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SIGNATURE TANYA LODEN
TITLE CONTROLLER
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 155,182
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 350,959
<NUMBER-OF-SHARES-REDEEMED> 229,693
<SHARES-REINVESTED> 12,253
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6,224,417
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> (.13)
<PER-SHARE-GAIN-APPREC> .41
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.61
<EXPENSE-RATIO> 3.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869760
<NAME> AC GLOBAL GOVERNMENT
<SERIES>
<NUMBER> 1
<NAME> CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 182,497,227
<INVESTMENTS-AT-VALUE> 184,118,921
<RECEIVABLES> 57,571,708
<ASSETS-OTHER> 26,851
<OTHER-ITEMS-ASSETS> 337,026
<TOTAL-ASSETS> 242,054,506
<PAYABLE-FOR-SECURITIES> 47,970,865
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,304,025
<TOTAL-LIABILITIES> 52,274,890
<SENIOR-EQUITY> 22,960
<PAID-IN-CAPITAL-COMMON> 216,994,358
<SHARES-COMMON-STOCK> 5,806,674
<SHARES-COMMON-PRIOR> 7,597,385
<ACCUMULATED-NII-CURRENT> 186,959
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (30,285,888)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,861,227
<NET-ASSETS> 189,779,616
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,955,444
<OTHER-INCOME> 0
<EXPENSES-NET> 4,137,228
<NET-INVESTMENT-INCOME> 13,818,216
<REALIZED-GAINS-CURRENT> (13,654,555)
<APPREC-INCREASE-CURRENT> 12,319,494
<NET-CHANGE-FROM-OPS> 12,483,155
<EQUALIZATION> (902,657)
<DISTRIBUTIONS-OF-INCOME> 4,034,848
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,027,970
<NUMBER-OF-SHARES-REDEEMED> 3,117,182
<SHARES-REINVESTED> 298,501
<NET-CHANGE-IN-ASSETS> (43,983,340)
<ACCUMULATED-NII-PRIOR> 4,861,884
<ACCUMULATED-GAINS-PRIOR> (16,797,522)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,568,102
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,137,228
<AVERAGE-NET-ASSETS> 54,514,399
<PER-SHARE-NAV-BEGIN> 8.26
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> (.016)
<PER-SHARE-DIVIDEND> .604
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.24
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869760
<NAME> AC GLOBAL GOVERNMENT
<SERIES>
<NUMBER> 2
<NAME> CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 14,898,886
<SHARES-COMMON-PRIOR> 17,755,475
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,907,916
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,425,271
<NUMBER-OF-SHARES-REDEEMED> 5,919,339
<SHARES-REINVESTED> 637,479
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 133,346,379
<PER-SHARE-NAV-BEGIN> 8.30
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> (.006)
<PER-SHARE-DIVIDEND> .544
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.28
<EXPENSE-RATIO> 2.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869760
<NAME> AC GLOBAL GOVERNMENT
<SERIES>
<NUMBER> 3
<NAME> CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,254,823
<SHARES-COMMON-PRIOR> 2,852,556
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,423,252
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 390,014
<NUMBER-OF-SHARES-REDEEMED> 1,096,832
<SHARES-REINVESTED> 109,085
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 21,219,544
<PER-SHARE-NAV-BEGIN> 8.25
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> .004
<PER-SHARE-DIVIDEND> .544
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.22
<EXPENSE-RATIO> 2.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
[DESCRIPTION] Price Waterhouse LLP
<PAGE> 1
[LOGO]
[PRICE WATERHOUSE LLP LETTERHEAD]
July 20, 1995
To the Board of Directors of the Funds Constituting
American Capital World Portfolio Series, Inc.
In planning and performing our audit of the financial statements of the
American Capital Global Government Securities Fund and American Capital Global
Equity Fund (constituting American Capital World Portfolio Series, Inc.,
hereinafter referred to as the "Funds") for the year ended May 31, 1995,
we considered their internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for the
purposes of expressing our opinion on the financial statements and to comply
with the requirements of Form N-SAR, and not to provide assurance on the
internal control structure.
The management of the Funds is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and
related costs of internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are appropriately
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions.
<PAGE> 2
[LOGO]
July 20, 1995
Page 2
However, we noted no matters involving the internal control structure,
including procedures for safeguarding securities, that we consider to be
material weaknesses as defined above as of May 31, 1995.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
/s/ PRICE WATERHOUSE LLP
<PAGE> 3
[LOGO]
[PRICE WATERHOUSE LLP LETTERHEAD]
July 20, 1995
To the Board of Directors and Management of the Funds Constituting
American Capital World Portfolio Series, Inc.
We have examined the accompanying description of the specific control
objectives and the control procedures that achieve those objectives of the
American Capital Global Government Securities Fund and American Capital Global
Equity Fund (constituting American Capital World Portfolio Series, Inc.,
hereinafter referred to as the "Funds") relating to that segment of its
system for allocating the results of operations of each Fund to separate classes
of shares and calculating the respective net asset values and dividends and
distributions (the Multiple Class System) as of May 31, 1995. Our
examination included procedures to obtain reasonable assurance about whether
(1) the accompanying description presents fairly, in all material respects, the
aspects of the Fund's policies and procedures that may be relevant to
understanding the internal control structure relating to the Multiple Class
System and review, (2) the control structure policies and procedures included
in the description were suitably designed to achieve the control objectives
specified in the description, if those policies and procedures were complied
with satisfactorily, and (3) such policies and procedures had been placed in
operation as of May 31, 1995. The control objectives were specified by
management of the Fund. Our examination was performed in accordance with
standards established by the American Institute of Certified Public Accountants
and included those procedures we considered necessary in the circumstances to
obtain a reasonable basis for rendering our opinion.
In our opinion, the accompanying description of the Multiple Class System
presents fairly, in all material respects, the relevant aspects of the Fund's
policies and procedures that had been placed in operation as of May 31,
1995. Also, in our opinion, the policies and procedures, as described, are
suitably designed to provide reasonable assurance that the specified control
objectives would be achieved if the described policies and procedures were
complied with satisfactorily.
In addition to the procedures we considered necessary to render our opinion as
expressed in the previous paragraph, we applied tests to specific policies and
procedures in the Multiple Class System as listed in the Appendix (Price
Waterhouse LLP Tests of Operating Effectiveness) to obtain evidence about the
effectiveness of such policies and procedures in meeting the control objectives
during the year ended May 31, 1995. The specific policies and procedures
and the nature, timing, extent, and results of the tests are listed in the
Appendix of this report. In our
<PAGE> 4
[LOGO]
July 20, 1995
Page 2
opinion, the policies and procedures that were tested were operating with
sufficient effectiveness to provide reasonable, but not absolute, assurance that
the control objectives specified were achieved during the period indicated.
The description of specific policies and procedures of the Funds' Multiple
Class System is as of May 31, 1995, and information about tests of the
operating effectiveness of specified policies and procedures covered the period
from June 1, 1994 to May 31, 1995. Any projection of such information
to the future is subject to the risk that, because of change, the description
may no longer portray the system in existence. The potential effectiveness of
specific policies and procedures for the Multiple Class System is subject
to inherent limitations and, accordingly, errors or irregularities may occur
and not be detected. Furthermore, the projection of any conclusions, based on
our findings, to future periods is subject to the risk that changes may alter
the validity of such conclusions.
This report is intended solely for use by the Directors and management of the
Fund and the Securities and Exchange Commission and should not be used for any
other purpose.
/s/ PRICE WATERHOUSE LLP
[DESCRIPTION] Price Waterhouse LLP Tests Of Operating
<PAGE> 1
APPENDIX
(Page 1 of 2)
PRICE WATERHOUSE LLP TESTS OF OPERATING EFFECTIVENESS
AMERICAN CAPITAL MUTUAL FUNDS
NET ASSET VALUE ("NAV") AND DIVIDEND/DISTRIBUTION
DETERMINATION FOR MULTIPLE CLASS OF SHARES
The following are the tests of operating effectiveness which we performed with
respect to the Fund's use of the Multiple Class System. We randomly selected
days throughout the year ended May 31, 1995, in which to test the
operating effectiveness of the Fund's policies and procedures. In addition, we
tested the net investment income and capital gain distributions for the Fund.
Finally, we reviewed the disclosure of the Fund as included in the May 31,
1995 financial statements. Our performance of the tests of operating
effectiveness, described below, did not result in any exceptions.
