<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
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials including product
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
COMMON SENSE TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
November 13, 1997
Dear Common Sense Fund Shareholder:
The enclosed proxy statement relates to a joint meeting of the shareholders of
the Funds of Common Sense Trust (the "Funds"). The primary purpose of the
meeting is to permit each Fund's shareholders to consider a new investment
advisory agreement with Smith Barney Mutual Funds Management Inc. ("SBMFM") to
take effect following consummation of the transactions described in the enclosed
proxy statement, as required by the federal securities laws. The new investment
advisory agreement between your Fund and its new adviser, SBMFM, will be
substantially the same as the Fund's current investment advisory agreement.
The attached proxy statement seeks shareholder approval on this and certain
other items. Although we encourage you to read carefully the full proxy
statement, we have created a brief question-and-answer section for your
convenience.
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 Trustees of the Fund(s),
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.
PLEASE SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Sincerely,
/s/ PHILIP N. DUFF
Philip N. Duff
President and Chief Executive Officer
<PAGE> 3
INFORMATION ABOUT YOUR PROXY STATEMENT
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. Federal securities laws require a vote by each Fund's shareholders whenever
the Fund's Board of Trustees recommends a new investment adviser.
Accordingly, your Fund is seeking shareholder approval of a new investment
advisory agreement.
Please refer to the proxy statement for a detailed explanation of the
proposed items.
Q. WHY DO I NEED TO VOTE?
A. Your vote is needed to ensure that the proposals can be acted upon. Your
immediate response on the enclosed proxy card(s) will help save on the costs
of any further solicitations for a shareholder vote. We encourage all
shareholders to participate in the governance of their Fund(s).
Q. HOW DO THE TRUSTEES OF MY FUND SUGGEST THAT I VOTE?
A. After careful consideration, the trustees of your Fund recommend that you
vote "FOR" each of the items proposed on the enclosed proxy card(s).
Q. WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDER MEETING?
A. Van Kampen American Capital, Inc., the parent of your current investment
adviser and Smith Barney Inc., an affiliate of Smith Barney Mutual Funds
Management Inc., the proposed new investment adviser, will share equally in
paying for those expenses relating to approval of new investment advisory
agreements.
Q. WILL THE CHANGE OF INVESTMENT ADVISER RESULT IN A TAXABLE EVENT FOR FEDERAL
INCOME TAX REPORTING?
A. No. This transaction will be a non-taxable event.
Q. WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER TRANSACTIONAL FEE IN
CONNECTION WITH THE CHANGE IN INVESTMENT ADVISER?
A. No.
Q. AFTER THE CHANGE OF INVESTMENT ADVISER, HOW WILL MY EXCHANGE PRIVILEGES BE
AFFECTED?
A. The exchange privileges for Common Sense Trust shareholders will be
expanded. In addition to being able to exchange between the existing Common
Sense Trust Funds, shareholders can also exchange from their Common Sense
Trust Fund into any of the Smith Barney mutual funds sold through PFS
<PAGE> 4
Investments Inc. Rights of Accumulation and Letters of Intent will also
include any Smith Barney funds sold through PFS Investments Inc.
Q. CAN I CONTINUE TO USE MY CHECKWRITING PRIVILEGE ON THE COMMON SENSE TRUST
MONEY MARKET, GOVERNMENT FUND AND MUNICIPAL BOND FUND?
A. Yes. You may continue to use your existing Common Sense Trust checks after
the change in investment adviser. You will receive checks with the new Fund
name on your next reorder.
Q. WHERE DO I MAIL MY PROXY CARD(S)?
A. You may use the enclosed postage-paid envelope or mail your proxy card(s)
to:
Proxy Tabulator
P.O. Box 9135
Hingham, MA 02043
Q. HOW WILL I BE NOTIFIED WHEN THE CHANGE IN INVESTMENT ADVISER IS COMPLETED?
A. You will receive special notification shortly after the change in investment
adviser is completed.
Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about the proxy solicitation.
Please call PFS Shareholder Services at 1-800-544-5445 between 9:00 a.m. and
6:00 p.m. Eastern time, Monday through Friday.
<PAGE> 5
COMMON SENSE(R) TRUST, ON BEHALF OF ITS SERIES:
COMMON SENSE EMERGING GROWTH FUND
COMMON SENSE GOVERNMENT FUND
COMMON SENSE GROWTH FUND
COMMON SENSE GROWTH AND INCOME FUND
COMMON SENSE INTERNATIONAL EQUITY FUND
COMMON SENSE MONEY MARKET FUND
COMMON SENSE MUNICIPAL BOND FUND
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 544-5445
NOTICE OF JOINT SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD DECEMBER 18, 1997
A Joint Special Meeting of Shareholders (the "Meeting") of the Common Sense
Emerging Growth Fund, the Common Sense Government Fund, the Common Sense Growth
Fund, the Common Sense Growth and Income Fund, the Common Sense International
Equity Fund, the Common Sense Money Market Fund and the Common Sense Municipal
Bond Fund (each a "Fund" and collectively, the "Funds"), each a separate series
of Common Sense Trust (the "Trust"), will be held at the offices of Van Kampen
American Capital, Inc., One Parkview Plaza, Oakbrook Terrace, IL 60181,
Thursday, December 18, 1997 at 2:00 p.m. for the following purposes:
1. Approving or disapproving with respect to the Trust on behalf of each
Fund a new investment advisory agreement with Smith Barney Mutual Funds
Management Inc. (the "New Advisory Agreement");
2. With respect to the Trust, to ratify or reject the selection of Ernst &
Young LLP as independent auditors for its current fiscal year; and
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Shareholders of record of each Fund at the close of business on October 24,
1997 are entitled to notice of and to vote at this meeting or any adjournment
thereof.
By Order of the Board of Trustees
/s/ Ronald A. Nyberg
Ronald A. Nyberg, Vice President and
Secretary
November 13, 1997
<PAGE> 6
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT) TO
A SHAREHOLDER OF ANY FUND UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO
PFS SHAREHOLDER SERVICES BY CALLING (800) 544-5445 OR BY WRITING TO THE TRUST AT
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.
SHAREHOLDERS OF EACH FUND 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 RECOMMENDS THAT YOU CAST YOUR VOTE:
- FOR approval of each New Advisory Agreement.
- FOR the ratification of the selection of Ernst & Young LLP as independent
auditors for the current fiscal year of the Trust.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
<PAGE> 7
PROXY STATEMENT
COMMON SENSE(R) TRUST, ON BEHALF OF ITS SERIES:
COMMON SENSE EMERGING GROWTH FUND
COMMON SENSE GOVERNMENT FUND
COMMON SENSE GROWTH FUND
COMMON SENSE GROWTH AND INCOME FUND
COMMON SENSE INTERNATIONAL EQUITY FUND
COMMON SENSE MONEY MARKET FUND
COMMON SENSE MUNICIPAL BOND FUND
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 544-5445
JOINT SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 18, 1997
This proxy statement is furnished in connection with the solicitation by the
Board of Trustees (the "Trustees" or the "Board") of the Common Sense Emerging
Growth Fund (the "Emerging Growth Fund"), the Common Sense Government Fund, the
Common Sense Growth Fund, the Common Sense Growth and Income Fund, the Common
Sense International Equity Fund (the "International Fund"), the Common Sense
Money Market Fund and the Common Sense Municipal Bond Fund (the "Municipal
Fund") (each a "Fund" and collectively, the "Funds"), each a separate series of
Common Sense Trust (the "Trust") 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, IL 60181, Thursday, December 18, 1997, at 2:00
p.m. The approximate mailing date of this proxy statement and accompanying form
of proxy is November 13, 1997.
The primary purpose of the Meeting is to permit each Fund's shareholders to
consider a New Advisory Agreement (defined below) to take effect following the
consummation of the transactions contemplated by the CST Master Agreement, dated
as of August 25, 1997 (the "CST Master Agreement"), by and among Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD"), Dean Witter Reynolds Inc. ("Dean
Witter"), Van Kampen American Capital, Inc. ("Van Kampen American Capital"),
VK/AC Holding, Inc., ("Holding"), Van Kampen American Capital Asset Management,
Inc. ("VKAC Asset Management"), Van Kampen American Capital Distributors, Inc.
