements for a period of two years in connection with the
purchase of Govett's corporate parent by Allied Irish Banks p.l.c. ("AIB"). The
shareholders of the Global Funds last approved the Current Govett Subadvisory
Agreements at a meeting held on March 14, 1996 relating to the acquisition of
Govett's corporate parent by AIB.
19
<PAGE> 27
Under the Current Govett Subadvisory Agreements, and subject to the
supervision of the Boards of Trustees, Govett keeps under review the foreign
investments of each Global Fund and continually furnishes to each Global Fund
and to Asset Management (i) investment advice primarily for investments in
securities for which the principal trading markets are in foreign countries;
(ii) economic, statistical and research information and advice, including advice
on the allocation of investments among countries, relating only to such portion
of the Global Fund's assets as Govett and Asset Management shall from time to
time designate, generally with respect to securities issued outside the United
States and Canada; (iii) recommendations as to the voting of proxies solicited
by or with respect to foreign securities; and (iv) an investment program with
respect to foreign securities and recommendations as to what securities shall be
purchased, sold or exchanged, and in what portion, if any, of the foreign
securities shall be held in money market instruments. Govett determines the
foreign securities to be purchased and sold by each Global Fund and places
orders for the purchase, sale and exchange of foreign securities with
broker-dealers and to give instructions to the Funds custodian and
sub-custodians in connection with such transactions. Asset Management and Govett
allocate between them on a quarterly basis the amount of each Global Fund's
assets to be invested in United States and foreign securities markets.
The Current Govett Subadvisory Agreements provide that Govett shall not be
liable to the Global Funds or any shareholders thereof for any error of
judgement or of law, or for any loss suffered by the Global Funds in connection
with the matters in which the Current Govett Subadvisory Agreement relates,
except in the case of a loss resulting from willful misfeasance, bad faith,
negligence or reckless disregard of its obligations or duties.
The Current Govett Subadvisory Agreements terminate automatically on the
assignment of such agreements and on the termination of the advisory agreement
between Asset Management and the respective Global Fund, and may be terminated
at any time, without the payment of any penalty, by (i) the Board of Trustees of
the respective Global Fund, (ii) a "vote of a majority of the outstanding voting
securities" (as defined in the 1940 Act) of the respective Global Fund, or (iii)
by Asset Management or Govett, as the case may be, in each case on 60 days'
written notice, or upon such shorter notice as may be mutually agreed upon.
The compensation paid to Govett under the Current Govett Subadvisory Agreement
for each Global Fund is equal to 50% of the net advisory fees received by Asset
Management under the respective Current Advisory Agreement. During each
20
<PAGE> 28
Global Fund's last completed fiscal year, Govett received subadvisory fees from
Asset Management in connection with providing subadvisory services as follows:
<TABLE>
<CAPTION>
FUND SUBADVISORY FEES
- - - ------------------------------------------------- ----------------
<S> <C>
Global Equity Fund............................... $684,133
Global Government Fund........................... $688,950
Global Managed Assets............................ $116,171
LIT Global Equity Portfolio...................... $ 5,492
</TABLE>
The net assets of each Global Fund as of August 27, 1996, are included as part
of Annex D hereto.
The foregoing summary of the Current Govett Subadvisory Agreements is
qualified by reference to the form of the Interim Govett Subadvisory Agreement
attached to this Proxy Statement as Annex C-2, which has been marked to show
changes from the form of the Current Govett Subadvisory Agreement.
THE INTERIM GOVETT SUBADVISORY AGREEMENTS
The Boards of Trustees of the Global Funds approved the proposed Interim
Govett Subadvisory Agreements between Asset Management and Govett at a meeting
called for that purpose on August 15, 1996. The form of the proposed interim
Govett subadvisory agreement is attached to this Proxy Statement as Annex C-2
(the "Interim Govett Subadvisory Agreement") and is substantially identical to
each Current Govett Subadvisory Agreement between Asset Management and Govett,
except for the dates of execution, effectiveness and termination and except that
certain provisions relating to the change in control of Govett's corporate
parent in December of 1995 have been deleted because they no longer are
applicable.
The investment subadvisory fee will be the same under the Interim Govett
Subadvisory Agreement as under the Current Govett Subadvisory Agreement. If the
investment subadvisory fee under each Interim Govett Subadvisory Agreement had
been in effect for each Global Fund's most recently completed fiscal year,
subadvisory fees paid to Govett by Asset Management would have been identical to
those paid under the respective Current Govett Subadvisory Agreement.
The Interim Govett Subadvisory Agreements would take effect upon the later to
occur of (i) the obtaining of shareholder approval or (ii) the closing of the
Acquisition. Each Interim Govett Subadvisory Agreement will terminate in
accordance with its terms on March 31, 1997.
DELIBERATIONS OF THE BOARD OF TRUSTEES
In evaluating the proposed Interim Govett Subadvisory Agreements, the Boards
of Trustees took into account that the Current Govett Subadvisory Agreements and
the Interim Govett Subadvisory Agreements, including the terms relating to the
services to be provided thereunder by Govett and the fees and expenses payable
to
21
<PAGE> 29
Govett by Asset Management, would be substantially identical, except for the
dates of execution, effectiveness and termination. The Boards of Trustees also
considered the possible advantages of replacing Govett with MSAM (see Proposal
2A) and the need to provide for an orderly transition between subadvisers.
Based upon their review, the Boards of Trustees concluded that the Interim
Govett Subadvisory Agreement is in the best interest of each Global Fund and the
shareholders of each Global Fund until MSAM replaces Govett as subadviser on
April 1, 1997, assuming shareholders of the Global Funds approve the proposed
MSAM Subadvisory Agreements. Accordingly, after consideration of the above
factors, and such other factors and information that it deemed relevant, the
Board of Trustees of each Global Fund, including the Disinterested Trustees,
unanimously approved the Interim Govett Subadvisory Agreement for each Global
Fund and recommended each such agreement for approval by the shareholders of the
respective Global Fund at the Meeting.
In the event the shareholders of a Global Fund do not approve the Interim
Govett Subadvisory Agreement but do approve the MSAM Subadvisory Agreement with
respect to a Global Fund and the Acquisition is consummated, Asset Management
anticipates that MSAM would serve as subadviser for the respective Global Fund
and begin to receive an investment subadvisory fee at such time. In the event
the shareholders of a Global Fund do not approve either the Interim Govett
Subadvisory Agreement or the MSAM Subadvisory Agreement with respect to a Global
Fund and the Acquisition is consummated, Asset Management and the Board of
Trustees would seek to obtain for the respective Global Fund interim investment
advisory services at the lesser of cost or the current fee rate either from
Govett, MSAM or another subadviser. Thereafter, Asset Management and the Board
of Trustees would either negotiate a new subadvisory agreement with a new
subadviser or make appropriate arrangements, in either event subject to approval
of the shareholders of such Global Fund. In the event the Acquisition is not
consummated, Govett would continue to serve as subadviser to each of the Global
Funds pursuant to the terms of the Current Govett Subadvisory Agreement pending
a review of such circumstances by the Board of Trustees.
SHAREHOLDER APPROVAL
To become effective, each Interim Govett Subadvisory Agreement must be
approved by a majority of the outstanding voting securities of the respective
Global Fund. The "vote of a majority of the outstanding voting securities" is
defined under the 1940 Act as the lesser of the vote of (i) 67% or more of the
Shares of the respective Global Fund entitled to vote thereon present 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 Global Fund entitled to vote thereon. Each Interim
Govett Subadvisory Agreement was approved by the Board of Trustees after
consideration of all factors
22
<PAGE> 30
which they determined to be relevant to their deliberations, including those
discussed above. The Board of Trustees also unanimously determined to submit
each Interim Govett Subadvisory Agreement for consideration by the shareholders
of the respective Global Fund. THE BOARD OF TRUSTEES OF EACH GLOBAL FUND
RECOMMENDS A VOTE "FOR" APPROVAL OF ITS RESPECTIVE INTERIM GOVETT SUBADVISORY
AGREEMENT.
- - - ------------------------------------------------------------------------------
PROPOSAL 2C: APPROVAL OF NEW SUBADVISORY AGREEMENTS WITH HINES INTERESTS REALTY
ADVISERS LIMITED PARTNERSHIP
- - - ------------------------------------------------------------------------------
Asset Management has entered into subadvisory agreements (the "Current Hines
Subadvisory Agreements") with Hines Interests Realty Advisers Limited
Partnership ("Hines") in connection with providing investment advisory services
to the Real Estate Securities Fund and the LIT Real Estate Securities Portfolio
(collectively, the "Real Estate Funds"). Hines has acted as subadviser for the
Real Estate Funds since they commenced investment operations.
HINES
Hines is a limited partnership among Hines Holdings, Inc., as a general
partner, and Hines 1980A, Ltd. and Gerald D. Hines, as limited partners. Hines
Holdings, Inc., Hines 1980A, Ltd., and Gerald D. Hines own 1%, 74.51% and
24.49%, respectively, of the partnership interest in Hines. Gerald D. Hines and
Jeffrey C. Hines own 51% and 49%, respectively, of Hines Holdings, Inc. Jeffrey
C. Hines owns 100% (in part indirectly) of Hines 1980A, Ltd. Hines, Hines
Holdings, Inc. and Hines 1980A, Ltd. are located at 2800 Post Oak Blvd.,
Houston, Texas 77056. Glenn L. Lowenstein, 2800 Post Oak Blvd., Houston, Texas
77056, is the President and Chief Executive Officer of Hines. Mr. Lowenstein is
also a Senior Vice President of Hines Interests Limited Partnership, an
affiliated partnership involved in real estate development and management
activities.
Hines' executive officers, together with their principal occupations, are
listed below. The address of each executive officer is 2800 Post Oak Blvd.,
Houston, Texas 77056.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
NAME HINES OCCUPATION
- - - ----------------------- ---------------------- -----------------------------------
<S> <C> <C>
Glenn L. Lowenstein.... President and Chief President of Hines and Senior Vice
Executive Officer President of Hines Interests
Limited Partnership
</TABLE>
23
<PAGE> 31
THE CURRENT HINES SUBADVISORY AGREEMENTS
The Boards of Trustees, including the Independent Trustees, last approved the
Current Hines Subadvisory Agreement for the Real Estate Securities Fund on May
10, 1995. The Trustee's voted in person at a meeting called for the purpose of,
among other things, considering the continuation of the Current Hines
Subadvisory Agreement for a period of two years. The shareholders of the Real
Estate Securities Fund last approved the Current Hines Subadvisory Agreement at
a meeting held on December 16, 1994 relating to the acquisition of Asset
Management's corporate parent by The Van Kampen Merritt Companies, Inc.
The Board of Trustees, including the Independent Trustees, last approved the
Current Hines Subadvisory Agreement for the LIT Real Estate Securities Portfolio
on May 10, 1995. The Trustees voted at a meeting called for the purpose of,
among other things, considering the continuation of the Current Hines
Subadvisory Agreement for a period of two years. Asset Management, as the sole
shareholder of the LIT Real Estate Securities Portfolio, approved the Current
Hines Subadvisory Agreement on June 30, 1995.
Under the Current Hines Subadvisory Agreements, Asset Management retains Hines
to assist Asset Management with providing real estate advisory services to the
Real Estate Funds, including (i) providing regional economic analysis of the
areas in which properties owned by real estate investment trusts are located;
(ii) providing analysis and information concerning the relative attractiveness
of various property types within geographic regions; (iii) evaluating and
assessing real estate valuations and the condition of property; (iv) evaluating
property managers and sponsors of real estate investment trusts; (v) reviewing
and monitoring the real estate investments in the Real Estate Fund's portfolio;
and (vi) furnishing such other information and reports as may be reasonably be
requested by Asset Management from time to time. Asset Management retains
responsibility for decisions to buy or sell securities for the Real Estate Funds
and for placing trades on behalf of the Real Estate Funds. Hines may not buy or
sell securities or place trades on behalf of the Real Estate Funds.
The Current Hines Subadvisory Agreements provide that Hines shall not be
liable to the Real Estate Funds or any shareholders thereof for any error of
judgement or of law, or for any loss suffered by the Real Estate Funds in
connection with the matters in which the Current Hines Subadvisory Agreement
relates, except in the case of a loss resulting from willful misfeasance, bad
faith, negligence or reckless disregard of its obligations or duties.
The Current Hines Subadvisory Agreement terminates automatically on its
assignment and on the termination of the advisory agreement between Asset
Management and the respective Real Estate Fund and may be terminated at any
time, without the payment of any penalty, by (i) the Board of Trustees, (ii) a
"vote
24
<PAGE> 32
of a majority of the outstanding voting securities" (as defined in the 1940 Act)
of the respective Real Estate Fund, or (iii) by Asset Management or Hines, as
the case may be, in each case on 30 days' written notice, or upon such shorter
notice as may be mutually agreed upon.
The rate of compensation to Hines under the Current Hines Subadvisory
Agreement for each Real Estate Securities Fund is equal to 50% of the net
advisory fees received by Asset Management under the respective Current Advisory
Agreement. During the Real Estate Securities Fund's most recently completed
fiscal year, Hines received subadvisory fees from Asset Management in connection
with the Real Estate Securities Fund in the amount of $9,068. During the LIT
Real Estate Securities Portfolio's most recently completed fiscal year, Hines
received subadvisory fees in connection with the LIT Real Estate Securities
Portfolio in the amount of $9,068. The net assets of the Real Estate Funds as of
August 27, 1996, are included as part of Annex D hereto. The Real Estate Funds
are the only investment companies advised or subadvised by Hines.
The foregoing summary of the Current Hines Subadvisory Agreement for each Real
Estate Fund between Asset Management and Hines is qualified by reference to the
form of the new Hines subadvisory agreement attached to this Proxy Statement as
Annex C-3 (the "New Hines Subadvisory Agreement"), which has been marked to show
changes from the form of the Current Hines Subadvisory Agreement.