<TABLE>
<CAPTION>
Price Waterhouse LLP
Control Objective Tests of Operating Effectivenes
----------------- --------------------------------
<S> <C>
1. That the direct expenses attributable For the days selected, we
to each class of shares are correctly obtained the Worksheet and
recorded in the Fund's accounting related trial balances and
records as charged to each class of noted full completion and
shares. evidence of approval and
performed the following procedures:
o We recalculated the relative
class allocation percentages
2. That income, other operating expenses Net Assets by Class" and "% of
and realized and unrealized (i.e., "% of Dividend assets by
gains/losses are allocated properly Class"). To arrive at these
to each class of shares based upon allocation percentages, we
the relative "% of Net Assets by agreed the calculation to each
Class", or the relative "% of Fund's primary accounting
Dividend Share Value by Class", as records.
appropriate.
o We agreed income, fund-level
operating expenses, and realized
and unrealized gain/loss amounts,
as listed on the Worksheet, to
each Fund's primary accounting
records.
o We recomputed the allocation
of income, fund-level operating
expenses and realized and
unrealized gain/loss amounts to
each share class based upon the
relative "% of Net Assets by
Class" or the relative "% of
Dividend Assets by Class",
as appropriate.
</TABLE>
<PAGE> 2
APPENDIX
(Page 2 of 2)
<TABLE>
<CAPTION>
Price Waterhouse LLP
Control Objective Tests of Operating Effectiveness
----------------- --------------------------------
<S> <C>
o We recalculated the class-level
12b-1 fees for each Fund which
represented the current-day
accrual calculated using the
beginning of day's net assets
attributable to each class
based on the respective class
rate per the Fund's prospectus.
o We agreed the capital
stock activity for each
respective class to the
primary accounting records.
o We recalculated NAV per share
by class by dividing the ending
total net assets applicable to
a class by the number of shares
outstanding relating to that
class.
3. That the dividend rates and daily NAV o For the distributions selected
per share for each class of shares for testing, we recalculated
reflect the proper allocation of the distributions rates for
income, expense, gain, and loss each class of shares and
amounts, and the proper amount of any determined that they reflected
direct expenses charged to each class the proper allocation of
of shares. income, expense, gain, and
loss amounts, and the proper
amount of any direct expenses
charged to each class of
shares. We agreed periodic
distribution rates to
memoranda received from
management or to the
respective Fund's Prospectus.
4. That the financial statements of each o We read the financial
Fund reflect appropriate disclosures statements of each Fund
for each class of shares. included in the respective
May 31, 1995 Annual Report,
concluding that the
financial statement
disclosures relating
to the Multiple Class
System complied in all
material respects with
generally accepted accounting
principles and
the Fund's exemptive order.
</TABLE>
[DESCRIPTION] Multiple Shares NAV Worksheet
<PAGE> 1
EXHIBIT III
AMERICAN CAPITAL
REPORT # R707
NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND
FOR THE PERIOD 10/12/93 THROUGH 10/13/93
REPORT IDENTIFIER NAV-P
NAV WORKSHEET FOR TOTAL FUND
- ----------------------------
NET ASSETS - PRIOR DAY
CAPITAL STOCK ACTIVITY AS OF PRIOR DAY
ADJUSTED NET ASSETS
CLASS ALLOCATION ON ADJUSTED NET ASSETS
NET INVESTMENT INCOME:
GROSS INVESTMENT INCOME
EXPENSES:
DISTRIBUTION FEES
SERVICE FEES
OTHER EXPENSES
NET ADJUSTMENT TO EXPENSES
NET EXPENSES
NET INVESTMENT INCOME
UNDISTRIBUTED INCOME - PRIOR DAY
INCOME AVAILABLE FOR DISTRIBUTION
INCOME AVAILABLE PER SHARE
DIVIDENDS DECLARED
GAINS DISTRIBUTIONS DECLARED
GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS:
NET REALIZED GAINS/LOSSES
NET UNREALIZED GAINS/LOSSES
INCREASE/DECREASE IN NET ASSETS
NET ASSETS - CURRENT DAY
CAPITAL SHARES OUTSTANDING CURRENT DAY
FOR STATISTICAL USE ONLY
------------------------
NAV PER SHARE:
UNROUNDED
ROUNDED
PRIOR DAY NAV - ROUNDED
CHANGE IN NAV (CENTS)
NET ASSETS FOR TOTAL FUND PER NAV WORKSHEET
NET ASSETS FOR TOTAL FUND PER R403
DIFFERENCE
<PAGE> 2
EXHIBIT III
AMERICAN CAPITAL
REPORT # R707
NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND
FOR THE PERIOD 10/12/93 THROUGH 10/13/93
NAV WORKSHEET FOR CLASS A SHARES
- --------------------------------
NET ASSETS - PRIOR DAY
CAPITAL STOCK ACTIVITY AS OF PRIOR DAY
ADJUSTED NET ASSETS
CLASS ALLOCATION ON ADJUSTED NET ASSETS
NET INVESTMENT INCOME:
GROSS INVESTMENT INCOME
EXPENSES:
SERVICE FEES
OTHER EXPENSES
NET ADJUSTMENT TO CLASS A EXPENSES
NET EXPENSES
NET INVESTMENT INCOME
UNDISTRIBUTED INCOME - PRIOR DAY
INCOME AVAILABLE FOR DISTRIBUTION
INCOME AVAILABLE PER SHARE
DIVIDENDS DECLARED
GAINS DISTRIBUTIONS DECLARED
GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS:
NET REALIZED GAINS/LOSSES
NET UNREALIZED GAINS/LOSSES
INCREASE/DECREASE IN NET ASSETS
NET ASSETS - CURRENT DAY
CAPITAL SHARES OUTSTANDING CURRENT DAY
NAV PER SHARE:
UNROUNDED
ROUNDED
PRIOR DAY NAV - ROUNDED
CHANGE IN NAV (CENTS)
CLASS A FRONT-END LOAD FACTOR (1 - LOAD)
MAXIMUM OFFERING PRICE (CLASS A)
NET ASSETS FOR CLASS A PER NAV WORKSHEET
NET ASSETS FOR CLASS A PER R403
DIFFERENCE
<PAGE> 3
EXHIBIT III
AMERICAN CAPITAL
REPORT # R707
NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND
FOR THE PERIOD 10/12/93 THROUGH 10/13/93
NAV WORKSHEET FOR CLASS B SHARES
- --------------------------------
NET ASSETS - PRIOR DAY
CAPITAL STOCK ACTIVITY AS OF PRIOR DAY
ADJUSTED NET ASSETS
CLASS ALLOCATION ON ADJUSTED NET ASSETS
NET INVESTMENT INCOME:
GROSS INVESTMENT INCOME
EXPENSES:
DISTRIBUTION FEES
SERVICE FEES
OTHER EXPENSES
NET EXPENSES
NET INVESTMENT INCOME
UNDISTRIBUTED INCOME - PRIOR DAY
INCOME AVAILABLE FOR DISTRIBUTION
INCOME AVAILABLE PER SHARE
DIVIDENDS DECLARED
GAINS DISTRIBUTIONS DECLARED
GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS:
NET REALIZED GAINS/LOSSES
NET UNREALIZED GAINS/LOSSES
INCREASE/DECREASE IN NET ASSETS
NET ASSETS - CURRENT DAY
CAPITAL SHARES OUTSTANDING CURRENT DAY
NAV PER SHARE:
UNROUNDED
ROUNDED
PRIOR DAY NAV - ROUNDED
CHANGE IN NAV (CENTS)
CLASS B FRONT-END LOAD FACTOR (1 - LOAD)
MAXIMUM OFFERING PRICE (CLASS B)
NET ASSETS FOR CLASS B PER NAV WORKSHEET
NET ASSETS FOR CLASS B PER R403
DIFFERENCE
<PAGE> 4
EXHIBIT III
AMERICAN CAPITAL
REPORT # R707
NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND
FOR THE PERIOD 10/12/93 THROUGH 10/13/93
NAV WORKSHEET FOR CLASS C SHARES
- --------------------------------
NET ASSETS - PRIOR DAY
CAPITAL STOCK ACTIVITY AS OF PRIOR DAY
ADJUSTED NET ASSETS
CLASS ALLOCATION ON ADJUSTED NET ASSETS
NET INVESTMENT INCOME:
GROSS INVESTMENT INCOME
EXPENSES:
DISTRIBUTION FEES
SERVICE FEES
OTHER EXPENSES
NET EXPENSES
NET INVESTMENT INCOME
UNDISTRIBUTED INCOME - PRIOR DAY
INCOME AVAILABLE FOR DISTRIBUTION
INCOME AVAILABLE PER SHARE
DIVIDENDS DECLARED
GAINS DISTRIBUTIONS DECLARED
GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS:
NET REALIZED GAINS/LOSSES
NET UNREALIZED GAINS/LOSSES
INCREASE/DECREASE IN NET ASSETS
NET ASSETS - CURRENT DAY
CAPITAL SHARES OUTSTANDING CURRENT DAY
NAV PER SHARE:
UNROUNDED
ROUNDED
PRIOR DAY NAV - ROUNDED
CHANGE IN NAV (CENTS)
CLASS C FRONT-END LOAD FACTOR (1 - LOAD)
MAXIMUM OFFERING PRICE (CLASS C)
NET ASSETS FOR CLASS C PER NAV WORKSHEET
NET ASSETS FOR CLASS C PER R403
DIFFERENCE
[DESCRIPTION] Multiple Class Funds
<PAGE> 1
AMERICAN CAPITAL MUTUAL FUNDS
MULTIPLE CLASS FUNDS
SECTION I
DESCRIPTION OF THE ALTERNATE PURCHASE PLANS
Mutual Funds that adopt a multiple class of share structure are required to
maintain records that account for each class of shares of the fund. Shares
which are subject to contingent deferred sales load (CDSL) versus paying only a
front-end sales load (FESL) are charged with a higher distribution fee (12b-1
fee) on a daily basis. Since the 12b-1 fees charged will be higher for CDSL
shares and multiple classes of shares exist, separate Net Asset Values (NAV)
and dividend/distributions must be calculated for each class of shares.