("VKAC Distributors"), Travelers Group Inc. ("Travelers"), The Travelers Life
and Annuity Company ("TLAC"), The Travelers Insurance Company ("TIC"), PFS
Investments Inc. ("PFSI"), Smith Barney Inc. ("Smith Barney"), Smith Barney
Mutual Funds Management Inc. ("SBMFM"), and PFS Distributors, Inc., as successor
to Common Sense
<PAGE> 8
Distributors and PFS Shareholder Services (formerly Common Sense Shareholder
Services). 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
the foregoing CST Master Agreement. In connection with transactions contemplated
by the CST Master Agreement, the Board of Trustees of the Funds has determined
that the current investment advisory agreement (the "Current Advisory
Agreement") with VKAC Asset Management be terminated and that the Funds enter
into a new investment advisory agreement (the "New Advisory Agreement") with
SBMFM. SBMFM currently serves as investment sub-adviser to the International
Fund. As SBMFM will become Adviser to the International Fund if the New Advisory
Agreement is approved, the Fund will no longer have a subadviser. Each Fund's
New Advisory Agreement is substantially the same as such Fund's Current Advisory
Agreement, except for the dates of execution, effectiveness and termination and
as described below (See "The Advisory Agreements" -- "The Current Advisory
Agreements" under Proposal 1).
Participating in the Meeting are holders of 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 respective shareholders of the
Funds (the "Shareholders"), because the Shareholders of each of the Funds are
expected to consider and vote on similar matters. The Board has determined that
the use of a joint proxy statement for the Meeting is in the best interest of
the Shareholders of each 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. Shareholders of each Fund will
vote separately with respect to Proposal 1, and an unfavorable vote on Proposal
1 by the Shareholders of one Fund will not necessarily affect the implementation
of such proposal by another Fund, if such proposal is approved by the
Shareholders of the other Fund. However, if all Funds do not approve Proposal 1,
VKAC Asset Management, SBMFM and the Trustees of the Trust will consult to
determine whether to consummate the transfer of advisory duties for those Funds
for which approval has been obtained. Shareholders of all Funds of the Trust
will vote together as a single class on Proposal 2.
The Board has fixed the close of business on October 24, 1997, as the record
date (the "Record Date") for the determination of holders of Shares of each Fund
entitled to vote at the Meeting. Shareholders of a Fund on the Record Date will
be entitled to one vote per share with respect to each proposal submitted to the
Shareholders of the Fund, with no Share having cumulative voting rights.
2
<PAGE> 9
At the close of business on October 24, 1997, there were issued and
outstanding the number of Shares of each of the Funds set forth below:
<TABLE>
<CAPTION>
CLASS 1 SHARES CLASS A SHARES CLASS B SHARES TOTAL SHARES
FUND NAME OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING
--------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Common Sense Emerging
Growth Fund............. 272,663 4,508,820 3,641,731 8,423,214
Common Sense Government
Fund.................... 22,618,450 1,261,589 1,156,875 25,036,914
Common Sense Growth
Fund.................... 167,373,874 5,107,562 6,013,526 178,494,962
Common Sense Growth and
Income Fund............. 54,279,138 3,931,621 4,891,295 63,102,054
Common Sense International
Equity Fund............. 90,498 906,243 781,642 1,778,383
Common Sense Money Market
Fund.................... 53,025,536 7,345,854 277,550 60,648,940
Common Sense Municipal
Bond Fund............... 7,328,401 611,715 192,158 8,132,274
</TABLE>
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 October 24, 1997 are set
forth at Annex A hereto.
VOTING
The voting requirement for passage of a particular proposal depends on the
nature of the particular proposal. With respect to Proposal 1, a 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 2, the
affirmative vote of a majority of the voting securities of a Fund present in
person or by proxy at the Meeting is necessary to ratify the selection of the
independent public accountants.
The Board recommends that you cast your vote:
- FOR approval of each New Advisory Agreement.
- FOR the ratification of the selection of Ernst & Young LLP as independent
auditors for the current fiscal year of the Trust.
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
3
<PAGE> 10
which it is entitled to vote. Abstentions do not constitute votes "for" a
proposal and are treated as votes "against" a proposal. Broker non-votes (i.e.,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other person entitled to vote shares
on a particular matter with respect to which the broker or nominees do not have
discretionary power) do not constitute votes "for" or "against" a proposal and
are disregarded in determining the "votes cast" when the voting requirement for
the 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 the 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 Trust 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 Trust knows of no business other than that mentioned in Proposals 1 and 2
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.
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PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENTS
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THE ADVISER
VKAC Asset Management (the "Adviser") currently acts as investment adviser for
each Fund. The Adviser has acted as investment adviser or investment subadviser
for each Fund since each Fund commenced its investment operations.
THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital. Van Kampen American Capital is an indirect wholly-owned subsidiary
4
<PAGE> 11
of MSDWD. The Adviser's principal office is located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181.
Prior to December 1994, the Adviser provided investment advisory services
under the name "American Capital Asset Management, Inc."
INFORMATION CONCERNING SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
SBMFM or the "New Adviser", is a wholly-owned subsidiary of Smith Barney
Holdings Inc., which in turn is a wholly-owned subsidiary of Travelers.
Travelers is a diversified financial services holding company engaged primarily
in four business segments: investment services, consumer finance services, life
insurance services and property and casualty insurance services. SBMFM was
formed in 1968 and serves as investment manager to numerous other investment
companies having aggregate assets as of the date of the Proxy Statement in
excess of $84 billion. SBMFM is located at 388 Greenwich Street, New York, New
York 10013.
BACKGROUND
In connection with the Transaction described below, Shareholders of each Fund
are being asked to approve a New Advisory Agreement with SBMFM that is
substantially the same as the current investment advisory agreement except as
noted below (each, a "Current Advisory Agreement") with VKAC Asset Management.
Prior to December 1994, the Adviser and certain of its affiliates were 50%
partners with various other affiliates of Travelers in four joint venture
partnerships, which partnerships provided investment advice and distribution,
transfer agency and certain custodial services with respect to the Common Sense
Funds.
In December 1994, VKAC Asset Management and certain of its affiliates entered
into an agreement relating to the Common Sense Funds (the "Common Sense
Agreement") which provided for, among other things, the following: (i) VKAC
Asset Management became investment adviser to the Common Sense Funds upon
acquiring 100% of the joint venture partner that had been investment adviser to
the Common Sense Funds; and (ii) affiliates of Travelers acquired 100% of the
partnerships that provide distribution, transfer agency and certain custodial
services with respect to the Common Sense Funds. PFS Distributors, Inc. (the
"Distributor") has served as the distributor of the Funds in accordance with the
Common Sense Agreement. The Distributor is a wholly-owned subsidiary of
Primerica Finance Corporation and an affiliate of PFSI, which is in turn an
indirect wholly-owned subsidiary of Travelers. The Common Sense Agreement also
provided that beginning in 1997 either VKAC Asset Management or affiliates of
Travelers would be required to pay to the other a "true-up" payment determined
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<PAGE> 12
pursuant to a formula based generally upon operating earnings of VKAC Asset
Management relating to the rendering of advisory services to the Common Sense
Funds, on the one hand, and the operating earnings of the Travelers' affiliates
attributable to providing distribution, transfer agency and custodial services
with respect to the Common Sense Funds, on the other hand (the foregoing payment
obligations being referred to as the "Formula Payment Arrangement").
The Common Sense Agreement also provided for a distribution arrangement with
PFSI, pursuant to which the Common Sense Funds would be distributed exclusively
through PFSI initially for a period through 2001, and thereafter as to any
Common Sense Fund that continued to achieve certain performance standards. Also,
during such initial period, PFSI would accord each of the Common Sense Funds a
more favorable broker-payout percentage than that accorded to all other like
situated (in terms of investment objective, "load" structure and amount) mutual
funds sold by PFSI. In addition to the status of the Common Sense Funds, PFSI
would also accord the mutual funds distributed by VKAC Distributors ("VKAC
Mutual Funds") (together with funds distributed by Smith Barney which received
equivalent treatment), a more favorable broker-payout percentage than that
accorded to all other like situated (in terms of investment objective, "load"
structure and amount) mutual funds sold by PFSI, with the exception of the
Common Sense Funds.