THE NEW HINES SUBADVISORY AGREEMENT
The Board of Trustees for each of the Real Estate Funds approved the proposed
New Hines Subadvisory Agreements between Asset Management and Hines on August
15, 1996. The form of the proposed New Hines Subadvisory Agreement is
substantially identical to the Current Hines Subadvisory Agreements between
Asset Management and Hines, except for the dates of execution, effectiveness and
termination.
The investment subadvisory fee will be the same under the New Hines
Subadvisory Agreement as under the Current Hines Subadvisory Agreement. If the
investment subadvisory fee under each New Hines Subadvisory Agreement had been
in effect for each Real Estate Fund's most recently completed fiscal year,
subadvisory fees paid to Hines by Asset Management would have been identical to
those paid under the respective Current Hines Subadvisory Agreement.
The New Hines Subadvisory Agreements would take effect upon the later to occur
of (i) the obtaining of shareholder approval or (ii) the closing of the
Acquisition. Each New Subadvisory Agreement will continue in effect until May
30, 1997 and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
25
<PAGE> 33
THE BOARDS OF TRUSTEES DELIBERATIONS
The Boards of Trustees of the Real Estate Funds held a joint meeting on July
25, 1996, at which meeting the Trustees, including the Disinterested Trustees,
concluded that if the Acquisition occurs, entry by each respective Real Estate
Fund into a New Hines Subadvisory Agreement would be in the best interest of
each Real Estate Fund and the shareholders of each Real Estate Fund. In
evaluating the New Hines Subadvisory Agreements, the Boards of Trustees took
into account that the Current Hines Subadvisory Agreements and the New Hines
Subadvisory Agreements, including the terms relating to the services to be
provided thereunder by Hines and the fees and expenses payable to Hines by Asset
Management, would be substantially identical, except for the dates of execution,
effectiveness and termination. The Boards of Trustees also took into
consideration that the Acquisition will not affect the operations, resources or
finances of Hines.
Based upon its review, the Boards of Trustees concluded that the New Hines
Subadvisory Agreement is in the best interest of each Real Estate Fund and such
Fund's shareholders. Accordingly, after consideration of the above factors, and
such other factors and information that it deemed relevant, the Board of
Trustees of each Real Estate Fund, including the Disinterested Trustees,
unanimously approved the New Hines Subadvisory Agreement for each Real Estate
Fund and recommended each such agreement for approval by the shareholders of the
respective Real Estate Fund at the Meeting.
In the event the shareholders of a Real Estate Fund do not approve the New
Hines Subadvisory Agreement with respect to a Real Estate Fund and the
Acquisition is consummated, Asset Management and the Board of Trustees would
seek to obtain for the respective Real Estate Fund interim investment advisory
services at the lesser of cost or the current fee rate either from Hines or
another subadviser. Thereafter, Asset Management and the Board of Trustees would
either negotiate a new subadvisory agreement with a new subadviser or make
appropriate arrangements, in either even subject to approval of the shareholders
of such Real Estate Fund. In the event the Acquisition is not consummated, Hines
would continue to serve as subadviser to each of the Real Estate Funds pursuant
to the terms of the Current Hines Subadvisory Agreement.
SHAREHOLDER APPROVAL
To become effective, each New Hines Subadvisory Agreement must be approved by
the vote of a majority of the outstanding voting securities of the respective
Real Estate Fund. The "vote of a majority of the outstanding voting securities"
is defined under the 1940 Act as the lesser of the vote of (i) 67% or more of
the Shares of the respective Real Estate Fund entitled to vote thereon present
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
26
<PAGE> 34
respective Real Estate Fund entitled to vote thereon. Each New Hines Subadvisory
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 Hines Subadvisory Agreement for consideration by
the shareholders of the respective Real Estate Fund. THE BOARD OF TRUSTEES OF
EACH REAL ESTATE FUND RECOMMENDS A VOTE "FOR" APPROVAL OF THE NEW HINES
SUBADVISORY AGREEMENT.
- - - ------------------------------------------------------------------------------
PROPOSAL 2D: APPROVAL OF NEW SUBADVISORY AGREEMENTS WITH VAN KAMPEN AMERICAN
CAPITAL ADVISORS, INC.
- - - ------------------------------------------------------------------------------
Asset Management has entered into a subadvisory agreement with Van Kampen
American Capital Advisors, Inc. ("Advisors Inc.") in connection with providing
investment advisory services to the High Yield Municipal Fund (the "Current High
Yield Municipal Subadvisory Agreement"). Advisors Inc. has acted as subadviser
for the High Yield Municipal Fund since September 14, 1993.
ADVISORS INC.
Advisors Inc. currently is a wholly-owned subsidiary of VKAC and an affiliate
of the Adviser. A description of those persons owning or controlling VKAC is set
forth above in the section of Proposal 1 captioned "The Adviser." The executive
officers of Advisors Inc., together with their principal occupations, are listed
below under "OTHER INFORMATION -- Directors and Officers of the Adviser". The
address of Advisors Inc. is 2800 Post Oak Blvd., Houston, Texas 77056.
THE CURRENT HIGH YIELD MUNICIPAL SUBADVISORY AGREEMENTS
The Board of Trustees of the High Yield Municipal Fund, including the
Independent Trustees, last approved the Current High Yield Municipal Subadvisory
Agreement on May 10, 1995. The Trustee's voted in person at a meeting called for
the purpose of, among other things, considering the continuation of the Current
High Yield Municipal Subadvisory Agreement for a period of two years. The
shareholders of the High Yield Municipal Fund last approved the Current High
Yield Municipal Subadvisory Agreement at a meeting held on December 16, 1994
relating to the acquisition of Advisors Inc.'s corporate parent by The Van
Kampen Merritt Companies, Inc.
Under the Current High Yield Municipal Subadvisory Agreement, Asset Management
retains Advisors Inc. to assist Asset Management with providing investment
subadvisory services to the High Yield Municipal Fund, including (i) obtaining
and evaluating pertinent information about significant developments
27
<PAGE> 35
and economic, statistical and financial data, with respect to the economy in
general, sectors of the municipal securities market, individual issuers and
securities in which the High Yield Municipal Fund invests, (ii) selecting
municipal securities and reporting on them to Asset Management and (iii)
formulating and implementing a continuous program for the purchase and sale of
securities and reporting thereon to Asset Management.
The Current High Yield Municipal Subadvisory Agreements provide that Advisors
Inc. shall not be liable to the High Yield Municipal Fund or any shareholders
thereof for any error of judgement or of law, or for any loss suffered by the
High Yield Municipal Fund in connection with the matters in which the Current
High Yield Municipal Subadvisory Agreement relates, except in the case of a loss
resulting from willful misfeasance, bad faith, negligence or reckless disregard
of its obligations or duties.
The Current High Yield Municipal Subadvisory Agreement terminates
automatically on its assignment and on the termination of the advisory agreement
between Asset Management and the High Yield Municipal Fund and may be terminated
at any time, without the payment of any penalty, by (i) the Board of Trustees,
(ii) a "vote of a majority of the outstanding voting securities" (as defined in
the 1940 Act) of the High Yield Municipal Fund, or (iii) by Asset Management or
Advisors Inc., as the case may be, in each case on 30 days' written notice, or
upon such shorter notice as may be mutually agreed upon.
The rate of compensation to Advisors Inc. under the Current High Yield
Municipal Subadvisory Agreement for the High Yield Municipal Fund is equal to
50% of the net advisory fees received by Asset Management under the respective
Current Advisory Agreement. During the High Yield Municipal Fund's most recently
completed fiscal year, Advisors Inc. received subadvisory fees from Asset
Management in connection with the High Yield Municipal Fund in the amount of
$1,154,803. The net assets of the High Yield Municipal Fund as of August 27,
1996, are set forth on Annex D hereto. The High Yield Municipal Fund is the only
investment company advised or subadvised by Advisors Inc.
The foregoing summary of the Current High Yield Municipal Subadvisory
Agreement between Asset Management and Advisors Inc. is qualified by reference
to the form of the new High Yield Municipal subadvisory agreement attached to
this Proxy Statement as Annex C-4 (the "New High Yield Municipal Subadvisory
Agreement"), which has been marked to show changes from the form of the Current
High Yield Municipal Subadvisory Agreement.
THE NEW HIGH YIELD MUNICIPAL SUBADVISORY AGREEMENT
The Board of Trustees for the High Yield Municipal Fund approved the proposed
New High Yield Municipal Subadvisory Agreement between Asset Management and
Advisors Inc. on August 15, 1996. The form of the proposed New High Yield
28
<PAGE> 36
Municipal Subadvisory Agreement is substantially identical to the Current High
Yield Municipal Subadvisory Agreement between Asset Management and Advisors
Inc., except for the dates of execution, effectiveness and termination.
The investment subadvisory fee payable by Asset Management to Advisors Inc.
will be the same under the New High Yield Municipal Subadvisory Agreement as
under the Current High Yield Municipal Subadvisory Agreement. If the investment
subadvisory fee under the New High Yield Municipal Subadvisory Agreement had
been in effect for the High Yield Municipal Fund's most recently completed
fiscal year, subadvisory fees paid to Advisors Inc. by Asset Management would
have been identical to those paid under the Current High Yield Municipal
Subadvisory Agreement.
The New High Yield Municipal Subadvisory Agreement would take effect upon the
later to occur of (i) the obtaining of shareholder approval or (ii) the closing
of the Acquisition. The New High Yield Municipal Subadvisory Agreement will
continue in effect until May 30, 1997 and thereafter for successive annual
periods as long as such continuance is approved in accordance with the 1940 Act.
THE BOARD OF TRUSTEES DELIBERATIONS
The Board of Trustees of the High Yield Municipal Fund held a meeting on July
25, 1996, at which meeting the Trustees, including the Disinterested Trustees,
concluded that if the Acquisition occurs, entry by the High Yield Municipal Fund
into the New High Yield Municipal Subadvisory Agreement would be in its best
interest and the best interest of its shareholders. In evaluating the New High
Yield Municipal Subadvisory Agreement, the Board of Trustees took into account
that the Current High Yield Municipal Subadvisory Agreement and the New High
Yield Municipal Subadvisory Agreement, including the terms relating to the
services to be provided thereunder by Advisors Inc. and the fees and expenses
payable to Advisors Inc. by Asset Management, would be substantially identical,
except for the dates of execution, effectiveness and termination. The Board of
Trustees also took into consideration those factors discussed above in Proposal
1 with respect to the Acquisition.
Based upon its review, the Board of Trustees concluded that the New High Yield
Municipal Subadvisory Agreement is in the best interest of the High Yield
Municipal Fund. Accordingly, after consideration of the above factors, and such
other factors and information that it deemed relevant, the Board of Trustees of
the High Yield Municipal Fund, including the Disinterested Trustees, unanimously
approved the New High Yield Municipal Subadvisory Agreement and recommended such
agreement for approval by the shareholders of the High Yield Municipal Fund at
the Meeting.
29
<PAGE> 37
In the event the shareholders of the High Yield Municipal Fund do not approve
the New High Yield Municipal Subadvisory Agreement and the Acquisition is
consummated, Asset Management and the Board of Trustees would seek to obtain
interim investment advisory services at the lesser of cost or the current fee
rate either from Advisors Inc. or another subadviser. Thereafter, Asset
Management and the Board of Trustees would either negotiate a new subadvisory
agreement with a new subadviser or make appropriate arrangements, in either
event subject to approval of the shareholders of the High Yield Municipal Fund.
In the event the Acquisition is not consummated, Advisors Inc. would continue to
serve as subadviser to the High Yield Municipal Fund pursuant to the terms of
the Current High Yield Municipal Subadvisory Agreement.
SHAREHOLDER APPROVAL
To become effective, the New High Yield Municipal Subadvisory Agreement must
be approved by the vote of a majority of the outstanding voting securities of
the High Yield Municipal Fund. The "vote of a majority of the outstanding voting
securities" is defined under the 1940 Act as the lesser of the vote of (i) 67%
or more of the Shares entitled to vote thereon present 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 entitled
to vote thereon. The New High Yield Municipal Subadvisory 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 the
New High Yield Municipal Subadvisory Agreement for consideration by the
shareholders of the High Yield Municipal Fund. THE BOARD OF TRUSTEES OF THE HIGH
YIELD MUNICIPAL FUND RECOMMENDS A VOTE "FOR" APPROVAL OF THE NEW HIGH YIELD
MUNICIPAL SUBADVISORY AGREEMENT.
- - - ------------------------------------------------------------------------------
PROPOSAL 3: APPROVAL OF CHANGES TO FUNDAMENTAL INVESTMENT POLICIES
- - - ------------------------------------------------------------------------------
Section 12 of the 1940 Act generally prohibits each Fund from (i) owning more
than 3% of the total outstanding voting stock of any other investment company;
(ii) investing more than 5% of its total assets in the securities of any one
other investment company; and (iii) investing more than 10% of its total assets
(in the aggregate) in the securities of other investment companies.
On and before June 18, 1996, the Securities and Exchange Commission issued a
series of exemptive orders granting the Adviser, certain of its affiliates and
certain of the open-end investment companies advised by them (including the
Funds) exemptive relief to permit such open-end investment companies to invest
their assets in shares of Van Kampen American Capital Small Capitalization Fund
(the
30
<PAGE> 38
"Small Capitalization Fund") and Van Kampen American Capital Foreign
Securities Fund (the "Foreign Securities Fund") in excess of the limitations
imposed by Section 12 of the 1940 Act. On August 22, 1996, the Boards of
Trustees authorized the Adviser, certain of its affiliates and the Funds,
together with certain other investment companies managed by the Adviser and its
affiliates, to seek additional exemptive relief from the Securities and Exchange
Commission to permit the Funds and such other investment companies to purchase
securities of the Van Kampen American Capital Reserve Fund and the Van Kampen
American Capital Tax Free Money Fund in excess of the limitations imposed by
Section 12 of the 1940 Act. The exemptive orders granted with respect to the
Small Capitalization Fund and the Foreign Securities Fund and similar exemptive
orders that may be obtained by the Funds and the Adviser in the future are
referred to herein collectively as the "Exemptive Orders." The Small
Capitalization Fund, the Foreign Securities Fund and any other Van Kampen
American Capital funds in which the Funds may invest pursuant to exemptive
relief similar to the Exemptive Orders are referred to herein collectively as
the "Exemptive Order Funds."