NAV CALCULATIONS
Income: Income of the Fund (all classes combined) will be allocated to the
individual classes based on the relative adjusted net assets of each class or
the relative value of adjusted dividend qualifying shares of each class (the
net assets at the beginning of the day after reflecting the prior day's capital
share transactions) as appropriate, depending on the type of fund.
Expenses: Expenses of the Fund not specific to one or more classes will be
allocated to all classes based on the adjusted net assets of each class or the
relative value of adjusted dividend qualifying shares of each class. Expenses
attributable to a particular class will be charged only to that class. Expenses
attributable to a particular class may include the following:
o Rule 12b-1 fees
o Transfer agent cost
UNREALIZED APPRECIATION/DEPRECIATION AND REALIZED GAINS/LOSSES
The change in the market value of investments will be allocated each day based
on the relative adjusted net assets of each class or the relative value of
adjusted dividend qualifying shares of each class as appropriate, depending on
the type of fund. Realized gains and losses will be allocated to the classes on
the same basis.
DIVIDEND/DISTRIBUTIONS PAID TO SHAREHOLDERS
The amount of dividends and distribution of gains paid to shareholders of each
class will be determined by the dividend/distribution calculation methodology
described below. The actual amounts paid to each class will be used to
calculate the net asset value of each class.
<PAGE> 2
PRICING WORKSHEET
The Multiple Shares NAV Worksheet (Exhibit III) will be used in the daily net
asset value calculation. Utilizing data reviewed by the fund accountant, the
computer system generates the above worksheet for the total fund and each
respective class.
For non-daily dividend funds, the class allocation is based on the relative
adjusted net assets of each class. The allocation is derived by taking prior
day's net assets plus the actual dollars booked from prior day capital stock
activity for each class compared to the total fund. For daily dividend funds,
the class allocation is based on the relative value of adjusted dividend
qualifying shares of each class. The allocation is derived by using dividend
shares times prior day's NAV compared to the fund total.
This class allocation is used to allocate income, non-class-specific expenses,
and realized and unrealized gains and losses. Class specific expenses and
dividend/distributions are applied to the appropriate class. This determines the
net assets for the current day which is divided by outstanding shares for the
NAV per share for each class.
DIVIDEND/DISTRIBUTIONS CALCULATION METHODOLOGY
The amount available for dividends, or the projected amount available, will be
based on the combined undistributed net investment income of the Fund. The per
share dividend rates for each class will differ by approximately the expense
rate differential, based on average daily NAV, between the classes of shares
for the applicable period, i.e. daily, monthly, etc.
The maximum distribution rate per share for net realized gains will be
determined by dividing the total fund shares outstanding on the ex-dividend
date into the undistributed net realized gains of the fund (all classes
combined) for the applicable period.
SECTION II
SPECIFIED CONTROL OBJECTIVES
The following are the specific control objectives of the system of internal
accounting control relating to the allocation of income and expenses and the
calculation of net asset values and dividend distribution amounts for the
multiple classes of shares contemplated above:
1. That the expenses attributable to a particular class are properly recorded
for that class.
2. That income, other operating expenses, and realized and unrealized gains
and losses are allocated properly to each class as described in Section I.
3. That capital share transactions, including dividends and distributions,
are properly allocated as described in Section I.
4. That net asset value is properly calculated as described in Section I.
- 2 -
<PAGE> 3
SECTION III
POLICIES AND PROCEDURES TO ACHIEVE SPECIFIED CONTROL OBJECTIVES
The following procedures are designed to account for the various classes of
shares in each fund. From time to time, policies and procedures may be revised
to improve or enhance operations and maintain adherence to specified control
objectives.
1. On a daily basis, the fund accountant completes the "Daily Net Asset
Reconciliation and NAV Proof" (proof sheet) on Exhibit II.
2. Using the proof sheet, the fund accountant reviews the allocation of daily
income and expenses and realized and unrealized gains and losses of each
class.
3. The fund accountant verifies the shares outstanding on the proof sheet to
the amounts supplied by the Transfer Agent.
4. On a daily basis, the fund supervisor reviews the allocations and the net
asset value calculation. On a test basis, the supervisor verifies the
amounts entered by the fund accountant on the proof sheet by agreeing the
amounts entered to source documents and reviewing for reasonableness. The
supervisor initials the worksheet to evidence this review.
5. On a monthly basis, the fund supervisor reviews the monthly financial
statement including the calculations of all income and expense items.
6. For periodic distributions (monthly, quarterly or annually, as applicable),
the calculation is performed by the fund accountant according to the
methodology described in Section I. The calculation is verified by a
supervisor by agreeing the amounts to the source documents. This review is
documented by the supervisor's initials on the calculation.
SECTION IV
FINANCIAL STATEMENT DISCLOSURE FOR FUNDS WITH MULTIPLE CLASSES OF SHARES
Portfolio of Investments
o Will be shown in accordance with standard reporting practices.
Statement of Assets and Liabilities
o Assets and liabilities will be disclosed on a combined basis.
o Net asset value and offering price per share data will be presented for
each class.
o The composition of net assets (Summary of Shareholders Equity) will be
presented on a combined basis, but will include a description of each class
(par, outstanding shares, etc.).
Statement of Operations
o A standard reporting format will be used.
-3-
<PAGE> 4
Statement of Changes in Net Assets
o A standard reporting format will be used with separate disclosure of
dividends and capital gain distributions to shareholders and dollar value
of capital share transactions for each class.
Financial Highlights
o A standard reporting format will be used and the per share data and ratios
will be shown for each class (portfolio turnover which will be shown in
total).
Notes to Financial Statements
The notes to the financial statements will include the following additional
disclosures in the footnotes:
o Description of each class of shares and the related class-specific
expenses.
o Information on the 12b-1 fee arrangements for each class.
o Capital shares transactions for each class for the most recent period and
the prior year.