SUMMARY OF THE TRANSACTION
On August 25, 1997, VKAC Asset Management and certain of its affiliates
entered into the CST Master Agreement with SBMFM and certain of its affiliates,
which provided for the sale and assignment of the Current Advisory Agreements by
VKAC Asset Management to SBMFM for an aggregate purchase price of $105.0
million, subject to adjustment based upon a formula with respect to sales of
VKAC Mutual Funds by affiliates of SBMFM compared to sales by affiliates of VKAC
Asset Management of mutual funds and fixed and variable annuity products
distributed by Smith Barney and PFSI, through the end of 1999. In addition, VKAC
Asset Management will assign to SBMFM its rights to the "Common Sense" and
"Common Sense Care" trademarks and service marks.
Further, the existing Common Sense Agreement will be terminated effective at
the Closing (herein so called) of the transactions contemplated by the CST
Master Agreement (the "Transaction"), and any obligations, liabilities, payments
and claims arising under the Common Sense Agreement, including the Formula
Payment Arrangement, will terminate effective at the Closing. The CST Master
Agreement provides for the continuation of a distribution arrangement with PFSI
through December 31, 2001, on the following terms: (i) the broker pay-out
percentage for VKAC Mutual Funds will not be less than the broker pay-out
percentage for substantially similar (in terms of general investment objective,
types
6
<PAGE> 13
of securities invested in, maturities of securities invested in and industrial
or geographic focus ("Similar Funds")), Common Sense Funds or Smith Barney
mutual funds; and (ii) the broker pay-out percentage for mutual funds other than
the VKAC Mutual Funds, the Common Sense Funds and Smith Barney mutual funds,
will be less than the broker pay-out percentage for VKAC Mutual Funds which are
Similar Funds. Through December 31, 2001, VKAC Mutual Funds will also have
"strategic alliance" status and be afforded "strategic alliance" services in the
PFSI retail system. Such distribution arrangements with PFSI will terminate in
the event that certain specified insurance companies that may be viewed as
competitors of insurance company affiliates of PFSI acquire beneficial ownership
of a majority interest in Van Kampen American Capital, the parent company of
VKAC Distributors.
Through December 31, 1999, VKAC Mutual Funds will have "strategic alliance"
status and be afforded "strategic alliance" services in the Smith Barney retail
system in exchange for certain payments to be made by VKAC Distributors to Smith
Barney based upon sales and assets of VKAC Mutual Funds in the Smith Barney
retail system. Finally, the CST Master Agreement also provided that Dean Witter
Reynolds Inc. and affiliates of Travelers would develop, market and distribute a
Travelers variable annuity product which may include VKAC Mutual Funds, Common
Sense Funds and other Travelers mutual funds.
Under the CST Master Agreement, the parties agreed to provide certain
indemnities to the other in connection with breaches of the representations,
warranties and covenants contained therein and certain other matters specified
therein.
THE ADVISORY AGREEMENTS
Consummation of the Transaction will constitute an "assignment" (as defined in
the 1940 Act) of the Current Advisory Agreement in effect between the Trust on
behalf of each Fund and the Adviser. 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.
In anticipation of the Transaction and in order for SBMFM to serve as
investment adviser to the Funds after consummation of the Transaction, the New
Advisory Agreement between the Trust on behalf of each Fund and SBMFM must be
approved (i) by a majority of the Trustees of the Trust who are not parties to
the New Advisory Agreement or interested persons of any such party
("Disinterested Trustees") and (ii) by the holders of a majority of the
outstanding voting securities (within the meaning of the 1940 Act) of each Fund.
As discussed below, the Trustees of the Trust have approved each New Advisory
Agreement. See "The New Advisory Agreements" below.
7
<PAGE> 14
The following summary of the Current Advisory Agreements and the New Advisory
Agreements set forth herein is qualified by reference to Annex B.
THE CURRENT ADVISORY AGREEMENTS. The Current Advisory Agreement for the Trust
on behalf of 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 June 10, 1997, to continue the Current
Advisory Agreement for a period of one year. The Current Advisory Agreement
dated October 31, 1996 was last approved by Shareholders of each Fund at a
meeting held on October 29, 1996 relating to the acquisition of the Adviser's
corporate parent by Morgan Stanley Group Inc.
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. 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
the Trust if duly elected to such positions.
Each Current Advisory Agreement provides that the Adviser shall not be liable
for any error of judgment or 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 its obligations or duties under each Current Advisory
Agreement.
Each Fund's advisory fee is based on that Fund's average net assets, which are
calculated on a daily basis. The advisory fee is payable for each calendar month
as soon as practicable after the end of that month. Under the 1940 Act, mutual
funds such as the Funds may employ broker dealers affiliated with their
investment advisors to execute Fund portfolio transactions. Under each Current
Advisory Agreement, the fees payable to the Adviser are 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 Van Kampen American Capital, or its successor, in connection with
the purchase and sale of assets of the Fund, less any direct expenses incurred
by such person in connection with obtaining such commissions, fees, brokerage or
similar payments. Under each Current Advisory Agreement and consistent with the
1940 Act, the Funds may employ broker dealers affiliated with the Adviser in
ways other than as a majority owned subsidiary of Van Kampen American Capital
without the reduction of fees to the Adviser discussed above. No such broker
dealer has been affiliated with the Funds. Under each Current Advisory
Agreement, the Adviser also agrees to use its best efforts to recapture tender
offer solicitation fees and exchange offer fees in connection with the Fund's
transactions and to advise the Board of any other
8
<PAGE> 15
commissions, fees, brokerage or similar payments which may be possible for the
Adviser or any other direct or indirect majority owned subsidiary of Van Kampen
American Capital, or its successor, to receive in connection with the Fund's
portfolio transactions or other arrangements which may benefit the Trust. The
1940 Act does not require the restrictions contemplated by the foregoing
provisions of the Current Advisory Agreements. Such provisions were relevant
only in the era of fixed rate commissions. To bring the Current Advisory
Agreement into conformance with current law, the New Advisory Agreements do not
provide for any such reduction of fees payable to SBMFM or any such recapture of
tender offer solicitation or exchange offer fees or disclosure to the Board. As
a matter of policy, however, the Adviser expects to, where possible, recapture
tender offer solicitation or exchange fees for the benefit of the Funds.
No advisory fee reduction or fee recapture of the type described above have
occurred in the Funds' last 5 fiscal years. Although Smith Barney and Robinson
Humphrey, Inc. may be considered affiliated persons of the Distributor, they are
not subject to the foregoing sentence because they are each an indirect
subsidiary of Travelers Group Inc. and not subsidiaries of VKAC Holding. In
addition, while Morgan Stanley & Co. ("Morgan Stanley") and Dean Witter
Reynolds, Inc. ("Dean Witter") are also affiliated persons of the Adviser, they
are not subsidiaries of VKAC Holding, and therefore would not be subject to such
fee reduction.
Annex C contains a schedule of brokerage commissions paid by the Funds on
portfolio transactions during the past fiscal year, including such commissions
paid by the Funds to affiliated brokers, Smith Barney, Robinson, Morgan Stanley
and Dean Witter.
Set forth below are the fee schedules in effect for each Fund:
A. Common Sense Emerging Growth Fund
Common Sense Growth Fund
Common Sense Growth and Income Fund
.65% of the first $1 billion of average daily net assets; .60% of
the next $1 billion; .55% of the next $1 billion; .50% of the next
$1 billion; and .45% of average daily net assets in excess of $4
billion.
B. Common Sense Government Fund
.60% of the first $1 billion of average daily net assets; .55% of
the next $1 billion; .50% of the next $1 billion; .45% of the next
$1 billion; .40% of the next $1 billion; and .35% of average daily
net assets in excess of $5 billion.
9
<PAGE> 16
C. Common Sense International Equity Fund
1.00% of the Fund's average daily net assets.
D. Common Sense Money Market Fund
.50% of the first $2 billion of average daily net assets; .475% of
the next $2 billion; and .45% of average daily net assets in excess
of $4 billion.
E. Common Sense Municipal Bond Fund
.60% of the first $1 billion of average daily net assets; .55% of
the next $1 billion; .50% of the next $1 billion; and .45% of
average daily net assets in excess of $3 billion.