The Funds and the Adviser obtained, and may seek future, Exemptive Orders
because they believe each Fund can more effectively invest in small
capitalization securities, foreign securities and certain other types of
securities through pooled investment vehicles such as the Exemptive Order Funds.
By pooling their investments in small capitalization securities, foreign
securities or other types of securities, the Funds have the ability to invest in
a wider range of issuers, industries and markets, thereby seeking to decrease
volatility and risk while at the same time providing greater liquidity than a
Fund would have available to it investing, in such securities by itself. Pooling
investments also allows the Funds to increase the efficiency of portfolio
management by permitting each Fund's portfolio manager to concentrate on those
investments that comprise the bulk of the Fund's assets and not spend a
disproportionate amount of time on specialized areas such as small
capitalization stocks and foreign securities.
If the proposed amendments to the Funds' investment restrictions are approved,
each Fund will invest in securities of the Small Capitalization Fund, the
Foreign Securities Fund and other Exemptive Order Funds only to the extent
consistent with the respective Fund's investment objectives and policies as set
forth from time to time in its prospectus. For example, the Real Estate
Securities Fund may invest up to 25% of its assets in foreign securities. If
this Proposal 3 is approved by shareholders of the Real Estate Securities Fund,
the Real Estate Securities Fund may elect up to 25% of its assets in the Foreign
Securities Fund instead of purchasing individual foreign securities. The Funds
also may be limited in their ability to invest in Exemptive Order Funds by state
securities laws and regulations.
The Adviser and its affiliated investment advisers will not charge advisory
fees for managing the Small Capitalization Fund or the Foreign Securities Fund,
nor is any
31
<PAGE> 39
sales load or other sales charge imposed in connection with the Funds' purchases
of their shares. In connection with obtaining future Exemptive Orders, the
Adviser and its affiliated investment advisers may agree to waive fees
applicable to the Funds and collect fees from the Exemptive Order Funds. Other
expenses incurred by the Exemptive Order Funds (such as audit and custodial
fees) will be borne by them, and thus indirectly by the Funds. Management of the
Adviser, however, anticipates that cost savings in the areas of administration,
out-of-pocket expenses (such as audit and custodial fees) and portfolio
transaction expenses will mitigate such additional expenses.
Certain of the Funds currently have fundamental investment restrictions that
prohibit them from purchasing securities issued by other investment companies in
excess of the percentage limitations imposed by Section 12 of the 1940 Act. In
order to take full advantage of the exemptive relief granted by the Securities
and Exchange Commission and to invest in shares of the Exemptive Order Funds in
excess of the percentage limitations imposed by Section 12, each such Fund is
seeking shareholder approval to amend this investment restriction. The amended
investment restriction would state:
The Fund may not invest in securities issued by other investment companies
except as part of a merger, reorganization or other acquisition and except to
the extent permitted by (i) the 1940 Act, as amended from time to time, (ii)
the rules and regulations promulgated by the Securities and Exchange
Commission under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act.
Certain of the Funds also have adopted other fundamental investment
restrictions that may prohibit each such Fund from taking full advantage of the
Exemptive Order. These fundamental restrictions may include one or more of the
following:
1.Diversification. Your Fund may be prohibited from investing more than 5% of
its assets in securities of a single issuer or holding more than 10% of the
outstanding voting securities of an issuer, except that the Fund may be able
to invest up to 25% (50% for a nondiversified Fund) of its assets without
regard to such restrictions. From time to time, a Fund may desire to invest
more than 5% of its assets in, or own more than 10% of the assets of, one or
more Exemptive Order Funds.
2. Control. Your Fund may be prohibited from making investments for the
purpose of exercising control or participation in management, except to the
extent that exercise by the Fund of its rights under agreements related to
securities owned by the Fund would be deemed to constitute such control or
participation. The 1940 Act deems a person to have presumptive control over
another person if it beneficially owns more than 25% of the other person's
32
<PAGE> 40
voting securities. From time to time, a Fund may own more than 25% of the
voting securities of the of one or more Exemptive Order Funds.
3. Unseasoned Issuers. Your Fund may be prohibited from investing in
securities of issuers that have less than three years of continuous
operation or may be prohibited from investing more than a certain
percentage of its assets in such issuers. Each of the Funds may want to
invest in one or more Exemptive Order Funds prior to the third anniversary
of the commencement of investment operations of the respective Exemptive
Order Funds.
4. Restricted Securities. Your Fund may be prohibited from investing more than
a certain percentage of its assets in restricted securities. Although each
Exemptive Order Fund will redeem its shares within seven days of
presentment for redemption as required by the 1940 Act, shares issued by
the Exemptive Order Funds may be deemed to be restricted securities because
they are not registered under the Securities Act of 1933. From time to
time, each Fund may desire to purchase shares of an Exemptive Order Fund in
excess of the percentage limitations imposed by its restricted securities
investment restriction.
The foregoing restrictions may be worded differently from Fund to Fund, but
the substance of the restrictions is as set forth above. Additional information
regarding your Fund's fundamental investment restrictions may be obtained
without cost by telephoning VKAC at 1-800-421-5666 and requesting a copy of your
Fund's Statement of Additional Information.
In order to take full advantage of the Exemptive Order, each Fund subject to
one or more of the foregoing investment restrictions seeks shareholder approval
to amend such restrictions by adding the following exception to each
restriction:
..., except that the Fund may purchase securities of other investment
companies to the extent permitted by (i) the 1940 Act, as amended from time to
time, (ii) the rules and regulations promulgated by the Securities and
Exchange Commission under the 1940 Act, as amended from time to time, or (iii)
an exemption or other relief from the provisions of the 1940 Act.
The proposed amendments to each Fund's investment restrictions are not related
to the Acquisition described in Proposal 1. Shareholders are being asked to
consider such amendments at this time because the Funds do not regularly hold
annual shareholder meetings, and management of the Funds believes that
submitting this proposal together with Proposal 1 may reduce the expenses
incurred by each Fund in connection with soliciting approval of this proposal.
33
<PAGE> 41
SHAREHOLDER APPROVAL
To become effective, the proposed amendments to each Fund's investment
restrictions 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 in the 1940 Act as the lesser of the
vote of (i) 67% or more of the Shares of the respective Fund entitled to vote
thereon present 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 Fund entitled to vote thereon. The
proposed amendments were approved by the Board of Trustees of each Fund after
consideration of all the factors they determined to be relevant to their
deliberations, including those discussed above. The Board of Trustees also
unanimously determined to submit the proposed changes to the Shareholders of the
Funds. THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS A VOTE "FOR" APPROVAL OF
THE AMENDED INVESTMENT RESTRICTIONS.
- - - ------------------------------------------------------------------------------
PROPOSAL 4: RATIFICATION OF INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FUNDS
- - - ------------------------------------------------------------------------------
The Boards of Trustees, including a majority of the Disinterested Trustees,
have selected the firm of Price Waterhouse LLP, independent public accountants,
to examine the financial statements for the current fiscal year of each Fund.
Each Fund knows of no direct or indirect financial interest of the accountants
in the Funds. Such appointment is subject to ratification or rejection by the
shareholders of each 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 Fund, voting with respect to such Fund as a single
class, are entitled to vote on this issue. An affirmative vote of a majority of
the Shares of each Fund present in person or by proxy and voting is required to
ratify the selection of the accountants for such Fund. THE BOARD OF TRUSTEES OF
EACH FUND RECOMMENDS A VOTE "FOR" RATIFICATION OF PRICE WATERHOUSE LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE CURRENT FISCAL YEAR OF EACH FUND.
34
<PAGE> 42
- - - ------------------------------------------------------------------------------
OTHER INFORMATION
- - - ------------------------------------------------------------------------------
DIRECTORS AND OFFICERS OF THE ADVISER
The following table sets forth certain information concerning the principal
executive officers and directors of the Adviser.
DIRECTORS AND OFFICERS OF THE ADVISER
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- - - ------------------------- -----------------------------------------------------
<S> <C>
Don G. Powell............ President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VKAC Holding and VKAC and Chairman, Chief Executive
Houston, TX 77056 Officer and a Director of Van Kampen American Capital
Distributors, Inc. (the "Distributor"), the Advisers,
Van Kampen American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc. Chairman,
President and a Director of Van Kampen American
Capital Exchange Corporation, American Capital
Contractual Services, Inc., Van Kampen Merritt Equity
Holdings Corp., and American Capital Shareholders
Corporation. Chairman and a Director of ACCESS
Investor Services, Inc. ("ACCESS"), Van Kampen
Merritt Equity Advisors Corp., McCarthy, Crisanti &
Maffei, Inc., and Van Kampen American Capital Trust
Company. Chairman, President and a Director of Van
Kampen American Capital Services, Inc. President,
Chief Executive Officer and a Trustee/Director of
certain open-end investment companies and closed-end
investment companies advised by the Texas Adviser.
Prior to July 1996, Chairman and Director of VSM Inc.
and VCJ Inc. Prior to July 1996, President, Chief
Executive Officer and a Trustee/Director of certain
open-end investment companies and certain closed-end
investment companies advised by Asset Management.
</TABLE>
35
<PAGE> 43
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- - - ------------------------- -----------------------------------------------------
<S> <C>
Dennis J. McDonnell...... President, Chief Operating Officer and a Director of
One Parkview Plaza Adviser, Advisory Corp., Van Kampen American Capital
Oakbrook Terrace, IL Advisors, Inc. and Van Kampen American Capital
60181 Management, Inc. Executive Vice President and a
Director of VKAC Holding and VKAC. President and
Director of Van Kampen Merritt Equity Advisors Corp.
Director of Van Kampen Merritt Equity Holdings Corp.
and McCarthy, Crisanti & Maffei, S.A. Chief Executive
Officer and Director of McCarthy, Crisanti & Maffei,
Inc. Chairman and a Director of MCM Asia Pacific
Company, Limited. President and Trustee/Director of
open-end investment companies and closed-end
investment companies advised by the Adviser and
Advisory Corp. Prior to July 1996, President, Chief
Operating Officer and Director of VSM Inc. and VCJ
Inc. Prior to December, 1991, Senior Vice President
of Van Kampen Merritt, Inc.
Ronald A. Nyberg......... Executive Vice President, General Counsel and
One Parkview Plaza Secretary of VKAC Holding and VKAC. Executive Vice
Oakbrook Terrace, IL President, General Counsel and a Director of the
60181 Distributor, the Adviser, Advisory Corp., Van Kampen
American Capital Management, Inc., Van Kampen Merritt
Equity Advisors Corp., and Van Kampen Merritt Equity
Holdings Corp. Executive Vice President, General
Counsel and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American Capital
Contractual Services, Inc., Van Kampen American
Capital Exchange Corporation, ACCESS, Van Kampen
American Capital Services, Inc. and American Capital
Shareholders Corporation. Executive Vice President,
General Counsel, Assistant Secretary and Director of
Van Kampen American Capital Trust Company. General
Counsel of McCarthy, Crisanti & Maffei, Inc. Vice
President and Secretary of open-end investment
companies and closed-end investment companies advised
by the Advisers. Director of ICI Mutual Insurance
Co., a provider of insurance to members of the
Investment Company Institute. Prior to July 1996,
Executive Vice President and General Counsel of VSM
Inc., and Executive Vice President, General Counsel
and Director of VCJ Inc.
</TABLE>
36
<PAGE> 44
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- - - ------------------------- -----------------------------------------------------
<S> <C>
William R. Rybak......... Executive Vice President and Chief Financial Officer
One Parkview Plaza of VKAC Holding and VKAC since February 1993, and
Oakbrook Terrace, IL Treasurer of VKAC Holding through December 1993.
60181 Executive Vice President, Chief Financial Officer and
a Director of the Distributor, the Advisers, and Van
Kampen American Capital Management, Inc. Executive
Vice President, Chief Financial Officer, Treasurer
and a Director of Van Kampen Merritt Equity Advisors
Corp. and Van Kampen Merritt Equity Holdings Corp.
Executive Vice President and Chief Financial Officer
of the Van Kampen American Capital Advisors, Inc.,
Van Kampen American Capital Exchange Corporation, Van
Kampen American Capital Trust Company, ACCESS, and
American Capital Contractual Services, Inc. Executive
Vice President, Chief Financial Officer and Treasurer
of American Capital Shareholders Corporation and Van
Kampen American Capital Services, Inc. Chief
Financial Officer and Treasurer of McCarthy, Crisanti
& Maffei, Inc. Chairman of the Board of Hinsdale
Financial Corp., a savings and loan holding company.
Prior to July 1996, Executive Vice President, Chief
Financial Officer and a Director of VCJ Inc., and
Executive Vice President and Chief Financial Officer
of VSM Inc.
Peter W. Hegel........... Executive Vice President of Advisory Corp., Van
One Parkview Plaza Kampen American Capital Advisors, Inc., and Van
Oakbrook Terrace, IL Kampen American Capital Management, Inc. Executive
60181 Vice President and Director of the Adviser. Director
of McCarthy, Crisanti & Maffei, Inc. Vice President
of open-end investment companies and closed-end
investment companies advised by the Adviser and
Advisory Corp. Prior to July 1996, Director of VSM
Inc.
Robert C. Peck, Jr. ..... Executive Vice President of Advisory Corp. and Van
2800 Post Oak Blvd. Kampen American Capital Management, Inc. Executive
Houston, TX 77056 Vice President and Director of the Adviser and Van
Kampen American Capital Advisors, Inc. Vice President
of open-end investment companies advised by the
Adviser and Advisory Corp.