-4-
[DESCRIPTION] Daily Net Asset Reconciliation and NAV Proof
<PAGE> 1
Exhibit II
DAILY NET ASSET RECONCILIATION AND NAV PROOF Page 1
FUND: ________________ DATE: _________________
DAILY NAV PROOF
<TABLE>
<CAPTION>
________________________________________________________________________________
Line Activity CLASS A CLASS B CLASS C TOTAL FUND
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Current Shares Outstanding _______ ________ _______ _________
1 Prior Day's NAV (4 decimals) _______ ________ _______ _________
PER SHARE IMPACT ON NAV
CAPITAL SHARE TRANSACTIONS
2 Capital Share Transactions _______ ________ _______ _________
(from Page 3) _______ ________ _______ _________
NET INVESTMENT INCOME
3 Today's Net Investment Income* $_______ $________ $_______
*(from R707 Cost-P)
4 Net Investment Income _______ ________ _______ _________
_______ ________ _______ _________
EX-DIVIDEND/DISTRIBUTION
5 Income Dividend (from Page 3) (_______) (________) (_______) (_________)
(_______) (________) (_______) (_________)
Capital Gain Distribution
per class (_______) (________) (_______) (_________)
(_______) (________) (_______) (_________)
MARKET VALUE ACTION
7 Per Class Allocation
(9 DECIMALS FROM R707) _______ ________ _______
8 Total impact (line 23 x
line 7) $_______ $________ $_______
9 Per Share Effect of Market
Change _______ ________ _______ _________
_______ ________ _______ _________
10 Calculated Price Per Share _______ ________ _______ _________
(SUM OF LNES 1,2,4,5,6,&9)
11 System Generated Price (_______) (________) (_______) (_________)
12 Difference should not exceed
.0002 _______ ________ _______ _________
_______ ________ _______ _________
MARKET VALUE ACTION
13 R403 Current Market Value of
all Investments _______
14 R403 Today's Mark-to Market
on Futures _______
15 P/D R403 Prior Day's Market Value (________)
16 R314 Today's Discount Earned (________)
17 R314 Today's Accretion of OID (________)
18 R314 Today's Amortization of
Premium ________
19 R309 Investments purchased - at c (________)
20 R309 Investments sold - at proceeds ________
21 R810 P I K / I O Adjustments (________)
R309 Adjusting Marks on Futures
Trades ________
Subtotal (_______)
23 Change in Market Value _______
_______
</TABLE>
<PAGE> 2
Exhibit II
DAILY NET ASSET RECONCILIATION AND NAV PROOF Page 1
FUND: ______________________________ DATE: _______________
DAILY NET ASSET RECONCILIATION
<TABLE>
<CAPTION>
________________________________________________________________________________
G/L PRIOR Percentage
Line Report Activity ACCT DAY Amount of change
________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
DAILY ACCRUALS
INCOME
1 R303 Dividend Income CP05 ____ ____ __%
2 R810 Bond Interest Income Non-taxable CP10 ____ ____ __%
3 R810 Bond Interest Income Taxable CP13 ____ ____ __%
4 R810 Short-term Interest Income Non-taxable CP16 ____ ____ __%
5 R810 Short-term Interest Income Taxable CP19 ____ ____ __%
6 R314 Acquisition Discount Earned CP31 ____ ____ __%
7 R314 Accretion of OID - Taxable CP34 ____ ____ __%
8 R314 Accretion of OID - Non-taxable CP35 ____ ____ __%
9 R314 Amortization of Premium - Taxable CP37 (____) (____ __%
10 R314 Amortization of Premium - Non-taxable CP38 (____) (____) __%
11 Other Income CP45 ____ ____ __%
12 Interim Income Adjustments CP46 ____ ____ __
13 GROSS INVESTMENT INCOME ____
EXPENSES
14 Operating Expense Accrual CP5095 (____)
15 12-b 1 Expense Accrual CP53/CP54B/CP54C +\-____
Direct Expense Payments +/-____
16 NET INVESTMENT INCOME TODAY ____
To Page 1, line 3 TF
To Page 2, Line 18
NET ASSETS AT COST RECONCILIATION
17 R701 Prior Day's Net Assets at Cost ____
18 Today's Net Investment Income (Line 16, page 2) ____
19 Today's Total Net Share Activity (Line 6, page 3) ____
20 R302 Today's Net Gain/Loss (excl. Futures) ____
21 R309 Mark-to-Market on Futures ____
22 R810 PIK/IO Adjustments _________________________ (____)
23 Today's Distributions (Line 31, page 3 or amounts from
Line 5 & 6, page 1) (____)
24 Below Adjustments *____
25 R701 TODAY'S NET ASSETS AT COST ____
____
(Pre-priced)
* DETAIL OF ADJUSTMENTS
$ ____________________________
$ ____________________________
$ ____________________________
$ ____________________________
</TABLE>
<PAGE> 3
EXHIBIT II
DAILY NET ASSET RECONCILIATION AND NAV PROOF Page 3
FUND: ______________________________ DATE: ________________
<TABLE>
<CAPTION>
______________________________________________________________________________
Line Report Activity Amount
______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Current Shares Outstanding
CAPITAL SHARE TRANSACTIONS-IMPACT ON NAV
CLASS A CLASS B CLASS C
1 S/R Today's Net Dollars to Fund _______ _______ _______
2 Est. Today's Net Est. Dollars _______ _______ _______
3 P/D Reverse P/D Net Est. Dollars _______ _______ _______
4 Reinvestment Dollars to Fund _______ _______ _______
5 Today's Dollar Impact = _______ = _______ = _______
6 TODAY'S TOTAL DOLLAR IMPACT A+B+C = _______
7 S/R Today's Net Shares to Fund _______ _______ _______
8 Est. Today's Net Est. Shares _______ _______ _______
9 P/D Reverse P/D Net Est. Shares _______ _______ _______
10 Reinvestment Shares to Fund _______ _______ _______
11 Today's Share Impact per ( = _______ = _______ = _______
12 Prior Day's NAV x _______ x _______ x _______
13 = (_______)= (_______)= (_______)
15 Change in Capital Shares(L5-L13) _______ = _______ = _______
PER SHARE EFFECT ** _______ _______ _______
_______ _______ _______
+A+B+C = _______
18 **IF ANSWER EXCEEDS +/-.0005 NOTIFY SUPERVISOR PER SHARE TF _______
_______
Equalization Factor _______ _______ _______
CLASS A CLASS B CLASS C
19 S/R Current Shares Outstanding _______ _______ _______
20 Est. Share Estimates - Sales _______ _______ _______
21 Est. Share Est - Redemptions (_______) (_______) (_______)
22 Est. Share Est - Reinvestments _______ _______ _______
23 Adj Shares Outstanding GL Total= _______ _______ _______
24 S/R Unsettled Sales CS80A (______)CS80B(_____)CS80C(____)
25 S/R Unsettled Redemptions CS90A ______ CS90B _____ CS90C ____
26 Current Distribution Shares GL Total___ _______ _______
TOTAL OUTSTANDING SHARES A+B+C ____________________________
____________________________
DIVIDENDS AND DISTRIBUTIONS
27 S/R T/A Reported Amount ______ ______ _______
28 P/D Estimate Div ______ ______ _______
29 Tie-in Adjustment Needed ______ ______ _______
30 Current Day's Total Dividend ** ______ ______ _______
** Line 23 or 26 x Line 31
31 Dividend Rate ______ ______ _______
</TABLE>
<PAGE> 4
DAILY NET ASSET RECONCILIATION AND NAV PROOF Page
FUND:__________________________________________ DATE: _______________
PAR/SHARES AND COST RECONCILIATION
<TABLE>
<CAPTION>
POSITIONS
<S> <C> <C> <C> <C> <C> <C>
Line Report Activity Long Short
Par/ Par/
Shares Cost Shares Cost
1 P/D R104 Prior Day's Total Par/Shares&Cost +______ ____ +_____ ____
2 Trade Tkts Purchases - L/T Inv. +______ ____ +_____ ____
3 Trade Tkts Purchases - S/T Inv. +______ ____ +_____ ____
4 Trade Tkts Opening Contracts +______ ____ +_____ ____
5 R302 Sales -______ ____ -_____ ____
6 P/D R104 Maturities -______ ____ -_____ ____
7 R302 Closing Contracts -______ ____ -_____ ____
8 R104 Current Day's Ttl Par/Shares&Cost =______ ____ =_____ ____
9 R301/04/05 Capital Change Impact +______ ____ _____ ____
10 Corrct Tkts Correcting Adjustments +/-______ ____+/-_____ ____
11 R104 Rev Revised Par/Shares & Cost =______ ____ =_____ ____
12 R104 Subtract Futures Par & Cost -______ ____ -_____ ____
13 Total Par & Cost =______ ____ =_____ ____
G/L Acct G/L Acct
GENERAL LEDGER COST RECONCILIATION
12 R701 Investments at Cost/Written Options AS10+____ LS10+______
13 R701 Short-term Investments (cost) AS70+____ ______
14 R701 Short Securities ____ LS20+______
16 Total Reconciled Cost Above (Line 13) =____ =______
17 Proof of R403 Par/Shares ____ ______
Prepared by _______________________ Reviewer's initials: _____________
</TABLE>
<PAGE> 1
N-SAR ITEM 77C (AC Global Equity)
a) A Special Meeting of Shareholders was held on December 16, 1994.
b) Inapplicable
c) The following was voted on at the meeting:
1) Approval of a new investment advisory agreement between the Registrant and
American Capital Asset Management, Inc. to take effect upon the closing of
the proposed acquisition of American Capital Management & Research, Inc.
by The Van Kampen Merritt Companies, Inc.
For 6,126,274.363 Against 179,663.365
2) Approval of a new investment subadvisory agreement between American
Capital Asset Management, Inc. and John Govett & Co. Limited to take
effect as soon as practicable following the approval of such subadvisory
agreement.