The Adviser's activities are subject to the review and supervision of the
Board, to which the Adviser renders periodic reports with respect to each Fund's
investment activities. The Current Advisory Agreement may be terminated by
either party, at any time, without penalty, upon 60 days written notice, and
will automatically terminate in the event of its assignment.
The net assets of each of the Funds as of September 30, 1997, and the
aggregate amount of advisory fees paid by each Fund to the Adviser for the last
fiscal year and the aggregate amount of any other material payments paid by each
Fund to the Adviser for the last fiscal year are set forth at Annex D hereto.
Each Fund pays all other expenses incurred in its operation including, but not
limited to, direct charges relating to the purchase and sale of its portfolio
securities, interest charges, fees and expenses of outside legal counsel and
independent auditors, taxes and governmental fees, costs of share certificates
and any other expenses (including clerical expenses) of issuance, sale or
repurchase of its Shares, expenses in connection with its dividend reinvestment
plan, membership fees in trade associations, expenses of registering and
qualifying its Shares for sale under federal and state securities laws, expenses
of printing and distribution, expenses of filing reports and other documents
filed with governmental agencies, expenses of annual and special meetings of the
trustees and shareholders, fees and disbursements of the transfer agents,
custodians and sub-custodians, expenses of disbursing dividends and
distributions, fees, expenses and out-of-pocket costs of the trustees who are
not affiliated with the Adviser, insurance premiums, indemnification and other
expenses not expressly provided for in each Current Advisory Agreement, and any
extraordinary expenses of a nonrecurring nature.
THE NEW ADVISORY AGREEMENTS. The Board approved a proposed New Advisory
Agreement between the Trust on behalf of each Fund and SBMFM on June 10, 1997,
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
10
<PAGE> 17
Agreement between the Trust on behalf of each Fund and the Adviser, except for
the provisions related to reducing advisory fees payable for commissions,
brokerage and similar payments and recapture of tender solicitation and exchange
offer fees discussed above, and for the dates of execution, effectiveness and
termination. In addition, as SBMFM currently serves as investment sub-adviser to
the International Equity Fund, the New Advisory Agreement with the International
Equity Fund would not contemplate the use of an investment sub-adviser.
The investment advisory fee as a percentage of net assets payable by each Fund
will be the same under each New Advisory Agreement as under the Current Advisory
Agreement. If the investment advisory fee under each New Advisory Agreement had
been in effect for each Fund's most recently completed fiscal year, advisory
fees paid to the respective Adviser by each Fund would have been identical to
those paid under the Current Advisory Agreement.
The Board met on June 10, 1997, at which meeting the Trustees, including the
Disinterested Trustees, 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, subject to final review by the Board of the
Transaction which they subsequently completed. The New Advisory Agreement would
take effect as to each Fund upon the later to occur of (i) obtaining Shareholder
approval or (ii) the Closing. Each New Advisory Agreement will continue in
effect for an initial two year term 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 Board 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
as discussed above and for the dates of execution, effectiveness and
termination. The Trustees were also informed of the cash compensation and other
contemplated benefits to Van Kampen American Capital and its affiliates
resulting from the Transaction as well as other possible benefits to the
Adviser, Van Kampen American Capital and its affiliates that may result from the
Transaction, including the possibility of open-end mutual funds sponsored by Van
Kampen American Capital being included on the "preferred list" of funds offered
by Smith Barney.
The Board also considered the quality of investment advisory services
anticipated to be provided to the Funds by SBMFM, as well as the quality of
SBMFM's mutual fund operations and investment philosophy, the performance of
other funds advised by SBMFM and compensation schedules for such funds as
compared to the Funds. The Board also considered the financial condition of
SBMFM and its affiliate Smith Barney. The Board further considered the effects
that the Transaction could have on the distribution of the Funds particularly
among the Smith Barney sales force.
11
<PAGE> 18
The Board was advised that Section 15(f) of the 1940 Act is applicable to the
Transaction. Section 15(f) of the 1940 Act permits, in the context of a change
in an investment adviser to a registered investment company, the receipt by the
original investment adviser, or any of its affiliated persons, of an amount or
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", as defined in the 1940 Act, 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).
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
would be in compliance with such condition subsequent to the Transaction.
Management of each of the Funds, SBMFM and its affiliates are aware of no
circumstances arising from the Transaction, preparatory transactions to the
Transaction or any potential financing that might result in the imposition of an
"unfair burden" on the Funds. Moreover, Travelers, TLAC, TIC, Smith Barney, PFSI
and SBMFM ("Travelers Group") have agreed in the CST Master Agreement that, upon
consummation of the Transaction, Travelers Group 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 respect of the Acquisition. In this regard the
CST Master Agreement provides that the Travelers Group will use its reasonable
best efforts to assure that (i) for a period of three years from the Closing, at
least 75% of the members of the Board of Trustees of the Funds which have
approved The New Advisory Agreement, are not (A) "interested persons" of the
investment manager of such Fund after the Closing, or (B) "interested persons"
of the present investment manager of such Common Sense Fund; and (ii) for a
period of two years from the Closing, there is not imposed on any of the Funds
an "unfair burden" as a result of the transactions contemplated by the CST
Master Agreement, any payments in connection therewith, or understandings
applicable thereto.
After consideration of the above factors, and such other factors and
information that the Trustees deemed relevant, the Trustees, including the
Disinterested
12
<PAGE> 19
Trustees, unanimously approved the New Advisory Agreement and voted to recommend
its approval to the Shareholders of each Fund, subject to final review by the
Board of the Transaction. On September 9, 1997, the Board held a meeting to
review the final terms and conditions of the Transaction. Upon such review, the
Trustees voted to call a shareholder's meeting for the purposes of submitting
the previously approved New Advisory Agreement to the Shareholders of each Fund.
The net assets of each investment company advised by SBMFM and the rate of its
compensation are set forth at Annex E hereto.
CERTAIN OTHER CHANGES
Effective with the New Advisory Agreements, the name of the Trust will be
changed to Concert Investment Series. Certain changes to the administration of
the Trust will also be effective on that same date. PNC Bank will replace State
Street Bank and Trust Company as custodian for each Fund other than the
International Fund. The Chase Manhattan Bank will serve as custodian for the
International Fund. First Data Investor Services Group, Inc. will become
transfer agent for the Funds with PFS Shareholder Services, Inc. the current
transfer agent, serving as sub-transfer agent.
The Trustees have also approved an Agreement and Plan of Reorganization
between the Common Sense Money Market Fund ("Money Market Fund") and the Cash
Portfolio of Smith Barney Money Funds, Inc., also advised by SBMFM, providing
for the acquisition by the Cash Portfolio of the assets and substantially all of
the liabilities of the Money Market Fund and the receipt by Class 1, Class A and
Class B shareholders of the Money Market Fund of Class A shares of the Cash
Portfolio at its net asset value per share (the "Reorganization").
The Reorganization is subject to approval by the holders of a majority of the
outstanding shares of the Money Market Fund. Further details of the proposed
Reorganization will be contained in a proxy statement/prospectus expected to be
mailed to Money Market Fund shareholders shortly.
Following the Closing, several changes are also contemplated to the
exchangeability features and sales charge structure of the Funds. It is
currently anticipated that effective with the New Advisory Agreements,
shareholders of the Funds will be able to exchange their Fund shares for shares
of any Smith Barney mutual funds distributed by PFSI. However, those Smith
Barney mutual funds may have different contingent deferred sales charge ("CDSC")
schedules and conversion time tables than are currently applicable to the Funds.
Any Fund shares exchanged for Smith Barney mutual funds will be subject to the
sales charge schedule and conversion time table applicable to the Smith Barney
mutual fund exchanged into.
It is also anticipated that effective with the New Advisory Agreements, the
sales charge schedule applicable to Class A shares of the Funds will be modified
by
13
<PAGE> 20
reducing the initial sales charge. At that time, the CDSC schedule for Class B
shares will also be modified, generally by reducing the CDSC charged in the
later years, except that the CDSC charged in the first year for certain
fixed-income funds will increase and the time after which Class B shares convert
to Class A shares will be increased. All such pricing changes will only be
applicable to purchases made after the effective date of the pricing changes.