Alan T. Sachtleben....... Executive Vice President of Advisory Corp. and Van
2800 Post Oak Blvd. Kampen American Capital Management, Inc. Executive
Houston, TX 77056 Vice President and a Director of the Adviser and Van
Kampen American Capital Advisors, Inc. Vice President
of open-end investment companies advised by the
Adviser and Advisory Corp.
</TABLE>
37
<PAGE> 45
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.................. Trustee and President
William N. Brown..................... Vice President
Peter W. Hegel....................... Vice President
Curtis W. Morell..................... Vice President and Chief Accounting Officer
Ronald A. Nyberg..................... Vice President and Secretary
Robert C. Peck, Jr................... Vice President
Alan T. Sachtleben................... Vice President
Paul R. Wolkenberg................... Vice President
Edward C. Wood III................... Vice President and Chief Financial Officer
John L. Sullivan..................... Treasurer
Tanya M. Loden....................... Controller
Nicholas Dalmaso..................... Assistant Secretary
Huey P. Falgout, Jr.................. Assistant Secretary
Scott E. Martin...................... Assistant Secretary
Weston B. Wetherell.................. Assistant Secretary
Steven M. Hill....................... Assistant Treasurer
Robert Sullivan...................... Assistant Controller
</TABLE>
The officers of the Funds serve for one year or until their respective
successors are chosen and qualified. The Funds' officers receive no compensation
from the Funds, but are all officers of the Adviser, Van Kampen American Capital
Investment Advisory Corp., the Distributor, VKAC or their affiliates and receive
compensation in such capacities.
NON-ADVISORY AGREEMENTS
Each Fund has entered into certain other agreements with the Adviser, Van
Kampen American Capital Investment Advisory Corp., Van Kampen American Capital
Distributors, Inc., the distributor of the Shares and an affiliate of the
Advisers (the "Distributor"), ACCESS Investor Services, Inc., the transfer agent
for each respective Fund ("ACCESS") and an affiliate of the Advisers, or VKAC,
as the case may be. These agreements are not terminated by the change in control
and do not need to be voted on by the shareholders of the Funds at the Meeting.
The Adviser currently anticipates that the services provided to the Funds
pursuant to these agreements will continue to be provided after the proposed New
Advisory Agreements are approved.
Fund Accounting Agreement. Each Fund is party to the Fund Accounting
Agreement, and currently receives all accounting services through Van Kampen
American Capital Investment Advisory Corp. Each Fund shares equally, together
with the other mutual funds advised and distributed by the Adviser and Advisory
Corp. and the Distributor, respectively, in 25% of the cost of providing such
38
<PAGE> 46
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 Van Kampen American Capital Investment Advisory Corp.
the amount set forth at Annex E hereto for its most recently completed fiscal
year.
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. 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, a national
accounting firm. The model allocates among the Funds ACCESS's cost of providing
the Funds with transfer agency services, plus a profit margin approved by the
Board of Trustees. The allocation is based upon a number of factors including
the number of shareholder accounts per Fund, the number and type of shareholder
transactions experienced by each Fund and other factors. Under the Transfer
Agency Agreement, each Fund paid ACCESS the amount set forth at Annex E hereto
for its most recently completed fiscal year.
Distribution Agreement, Distribution Plan and Service Plan. Each Fund (except
for LIT Global Equity Portfolio) has executed 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. Under each Distribution Agreement, each such Fund paid the Distributor
the amount set forth at Annex E hereto for its most recently completed fiscal
year.
Each Fund (except for LIT Global Equity Portfolio) 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 such Fund also has adopted a service plan
(the "Service Plan") with respect to each class of its shares. The Distribution
Plan and the Service Plan provide that the Fund may pay to the Distributor a
portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of each class.
The Distribution Plan and the Service Plan are implemented through an agreement
with the Distributor. The Distributor has entered into sub-agreements with
certain members of the NASD who are acting as securities dealers, as well as
NASD members or eligible non-members who are acting as brokers or agents. The
Funds have entered into similar agreements with financial intermediaries who are
acting as brokers that may provide for their customers or clients certain
services or assistance. The agreements between the Distributor and certain
brokers, dealers and agents and the agreements between the Funds and certain
financial intermediaries, which agreements implement the Distribution Plan and
the Service Plan, are referred to herein collectively as the "Selling
Agreements." Brokers, dealers and financial intermediaries that
39
<PAGE> 47
have entered into Selling Agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."
Each Fund (except for LIT Global Equity Portfolio) may spend an aggregate
amount of up to 0.25% per year of the average daily net assets attributable to
the Class A Shares of the respective Fund pursuant to the Distribution Plan and
the Service Plan. From such amount, each Fund may spend up to the full 0.25% per
year of its average daily net assets attributable to the Class A Shares pursuant
to the Service Plan in connection with the ongoing provision of services to
holders of such shares by the Distributor and by financial intermediaries and in
connection with the maintenance of shareholders' accounts. Each Fund pays the
Distributor the lesser of the balance of the 0.25% not paid to such financial
intermediaries or the amount of the Distributor's actual distribution related
expenses.
Each Fund (except for LIT Global Equity Portfolio) 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
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 (except for LIT Global Equity Portfolio) may spend up to 0.75% per
year of the average daily net assets attributable to its Class C Shares pursuant
to the Distribution Plan. From such amount, the Fund, or the Distributor as
agent for the Fund, pays financial intermediaries in connection with the
distribution of the Class C Shares up to 0.75% of the Fund's average daily net
assets attributable to Class C Shares maintained in the Fund more than one year
by such financial intermediary's customers. In addition, each Fund may spend up
to 0.25% per year of the respective Fund's average daily net assets attributable
to the Class C Shares pursuant to the Service Plan in connection with the
ongoing provision of services to holders of such shares by the Distributor and
by financial intermediaries and in connection with the maintenance of such
shareholders' accounts.
Amounts payable to the Distributor with respect to the Class A Shares under
the Distribution Plan in a given year may not fully reimburse the Distributor
for its actual distribution-related expenses during such year. In such event,
with respect to the Class A Shares, there is no carryover of such reimbursement
obligations to succeeding years.
The Distributor's actual expenses with respect to Class B Shares and Class C
Shares sold subject to a contingent deferred sales charge ("CDSC Shares") for
any given year may exceed the amounts payable to the Distributor with respect to
the CDSC Shares under the Distribution Plan, the Service Plan and payments
received pursuant to the contingent deferred sales charge. In such event, with
respect to the
40
<PAGE> 48
CDSC Shares, any unreimbursed expenses will be carried forward and paid by the
Fund (up to the amount of the actual expenses incurred) in future years so long
as such Distribution Plan is in effect. Except as mandated by applicable law,
the Funds do not impose any limit with respect to the number of years into the
future that such unreimbursed distribution expenses may be carried forward (on a
Fund level basis). Because such expenses are accounted for on a Fund-wide basis,
a particular CDSC Share may be greater or less than the amount of the initial
commission (including carrying cost) paid by the Distributor with respect to
such CDSC Share.
The address of the Distributor is One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Following the Acquisition, the Adviser will be an affiliate of Morgan Stanley
& Co., a registered broker-dealer. The amount of brokerage commissions, if any,
paid by each Fund to Morgan Stanley & Co. during its most recently completed
fiscal year is set forth on Annex E to this Proxy Statement.
SHAREHOLDER INFORMATION
As of August 27, 1996, the trustees and officers of the Funds as a group owned
less than 1% of the outstanding shares of each Fund. At such date the
"interested persons" of each Fund, as a group, owned an aggregate of less than
5% of the outstanding shares of the Fund.
The number of each Fund's outstanding Shares as of August 27, 1996 is set
forth at Annex D hereto. The persons who, to the knowledge of the Funds, owned
beneficially more than 5% of a class of a Fund's outstanding Shares as of August
16, 1996 are set forth at Annex H hereto.
- - - ------------------------------------------------------------------------------
EXPENSES
- - - ------------------------------------------------------------------------------
VKAC Holding and the Funds will share the expense of preparing, printing and
mailing the enclosed form of proxy, the accompanying Notice and this Proxy
Statement. VKAC Holding will bear such expenses to the extent that they relate
to the Acquisition (i.e., Proposals 1 and 2). The Funds will bear such expenses
to the extent that they relate to the management or governance of the Funds
(i.e., Proposals 3 and 4).
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 Adviser 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 $56,200.
41
<PAGE> 49
- - - ------------------------------------------------------------------------------
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
Securities and Exchange Commission 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
September 6, 1996
42
<PAGE> 50
ANNEX A
VAN KAMPEN AMERICAN CAPITAL FUNDS
The following list sets forth the Van Kampen American Capital 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 Friday, October 25, 1996, at 2:00 p.m. The
name in the left hand column below is the legal name for each Fund and the name
in the right hand column is the abbreviated name as used in the Proxy Statement.
<TABLE>
<CAPTION>
LEGAL NAME ABBREVIATED NAME
- - - ----------------------------------------------------- ---------------------------------
<S> <C>
Van Kampen American Capital World Portfolio Series Trust:
Van Kampen American Capital Global Equity Fund Global Equity Fund
Van Kampen American Capital Global Government Global Government Fund
Securities Fund
Van Kampen American Capital Global Managed Assets Global Managed Assets Fund
Fund
Van Kampen American Capital Life Investment Trust:
Global Equity Portfolio LIT Global Equity Portfolio
Real Estate Securities Portfolio LIT Real Estate Securities
Portfolio
Van Kampen American Capital Real Estate Securities Real Estate Securities Fund
Fund
Van Kampen American Capital Tax-Exempt Trust:
Van Kampen American Capital High Yield Municipal High Yield Municipal Fund
Fund
</TABLE>
A-1
<PAGE> 51
ANNEX B
FORM OF
INVESTMENT ADVISORY AGREEMENT
(MARKED TO SHOW CHANGES FROM THE CURRENT 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
B-1
<PAGE> 52
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
B-2
<PAGE> 53
between the FUND and any other party, such allocations shall be pursuant to
methods approved by the Trustees.
(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.
(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
B-3
<PAGE> 54
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 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 on the date hereof, and shall remain in
full force until [May 30, 1997] 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
B-4
<PAGE> 55
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.
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.
It is understood and agreed that the ADVISER may engage a subadviser to assist
it in the performance of its duties hereunder.
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:
------------------------------------
B-5
<PAGE> 56
ANNEX C-1
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
AND
MORGAN STANLEY ASSET MANAGEMENT INC.
THIS AGREEMENT is made as of this [Date] by and between MORGAN STANLEY ASSET
MANAGEMENT INC., a Delaware corporation, located at 1221 Avenue of the Americas,
New York, New York 10020, and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("VKAC"), a Delaware corporation, located at 2800 Post Oak Boulevard, Houston,
Texas 77056.
WHEREAS, VKAC has heretofore sponsored and acts as Investment Adviser to Van
Kampen American Capital Fund (the "Fund"); and
WHEREAS, Morgan Stanley Asset Management Inc. ("MSAM") has available a staff of
experienced investment personnel and facilities for providing investment
sub-advisory services to the investment portfolio; and
WHEREAS, MSAM is an investment adviser registered under the Investment Advisers
Act of 1940, as amended and is willing to provide VKAC with investment advisory
services on the terms and conditions hereinafter set forth; and
WHEREAS, VKAC and MSAM (jointly referred to as "the Advisers") desire to enter
into an agreement for MSAM to provide sub-advisory services to the Fund and to
VKAC with respect to the Fund's investments.
NOW THEREFORE it is mutually agreed:
1. INVESTMENT SUB-ADVISORY SERVICES
1.1 Investment Advice
a) Effective on April 1, 1997, and subject to the overall policies, control,
direction and review of the Fund's Trustees, MSAM shall keep under review the
investments of the Fund and continuously furnish to the Fund and to VKAC (1)
investment advice with respect to all or such portion of the Fund's assets as
the Advisers agree to from time to time; (2) economic, statistical and research
information and advice, including advice on the allocation of investments among
countries, relating to all or such portion of the Fund's assets as the Advisers
shall agree to from time to time; (3) recommendations as to the voting of
proxies solicited by or with respect to securities under MSAM's supervision; and
(4) an investment program with respect to securities and recommendations as to
what securities shall be purchased, sold or
C1-1
<PAGE> 57
exchanged, and what portion, if any, of the securities shall be held in money
market instruments.
b) The Advisers are responsible for the allocation of the Fund's assets among
the various securities markets of the world. The Advisers will determine at
least quarterly the percentage of the assets that shall be allocated to each of
the Advisers (the "Asset Allocation"). The Asset Allocation will specify the
percentage and nature of the assets of the Fund allocated to each of the
Advisers for management on the effective date of the determination and will
apply to cash inflows or outflows and income and expense accruals thereafter
until such time as the Asset Allocation is redetermined. Each of the Advisers
will be responsible for the allocation of assets among the securities markets
within various regions as they agree to from time to time.
c) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by VKAC or by the Trustees, MSAM shall determine the securities to
be purchased and sold by the Fund and shall place orders for the purchase, sale
or exchange of securities for the Fund's accounts with brokers or dealers and to
that end MSAM is authorized by the Trustees to give instructions to the
Custodian and any Sub-Custodian of the Fund as to deliveries of such securities,
transfers of currencies and payments of cash for the account of the Fund.
d) In performing these services, MSAM shall adhere to the Fund's investment
objectives, restrictions and limitations as contained in its Prospectus,
Statement of Additional Information, or Agreement and Declaration of Trust and
shall comply with all statutory and regulatory restrictions, limitations and
requirements applicable to the activity of the Fund.
e) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by VKAC or by the Trustees, MSAM shall have executed and performed
on behalf of and at the expense of the Fund:
i) Purchases, sales, exchanges, conversions, and placement or orders for
execution, and
ii) Reporting of all transactions to VKAC and to other entities as directed
by VKAC or by the Trustees.
f) MSAM shall provide the Trustees at least quarterly, in advance of the
regular meetings of the Trustees, a report of its activities hereunder on behalf
of the Fund and its proposed strategy for the next quarter, all in such form and
detail as requested by the Trustees. MSAM shall also make an investment officer
available to attend such meetings of the Trustees as the Trustees may reasonably
request.
g) During the period commencing with the date of this Agreement and continuing
through March 31, 1997, MSAM shall consult with VKAC and John Govett & Company
Limited ("Govett") regarding the Fund's investment portfolio and
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<PAGE> 58
operations in order to provide for the orderly transition of subadvisory
services from Govett to MSAM. During this period, MSAM will not provide VKAC,
Govett or the Fund with investment subadvisory services or make recommendations
with respect to the execution of portfolio trades and will not receive any
investment fees.