For 6,121,924.601 Against 182,694.596
d) Inapplicable
<PAGE> 1
EXHIBIT 77 0
AMERICAN CAPITAL WORLD PORTFOLIO SERIES, INC. -
AMERICAN CAPITAL GLOBAL EQUITY FUND
Underwritings Pursuant to Rule 10f-3
1. Name of Issuer: Nabisco Holdings Corp.
Securities Acquired from: Goldman Sachs
Syndicate Members: See Attached List
Principal Amount in Offering: 45,000,000
Principal Amount Purchased: 8,000
Price Per Share: $24.50
Purchase Date: 1-19-95
<PAGE> 2
NABISCO HOLDINGS CORP.
Goldman, Sachs & Co.............................................................
Bear, Stearns & Co. Inc.........................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..............................
Morgan Stanley & Co. Incorporated...............................................
Advest, Inc.....................................................................
Sanford C. Bernstein & Co., Inc.................................................
CS First Boston Corporation.....................................................
Cleary Gull Reiland & McDevitt Inc..............................................
Dain Bosworth Incorporated......................................................
Dean Witter Reynolds Inc........................................................
Dillon, Read & Co., Inc.........................................................
Doft & Co., Inc.................................................................
Donaldson, Lufkin & Jenrette Securities Corporation.............................
A. G. Edwards & Sons, Inc.......................................................
Interstate/Johnson Lane Corporation.............................................
Janney Montgomery Scott Inc.....................................................
Johnston, Lemon & Co. Incorporated..............................................
Edward D. Jones & Co............................................................
Kemper Securities, Inc..........................................................
C.J. Lawrence/Deutsche Bank Securities Corporation..............................
Lazard Freres & Co..............................................................
Lehman Brothers Inc.............................................................
McDonald & Company Securities, Inc..............................................
J.P. Morgan Securities Inc......................................................
Oppenheimer & Co., Inc..........................................................
PaineWebber Incorporated........................................................
Prudential Securities Incorporated..............................................
Pryor, McClendon, Counts & Co., Inc.............................................
Rauscher Pierce Refsnes, Inc....................................................
The Robinson-Humphrey Company, Inc..............................................
Salomon Brothers Inc............................................................
Smith Barney Inc................................................................
Sutro & Co. Incorporated........................................................
Tucker Anthony Incorporated.....................................................
Wasserstein Perella Securities, Inc.............................................
Wertheim Schroder & Co. Incorporated............................................
Wheat, First Securities, Inc....................................................
<PAGE> 1
N-SAR ITEM 77C (AC Global Govt)
a) A Special Meeting of Shareholders was held on December 16, 1994.
b) Inapplicable
c) The following was voted on at the meeting:
1) Approval of a new investment advisory agreement between the Registrant and
American Capital Asset Management, Inc. to take effect upon the closing of
the proposed acquisition of American Capital Management & Research, Inc.
by The Van Kampen Merritt Companies, Inc.
For 17,670,990.653 Against 322,310.281
2) Approval of a new investment subadvisory agreement between American
Capital Asset Management, Inc. and John Govett & Co. Limited to take
effect as soon as practicable following the approval of such subadvisory
agreement.
For 17,613,644.090 Against 383,296.327
d) Inapplicable
<PAGE> 1
AMERICAN CAPITAL WORLD PORTFOLIO SERIES, INC.
BY-LAWS
(As amended March 3, 1995)
ARTICLE I.
STOCKHOLDERS
SECTION 1.01. Annual Meeting. So long as the Corporation is
registered as an investment company under the Investment Company Act of 1940,
the Corporation shall not be required to hold an annual meeting in any year in
which the election of directors is not required to be acted upon under the
Investment Company Act of 1940. In the event that the Corporation is required
to hold an annual meeting of its stockholders by the Investment Company Act of
1940, such meeting shall be held: (a) at a date and time set by the Board of
Directors in accordance with the Investment Company Act of 1940 ("40 Act") if
the purpose of the meeting is to elect Directors or to approve an investment
advisory agreement or distribution agreement; and (b) on a date fixed by the
Board of Directors (i) in the fiscal year immediately following the fiscal year
in which independent accountants were appointed if the purpose of the meeting is
to ratify the selection of such independent accountants or (ii) in any fiscal
year if an annual meeting is to be held for any reason other than as specified
in the foregoing. Any stockholders' meeting held in accordance with the
preceding sentence shall for all purposes constitute the annual meeting of
stockholders for the fiscal year of the Corporation in which the meeting is
held. At any such meeting, the stockholders shall elect Directors to hold the
offices of any Directors who have held office for more than one year or who have
been elected by the Board of Directors to fill vacancies which result from any
cause. Except as the Charter or statute provides otherwise, any business may be
considered at an annual meeting without the purpose of the meeting having been
specified in the notice. Failure to hold an annual meeting does not invalidate
the Corporation's existence or affect any otherwise valid corporate acts.
SECTION 1.02 Special Meeting. At any time in the interval between
stockholders' meetings, a special meeting of the stockholders may be called by
the Chairman of the Board or the President or by a majority of the Board of
Directors by vote at a meeting or in writing (addressed to the Secretary of the
Corporation) with or without a meeting. Special meetings of stockholders shall
also be called by the Secretary upon the written request of the holders of not
less than ten percent (10%) of all the shares entitled to vote at such meeting.
Such request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. No special meeting need be called upon the
request of the holders of less than a majority of all the shares entitled to
vote at such meeting to consider any matter which is substantially the same as a
matter voted upon at any special meeting of stockholders held during the
preceding twelve months.
SECTION 1.03. Place of Meetings. Meetings of stockholders shall
be held at
1
<PAGE> 2
such place in the United States as is set from time to time by the Board of
Directors
SECTION 1.04. Notice of Meetings; Waiver of Notice. Not less than
ten nor more than 90 days before each stockholders' meeting, the Secretary shall
give written notice of the meeting to each stockholder entitled to vote at the
meeting and each other stockholder entitled to notice of the meeting. The
notice shall state the time and place of the meeting and, if the meeting is a
special meeting or notice of the purpose is required by statute, the purpose of
the meeting. Notice is given to a stockholder when it is personally delivered
to him, left at his residence or usual place of business, or mailed to him at
his address as it appears on the records of the Corporation. Notwithstanding
the foregoing provisions, each person who is entitled to notice waives notice if
he before or after the meeting signs a waiver of the notice which is filed with
the records of stockholders' meetings, or is present at the meeting in person or
by proxy.
SECTION 1.05. Quorum; Voting. Unless statute or the Charter
provides otherwise, at a meeting of stockholders the presence in person or by
proxy of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting constitutes a quorum, and a majority of all the votes
cast at a meeting at which a quorum is present is sufficient to approve any
matter which properly comes before the meeting, except that a plurality of all
the votes cast at a meeting at which a quorum is present is sufficient to elect
a director.
SECTION 1.06. Adjournments. Whether or not a quorum is present, a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time by the stockholders present in person or by proxy by
a majority vote. Any business which might have been transacted at the meeting as
originally notified may be deferred and transacted at any such adjourned meeting
at which a quorum shall be present. No further notice of an adjourned meeting
other than by announcement shall be necessary if held on a date not more than
120 days after the original record date.
SECTION 1.07. General Right to Vote; Proxies. Unless the Charter
provides for a greater or lesser number of votes per share or limits or denies
voting rights, each outstanding share of stock, regardless of class, is entitled
to one vote on each matter submitted to a vote at a meeting of stockholders. In
all elections for directors, each share of stock may be voted for as many
individuals as there are directors to be elected and for whose election the
share is entitled to be voted. A stockholder may vote the stock the stockholder
owns of record either in person or by proxy. A stockholder may sign a writing
authorizing another person to act as proxy. Signing may be accomplished by the
stockholder or the stockholder's authorized agent signing the writing or causing
the stockholder's signature to be affixed to the writing by any reasonable
means, including facsimile signature. A stockholder may authorize another
person to act as proxy by transmitting, or authorizing the transmission of, a
telegram, cablegram, datagram, or other means of electronic transmission to the
person authorized to act as proxy or to a proxy solicitation firm, proxy support
service organization, or other person authorized by the person who will act as
proxy to receive the transmission. Unless a proxy provides otherwise, it is not
valid more than 11 months after its date. A proxy is revocable by a stockholder
at any time without condition or qualification unless the proxy states that it
is irrevocable and the proxy is
2
<PAGE> 3
coupled with an interest. A proxy may be made irrevocable for so long as it is
coupled with an interest. The interest with which a proxy may be coupled
includes an interest in the stock to be voted under the proxy or another general
interest in the Corporation or its assets or liabilities.