SHAREHOLDER APPROVAL
To become effective, each New Advisory Agreement must be approved by 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 after
consideration of all factors which they determined to be relevant to their
deliberations, including those discussed above. The Board 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: RATIFICATION OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
The Board, including a majority of the Disinterested Trustees, has selected
the firm of Ernst & Young LLP, independent auditors, to examine the financial
statements for the current fiscal year of the Trust and each of its Funds. Each
Fund knows of no direct or indirect financial interest of the auditors in the
Funds. Such appointment is subject to ratification or rejection by the
shareholders of the Trust. Unless a contrary specification is made, the
accompanying proxy will be voted in favor of ratifying the selection of such
accountants.
Representatives of Ernst & Young LLP are expected to be present at the Meeting
and will be available to respond to appropriate questions from shareholders and
will have the opportunity to make a statement if they so desire.
SHAREHOLDER APPROVAL
The Shareholders of all the Funds of the Trust voting as a single class are
entitled to vote on this issue. An affirmative vote of a majority of the Shares
of the Trust present in person or by proxy and voting is required to ratify the
selection of the accountants for the Trust. THE BOARD OF TRUSTEES OF EACH FUND
RECOMMENDS A VOTE "FOR" RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE CURRENT FISCAL YEAR OF THE TRUST.
14
<PAGE> 21
- ------------------------------------------------------------------------------
OTHER INFORMATION
- ------------------------------------------------------------------------------
DIRECTORS AND OFFICERS OF THE NEW ADVISER
The following table sets forth certain information concerning the principal
executive officers and directors of the New Adviser. The address of each of the
following persons is noted below.
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
A. George Saks.............. Director of SBMFM, Executive Vice President,
388 Greenwich Street Secretary and Chief Legal Officer of Smith
New York, New York 10013 Barney.
Lewis E. Daidone............ Director and Senior Vice President of SBMFM.
388 Greenwich Street Senior Vice President and Treasurer of
New York, New York 10013 forty-one mutual funds sponsored by Smith
Barney.
Heath B. McLendon........... Director, President and Chief Executive
388 Greenwich Street Officer of SBMFM. Managing Director of Smith
New York, New York 10013 Barney.
Bruce D. Sargent............ Vice President and formerly a Director of
388 Greenwich Street SBMFM. Managing Director of Smith Barney.
New York, New York 10013 Director of the Capital Management Division,
Smith Barney.
Michael J. Day.............. Treasurer of SBMFM. Managing Director of Smith
388 Greenwich Street Barney.
New York, New York 10013
Christina T. Sydor.......... General Counsel and Secretary of SBMFM.
388 Greenwich Street Managing Director of Smith Barney. Secretary
New York, New York 10013 of the forty-one investment companies
sponsored by Smith Barney.
Audrey C. Pappas-Wragg...... Chief Compliance Officer of SBMFM. Vice
388 Greenwich Street President of Smith Barney. Formerly Mutual
New York, New York 10013 Fund Compliance Officer, Goldman Sachs Asset
Management, Inc. Formerly Chief Compliance
Officer in Asset Management, Paine
Webber/Mitchell Hutchins Asset Management.
</TABLE>
The following table sets forth the Trustees and officers of the Funds who are
also officers of the Adviser. It is anticipated that, in connection with the
Transaction, the New Adviser will recommend the replacement of certain or all of
the current Fund
15
<PAGE> 22
officers with individuals connected with the Smith Barney mutual fund
organization.
<TABLE>
<CAPTION>
NAME POSITION WITH THE FUNDS
---- -----------------------
<S> <C>
Don G. Powell.................. Chairman of the Board, Trustee and
President
Dennis J. McDonnell............ Executive Vice President
Curtis W. Morell............... Vice President and Chief Accounting
Officer
Ronald A. Nyberg............... Vice President and Secretary
Peter W. Hegel................. 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 Trust serve for one year or until their respective
successors are chosen and qualified. The Trust's officers receive no
compensation from the Funds but may also be officers of the Adviser or officers
of affiliates of the Adviser and receive compensation in such capacities.
With respect to the Funds, as of October 24, 1997, the Trustees and officers
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 such Fund.
No Trustee, other than Mr. Powell, has owned any securities of or has had any
other material interest in, or a material interest in a material transaction
with, the Current Adviser or its respective affiliates since the beginning of
such Fund's most recent fiscal year. With respect to the New Adviser, no
Trustee, other than Mr. Lane, has owned any securities of or has had any other
material interest in, or a material interest in a material transaction in the
New Adviser or its respective affiliates since the beginning of each Fund's most
recent fiscal year.
The address of PFS Distributors, Inc., the principal distributor of the Funds'
Shares, is 3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia 30199-0001.
- ------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------
Van Kampen American Capital and Smith Barney will share equally the expense of
preparing, printing and mailing the enclosed form of proxy, the accompanying
Notice and this Proxy Statement and related solicitation expenses.
16
<PAGE> 23
In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph or personal interview by
representatives of the Trust, the Adviser or VKAC, or by the Transfer Agent, or
by First Data Investors Services Group, a solicitation firm located in Boston,
Massachusetts that has been engaged to assist in proxy solicitations at an
estimated cost of approximately $81,406 for the Emerging Growth Fund, $38,033
for the Common Sense Government Fund, $797,787 for the Common Sense Growth Fund,
$198,404 for the Common Sense Growth and Income Fund, $14,068 for the
International Fund, $34,609 for the Common Sense Money Market Fund and $16,124
for the Municipal Fund.
- ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ------------------------------------------------------------------------------
As a general matter, each Fund does not hold regular annual meetings of
shareholders. Any Shareholder who wishes to submit proposals for consideration
at a meeting of such Shareholder's Fund should send such proposal to the
respective Fund at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. To be
considered for presentation at a shareholders' meeting, rules promulgated by the
SEC require that, among other things, a shareholder's proposal must be received
at the offices of such Fund a reasonable time before a solicitation is made.
Timely submission of a proposal does not necessarily mean that such proposal
will be included.
- ------------------------------------------------------------------------------
GENERAL
- ------------------------------------------------------------------------------
Management of each Fund does not intend to present and does not have reason to
believe that others will present any other items of business at the Meeting.
However, if other matters are properly presented to the Meeting for a vote, the
proxies will be voted upon such matters in accordance with the judgment of the
persons acting under the proxies.
A list of shareholders of each Fund entitled to be present and vote at the
Meeting will be available at the offices of the respective Fund, One Parkview
Plaza, Oakbrook Terrace, IL 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
November 13, 1997
17
<PAGE> 24
ANNEX A
LIST OF 5% BENEFICIAL OWNERS AS OF OCTOBER 24, 1997
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF CLASS PERCENTAGE
OF HOLDER FUND OWNERSHIP OF SHARES OWNERSHIP
---------------- ---- ----------- --------- ----------
<S> <C> <C> <C> <C>
PFS INVESTMENTS INC.* Emerging Growth 2,707,051 A 60.04%
3100 BRECKINRIDGE BLVD. Emerging Growth 2,218,034 B 60.91%
BLDG. 200 Emerging Growth 167,008 1 61.25%
DULUTH, GEORGIA 30199-0001 Government 498,369 A 39.50%
Government 499,309 B 43.16%
Government 10,444,550 1 46.18%
Growth 2,791,250 A 54.65%
Growth 3,597,113 B 59.82%
Growth 115,156,851 1 68.80%
Growth & Income 1,964,904 A 49.98%
Growth & Income 2,693,087 B 55.06%
Growth & Income 32,610,021 1 60.08%
Money Market 994,478 A 13.54%
Money Market 74,415 B 26.81%
Money Market 9,109,460 1 17.18%
STEVEN K. BROIDO Money Market 17,079 B 6.15%
PAMELA E. BROIDO
60 OLD DENNETT RD.
KITTERY, ME 03904-1017
PETER DUCOAT Money Market 21,337 B 7.69%
9132 SW 20TH ST.
BOCA RATON, FL 33428-
7737
KATHERINE PHOMPHAKDY Money Market 16,185 B 5.83%
PETH PHOMPHAKDY
919 MAGENTA ST.
SAN DIEGO, CA 92113-3540
KATHLEEN M. PREECE Money Market 15,230 B 5.49%
7818 N 16TH LN.
PHOENIX, AZ 85021-7006
MARGARET C. WADLINGTON Municipal Bond 41,767 A 6.83%
8385 WESTFAIR DR.
GERMANTOWN, TN 38139-
3259
WILLIAM L. BEVINS Municipal Bond 10,660 B 5.55%
6900 BUNCOMBE RD.
LOT #26
SHREVEPORT, LA
71129-9492
</TABLE>
- ---------------
* PFS Investments Inc. acts as custodian for independent retirement accounts.