1.2 Restriction of MSAM's Powers
(a) MSAM shall not commit the Fund to any extent beyond the amount of the cash
and securities placed by the Fund under the control of the MSAM.
(b) In carrying out its duties hereunder MSAM shall comply with all reasonable
instruction of the Fund or VKAC in connection therewith. Such instructions may
be given by letter, telex, telefax or telephone confirmed by telex, by the
Trustees or by any other person authorized by a resolution of the Trustees
provided a certified copy of such resolution has been supplied to MSAM.
(c) All securities, cash, and other assets of the Fund shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Trustees as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the Investment Company Act
of 1940 (the "1940 Act")) approved by the Trustees as sub-custodians.
(d) Persons authorized by resolution of the Trustees shall have the right to
inspect and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Fund's transactions at the registered
office of MSAM at any time during normal business hours. Such records, in
relation to each transaction effected by MSAM on behalf of the Fund shall be
maintained by MSAM for a period of seven years from the date of such
transaction.
1.3 Purchase and Sale of Securities
In performing the services described above, MSAM shall use its best efforts to
obtain for the Fund the most favorable price and execution available. Subject to
prior authorization of appropriate policies and procedures by the Trustees, MSAM
may, to the extent authorized by law, cause the Fund to pay a broker or dealer
who provides brokerage and research services an amount of commission for
effecting the Fund's investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, in recognition of the brokerage and research services provided by
the broker or dealer. To the extent authorized by law, MSAM 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.
1.4 Custodian
MSAM shall not act as Custodian for the securities or any other assets of the
Fund. All such assets shall be held by the Custodian or Sub-Custodian appointed
by the Trustees.
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<PAGE> 59
2. DUTIES OF VKAC
2.1 Provision of Information
VKAC shall advise MSAM from time to time with respect to the Fund of its
investment objectives and of any changes or modifications thereto, as well as
any specific investment restrictions or limitations by sending to MSAM a copy of
each registration statement relating to the Fund as filed with the Securities
and Exchange Commission. As requested by MSAM, VKAC shall furnish such
information to MSAM as to holdings, purchases, and sales of the securities under
its management as will reasonably enable MSAM to furnish its investment advice
under this Agreement.
2.2 Compensation to MSAM
The fee for the services provided under this Agreement will be determined as
follows:
(a) An amount for each month (or such other valuation period as may be
mutually agreed upon) equivalent, on an annual basis, to 50% of the
compensation actually received by VKAC pursuant to the investment advisory fee
schedule set forth in the Investment Advisory Agreement between the Fund and
VKAC taking into account any waiver or return to the Fund of any or all of
such advisory fee by VKAC (with any such return of fees to be treated as if
not actually received). The value of the assets of the Fund shall be computed
as of the close of business on the last day of each valuation period for the
Fund, using the average of all the daily determinations of the net value of
the assets of the Fund.
(b) The foregoing fee shall be paid in cash by VKAC to MSAM within five (5)
business days after the last day of the valuation period.
3. MISCELLANEOUS
3.1 Activities of MSAM
The services of MSAM as Sub-Adviser to VKAC under this Agreement are not to be
deemed exclusive, MSAM and its affiliates being free to render services to
others. It is understood that shareholders, trustees, officers and employees of
MSAM may become interested in the Fund or VKAC as a shareholder, trustee,
officer, partner or otherwise.
3.2 Services to Other Clients
VKAC acknowledges that MSAM may have investment responsibilities, or render
investment advice to, or perform other investment advisory services for, other
individuals or entities ("Clients"). Subject to the provisions of this
paragraph, VKAC agrees that MSAM may give advice or exercise investment
responsibility and take such other action with respect to such Clients which may
differ from advice given or the timing or nature of action taken with respect to
the Fund,
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<PAGE> 60
provided that MSAM acts in good faith, and provided, further, that it is MSAM
policy to allocate, within its reasonable discretion, investment opportunities
to the Fund over a period of time on a fair and equitable basis relative to the
Clients, taking into account the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto. VKAC acknowledges
that one or more of the Clients may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Fund may have an interest from time to time, whether in transactions which
may involve the Fund or otherwise. MSAM shall have no obligation to acquire for
the Fund a position in any investment which any Client may acquire, and VKAC
shall have no first refusal, coinvestment or other rights in respect of any such
investment, either for the Fund or otherwise.
3.3 Best Efforts
It is understood and agreed that in furnishing the investment advice and other
services as herein provided, MSAM shall use its best professional judgment to
recommend actions which will provide favorable results for the Fund. MSAM shall
not be liable to the Fund or to any shareholder of the Fund to any greater
degree than VKAC.
3.4 Duration of Agreement
a) This Agreement, unless terminated pursuant to paragraph b or c below or
Section 2.2(c), shall continue in effect through May 31, 1997, and thereafter
shall continue in effect from year to year, provided its continued applicability
is specifically approved at least annually by the Trustees or by a vote of the
holders of a majority of the outstanding shares of the Fund. In addition, such
continuation shall be approved by vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. As used
in this paragraph, the term "interested person" shall have the same meaning as
set forth in the 1940 Act.
b) This Agreement may be terminated by sixty (60) days' written notice by
either VKAC or MSAM to the other party. The Agreement may also be terminated at
any time, without the payment of any penalty, by the Fund (by vote of the
Trustees or, by the vote of a majority of the outstanding voting securities of
such Fund), on sixty (60) days' written notice to both VKAC and MSAM. This
Agreement shall automatically terminate in the event of the termination of the
investment advisory agreement between VKAC and the Fund.
c) This Agreement shall terminate in the event of its assignment. The term
"assignment" for this purpose shall have the same meaning set forth in Section
2(a)(4) of the 1940 Act.
d) Termination shall be without prejudice to the completion of any
transactions which MSAM shall have committed to on behalf of the Fund prior to
the time of
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<PAGE> 61
termination. MSAM shall not effect and the Fund shall not be entitled to
instruct MSAM to effect any further transactions on behalf of the Fund
subsequent to the time termination takes effect.
e) This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
i) if VKAC or MSAM shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide reconstruction or
amalgamation upon terms previously approved in writing by the party not in
liquidation) or if a receiver or receiver and manager of any of the assets of
any of them is appointed; or
ii) if either of the parties hereto shall commit any breach of the
provisions hereof and shall not have remedied such breach within 30 days after
the service of notice by the party not in breach on the other requiring the
same to be remedied.
f) On the termination of this Agreement and completion of all matters referred
to in the foregoing paragraph (d) MSAM shall deliver or cause to be delivered to
the Fund copies of all documents, records and books of the Fund required to be
maintained pursuant to Rules 31a-1 or 31a-2 of the 1940 Act which are in MSAM's
possession, power or control and which are valid and in force at the date of
termination.
3.5 Notices
Any notice, request, instruction, or other document to be given under this
Agreement by any party hereto to the other parties shall be in writing and
delivered personally or sent by mail or telecopy (with a hard copy to follow),
If to MSAM, to:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
attn: Warren J. Olsen
with a copy to:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
attn: Harold J. Schaaff, Esq.
If to VKAC, to:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
attn: Dennis J. McDonnell
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<PAGE> 62
with a copy to:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
attn: Ronald A. Nyberg, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be presumed to have
been duly given to the party to which it is addressed, on the date three (3)
days after mailing, and in the case of delivery by telecopy, on the date the
hard copy is received.
3.6 Choice of Law
This Agreement shall be construed according to, and the rights and liabilities
of the parties hereto shall be governed by, the laws of the United States and
the State of New York, without regard to the conflicts of laws principles
thereof.
3.7 Miscellaneous Provisions
The execution of this Agreement has been authorized by the Fund's Trustees and
by the shareholders. This Agreement is executed on behalf of the Fund or the
Trustees of the Fund as Trustees and not individually and that the obligations
of this Agreement are not binding upon any of the Trustees, officers or
shareholders of the Fund individually but are binding only upon the assets and
property of the Fund. A Certificate of Trust in respect of the Fund is on file
with the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
VAN KAMPEN AMERICAN
CAPITAL ASSET
MANAGEMENT, INC.
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
MORGAN STANLEY ASSET MANAGEMENT INC.
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
C1-7
<PAGE> 63
ANNEX C-2
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
AND
JOHN GOVETT & CO. LIMITED
(MARKED TO SHOW CHANGES FROM THE CURRENT ADVISORY AGREEMENT)
THIS AGREEMENT is made as of this [Date] by and between JOHN GOVETT & CO.
LIMITED ("JOHN GOVETT") of Shackleton House, 4 Battle Bridge Lane, London SE1
2HR, England, and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("VKAC") of
2800 Post Oak Boulevard, Houston, Texas 77056.
WHEREAS, VKAC has heretofore sponsored and acts as Investment Adviser to Van
Kampen American Capital (the "Trust") with respect to
it series Van Kampen American Capital (the "Fund"); and
WHEREAS, JOHN GOVETT has available a staff of experienced investment personnel
and facilities for providing investment sub-advisory services applicable to that
portion of the investment portfolio invested in non-U.S. securities; and
WHEREAS, VKAC represents that it is a non-private investor with regard to the
Investment Management Regulatory Organization Limited ("IMRO") rules.
WHEREAS, JOHN GOVETT is a member of IMRO, a self-regulating organization
recognized under the Financial Services Act 1986 of the United Kingdom and is
willing to provide VKAC with investment advisory services on the terms and
conditions hereinafter set forth; and
WHEREAS, VKAC and JOHN GOVETT (jointly referred to as "the Advisers") desire to
enter into an agreement for JOHN GOVETT to provide sub-advisory services to the
Fund and to VKAC with respect to the Fund's non-U.S. investments.
NOW THEREFORE it is mutually agreed:
1. INVESTMENT SUB-ADVISORY SERVICES
1.1 Investment Advice
a) Subject to the overall policies, control, direction and review of the
Fund's Trustees, JOHN GOVETT shall keep under review the non-U.S. investments of
the Fund and continuously furnish to the Fund and to VKAC (1) investment advice
primarily for investments insecurities for which the principal trading market(s)
are in non-U.S. countries; (2) economic, statistical and research information
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<PAGE> 64
and advice, including advice on the allocation of investments among countries,
relating only to such portion of the Fund's assets as the Advisers shall from
time to time designate ("Non-U.S. Securities"), generally with respect to
securities issued outside the United States and Canada; (3) recommendations as
to the voting of proxies solicited by or with respect to Non-U.S. Securities;
and (4) an investment program with respect to Non-U.S. Securities and
recommendations as to what securities shall be purchased, sold or exchanged, and
what portion, if any, of the Non-U.S. Securities shall be held in money market
instruments.
b) The Advisers are responsible for the allocation of the Fund's assets among
the various securities markets of the world. The Advisers will determine at
least quarterly the percentage of the assets that shall be allocated to each of
the Advisers (the "Asset Allocation"). The Asset Allocation will specify the
percentage and nature of the assets of the Fund allocated to each of the
Advisers for management on the effective date of the determination and will
apply to cash inflows or outflows and income and expense accruals thereafter
until such time as the Asset Allocation is redetermined. Each of the Advisers
will be responsible for the allocation of assets among the securities markets
within the area for which it is responsible. If the Advisers cannot agree on an
Asset Allocation, the Trustees shall make the final determination since the
Trustees retain in all events the control and management of the business and
affairs of the Fund.
c) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by VKAC or by the Trustees, JOHN GOVETT shall determine the
Non-U.S. Securities to be purchased and sold by the Fund and shall place orders
for the purchase, sale or exchange of Non-U.S. Securities for the Fund's
accounts with brokers or dealers and to that end JOHN GOVETT is authorized by
the Trustees to give instructions to the Custodian and any Sub-Custodian of the
Fund as to deliveries of such Non-U.S. Securities, transfers of currencies and
payments of cash for the account of the Fund.
d) In performing these services, JOHN GOVETT shall adhere to the Fund's
investment objectives, restrictions and limitations as contained in its
Prospectus, Statement of Additional Information, or Agreement and Declaration of
Trust and shall comply with all statutory and regulatory restrictions,
limitations and requirements applicable to the activity of the Fund.
e) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by VKAC or by the Trustees, JOHN GOVETT shall have executed and
performed on behalf of and at the expense of the Fund:
i) Purchases, sales, exchanges, conversions, and placement or orders for
execution, and
ii) Reporting of all transactions to VKAC and to other entities as directed
by VKAC or by the Trustees.
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<PAGE> 65
f) JOHN GOVETT shall provide the Trustees at least quarterly, in advance of
the regular meetings of the Trustees, a report of its activities hereunder on
behalf of the Fund and its proposed strategy for the next quarter, all in such
form and detail as requested by the Trustees. JOHN GOVETT shall also make an
investment officer available to attend such meetings of the Trustees as the
Trustees may reasonably request.
1.2 Restriction of JOHN GOVETT's Powers
(a) JOHN GOVETT shall not commit the Fund to any extent beyond the amount of
the cash and securities placed by the Fund under the control of JOHN GOVETT.
(b) In carrying out its duties hereunder JOHN GOVETT shall comply with all
reasonable instruction of the Fund or VKAC in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Trustees or by any other person authorized by a resolution of the
Trustees provided a certified copy of such resolution has been supplied to JOHN
GOVETT.