SECTION 1.08. List of Stockholders. At each meeting of
stockholders, a full, true and complete list of all stockholders entitled to
vote at such meeting, showing the number and class of shares held by each and
certified by the transfer agent for such class or by the Secretary, shall be
furnished by the Secretary.
SECTION 1.09. Conduct of Voting. At all meetings of stockholders,
unless the voting is conducted by inspectors, the proxies and ballots shall be
received, and all questions touching the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided,
by the chairman of the meeting. If demanded by stockholders, present in person
or by proxy, entitled to cast 10% in number of votes entitled to be cast, or if
ordered by the chairman, the vote upon any election or question shall be taken
by ballot, and upon like demand or order, the voting shall be conducted by two
inspectors, in which event the proxies and ballots shall be received, and all
questions touching the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided, by such inspectors.
Unless so demanded or ordered, no vote need be by ballot and voting need not be
conducted by inspectors. The stockholders at any meeting may choose an
inspector or inspectors to act at such meeting, and in default of such election
the chairman of the meeting may appoint an inspector or inspectors. No
candidate for election as a director at a meeting shall serve as an inspector
thereat.
SECTION 1.10. Informal Action by Stockholders. Any action
required or permitted to be taken at a meeting of stockholders may be taken
without a meeting if there is filed with the records of stockholders' meetings a
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting but not
entitled to vote at it.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and affairs of
the Corporation shall be managed under the direction of its Board of Directors.
All powers of the Corporation may be exercised by or under authority of the
Board of Directors, except as conferred on or reserved to the stockholders by
statute or by the Charter or By-Laws.
SECTION 2.02. Number of Directors. The business and property of
the Corporation shall be conducted and managed by a Board of Directors
consisting of not less than five (5) nor more than seventeen (17) Directors,
which number may be increased or decreased
3
<PAGE> 4
as herein provided. By vote of a majority of the entire Board of Directors, the
number of Directors fixed by these Bylaws may be increased or decreased from
time to time, but the tenure of office of a Director shall not be affected by
any decrease in the number of Directors to hold office until the next annual
meeting and until their successors are elected and qualify. Directors need not
be stockholders.
SECTION 2.03. Election and Tenure of Directors. At each annual
meeting, the stockholders shall elect directors to hold office until the next
annual meeting and until their successors are elected and qualify; provided,
however, that through June 30, 1996 the term of office of each director shall
end at the time such director reaches the age of 76 1/2 or 74 1/2 for persons
first elected on or after January 1, 1986 as a director of any open end
investment company managed by Van Kampen American Capital Asset Management, Inc.
and that on and after July 1, 1996 the term of office of each director shall end
at the time such director reaches the age of 76 1/2 or 72 1/2 for persons first
elected on or after January 1, 1986 as a director of any open end investment
company managed by Van Kampen American Capital Asset Management, Inc.
SECTION 2.04. Removal of Director. Unless statute or the Charter
provides otherwise, the stockholders may remove any director, with or without
cause, by the affirmative vote of a majority of the outstanding voting
securities as defined in Section 2(a)(42) of the 40 Act. Such action may be
taken at a special meeting of stockholders called for such purpose upon the
request of the holders of not less than 10% of the shares entitled to vote
pursuant to Section 1.02 hereof.
Whenever ten or more stockholders of record who have been such for
at least six months preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least $25,000 or at least
1 per centum of the outstanding shares, whichever is less, shall apply to the
Board of Directors in writing, stating that they wish to communicate with other
stockholders with a view to obtaining signatures to a request for a special
meeting to remove any director and accompanied by a form of communication and
request which they wish to transmit, the Board shall within five business days
after receipt of such application either:
(a) afford to such applicants access to a list of the names and
addresses of all stockholders as recorded on the books of the Corporation; or
(b) inform such applicants as to the approximate number of stockholders
of record, and the approximate cost of mailing to them the proposed
communication and form of request.
If the Board elects to follow the course specified in paragraph
(b), the Board, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all stockholders of
record at their addresses as recorded on the books, unless within five business
days after such tender the Board shall mail to such applicants and file with the
Securities and Exchange Commission (the "Commission") together with a copy of
the material to be mailed, a
4
<PAGE> 5
written statement signed by at least a majority of the directors to the effect
that in their opinion either such material contains untrue statements of fact or
omits to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
If the Commission shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more of
such objections, the Commission shall find, after notice and opportunity for
hearing, that all objections so sustained have been met, and shall enter an
order so declaring, the Board shall mail copies of such material to all
stockholders with reasonable promptness after the entry of such order and the
renewal of such tender.
SECTION 2.05. Vacancy on Board. The stockholders may elect a
successor to fill a vacancy on the Board of Directors which results from the
removal of a director. A director elected by the stockholders to fill a vacancy
which results from the removal of a director serves for the balance of the term
of the removed director. A majority of the remaining directors, whether or not
sufficient to constitute a quorum, may fill a vacancy on the Board of Directors
which results from any cause except an increase in the number of directors and a
majority of the entire Board of Directors may fill a vacancy which results from
an increase in the number of directors. A director elected by the Board of
Directors to fill a vacancy serves until the next annual meeting of stockholders
and until his successor is elected and qualifies. The Board of Directors may
not fill more than two directorships resulting from an increase in the number of
directors during the period between any two successive annual meetings of
stockholders.
SECTION 2.06. Regular Meetings. Any regular meeting of the Board
of Directors shall be held on such date and at any place as may be designated
from time to time by the Board of Directors.
SECTION 2.07. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by a majority of the Board of Directors by vote at a meeting, or in
writing with or without a meeting. A special meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors. In the absence of designation such meeting
shall be held at such place as may be designated in the call.
SECTION 2.08. Notice of Meeting. Except as provided in Section
2.06, the Secretary shall give notice to each director of each regular and
special meeting of the Board of Directors. The notice shall state the time and
place of the meeting. Notice is given to a director when it is delivered
personally to him, left at his residence or usual place of business, or sent by
telegraph or telephone, at least 24 hours before the time of the meeting or, in
the alternative, by mail to his address as it shall appear on the records of the
Corporation, at least 72 hours before the time of the meeting. Unless the
By-Laws or a resolution of the Board of Directors provides otherwise, the notice
need not state the business to be transacted at or the purposes of any regular
or special meeting of the Board of Directors. No notice of any meeting of the
Board of Directors need be given to any director who attends (except where a
director attends a meeting for the
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express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully convened), or to any director who, in writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of the Board of Directors,
regular or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement.
SECTION 2.09. Action by Directors. Unless statute or the Charter
or By-Laws requires a greater proportion, the action of a majority of the
directors present at a meeting at which a quorum is present is action of the
Board of Directors. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. In the absence of a
quorum, the directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified. Any action required or permitted to be taken at a meeting
of the Board of Directors may be taken without a meeting, if a unanimous written
consent which sets forth the action is signed by each member of the Board and
filed with the minutes of proceedings of the Board.
SECTION 2.10. Meeting by Conference Telephone. Members of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Participation in a meeting by
these means constitutes presence in person at a meeting.
SECTION 2.11. Compensation. By resolution of the Board of
Directors a fixed sum and expenses, if any, for attendance at each regular or
special meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. A director who serves the Corporation in
any other capacity also may receive compensation for such other services,
pursuant to a resolution of the directors.
ARTICLE III.
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from
among its members an Executive Committee and other committees composed of two or
more directors and delegate to these committees any of the powers of the Board
of Directors, except the power to declare dividends or other distributions on
stock, elect directors, issue stock other than as provided in the next sentence,
recommend to the stockholders any action which requires stockholder approval,
amend the Articles of Incorporation or By-Laws, approve any merger or share
exchange which does not require stockholder approval, elect or remove officers
or members of any such committee, fix the compensation or any member of such
committee, or any other
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power prohibited by law. If the Board of Directors has given general
authorization for the issuance of stock, a committee of the Board, in accordance
with a general formula or method specified by the Board by resolution or by
adoption of a stock option or other plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
SECTION 3.02. Committee Procedure. Each committee may fix rules
of procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if a unanimous written consent which
sets forth the action is signed by each member of the committee and filed with
minutes of the committee. The members of a committee may conduct any meeting
thereof by conference telephone in accordance with the provisions of Section
2.10.