A-1
<PAGE> 25
ANNEX B
- ------------------------------------------------------------------------------
FORM OF INVESTMENT ADVISORY AGREEMENT
- ------------------------------------------------------------------------------
AGREEMENT made this day of , 199 by and between COMMON SENSE TRUST,
a Massachusetts business trust, hereinafter referred to as the "TRUST," and
, a corporation,
hereinafter referred to as the "Adviser."
The TRUST and the ADVISER agree as follows:
(1.) APPOINTMENT
a. The TRUST hereby appoints the ADVISER to act as investment adviser to the
TRUST's Common Sense Fund (the "Fund") for the period and on the terms
set forth in this Agreement. The ADVISER accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
b. In the event that the TRUST establishes one or more funds with respect to
which it desires to retain the ADVISER to act as investment adviser hereunder,
it shall notify the ADVISER in writing. If the ADVISER is willing to render such
services it shall notify the TRUST in writing whereupon such fund shall become a
fund hereunder and the compensation payable by such new fund to the ADVISER will
be as agreed in writing at that time.
(2.) SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the control, direction and supervision of the TRUST's
Trustees and in conformity with applicable laws, the TRUST's Declaration of
Trust, Bylaws, registration statement, prospectuses and the stated investment
objectives, policies and restrictions of the Fund, shall:
a. manage the investment and reinvestment of the TRUST'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, 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 account of the Fund of the TRUST with
brokers or dealers selected by the ADVISER;
c. conduct and manage the day-to-day operations of the TRUST including,
by way of illustration, the preparation of registration statements,
prospectuses, reports, proxy solicitation materials and amendments thereto,
the
B-1
<PAGE> 26
furnishing of legal services except for services provided by outside counsel
to the TRUST selected by the Trustees, and the supervision of the TRUST's
Treasurer and the personnel working under his direction; and
d. furnish to the TRUST 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 TRUST trustee and TRUST
officer who is an affiliated person of the ADVISER, except the compensation
of the TRUST'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 TRUST and the Fund the most favorable
price and execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the TRUST's
Trustees of appropriate policies and procedures, the ADVISER may, to the extent
authorized by law, cause the TRUST to pay a broker or dealer that provides
brokerage and research services to the ADVISER an amount of commission for
effecting a fund 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 TRUST 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
TRUST shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of fund 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 TRUST which consist of maintenance of
the accounts, books and other documents which constitute the record forming the
basis for the TRUST's financial statements, preparation of such financial
statements and other TRUST documents and reports of a financial nature required
by federal and state laws, and participation in the production of the TRUST's
registration statement, prospectuses, proxy solicitation materials and reports
to shareholders; (v) fees of outside counsel to and of independent accountants
of the TRUST 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 TRUST and its shares
for
B-2
<PAGE> 27
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 TRUST; (xi) all other expenses incidental to
holding meetings of the TRUST'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 TRUST's membership in trade associations approved by the Trustees; and
(xv) such non-recurring expenses as may arise, including those associated with
actions, suits, or proceedings to which the TRUST is a party and the legal
obligation which the TRUST may have to indemnify its officers and trustees with
respect thereto. To the extent that any of the foregoing expenses are allocated
between the TRUST and any other party, such allocations shall be pursuant to
methods approved by the Trustees.
(3.) 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 TRUST are not impaired.
Except as otherwise required by the Investment Company Act of 1940 ("1940
Act") any of the shareholders, trustees, officers and employees of the TRUST may
be a shareholder, 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 TRUST.
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, the ADVISER shall not be subject to liability to the TRUST, or
to any shareholder of the TRUST, 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.
(4.) COMPENSATION PAYABLE TO ADVISER
The TRUST shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, with respect to the Fund,
a monthly fee calculated at the following annual rates:
A. Common Sense Emerging Growth Fund
Common Sense Growth Fund
Common Sense Growth and Income Fund
.65% of the first $1 billion of average daily net assets; .60% of the
next $1 billion; .55% of the next $1 billion; .50% of the next $1
billion; and .45% of average daily net assets in excess of $4 billion.
B-3
<PAGE> 28
B. Common Sense Government Fund
.60% of the first $1 billion of average daily net assets; .55% of the
next $1 billion; .50% of the next $1 billion; .45% of the next $1
billion; .40% of the next $1 billion; and .35% of average daily net
assets in excess of $5 billion.
C. Common Sense International Equity Fund
1.00% of the Fund's average daily net assets.
D. Common Sense Money Market Fund
.50% of the first $2 billion of average daily net assets; .475% of the
next $2 billion; and .45% of average daily net assets in excess of $4
billion.
E. Common Sense Municipal Bond Fund
.60% of the first $1 billion of average daily net assets; .55% of the
next $1 billion; .50% of the next $1 billion; and .45% of average daily
net assets in excess of $3 billion.
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, made in
the manner provided in the TRUST's Declaration of Trust.
[The following provision, which is included in the Current Advisory Agreement,
will not appear in the New Advisory Agreement:
The fees payable to the ADVISER by the TRUST pursuant to this Section 4 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 Van Kampen American Capital Inc., or its successor,
in connection with the purchase and sale of assets of the TRUST, 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 transactions and shall advise the Trustees of any
other commissions, fees, brokerage or similar payments which may be possible for
the ADVISER or any other direct or indirect majority owned subsidiary of Van
Kampen American Capital Inc., or its successor, to receive in connection with
the Fund's transactions or other arrangements which may benefit the TRUST.]
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 TRUST's shares are qualified for sale, unless waived, the
compensation due to 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
B-4
<PAGE> 29
thereof, at the time such compensation is payable after the end of each calendar
month during such fiscal year of the TRUST, 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 TRUST's fiscal
year. For purposes of this paragraph, all ordinary business expenses of the Fund
include the investment advisory fee and other operating costs paid by the Fund
except for (i) interest and taxes; (ii) brokerage commissions; (iii) expenses
incurred 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 TRUST and 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 TRUST 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 PFS Distributors, Inc., the distributor of the Trust's shares,
in connection with a distribution plan adopted by the Trust's Trustees pursuant
to Rule 12b-1 under the 1940 Act.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(5.) BOOKS AND RECORDS
In compliance with the requirements of the 1940 Act, the ADVISER hereby agrees
that, to the extent required by law, all records which it maintains for the
TRUST are the property of the TRUST and further agrees to surrender promptly to
the TRUST any of such records upon the TRUST'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.
(6.) DURATION AND TERMINATION
This Agreement will become effective with respect to the Fund on the date
hereof, and with respect to any additional funds, on the date of receipt by the
TRUST of notice from the ADVISER in accordance with Section 1(b) hereof that the
ADVISER is willing to serve as investment adviser with respect to such fund,
provided that this Agreement (as supplemented by the terms specified in any
notice and agreement pursuant to Section 1(b) hereof) shall have been approved
by the shareholders of the Fund subject to this Agreement, in accordance with
the requirements under the 1940 Act, and, unless sooner terminated as provided
herein, shall continue in effect for a period of two years. Thereafter, if not
terminated, this Agreement shall continue in effect as to a particular Fund for
successive periods of twelve months each, provided such continuance is
specifically approved at least annually, (a) by the vote of a majority of those
members of the TRUST's Trustees
B-5
<PAGE> 30
who are not interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval, and (b) by the
TRUST's Trustees or by vote of a majority of the outstanding voting securities
of the Fund. Notwithstanding the foregoing, this Agreement may be terminated as
to the Fund at any time, without the payment of any penalty, by the TRUST (by
vote of the TRUST's Trustees or by vote of a majority of the outstanding voting
securities of the Fund), or by the ADVISER, on sixty days' written notice. This
Agreement will immediately terminate in the event of its assignment.
(7.) AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective as to the Fund until
approved by vote of a majority of the outstanding voting securities of the Fund
if such vote is required by the 1940 Act.