(c) All securities, cash, and other assets of the Fund shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Trustees as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the Investment Company Act
of 1940 (the "1940 Act")) approved by the Trustees as sub-custodians.
(d) Persons authorized by resolution of the Trustees shall have the right to
inspect and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Fund's transactions at the registered
office of JOHN GOVETT at any time during normal business hours. Such records, in
relation to each transaction effected by JOHN GOVETT on behalf of the Fund shall
be maintained by JOHN GOVETT for a period of seven years from the date of such
transaction.
1.3 Purchase and Sale of Securities
In performing the services described above, JOHN GOVETT shall use its best
efforts to obtain for the Fund the most favorable price and execution available.
Subject to prior authorization of appropriate policies and procedures by the
Trustees, JOHN GOVETT may, to the extent authorized by law, cause the Fund to
pay a broker or dealer who provides brokerage and research services an amount of
commission for effecting the Fund's investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, in recognition of the brokerage and research services provided
by the broker or dealer. To the extent authorized by law, JOHN GOVETT 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.
C2-3
<PAGE> 66
1.4 Custodian
JOHN GOVETT shall not act as Custodian for the securities or any other assets
of the Fund. All such assets shall be held by the Custodian or Sub-Custodian
appointed by the Trustees.
2. DUTIES OF VKAC
2.1 Provision of Information
VKAC shall advise JOHN GOVETT from time to time with respect to the Fund of
its investment objectives and of any changes or modifications thereto, as well
as any specific investment restrictions or limitations by sending to JOHN GOVETT
a copy of each registration statement relating to the Fund as filed with the
Securities and Exchange Commission. As requested by JOHN GOVETT, VKAC shall
furnish such information to JOHN GOVETT as to holdings, purchases, and sales of
the securities under its management as will reasonably enable JOHN GOVETT to
furnish its investment advice under this Agreement.
2.2 Compensation to JOHN GOVETT
The fee for the services provided under this Agreement will be determined as
follows:
(a) Subject to paragraph (c) below, an amount for each month (or such other
valuation period as may be mutually agreed upon) equivalent, on an annual
basis, to 50% of the compensation actually received by VKAC pursuant to the
investment advisory fee schedule set forth in the Investment Advisory
Agreement between the Fund and VKAC taking into account any waiver or return
to the Fund of any or all of such advisory fee by VKAC (with any such return
of fees to be treated as if not actually received). The value of the assets of
the Fund shall be computed as of the close of business on the last day of each
valuation period for the Fund, using the average of all the daily
determinations of the net value of the assets of the Fund.
(b) The foregoing fee shall be paid in cash by VKAC to JOHN GOVETT within
five (5) business days after the last day of the valuation period.
3. MISCELLANEOUS
3.1 Activities of JOHN GOVETT
The services of JOHN GOVETT as Sub-Adviser to VKAC under this Agreement are
not to be deemed exclusive, JOHN GOVETT and its affiliates being free to render
services to others. It is understood that shareholders, trustees, officers and
employees of JOHN GOVETT may become interested in the Fund or VKAC as a
shareholder, trustee, officer, partner or otherwise.
C2-4
<PAGE> 67
3.2 Services to Other Clients
VKAC acknowledges that JOHN GOVETT may have investment responsibilities, or
render investment advice to, or perform other investment advisory services for,
other individuals or entities, ("Clients"). Subject to the provisions of this
paragraph, VKAC agrees that JOHN GOVETT may give advice or exercise investment
responsibility and take such other action with respect to such Clients which may
differ from advice given or the timing or nature of action taken with respect to
the Fund, provided that JOHN GOVETT acts in good faith, and provided, further,
that it is JOHN GOVETT policy to allocate, within its reasonable discretion,
investment opportunities to the Fund over a period of time on a fair and
equitable basis relative to the Clients, taking into account the investment
objectives and policies of the Fund and any specific investment restrictions
applicable thereto. VKAC acknowledges that one or more of the Clients may at any
time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Fund may have an interest from time to
time, whether in transactions which may involve the Fund or otherwise. JOHN
GOVETT shall have no obligation to acquire for the Fund a position in any
investment which any Client may acquire, and VKAC shall have no first refusal,
coinvestment or other rights in respect of any such investment, either for the
Fund or otherwise.
3.3 Best Efforts
It is understood and agreed that in furnishing the investment advice and other
services as herein provided, JOHN GOVETT shall use its best professional
judgment to recommend actions which will provide favorable results for the Fund.
JOHN GOVETT shall not be liable to the Fund or to any shareholder of the Fund to
any greater degree than VKAC.
3.4 Indemnity for Taxes
a) Notwithstanding any other provision of this Agreement, VKAC shall indemnify
and save JOHN GOVETT and each of its affiliates, officers, trustees and
employees (each an "Indemnified Party") harmless from, against, for and in
respect of all taxes imposed by the United Kingdom on VKAC or the Fund, in
relation to the matters contemplated by this Agreement in the event that any
such tax is assessed or charged on an Indemnified Party as a branch or agent of
VKAC or the Fund.
b) VKAC will not be liable under this indemnification provision with respect
to any liabilities incurred by reason of an Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Fund.
c) VKAC will not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified VKAC in writing within a reasonable time after the summons
or other
C2-5
<PAGE> 68
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent). In case any such
action is brought against the Indemnified Parties, VKAC will be entitled to
participate, at its own expense, in the defense thereof. VKAC also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from VKAC to such party of VKAC's election to
assume the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and VKAC will not be liable
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof.
3.5 Duration of Agreement
a) This Agreement, unless terminated earlier pursuant to paragraph b or c
below or Section 2.2(c), shall continue in effect through [March 31, 1997]. As
used in this paragraph, the term "interested person" shall have the same meaning
as set forth in the 1940 Act.
b) This Agreement may be terminated by sixty (60) days written notice by
either VKAC or JOHN GOVETT to the other party. The Agreement may also be
terminated at any time, without the payment of any penalty, by the Fund (by vote
of the Trustees or, by the vote of a majority of the outstanding voting
securities of such Fund), on sixty (60) days written notice to both VKAC and
JOHN GOVETT. This Agreement shall automatically terminate in the event of the
termination of the investment advisory agreement between VKAC and the Fund.
c) This Agreement shall terminate in the event of its assignment. The term
"assignment" for this purpose shall have the same meaning set forth in Section
2(a)(4) of the 1940 Act.
d) Termination shall be without prejudice to the completion of any
transactions which JOHN GOVETT shall have committed to on behalf of the Fund
prior to the time of termination. JOHN GOVETT shall not effect and the Fund
shall not be entitled to instruct JOHN GOVETT to effect any further transactions
on behalf of the Fund subsequent to the time termination takes effect.
e) This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
i) If VKAC or JOHN GOVETT shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide reconstruction or
amalgamation upon terms previously approved in writing by the party not in
liquidation) or if a receiver or receiver and manager of any of the assets of
any of them is appointed; or
ii) If either of the parties hereto shall commit any breach of the
provisions hereof and shall not have remedied such breach within 30 days after
the service
C2-6
<PAGE> 69
of notice by the party not in breach on the other requiring the same to be
remedied.
f) On the termination of this Agreement and completion of all matters referred
to in the foregoing paragraph (d) JOHN GOVETT shall deliver or cause to be
delivered to the Fund copies of all documents, records and books of the Fund
required to be maintained pursuant to Rules 31a-1 or 31a-2 of the 1940 Act which
are in JOHN GOVETT's possession, power or control and which are valid and in
force at the date of termination.
3.6 Notices
Any notice, request, instruction, or other document to be given under this
Agreement by any party hereto to the other parties shall be in writing and
delivered personally or sent by mail or telecopy (with a hard copy to follow),
If to JOHN GOVETT, to:
Shackleton House
4 Battle Bridge Lane
London SE1 2HR
England
attn: The Hon. Kevin Pakenham
with a copy to:
Shackleton House
4 Battle Bridge Lane
London SE1 2HR
England
attn: Colin Kreidelwolf
If to VKAC, to:
2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4300
attn: Don Powell
with a copy to:
One Parkview Plaza
Oakbrook Terrace, IL 60181
attn: Ronald A. Nyberg, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be presumed to have
been duly given to the party to
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<PAGE> 70
which it is addressed, on the date three (3) days after mailing, and in the case
of delivery by telecopy, on the date the hard copy is received.
3.7 IMRO Rules
As a member of IMRO and in light of IMRO Rules, the Sub-Adviser places on
record that it regards this Agreement as not necessitating any ancillary
agreement with the Fund or VKAC on the grounds that, within meanings of the IMRO
Rules (a) the Fund is a series of an open-ended investment company and a
business investor, (b) VKAC is a professional investor and (c) the subject
matter of this Agreement is a scheme management activity.
3.8 Choice of Law
This Agreement shall be construed according to, and the rights and liabilities
of the parties hereto shall be governed by, the laws of the United States and
the State of California.
3.9 Miscellaneous Provisions
The execution of this Agreement has been authorized by the Trust's Trustees
and by the sole shareholder. This Agreement is executed on behalf of the Trust
or the Trustees of the Trust 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 Trust individually but are binding only upon the assets
and property of the Trust. A Certificate of Trust in respect of the Trust is on
file with the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
VAN KAMPEN
AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
By:
- - - ---------------------------------
Name:
- - - ---------------------------------
Its:
- - - ---------------------------------
JOHN GOVETT & CO. LIMITED
By:
- - - ---------------------------------
Name:
- - - ---------------------------------
Its:
- - - ---------------------------------
C2-8
<PAGE> 71
ANNEX C-3
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
AND
HINES INTERESTS REALTY ADVISORS
LIMITED PARTNERSHIP
(MARKED TO SHOW CHANGES FROM CURRENT SUBADVISORY AGREEMENT)
This Agreement is entered into this [Date], between VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC., ("VKAC") and HINES INTERESTS REALTY ADVISORS LIMITED
PARTNERSHIP ("Hines"), to provide certain investment advisory services to Van
Kampen American Capital (the "Fund").
WHEREAS, VKAC has entered into an Investment Advisory Agreement (the "Advisory
Agreement"), dated this date, with the Fund, under which VKAC has agreed, among
other things, to act as investment adviser to the Fund; and
WHEREAS, the Advisory Agreement provides that VKAC may engage a subadviser to
furnish requested investment information and advice with respect to real estate
matters to assist VKAC in carrying out its responsibilities under the Advisory
Agreement; and
WHEREAS, it is the purpose of this Sub-Advisory Agreement (the "Agreement") to
express the agreements and understandings of the parties with respect to the
services to be provided by Hines to VKAC with respect to the Fund and the terms
and conditions under which such services will be rendered.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is agreed as follows:
1. SERVICES OF HINES.
Hines shall act as sub-adviser to VKAC to assist VKAC in the performance of
its investment advisory responsibilities to the Fund. In this capacity, Hines
shall have the following responsibilities:
(a) to provide regional economic analysis of the areas in which properties
owned by real estate investment trusts are located;
(b) to provide analysis and information concerning the relative
attractiveness of the various property types within the several geographic
regions;
C3-1
<PAGE> 72
(c) to evaluate and assess real estate valuations and the condition of
properties;
(d) to evaluate property managers and sponsors of real estate investment
trusts;
(e) to review and monitor the real estate investments in the Fund; and
(f) to furnish such other information and reports as may reasonably be
requested by VKAC from time to time.
2. OBLIGATIONS OF VKAC.
VKAC shall have the following obligations under this Agreement:
(a) to keep Hines fully informed as to the composition of the Fund's
investment securities;
(b) to keep Hines fully advised of the Fund's investment objectives, and any
modifications and changes thereto, as well as any specific investment
restrictions or limitations by sending Hines copies of each registration
statement;
(c) to furnish Hines with a copy of any financial statement or report
prepared for the Fund by independent public accountants, and with copies of
any financial statements or reports made by the Fund to shareholders or to any
governmental body or securities exchange and to inform Hines of the results of
any audits or examinations by regulatory authorities pertaining to the Fund;
(d) to furnish Hines with any further materials or information which Hines
may reasonably request to enable it to perform its functions under this
Agreement; and
(e) to compensate Hines for its services under this Agreement by the payment
of fees equal to (i) 50% of the fees received by VKAC for services rendered
under the Advisory Agreement by VKAC to the Fund during the term of this
Agreement, less (ii) 50% of the amount paid by VKAC on behalf of the Fund
pursuant to any expense limitation or the amount of any other reimbursement
made by VKAC to the Fund. In the event that this Agreement shall be effective
for only part of a period to which any such fee received by VKAC is
attributable, then an appropriate pro-ration of the fee that would have been
payable to Hines under this Agreement shall be made. The fees payable to Hines
from VKAC shall be payable upon receipt by VKAC of advisory fees from the
Fund.
3. BEST EFFORTS.
It is understood and agreed that in furnishing the investment advice and other
services as provided in this Agreement, Hines shall use its best professional
judgment to recommend actions which will provide favorable results for the Fund.
Hines shall not be liable to the Fund or to any shareholder of the Fund to any
greater degree than VKAC. Hines shall be free to render similar services to
others
C3-2
<PAGE> 73
and otherwise to engage in the real estate business and related activities so
long as the services rendered to the Fund are not impaired.
4. COMPLIANCE WITH LAWS.
Hines represents that it is, and will continue to be throughout the term of
this Agreement, an investment adviser registered under all applicable federal
and state laws. In all matters relating to the performance of this Agreement,
Hines will act in conformity with the Fund's Agreement and Declaration of Trust,
Bylaws, and current registration statement and with the instructions and
direction of VKAC and the Fund's Trustees, and will conform to and comply with
the Investment Company Act of 1940, as amended (the "1940 Act"), and all other
applicable federal or state laws and regulations.