SECTION 3.03. Emergency. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as contemplated by the
Charter and the By-Laws, any two or more available members of the then incumbent
Executive Committee shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Corporation in
accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available directors shall elect an Executive Committee
consisting of any two members of the Board of Directors, whether or not they be
officers of the Corporation, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Corporation
in accordance with the aforegoing provisions of this Section. This Section
shall be subject to implementation by resolution of the Board of Directors
passed from time to time for that purpose, and any provisions of the By-Laws
(other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
resolutions shall be suspended until it shall be determined by any interim
Executive Committee acting under this Section that it shall be to the advantage
of the Corporation to resume the conduct and management of its affairs and
business under all the other provisions of the By-Laws.
ARTICLE IV.
OFFICERS
SECTION 4.01. Executive and Other Officers. The Corporation shall
have a President, a Secretary, and a Treasurer who shall be the executive
officers of the Corporation. The Board of Directors may designate an officer to
serve as Chief Executive Officer, having
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general supervision of the business and affairs of the Corporation, or as Chief
Operating Officer, having supervision of the operations of the Corporation; in
the absence of designation the President shall serve as Chief Executive Officer
and Chief Operating Officer. The Corporation may also have one or more Vice
Presidents, assistant officers, and subordinate officers as may be established
by the Board of Directors. A person may hold more than one office in the
Corporation but may not serve concurrently as both President and Vice President
or as President and Secretary of the Corporation. Officers may also be
directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board,
if one be elected, shall preside at all meetings of the Board of Directors and
of the stockholders at which he shall be present; and, in general, he shall
perform all such duties as are from time to time assigned to him by the Board of
Directors. The Chairman of the Board shall be a director. The Chairman of the
Board, if one be elected, shall not be an officer of the corporation unless
expressly designated as an officer by the Board of Directors; the Chairman shall
be an executive officer if also expressly designated as the Chief Executive
Officer of the Corporation.
SECTION 4.03. President. The President, in the absence of the
Chairman of the Board, shall preside at all meetings of the Board of Directors
and of the stockholders at which he shall be present; he may sign and execute,
in the name of the Corporation, all authorized deeds, mortgages, bonds,
contracts or other instruments, except in cases in which the signing and
execution thereof shall have been expressly delegated to some other officer or
agent of the Corporation; and, in general, he shall perform all duties usually
performed by a president of a corporation and such other duties as are from time
to time assigned to him by the Board of Directors or the Chief Executive Officer
of the Corporation.
SECTION 4.04. Vice Presidents. The Vice President or Vice
Presidents, at the request of the Chief Executive Officer or the President, or
in the President's absence or during his inability to act, shall perform the
duties and exercise the functions of the President, and when so acting shall
have the powers of the President. If there be more than one Vice President, the
Board of Directors may determine which one or more of the Vice Presidents shall
perform any of such duties or exercise any of such functions, of if such
determination is not made by the Board of Directors, the Chief Executive
Officer, or the President may make such determination; otherwise any of the Vice
Presidents may perform any of such duties or exercise any of such functions.
The Vice President or Vice Presidents shall have such other powers and perform
such other duties, and have such additional descriptive designations in their
titles (if any), as are from time to time assigned to them by the Board of
Directors, the Chief Executive Officer, or the President.
SECTION 4.05. Secretary. The Secretary shall keep the minutes of
the meetings of the stockholders, of the Board of Directors and of any
committees (unless a committee has elected a different person as secretary), in
books provided for the purpose; he shall see that all notices are duly given in
accordance with the provisions of the By-Laws or as required by law; he shall be
custodian of the records of the Corporation; he may witness any document on
behalf of the Corporation, the execution of which is duly authorized, see that
the corporate seal is
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affixed where such document is required or desired to be under its seal, and
when so affixed, may attest the same; and, in general, he shall perform all
duties incident to the office of a secretary of a corporation, and such other
duties as are from time to time assigned to him by the Board of Directors, the
Chief Executive Officer, or the President.
SECTION 4.06. Treasurer. The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors; he shall render to the President and to the Board of Directors,
whenever requested an account of the financial condition of the Corporation;
and, in general, he shall perform all the duties incident to the office of a
treasurer of a corporation, and such other duties as are from time to time
assigned to him by the Board of Directors, the Chief Executive Officer, or the
President.
SECTION 4.07. Assistant and Subordinate Officers. The assistant
and subordinate officers of the Corporation are all officers below the office of
Vice President, Secretary, or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board of
Directors, the Chief Executive Officer, or the President.
SECTION 4.08. Election, Tenure and Removal of Officers. The Board
of Directors shall elect the officers. The Board of Directors may from time to
time authorize any committee or officer to appoint assistant and subordinate
officers. The President serves for one year. All other officers shall be
appointed to hold their offices, respectively, during the pleasure of the Board.
The Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by the Board) may remove an officer at any time.
The removal of an officer does not prejudice any of his contract rights. The
Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by the Board) may fill a vacancy which occurs in
any office for the unexpired portion of the term.
SECTION 4.09. Compensation. The Board of Directors shall have
power to fix the salaries and other compensation and remuneration, of whatever
kind, of all officers of the Corporation. It may authorize any committee or
officer, upon whom the power of appointing assistant and subordinate officers
may have been conferred, to fix the salaries, compensation and remuneration of
such assistant and subordinate officers.
ARTICLE V.
STOCK
SECTION 5.01. Certificates for Stock. Upon written request
therefor in accordance with such procedures as may be established by the Board
of Directors from time to time, each stockholder is entitled to certificates
which represent and certify the shares of stock he holds in the Corporation.
Each stock certificate shall include on its face the name of the
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corporation that issues it, the name of the stockholder or other person to whom
it is issued, and the class of stock and number of shares it represents. It
shall be in such form, not inconsistent with law or with the Charter, as shall
be approved by the Board of Directors or any officer or officers designated for
such purpose by resolution of the Board of Directors. Each stock certificate
shall be signed by the Chairman of the Board, the President, or a Vice
President, and countersigned by the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the
actual corporate seal or a facsimile of it or in any other form and the
signatures may be either manual or facsimile signatures. A certificate is valid
and may be issued whether or not an officer who signed it is still an officer
when it is issued.
SECTION 5.02. Transfers. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates of stock; and
may appoint transfer agents and registrars thereof. The duties of transfer
agent and registrar may be combined.
SECTION 5.03. Record Date and Closing of Transfer Books. The
Board of Directors may set a record date or direct that the stock transfer books
be closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be more than 90 days before the date on which
the action requiring the determination will be taken; the transfer books may not
be closed for a period longer than 20 days; and, in the case of a meeting of
stockholders, the record date or the closing of the transfer books shall be at
least ten days before the date of the meeting.
SECTION 5.04. Stock Ledger. The Corporation shall maintain a
stock ledger which contains the name and address of each stockholder and the
number of shares of stock of each class which the stockholder holds. The stock
ledger may be in written form or in any other form which can be converted within
a reasonable time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the offices of a transfer agent
for the particular class of stock, or, if none, at the principal office in the
State of Texas or the principal executive offices of the Corporation.
SECTION 5.05. Certification of Beneficial Owners. The Board of
Directors may adopt by resolution a procedure by which a stockholder of the
Corporation may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may certify; the purpose for which the certification
may be made; the form of certification and the information to be contained in
it; if the certification is with respect to a record date or closing of the
stock transfer books, the time after the record date or closing of the stock
transfer books, within which the certification must be received by the
Corporation; and any other provisions with respect to the procedure which the
Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this
Section, the person specified in the certification is, for the purpose set forth
in the certification, the holder of record of the specified stock in place of
the stockholder
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who makes the certification.
SECTION 5.06. Lost Stock Certificates. The Board of Directors of
the Corporation may determine the conditions for issuing a new stock certificate
in place of one which is alleged to have been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
ARTICLE VI.
FINANCE
SECTION 6.01. Checks, Drafts, Etc. All checks, drafts and orders
for the payment of money, notes and other evidences of indebtedness, issued in
the name of the Corporation, shall, unless otherwise provided by resolution of
the Board of Directors, be signed by the President, a Vice President or an
Assistant Vice President and countersigned by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
SECTION 6.02. Annual Statement of Affairs. The President shall
prepare annually a full and correct statement of the affairs of the Corporation,
to include a balance sheet and a financial statement of operations for the
preceding fiscal year. The statement of affairs shall be submitted at the annual
meeting of the stockholders and, within 20 days after the meeting, placed on
file at the Corporation's principal office.
SECTION 6.03. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
SECTION 6.04. Dividends. If declared by the Board of Directors at
any meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
ARTICLE VII.