(8.) 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 TRUST by the Securities and Exchange
Commission, or such interpretive positions as may be taken by the Commission or
its staff, under said 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 Declaration of Trust establishing Common Sense Trust, dated January 29,
1987, a copy of which, together with all amendments thereto (the "Declaration"),
is on file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Common Sense Trust" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of said TRUST shall be held
to any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise in connection with the
affairs of said TRUST, but the Trust Estate only shall be liable. All
obligations of the TRUST under this Agreement shall apply only on a Fund by Fund
basis and the assets of one Fund shall not be liable for the obligations of any
other Fund.
B-6
<PAGE> 31
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.
COMMON SENSE TRUST
By:
- --------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------
Its:
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
By:
- --------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------
Its:
- --------------------------------------------------------------------------
B-7
<PAGE> 32
ANNEX C
BROKERAGE BY FUND
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL PERIOD
ENDED OCTOBER 31, ENDED APRIL 30,
1996 1997
------------------------- -------------------------
AGGREGATE % OF AGGREGATE % OF
AMOUNT OF AGGREGATE AMOUNT OF AGGREGATE
COMMISSIONS COMMISSIONS COMMISSIONS COMMISSIONS
PAID TO PAID TO PAID TO PAID TO
AFFILIATED AFFILIATED AFFILIATED AFFILIATED
FUND NAME BROKERS BROKERS BROKERS BROKERS
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Common Sense Emerging
Growth...................... $ 1,835(1) 1.87% $ 1,450(1) 1.70%
Common Sense Government....... $ 28,322(1) 17.68% 13,827(1) 22.07%
Common Sense Growth........... $240,982(1) 2.38% 148,870(1) 3.09%
$ 7,200(2) 0.07% 20,438(3) 0.42%
17,100(4) 0.36%
4,500(2) 0.09%
Common Sense Growth and
Income...................... $ 92,761(1) 4.08% 47,385(1) 3.58%
$ 2,400(2) 0.10% 375(3) 0.03%
Common Sense International
Equity...................... N/A N/A N/A N/A
Common Sense Money Market..... N/A N/A N/A N/A
Common Sense Municipal Bond... N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Smith Barney Inc.
(2) Robinson Humphrey, Inc.
(3) Morgan Stanley Group, Inc.
(4) Dean Witter Reynolds, Inc.
N/A Not applicable.
C-1
<PAGE> 33
ANNEX D
The following table indicates the size of each Fund, and the amount of
advisory fees paid to the Adviser for the last fiscal year, and the amount of
other material fees paid to such persons for such fiscal year.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL PERIOD ENDED
OCTOBER 31, 1996 APRIL 30, 1997
-------------------------------- --------------------------------
AMOUNT OF AMOUNT OF
NET ASSETS ON AGGREGATE OTHER MATERIAL AGGREGATE OTHER MATERIAL
SEPTEMBER 30, AMOUNT OF PAYMENTS TO AMOUNT OF PAYMENTS TO
NAME 1997 ADVISER FEE ADVISER ADVISER FEE ADVISER
---- ------------- ----------- -------------- ----------- --------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Common Sense Trust
Common Sense Emerging
Growth Fund........... $ 193.2 $ 376,436 $ 79,620 $ 357,558 $ 17,151
Common Sense Government
Fund.................. 265.4 1,883,666 93,056 885,124 25,056
Common Sense Growth
Fund.................. 3,902.3 17,148,560 406,931 9,603,263 200,033
Common Sense Growth and
Income Fund........... 1,330.1 6,017,204 168,039 3,493,398 73,671
Common Sense
International Equity
Fund.................. 32.7 (47,998)+ 30,600 95,863+ 10,712
Common Sense Money
Market Fund........... 60.6 (219,511)+ 62,857 (94,687)+ 14,280
Common Sense Municipal
Bond Fund............. 116.3 728,210 99,374 352,617 30,318
</TABLE>
- ---------------
+ This amount is net of either a voluntary advisory fee waiver or other expense
reduction.
D-1
<PAGE> 34
ANNEX E
The following table indicates the size of each investment company advised by
the New Adviser and the advisory fee rates.
<TABLE>
<CAPTION>
NET ASSETS ON
OCTOBER 17, ANNUAL MANAGEMENT FEES
1997 PERCENT OF
OTHER FUNDS (IN THOUSANDS) AVERAGE NET ASSETS
----------- -------------- ----------------------
<S> <C> <C>
OPEN-END FUNDS
THE CONSULTING GROUP CAPITAL MARKETS FUNDS
Government Money Investments............ 409,184 0.35%
Mortgage Backed Investments............. 140,294 0.70%
Municipal Bond Investments.............. 53,545 0.60%
Small Cap Growth Investments............ 844,204 1.00%
Small Cap Value Equity Investments...... 689,114 0.80%
Large Cap Growth Investments............ 1,961,912 0.80%
Large Cap Value Equity Investments...... 2,053,965 0.80%
Balanced Investments.................... 95,089 0.80%
Long Term Bond Investments.............. 189,573 0.60%
International Equity Investments........ 1,206,080 0.90%
International Fixed Income
Investments........................... 130,114 0.70%
Intermediate Fixed Income Investments... 385,641 0.60%
Emerging Markets Equity Investments..... 239,216 1.10%
Smith Barney Adjustable Rate Government
Income Fund........................... 118,984 0.60%
Smith Barney Aggressive Growth
Fund Inc. .............................. 870,318 0.80%
Smith Barney Appreciation Fund Inc. ...... 4,208,587 0.75% to $250M; 0.70%
on next $250M; 0.65%
on next $500M; 0.60%
on next $1B; 0.55% on
next $1B; 0.50% on
excess.
Smith Barney Arizona Municipals
Fund Inc. .............................. 60,305 0.50% to $500M;
0.48% thereafter.
Smith Barney California Municipals
Fund Inc. .............................. 839,891 0.50% to $500M;
0.48% thereafter.
SMITH BARNEY EQUITY FUNDS
Growth & Income Fund...................... 432,838 0.65%
Smith Barney Fundamental Value
Fund Inc. .............................. 1,669,798 0.55% to $1.5B;
0.50% on excess.
</TABLE>
E-1
<PAGE> 35
<TABLE>
<CAPTION>
NET ASSETS ON
OCTOBER 17, ANNUAL MANAGEMENT FEES
1997 PERCENT OF
OTHER FUNDS (IN THOUSANDS) AVERAGE NET ASSETS
----------- -------------- ----------------------
<S> <C> <C>
SMITH BARNEY FUNDS, INC.
Equity Income Portfolio................... 1,029,345 0.60% to $500M;
0.55% next $500M;
0.50% after $1B.
Income Return Account Portfolio........... 1,349 0.50% to $200M;
0.40% after $200M.*
U.S. Government Securities Portfolio...... 326,074 0.50% to $200M;
0.40% after $280M.*
Short-Term U.S. Treasury Securities
Portfolio............................... 133,880 0.45%
SMITH BARNEY INCOME FUNDS
Convertible Fund........................ 121,209 0.70%
High Income Fund........................ 1,368,198 0.70%
Diversified Strategic Income Fund....... 2,905,819 0.65%
Tax-Exempt Income Fund.................. 787,407 0.60%
Exchange Reserve Fund................... 153,955 0.50%
Utilities Fund.......................... 1,297,293 0.65%
SMITH BARNEY INVESTMENT TRUST
Intermediate Maturity CA Municipal
Fund.................................. 28,200 0.50%
Intermediate Maturity NY Municipal
Fund.................................. 50,023 0.50%
Large Capitalization Growth Fund........ 330,122 0.75%
SMITH BARNEY INVESTMENT FUNDS INC.
Special Equities Fund................... 682,812 0.75%
Government Securities Fund.............. 543,042 0.55% to $2B;
0.50% on next $2B;
0.45% on next $2B;
0.40% on next $2B;
0.35% on excess.
Investment Grade Bond Fund.............. 483,721 0.65% to $500M;
0.62% on excess.
Growth Opportunity Fund................. 123,440 1.00%
Managed Growth.......................... 1,067,576 0.85%
Smith Barney Managed Governments
Fund Inc. .............................. 572,694 0.65% to $1B;
0.60% on excess.
Smith Barney Managed Municipals
Fund Inc. .............................. 3,345,546 0.55% to $500M;
0.50% on next $1B;
0.48% on excess of
$1.5B.