5. TERMINATION.
This Agreement shall terminate automatically upon the termination of the
Advisory Agreement. This Agreement may be terminated at any time, without
penalty, by VKAC or by the Fund by giving 30 days' written notice of such
termination to Hines at its principal place of business, provided that such
termination is approved by the Trustees of the Fund or by vote of a majority of
the outstanding voting securities (as that phrase is defined in Section 2(a)(42)
of the 1940 Act) of the Fund. This Agreement may be terminated at any time by
Hines by giving 30 days' written notice of such termination to the Fund and VKAC
at their respective principal places of business.
6. ASSIGNMENT.
This Agreement shall terminate automatically in the event of its assignment
(as that term is defined in Section 2(a)(4) of the 1940 Act).
7. TERM.
This Agreement shall continue in effect, unless sooner terminated in
accordance with its terms, for an initial term from the date hereof until [May
30, 1997] and shall continue in effect from year to year thereafter provided
continuance is specifically approved at least annually by the vote of a majority
of the Trustees of the Fund who are not parties hereto or interested persons (as
the term is defined in Section 2(a)(19) of the 1940 Act) of any such party, cast
in person at a meeting called for the purpose of voting on the approval of the
terms of such renewal, and by either the Trustees of the Fund or the affirmative
vote of a majority of the outstanding voting securities of the Fund (as that
phrase is defined in Section 2(a)(42) of the 1940 Act).
8. AMENDMENTS.
This Agreement may be amended only with the approval by the affirmative vote
of a majority of the outstanding voting securities of the Fund (as that phrase
is
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<PAGE> 74
defined in Section 2(a)(42) of the 1940 Act) and the approval by the vote of a
majority of the Trustees of the Fund who are not parties hereto or interested
persons (as that term is defined in Section 2(a)(19) of the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on the
approval of such amendment, unless otherwise permitted in accordance with the
1940 Act.
9. APPLICABLE LAWS.
This Agreement shall be construed according to, and the rights and liabilities
of the parties hereto shall be governed by, the laws of the United States and
the State of Texas.
The execution of this Agreement has been authorized by the Fund's Trustees and
by the Fund's shareholders. This Agreement is executed on behalf of the Fund or
the Trustees of the Fund as Trustees and not individually and the obligations of
this Agreement are not binding upon any of the Trustees, officers or
shareholders of the Fund individually but are binding only upon the assets and
property of the Fund. A Certificate of Trust in respect of the Fund is on file
with the Secretary of State of Delaware.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
HINES INTERESTS
REALTY ADVISORS
LIMITED PARTNERSHIP
Name:
-----------------------------------
Its:
------------------------------------
By:
------------------------------------
VAN KAMPEN
AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
Name:
------------------------------------
Its:
------------------------------------
By:
------------------------------------
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<PAGE> 75
ANNEX C-4
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST --
VAN KAMPEN AMERICAN CAPITAL HIGH YIELD MUNICIPAL FUND
SUBADVISORY AGREEMENT
(MARKED TO SHOW CHANGES FROM CURRENT ADVISORY AGREEMENT)
THIS AGREEMENT is made this [Date], by and between VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC., a Delaware corporation (the "Adviser") and VAN KAMPEN
AMERICAN CAPITAL ADVISORS, INC., a Delaware corporation (the "Subadviser").
WHEREAS, Van Kampen American Capital Tax-Exempt Trust (the "Trust") is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end, diversified management investment company, consisting of multiple
series of investment portfolios;
WHEREAS, the Adviser is registered under the Investment Advisers Act of 1940, as
amended, as an investment adviser and engages in the business of acting as an
investment adviser;
WHEREAS, the Subadviser is registered under the Investment Advisers Act of 1940,
as amended, as an investment adviser;
WHEREAS, the Agreement and Declaration of Trust authorizes the Trustees of the
Trust to classify or reclassify authorized but unissued shares of the Trust, and
as of the date of this Agreement, the Trust's Trustees have authorized the
issuance of one series of shares representing interests in one investment
portfolio -- the Van Kampen American Capital High Yield Municipal Fund (the
"Fund") (such portfolio and any other portfolios hereafter added to the Trust
being referred to collectively herein as the "Funds");
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated
[Date], with the Trust (the "Investment Advisory Agreement"), pursuant to which
the Adviser shall act as investment adviser with respect to the Fund; and
WHEREAS, the securities sought for the investment portfolio of the Fund are sold
in a highly specialized market and the Adviser is desirous to engage a
subadviser in an effort to improve its access to that market and enhance its
ability to acquire investment securities that meet the Fund's investment
objectives;
WHEREAS, the Adviser wishes to retain the Subadviser for purposes of rendering
such advisory services to the Adviser in connection with the Fund upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
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<PAGE> 76
1. APPOINTMENT OF SUBADVISER. The Adviser hereby appoints the Subadviser to
render investment research and advisory services to the Adviser with respect to
the Fund, under the supervision of the Adviser and subject to the approval and
direction of the Trust's Trustees, and the Subadviser hereby accepts such
appointment, all subject to the terms and conditions contained herein.
2. INVESTMENT ANALYSIS. The duties of the Subadviser shall include:
a. obtaining and evaluating pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign
or otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund or
the activities in which such issuers engage, or with respect to securities
which the Subadviser considers desirable for inclusion in the Fund's
investment portfolio;
b. determining which issuers and securities shall be represented in the
Fund's investment portfolio and regularly reporting thereon to the Adviser
and, at the request of the Adviser, to the Trust's Trustees; and
c. formulating and implementing continuing programs for the purchases and
sales of the securities of such issuers and regularly reporting thereon to the
Adviser and, at the request of the Adviser, to the Trust's Trustees.
3. CONTROL BY TRUSTEES. Any investment program undertaken by the Subadviser
pursuant to this Agreement, as well as any other activities undertaken by the
Subadviser with respect to the Fund, shall at all times be subject to any
directives of the Trust's Trustees.
4. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its obligations
under this Agreement, the Subadviser shall at all times conform to:
a. all applicable provisions of the Act and any rules and regulations
adopted thereunder;
b. the provisions of the registration statement of the Trust, as the same
may be amended from time to time, under the Securities Act of 1933 and the
Act;
c. the provisions of the Investment Advisory Agreement;
d. the provisions of the Agreement and Declaration of Trust of the Trust, as
the same may be amended from time to time;
e. the provisions of the by-laws of the Trust, as the same may be amended
from time to time; and
f. any other applicable provisions of state or federal law.
5. COMPENSATION. The Adviser shall pay the Subadviser, as compensation for
services rendered hereunder, an annual fee, payable monthly, which for the
initial one-year term of this Agreement shall be paid according to the following
fee schedule: 0.40% of the first $20 million of the Fund's average daily net
assets, 0.25% of the next $30 million of the Fund's average daily net assets and
0.15% of the
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<PAGE> 77
excess over $50 million of the Fund's average daily net assets. The average
daily net assets of the Fund 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 Trust's Agreement and Declaration of Trust. After the
termination of the initial term of this Agreement, such fee schedule shall be
subject to annual adjustment concurrently with renewal of this Agreement for an
additional one-year term. Each annual renewal shall be deemed to be at the fee
schedule in effect immediately prior to the expiration of the most recent term
unless a new fee schedule is set prior to renewal in writing signed by the
Adviser and the Subadviser, in which case the renewal will be deemed to be at
the fee schedule set forth in such writing.
6. EXPENSES OF THE FUND. All of the ordinary business expenses incurred in the
operations of the Fund and the offering of its shares shall be borne by the Fund
unless specifically provided otherwise in the Investment Advisory Agreement.
7. NON-EXCLUSIVITY. The services of the Subadviser to the Adviser with respect
to the Trust and the Fund are not to be deemed to be exclusive, and the
Subadviser shall be free to render investment advisory and administrative or
other services to others (including other investment companies) and to engage in
other activities. It is understood and agreed that officers or directors of the
Subadviser may serve as officers or directors/trustees of the Adviser or of the
Trust, and that officers or directors/trustees of the Adviser or of the Trust
may serve as officers or directors of the Subadviser to the extent permitted by
law; and that the officers and directors of the Subadviser are not prohibited
from engaging in any other business activity or from rendering services to any
other person, or from serving as partners, officers, directors or trustees of
any other firm or trust, including other investment advisory companies.
8. TERM AND APPROVAL. This Agreement shall have an initial term [through May
31, 1997,] and may be continued from year to year thereafter, provided that the
continuation of the Agreement is specifically approved at least annually:
a. (i) by the Trust's Trustees or (ii) by the vote of "a majority of the
outstanding voting securities" of the Fund (as defined in Section 2(a)(42) of
the Act); and
b. by the affirmative vote of a majority of the trustees who are not parties
to this Agreement or "interested persons" (as defined in the Act) of a party
to this Agreement (other than as Trustees of the Trust), by votes cast in
person at a meeting specifically called for such purpose.
9. TERMINATION. This Agreement may be terminated as to the Fund at any time,
without the payment of any penalty, by vote of the Trust's Trustees or by vote
of a majority of the Fund's outstanding voting securities, or by the Adviser, or
by the Subadviser on sixty (60) days' written notice to the other party and to
the Trust. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the Act.
C4-3
<PAGE> 78
10. LIABILITY OF SUBADVISER. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Subadviser or any of its officers, directors or employees, the
Subadviser shall not be subject to liability to the Adviser 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.
11. NOTICES. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to such address as may be designated for
the receipt of such notice, with a copy to the Trust. Until further notice, it
is agreed that the address of (i) the Trust shall be One Parkview Plaza,
Oakbrook Terrace, Illinois, 60181; (ii) that of the Adviser shall be 2800 Post
Oak Blvd., Houston, Texas 77056; and (iii) that of the Subadviser shall be 40
Broad Street, Suite 828, Boston, Massachusetts 02110.
12. QUESTIONS OF INTERPRETATION. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission issued
pursuant to the Act. In addition, where the effect of a requirement of the Act
reflected in any provision of the Agreement is revised by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
13. MISCELLANEOUS PROVISIONS
The execution of this Agreement has been authorized by the Trust's Trustees
and by the sole shareholder. This Agreement is executed on behalf of the Trust
or the Trustees of the Trust 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 Trust individually but are binding only upon the assets
and property of the Trust. A Certificate of Trust in respect of the Fund is on
file with the Secretary of State of Delaware.
C4-4
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
VAN KAMPEN VAN KAMPEN
AMERICAN CAPITAL AMERICAN CAPITAL
ADVISORS, INC. ASSET MANAGEMENT, INC.
By:_____________________________ By:_____________________________
Name:___________________________ Name:___________________________
Its:____________________________ Its:____________________________
C4-5
<PAGE> 80
ANNEX D
The table below sets forth, for each investment company advised by Asset
Management, such investment company's shares outstanding and net assets as of
August 27, 1996, or as otherwise noted, and the rate at which it compensates
Asset Management for investment advisory services.