- ---------------
* Based on the aggregate assets of Income Return Account Portfolio and U.S.
Government Securities Portfolio
</TABLE>
E-2
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C>
Smith Barney Massachusetts Municipals
Fund.................................... 59,948 0.55% to $500M;
0.50% on excess.
SMITH BARNEY MONEY FUNDS, INC.
Cash Portfolio.......................... 30,743,255 0.45% to $6B;
0.425% next $6B;
0.40% next $6B;
0.35% after $18B.
Government Portfolio.................... 4,587,668 0.45% to $2.5B;
0.40% next $2.5B;
0.35% after $5B.
Retirement Portfolio.................... 1,370,752 0.45% to $1B;
0.40% next $1B;
0.35% after $2B.
Smith Barney Municipal Money Market Fund,
Inc. ................................... 5,832,377 0.50% to $2.5B;
0.475% next $2.5B;
0.45% next $2.5B;
0.40% after $7.5B.
SMITH BARNEY MUNI FUNDS
California Money Market Portfolio....... 1,569,697 0.50% to $2.5B; 0.475%
next $2.5B;
0.45% after $5B.
Florida Portfolio....................... 196,020 0.50%
Georgia Portfolio....................... 28,377 0.45%
Limited Term Portfolio.................. 280,219 0.50%
National Portfolio...................... 381,301 0.45%
New York Portfolio...................... 741,482 0.50%
New York Money Market Portfolio......... 983,258 0.50% to $2.5B;
0.475% next $2.5B;
0.45% after $5B.
Ohio Portfolio.......................... 7,253 0.45%
Pennsylvania Portfolio.................. 39,265 0.45%
Smith Barney New Jersey Municipals Fund
Inc..................................... 220,851 0.50% to $500M;
0.48% thereafter.
Smith Barney Oregon Municipals Fund....... 27,866 0.50% to $500M;
0.48% thereafter.
Smith Barney Natural Resources
Fund Inc................................ 130,362 0.75%
</TABLE>
E-3
<PAGE> 37
<TABLE>
<CAPTION>
<S> <C> <C>
SMITH BARNEY PRINCIPAL RETURN FUNDS
Zeros and Appreciation Series 1998...... 87,457 0.50%
Zeros Plus Emerging Growth Series
2000.................................. 64,274 0.60%
Security and Growth Fund................ 217,521.... 0.50%
SMITH BARNEY WORLD FUNDS, INC.
International Equity Portfolio.......... 1,426,056 0.85%
International Balanced Portfolio........ 64,279 0.85%
Emerging Markets Portfolio.............. 43,188 1.00%
European Portfolio...................... 48,104 0.85%
Pacific Portfolio....................... 8,373 0.85%
Global Government Bond Portfolio........ 150,715 0.75%
SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT
FUND INC.
Municipal Portfolio..................... 73,505 0.27%
Cash Portfolio.......................... 425,145 0.27%
Government Portfolio.................... 141,268 0.27%
Smith Barney Municipal Fund, Inc. ........ 62,878 0.70%
The Italy Fund Inc. ...................... 121,443 0.95%
Zenix Income Fund Inc. ................... 137,033 0.70%
SMITH BARNEY CONCERT ALLOCATION SERIES
FUND
Balanced Portfolio...................... 357,371 0.35%
Income Portfolio........................ 54,140 0.35%
High Growth Portfolio................... 498,666 0.35%
Growth Portfolio........................ 620,621 0.35%
Conservative Portfolio.................. 94,851 0.35%
CLOSED-END FUNDS
Greenwich Street California Municipal Fund
Inc. ................................... 50,607 0.90%
Greenwich Street Municipal Fund........... 232,328 0.90%
High Income Opportunity Fund Inc. ........ 893,043 1.15%
Municipal High Income Fund Inc. .......... 193,109 0.60%
Managed High Income Portfolio Inc. ....... 524,987 1.10%
Managed Municipals Portfolio Inc. ........ 422,384 0.90%
Managed Municipals Portfolio II Inc. ..... 136,799 0.90%
Smith Barney Intermediate Municipal Fund,
Inc. ................................... 87,676 0.60%
VARIABLE ANNUITY FUNDS
GREENWICH STREET SERIES FUND
Money Market Portfolio.................. 4,892 0.50%
Intermediate High Grade Portfolio....... 15,184 0.60%
Diversified Strategic Income
Portfolio............................. 58,204 0.65%
</TABLE>
E-4
<PAGE> 38
<TABLE>
<CAPTION>
<S> <C> <C>
Equity Income Portfolio................. 43,189 0.65%
Growth & Income Portfolio............... 44,013 0.65%
Appreciation Portfolio.................. 134,437 0.75%
International Equity Portfolio.......... 33,032 1.05%
TRAVELERS SERIES FUND, INC.
Smith Barney Income and Growth
Portfolio............................. 290,795 0.65%
Smith Barney Money Market Portfolio..... 108,727 0.60%
Smith Barney High Income Portfolio...... 123,073 0.60%
Smith Barney International Equity
Portfolio............................. 228,764 0.90%
Smith Barney Pacific Basin Portfolio.... 18,742 0.90%
Alliance Growth Portfolio............... 551,989 0.80%
Van Kampen American Capital Enterprise
Portfolio............................. 201,115 0.70%
TBC Managed Income Portfolio............ 30,666 0.65%
MFS Total Return Portfolio.............. 260,104 0.80%
Putnam Diversified Income Portfolio..... 120,047 0.75%
GT Global Strategic Income Portfolio.... 30,069 0.80%
AIM Capital Appreciation Portfolio...... 210,491 0.80%
SMITH BARNEY VARIABLE ACCOUNT FUNDS
Income and Growth Portfolio............. 17,028 0.60%
Reserve Account Portfolio............... 95 0.45%
U.S. Government/High Quality Securities
Portfolio............................. 1,636 0.45%
SMITH BARNEY CONCERT SELECT FUNDS
Select Balanced Portfolio............... 27,303 0.35%
Select Conservative Portfolio........... 6,604 0.35%
Select Growth Portfolio................. 26,766 0.35%
Select High Growth Portfolio............ 18,022 0.35%
Select Income Portfolio................. 2,615 0.35%
</TABLE>
E-5
<PAGE> 39
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.
PLEASE RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
-- Please Fold and Detach Card at Perforation Before Mailing --
A FUND OF THE COMMON SENSE TRUST
PROXY SOLICITED BY THE TRUSTEES OF THE TRUST (THE "TRUST")
The undersigned, revoking previous proxies, hereby appoint(s) Ronald A. Nyberg
and Edward C. Wood, III or any one or more of them, proxies, with full power of
substitution, to vote all shares of the Fund as indicated above which the
undersigned is entitled to vote at the Joint Special Meeting of Shareholders of
the Fund to be held at Van Kampen American Capital, Inc., One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, on December 18, 1997 at 2:00 P.M. and at any
adjournments thereof. All powers may be exercised by a majority of said proxy
holders or substitutes voting or acting or, if only one votes and acts, then by
that one. This Proxy shall be voted on the proposals described in the Proxy
Statement as specified on the reverse side. Receipt of the Notice of the
Meeting and the accompanying Proxy Statement is hereby acknowledged.
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date ___________________, 1997
NOTE: Please sign exactly as your name appears on this
Proxy. When signing in a fiduciary capacity, such as
executor, administrator, trustee, attorney, guardian,
etc., please so indicate. Corporate and partnership
proxies should be signed by authorized person indicating
the person's title.
|-------------------------------------------------------|
| |
| |
| |
| |
Signature(s) (Title(s), if applicable)
WHEN SHARES ARE REGISTERED WITH JOINT OWNERS, ALL
JOINT OWNERS SHOULD SIGN. CST
<PAGE> 40
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.
PLEASE RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
- Please fold and detach card at perforation before mailing -
Please refer to the Proxy Statement discussion.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said proxy shall vote in accordance with the
best judgment of the aforementioned proxies.
THE TRUSTEES RECOMMEND A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
Please vote by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil. Do not use red ink. [X]
FOR AGAINST ABSTAIN
1. With respect to each Fund, to approve a new [ ] [ ] [ ]
investment advisory agreement.
2. With respect to each Fund, to ratify the [ ] [ ] [ ]
selection of Ernest & Young LLP as
independent auditors.