I. ADVISORY AGREEMENTS BETWEEN ASSET MANAGEMENT AND THE FUNDS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF
AUGUST 27, AUGUST 27, ADVISORY FEE
FUNDS 1996 1996 SCHEDULE
-------------------------------------------------------- ------------- -------------- -------------------------
<S> <C> <C> <C> <C>
A. Global Government Fund.................................. 16,968,185 $ 137,029,765 .750%
B. Global Managed Assets Fund.............................. 2,406,459 $ 25,630,376 1.00%
Global Equity Fund...................................... 15,642,887 $ 213,726,965
Real Estate Securities Fund............................. 2,857,146 $ 31,635,599
LIT Global Equity Portfolio............................. 300,755 $ 3,434,617
LIT Real Estate Securities Portfolio.................... 3,643,943 $ 44,310,343
C. High Yield Municipal Fund............................... 76,453,276 $ 842,446,798 First $300 Million .600%
Next $300 Million .550%
Over $600 Million .500%
D-1
</TABLE>
<PAGE> 81
II. ADVISORY AGREEMENTS BETWEEN ASSET MANAGEMENT AND OTHER INVESTMENT COMPANIES
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF
AUGUST 27, AUGUST 27, ADVISORY FEE
FUNDS 1996 1996 SCHEDULE
-------------------------------------------------------- ------------- -------------- -------------------------
<S> <C> <C> <C> <C>
A. Van Kampen American Capital Bond Fund................... 11,362,465(1) $ 226,485,169(2) First $150 Million .500%
Van Kampen American Capital Convertible Securities
Fund.................................................. 3,241,824(1) $ 80,436,719(2) Next $100 Million .450%
Van Kampen American Capital Corporate Bond Fund......... 29,386,774 $ 198,017,530 Next $100 Million .400%
Van Kampen American Capital Equity Income Fund.......... 154,410,508 $1,007,128,943 Over $350 Million .350%
Van Kampen American Capital Growth and Income Fund...... 45,827,701 $ 693,567,377
Van Kampen American Capital Reserve Fund................ 478,726,951 $ 478,726,952
B. Van Kampen American Capital Exchange Fund............... 305,671(1) $ 51,790,731 .500%
Van Kampen American Capital Government Target Fund...... 1,106,234 $ 15,974,026
C. Smith Barney Series Fund Emerging Growth Portfolio...... 1,222,056 $ 19,015,187 .750%
D. Common Sense International Equity Fund.................. 969,606(1) $ 16,033,656 1.00%
E. Van Kampen American Capital Texas Municipal Income
Fund.................................................. 1,648,949 $ 16,647,748 First $300 Million .600%
Next $300 Million .550%
Over $600 Million .500%
F. Van Kampen American Capital Limited Maturity Government
Fund.................................................. 5,877,774 $ 113,140,815 First $1 Billion .500%
Next $1 Billion .475%
Next $1 Billion .450%
Next $1 Billion .400%
Over $4 Billion .350%
G. Van Kampen American Capital Government Securities
Fund.................................................. 252,947,769 $2,504,412,119 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%
D-2
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF
AUGUST 27, AUGUST 27, ADVISORY FEE
FUNDS 1996 1996 SCHEDULE
-------------------------------------------------------- ------------- -------------- -------------------------
<S> <C> <C> <C> <C>
H. Van Kampen American Capital High Income Corporate Bond
Fund.................................................. 87,327,224 $ 554,652,250 First $150 Million .625%
Next $150 Million .550%
Over $300 Million .500%
I. Van Kampen American Capital Life Investment Trust Asset
Allocation Portfolio.................................. 5,144,482 $ 61,785,230 First $500 Million .500%
Van Kampen American Capital Life Investment Trust Next $500 Million .450%
Domestic Income Portfolio............................. 2,617,926 $ 21,545,532 Over $1 Billion .400%
Van Kampen American Capital Life Investment Trust
Enterprise Portfolio.................................. 4,947,742 $ 78,619,619
Van Kampen American Capital Life Investment Trust
Government Portfolio.................................. 6,849,378 $ 58,493,687
Van Kampen American Capital Life Investment Trust Money
Market Portfolio...................................... 20,973,419 $ 20,973,419
J. Van Kampen American Capital Comstock Fund............... 78,482,712 $1,208,595,182 First $1 Billion .500%
Van Kampen American Capital Enterprise Fund............. 99,223,909 $1,413,008,285 Next $1 Billion .450%
Van Kampen American Capital Pace Fund................... 215,668,246 $2,561,413,881 Next $1 Billion .400%
Over $3 Billion .350%
K. Van Kampen American Capital Harbor Fund................. 29,277,408 $ 449,646,639 First $350 Million .550%
Next $350 Million .500%
Next $350 Million .450%
Over $1.05 Billion .400%
L. Van Kampen American Capital U.S. Government Trust for
Income................................................ 27,094,338 $ 219,193,198 .600%
M. Van Kampen American Capital Emerging Growth Fund........ 68,127,007 $2,317,801,203 First $350 Million .575%
Next $350 Million .525%
Next $350 Million .475%
Over $1.05 Billion .425%
N. Van Kampen American Capital Small Capitalization Fund... 0 $ 0 N/A(3)
D-3
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING NET ASSETS
AS OF AS OF
AUGUST 27, AUGUST 27, ADVISORY FEE
FUNDS 1996 1996 SCHEDULE
-------------------------------------------------------- ------------- -------------- -------------------------
<S> <C> <C> <C> <C>
O. Van Kampen American Capital Life Investment Trust
Emerging Growth Portfolio............................. 396,047 $ 5,188,218 .700%
P. Van Kampen American Capital Income Trust................ 15,290,019(1) $118,115,594(2) .650%
Q. Mosher.................................................. 1,905,282(1) $36,756,889(2) .450%
R. Common Sense Government Fund............................ 30,789,872(1) $ 312,774,680 First $1 Billion .600%
Next $1 Billion .550%
Next $1 Billion .500%
Next $1 Billion .450%
Next $1 Billion .400%
Over $5 Billion .350%
S. Common Sense Growth Fund................................ 175,705,873(1) $2,954,530,354 First $1 Billion .650%
Common Sense Growth and Income Fund..................... 57,051,768(1) $ 996,604,013 Next $1 Billion .600%
Common Sense Emerging Growth Fund....................... 4,120,533(1) $ 74,736,294 Next $1 Billion .550%
Next $1 Billion .500%
Over $4 Billion .450%
T. Common Sense Money Market Fund.......................... 60,800,058(1) $ 60,449,905 First $2 Billion .500%
Next $2 Billion .475%
Over $4 Billion .450%
U. Common Sense Municipal Bond Fund........................ 8,797,436(1) $ 120,328,629 First $1 Billion .600%
Next $1 Billion .550%
Next $1 Billion .500%
Over $3 Billion .450%
</TABLE>
- - - ---------------
(1) Information provided as of August 12, 1996.
(2) Information provided as of August 30, 1996.
(3) Fund does not charge an advisory fee; shares of the fund are held by other
funds advised by Van Kampen American Capital Investment Advisory Corp. or
Asset Management. Assets of the fund also are reflected in the assets of
such other funds.
D-4
<PAGE> 84
ANNEX E
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.
<TABLE>
<CAPTION>
BROKER-DEALER
FUND TRANSFER LEGAL FEES PAID
ADVISORY ACCOUNTING AGENCY SERVICES DISTRIBUTION TO MORGAN
FUND EXPENSES EXPENSES EXPENSES EXPENSES EXPENSES STANLEY & CO.
- - - ----------------------------------------------- --------- ---------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Global Equity Fund............................. 1,200,835 28,800 586,655 N/A 399,444 24,562
Global Government Fund......................... 1,568,102 28,800 399,072 N/A 148,018 -0-
Global Managed Assets Fund..................... 27,072 29,687 131,969 N/A 49,245 1,620
LIT Global Equity Portfolio.................... 10,983 7,200 0 N/A N/A 23,350
LIT Real Estate Securities Portfolio........... 18,136 3,153 0 N/A N/A 670
Real Estate Securities Fund.................... 98,904 48,971 107,182 N/A 68,340 2,030
High Yield Municipal Fund...................... 3,906,255 158,098 648,335 N/A 3,369,458 -0-
</TABLE>
E-1
<PAGE> 85
ANNEX F
The following table indicates the size of each investment company advised by
MSAM that has an investment objective similar to the Global Funds and the
respective advisory fee rate.
<TABLE>
<CAPTION>
OTHER FUNDS WITH ASSETS AS OF ANNUAL RATE OF MSAM'S
SIMILAR OBJECTIVES 8/31/96 ADVISORY FEES
- - - ------------------- ------------ ---------------------------------
<S> <C> <C>
MORGAN STANLEY INSTITUTIONAL FUND, INC.
(FEES ARE SUBJECT TO WAIVERS AND INCLUDE CLASS A & B SHARES)
Global Equity...... $ 78,076,814 0.80% of average daily net assets
Global Fixed
Income........... 114,045,166 0.50% of average daily net assets
MORGAN STANLEY FUND, INC.
(FEES ARE SUBJECT TO WAIVERS AND INCLUDE CLASS A, B & C SHARES)
Global Equity
Allocation
Fund............. $138,142,492 1.00% of average daily net assets
Global Fixed
Income Fund...... 11,274,555 0.75% of average daily net assets
</TABLE>
F-1
<PAGE> 86
ANNEX G
The following table indicates the size of each investment company advised by
John Govett that has an investment objective similar to the Global Funds and the
respective advisory fee rate.
<TABLE>
<CAPTION>
NET ASSETS ON
OTHER FUNDS WITH AUGUST 27, ANNUAL MANAGEMENT FEES
SIMILAR OBJECTIVES 1996 PERCENT OF AVERAGE NET ASSETS
- - - -------------------------------- ------------- -----------------------------
<S> <C> <C>
Govett International Equity
Fund(1)....................... $ 27,450,880 1.00% of Fund's net assets
Govett Emerging Markets
Fund(1)....................... 76,584,053 1.00% of Fund's net assets
Govett Global Income Fund(1).... 26,046,570 0.75% of Fund's net assets
</TABLE>
- - - ---------------
(1) For the fiscal year ended December 31, 1995, John Govett waived a portion of
its advisory fees and the VKAC Distributors reimbursed a portion of the
total annual operating expenses of the Fund. In addition, John Govett and
VKAC Distributors have agreed to reduce their fees, and John Govett has
agreed to pay certain Fund operating expenses through at least December 31,
1996 to the extent necessary to limit total annual operating expenses to the
lesser of the percentages listed below or the maximum allowed by the most
stringent state expense limitations:
<TABLE>
<S> <C>
International Equity..................... 2.50%
Emerging Markets......................... 2.30%
Global Income............................ 1.75%
</TABLE>
G-1
<PAGE> 87
ANNEX H
LIST OF 5% BENEFICIAL OWNERS
(AS OF AUGUST 16, 1996)
<TABLE>
<CAPTION>
FUND NAME AND NAME AND ADDRESS OF AMOUNT OF BENEFICIAL PERCENT OF
CLASS OF SHARES BENEFICIAL OWNER OWNERSHIP CLASS
- - - ---------------------- ---------------------------------------------------- ----------
<S> <C> <C> <C>
GLOBAL EQUITY FUND Merrill Lynch Pierce Fenner & 36,040.000 5.12%
CLASS C Smith Inc.
Mutual Fund Operations
Attn: Book Entry
4800 Deer Lake Dr. E., 3rd Fl.
Jacksonville, FL 32246-6484
GLOBAL GOVERNMENT Am. Council on Educ. Inc. 63,626.866 5.58%
SECURITIES FUND 1 Dupont Cir.
CLASS C Washington, DC 20036
GLOBAL MANAGED ASSETS Van Kampen Am. Cap. Dist. Inc. 999,864.391 59.03%
FUND Attn: Dominick Cogliandro
CLASS A One Chase Manhattan Plaza
37th Floor
New York, NY 10005-1401
GLOBAL MANAGED ASSETS Merrill Lynch Pierce Fenner & 85,343.000 9.38%
FUND Smith Inc.
CLASS B Mutual Fund Operations
Attn: Book Entry
4800 Deer Lake Dr. E., 3rd Fl.
Jacksonville, FL 32246-6484
GLOBAL MANAGED Van Kampen Am. Cap. Dist. Inc. 54,469.891 27.17%
ASSETS FUND Attn: Dominick Cogliandro
CLASS C One Chase Manhattan Plaza
37th Floor
New York, NY 10005-1401
Merrill Lynch Pierce Fenner & 21,553.000 10.75%
Smith Inc.
Mutual Fund Operations
Attn: Book Entry
4800 Deer Lake Dr. E., 3rd Fl.
Jacksonville, FL 32246-6484
H-1
<CAPTION>
FUND NAME AND NAME AND ADDRESS OF AMOUNT OF BENEFICIAL PERCENT OF
CLASS OF SHARES BENEFICIAL OWNER OWNERSHIP CLASS
- - - ---------------------- ---------------------------------------------------- ----------
<S> <C> <C> <C>
HIGH YIELD Merrill Lynch Pierce Fenner & 2,654,758.000 5.40%
MUNICIPAL FUND Smith Inc.
CLASS A Mutual Fund Operations
Attn: Book Entry
4800 Deer Lake Dr. E., 3rd Fl.
Jacksonville, FL 32246-6484
HIGH YIELD Merrill Lynch Pierce Fenner & 2,348,090.000 9.77%
MUNICIPAL FUND Smith Inc.
CLASS B Mutual Fund Operations
Attn: Book Entry
4800 Deer Lake Dr. E., 3rd Fl.
Jacksonville, FL 32246-6484
LIT REAL ESTATE Nationwide Life Insurance Co. 3,061,529.254 94.41%
SECURITIES PORTFOLIO Nationwide Variable Account
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
REAL ESTATE Helen D. Vasilius 109,402.026 11.00%
SECURITIES FUND P.O. Box 2015
CLASS A Prescott, AZ 86302-2015
REAL ESTATE Merrill Lynch Pierce Fenner & 194,944.041 14.57%
SECURITIES FUND Smith Inc.
CLASS B Mutual Fund Operations
Attn: Book Entry
4800 Deer Lake Dr. E., 3rd Fl.
Jacksonville, FL 32246-6484
REAL ESTATE PaineWebber for the Benefit 74,747.000 18.58%
SECURITIES FUND of Schoellkopf Shenandoah
CLASS C Partnership, Ltd.
3303 Lee Parkway, Ste. 405
Dallas, TX 75219-5109
H-2
</TABLE>
<PAGE> 88
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
Pace Fund
Growth & Income
Balanced Fund
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
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies 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 direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
<PAGE> 89
SAG
<PAGE> 90
FORM OF PROXY
VAN KAMPEN AMERICAN CAPITAL [ ] FUND,
a series of Van Kampen American Capital
World Portfolio Series Trust
JOINT SPECIAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of shares of VAN KAMPEN AMERICAN CAPITAL
[ ] FUND (the "Fund"), a series of Van Kampen American Capital
World Portfolio Series Trust, a Delaware business trust, 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 Special Meeting of Shareholders to be held at the
offices of Van Kampen American Capital, Inc., One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, on Friday, October 25, 1996 at 2:00 p.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.
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.
Account No. No. of Shares Class of Shares Proxy No.
<TABLE>
<S><C>
1. To approve or disapprove a new investment advisory agreement; FOR AGAINST ABSTAIN
------ ------ ------
------ ------ ------
2. NEW SUBADVISORY AGREEMENTS
2A. To approve or disapprove an investment subadvisory agreement FOR AGAINST ABSTAIN
with Morgan Stanley Asset Management Inc. [only applicable to ------ ------ ------
certain Funds];
------ ------ ------
2B. To approve or disapprove interim investment subadvisory agreements FOR AGAINST ABSTAIN
with John Govett & Co. Limited [only applicable to certain Funds]; ------ ------ ------
------ ------ ------
2C. To approve or disapprove new investment subadvisory agreements with FOR AGAINST ABSTAIN
Hines Interests Realty Advisers Limited Partnership [only applicable ------ ------ ------
to certain Funds];
------ ------ ------
2D. To approve or disapprove a new investment subadvisory agreement FOR AGAINST ABSTAIN
with Van Kampen American Capital Advisors, Inc. [only applicable to ------ ------ ------
certain Funds];
------ ------ ------
3. To approve or disapprove certain changes to its FOR AGAINST ABSTAIN
fundamental investment policies with respect to investments ------ ------ ------
in other investment companies;
------ ------ ------
4. To ratify or reject the selection of Price Waterhouse LLP as FOR AGAINST ABSTAIN
independent public accountants for its current fiscal year; and ------ ------ ------
------ ------ ------
5. To transact such other business as may properly come before the Meeting.
</TABLE>
The undersigned hereby acknowledges receipt of the accompanying Notice of
Meeting and Proxy Statement for the Meeting to be held on October 25, 1996.
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.
<TABLE>
<S> <C>
- - - ----------------------------------------------------- ----------------------------------- ,
Shareholder signature 1996
Date
- - - ----------------------------------------------------- ----------------------------------- ,
Co-owner signature (if applicable) 1996
Date
</TABLE>