SUNDRY PROVISIONS
SECTION 7.01. Books and Records. The Corporation shall keep
correct and complete books and records of its accounts and transactions and
minutes of the proceedings of its stockholders and Board of Directors and of any
executive or other committee when exercising any of the powers of the Board of
Directors. The books and records of a Corporation may be in written form or in
any other form which can be converted within a reasonable time into written
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form for visual inspection. Minutes shall be recorded in written form but may
be maintained in the form of a reproduction. The original or a certified copy
of the By-Laws shall be kept at the principal office of the Corporation.
SECTION 7.02. Corporate Seal. The Board of Directors shall
provide a suitable seal, bearing the name of the Corporation, which shall be in
the charge of the Secretary. The Board of Directors may authorize one or more
duplicate seals and provide for the custody thereof. If the Corporation is
required to place its corporate seal to a document, it is sufficient to meet the
requirement of any law, rule, or regulation relating to a corporate seal to
place the word "Seal" adjacent to the signature of the person authorized to sign
the document on behalf of the Corporation.
SECTION 7.03. Bonds. The Board of Directors may require any
officer, agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors.
SECTION 7.04. Voting Upon Shares in Other Corporations. Stock of
other corporations or associations, registered in the name of the Corporation,
may be voted by the President, a Vice President, or a proxy appointed by either
of them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
SECTION 7.05. Mail. Any notice or other document which is
required by these By-Laws to be mailed shall be deposited in the United States
mails, postage prepaid.
SECTION 7.06. Execution of Documents. A person who holds more
than one office in the Corporation may not act in more than one capacity to
execute, acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
SECTION 7.07. Amendments. Subject to the special provisions of
Section 2.02, (a) any and all provisions of these By-Laws may be altered or
repealed and new by-laws may be adopted at any annual meeting of the
stockholders, or at any special meeting called for that purpose, and (b) the
Board of Directors shall have the power, at any regular or special meeting
thereof, to make and adopt new by-laws, or to amend, alter or repeal any of the
By-Laws of the Corporation.
ARTICLE VIII.
CUSTODIAN
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SECTION 8.01. Employment of Custodian. All assets of the
Corporation shall be held by one or more custodian banks or trust companies
meeting the requirements of the Investment Company Act of 1940, as amended (the
"1940 Act"), and having capital, surplus and undivided profits of at least
$2,000,000 and may be registered in the name of the Corporation, including the
designation of the particular class or series to which such assets belong, or
any such custodian, or the nominee of either of them. The terms of any such
custodian agreement shall be determined by the Board of Directors, which terms
shall be in accordance with the provisions of the 1940 Act. If so directed by
vote of the holders of a majority of the outstanding shares of a particular
class or series or by vote of the Board of Directors, the custodian of the
assets belonging to such class or series shall deliver and pay over such assets
as specified in such vote.
Subject to such rules, regulations and orders as the Securities and
Exchange Commission (the "Commission") may adopt, the Corporation may direct a
custodian to deposit all or any part of the securities owned by the Corporation
in a system for the central handling of securities established by the Federal
Reserve system or by a national securities exchange or a national securities
association registered with the Commission, or otherwise in accordance with the
1940 Act, pursuant to which system, all securities of a particular class or
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without the physical delivery of
such securities, provided that all such deposits shall be subject to withdrawal
only upon the order of the Corporation or a custodian.
ARTICLE IX.
INDEMNIFICATION
SECTION 9.01. Indemnification of Directors and Officers. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
a proceeding by or in the right of the Corporation in which such person shall
have been adjudged to be liable to the Corporation), by reason of being or
having been a director or officer of the Corporation, or serving or having
served at the request of the Corporation as a director, officer, partner,
trustee, employee or agent of another entity in which the Corporation has an
interest as a shareholder, creditor or otherwise (a "Covered Person"), against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable expenses
(including attorney's fees) actually incurred by the Covered Person in
connection with such action, suit or proceeding, except (a) liability in
connection with any proceeding in which it is determined that (i) the act or
omission of the Covered Person was material to the matter giving rise to the
proceeding, and was committed in bad faith or was the result of active and
deliberate dishonesty, or (ii) the Covered Person actually received an improper
personal benefit in money, property or services, or (iii) in the case of any
criminal proceeding, the Covered Person had reasonable cause to believe that the
act or omission was unlawful and (b) liability to the Corporation or its
security holders to which the Covered Person would otherwise be subject by
reason of willful
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misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office (any or all of the conduct referred to in
clauses (a) and (b) being hereinafter referred to as "Disabling Conduct").
SECTION 9.02. Procedure for Indemnification. Any indemnification
under this By-law shall (unless ordered by a court) be made by the Corporation
only as authorized for a specific proceeding by (a) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
Covered Person to be indemnified was not liable by reason of Disabling Conduct,
(b) dismissal of the proceeding against the Covered Person for insufficiency of
evidence of any Disabling Conduct, or (c) a reasonable determination, based upon
a review of the facts, by a majority of a quorum of the directors who are
neither "interested persons" of the Corporation as defined in the 40 Act nor
parties to the proceeding ("disinterested, non-party directors"), or an
independent legal counsel in a written opinion, that the Covered Person was not
liable by reason of Disabling Conduct. The termination of any proceeding by
judgment, order or settlement shall not create a presumption that the Covered
Person did not meet the required standard of conduct; the termination of any
proceeding by conviction, or a plea of nolo contendere or its equivalent, or an
entry of an order of probation prior to judgment, shall create a rebuttable
presumption that the Covered Person did not meet the required standard of
conduct. Any determination pursuant to this Section IX shall not prevent
recovery from any Covered Person of any amount paid to him in accordance with
this By-Law as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to be liable by reason of
Disabling Conduct.
SECTION 9.03. Advance Payment of Expenses. Reasonable expenses
(including attorney's fees) incurred by a Covered Person may be paid or
reimbursed by the Corporation in advance of the final disposition of an action,
suit or proceeding upon receipt by the Corporation of (a) a written affirmation
by the Covered Person of his good faith belief that the standard of conduct
necessary for indemnification under this By-Law has been met and (b) a written
undertaking by or on behalf of the Covered Person to repay the amount if it is
ultimately determined that such standard of conduct has not been met, so long as
either (i) the Covered Person has provided a security for his undertaking, (ii)
the Corporation is insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the disinterested, non-party
directors, or an independent legal counsel in a written opinion, has determined,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Covered Person ultimately
will be found entitled to indemnification.
SECTION 9.04. Exclusivity, Etc. The indemnification and advance
of expenses provided by this By-Law shall not be deemed exclusive of any other
rights to which a Covered Person seeking indemnification or advance of expenses
may be entitled under any law (common or statutory), or any agreement, vote of
stockholders or disinterested directors, or other provision that is consistent
with law, both as to action in an official capacity and as to action in another
capacity while holding office or while employed by or acting as agent for the
Corporation, shall continue in respect of all events occurring while the Covered
Person was a director or officer after such Covered Person has ceased to be a
director or officer, and shall inure to the benefit of
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the estate, heirs, executors and administrators of such Covered person. All
rights to indemnification and advance of expenses under the Charter and
hereunder shall be deemed to be a contract between the Corporation and each
director or officer of the Corporation who serves or served in such capacity at
any time while this By-Law is in effect. Nothing herein shall prevent the
amendment of this By-Law, provided that no such amendment shall diminish the
rights of any Covered Person hereunder with respect to events occurring or
claims made before its adoption or as to claims made after its adoption in
respect of events occurring before its adoption. Any repeal or modification of
this By-Law shall not in any way diminish any rights to indemnification or
advance of expenses of a Covered Person or the obligations of the Corporation
arising hereunder with respect to events occurring, or claims made, while this
By-Law or any provision hereof is in force.
SECTION 9.05. Insurance. The Corporation may purchase and
maintain insurance on behalf of any Covered Person against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such; provided, however, that the Corporation shall not purchase
insurance to indemnify any Covered Person against liability for Disabling
Conduct.
SECTION 9.06. Severability: Definitions. The invalidity or
unenforceability of any provision of this Article IX shall not affect the
validity or enforceability of any other provision hereof. The phrase "this
By-Law" in this Article IX means this Article IX in its entirety.
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INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 20th day of December, 1994 by and between AMERICAN CAPITAL
WORLD PORTFOLIO SERIES, INC., a Maryland corporation, hereinafter referred to as
the "FUND", and AMERICAN CAPITAL ASSET MANAGEMENT, INC., a Delaware corporation,
hereinafter referred to as the "ADVISER".
The FUND and the ADVISER agree as follows:
1. Appointment
a. The FUND hereby appoints the ADVISER to act as investment adviser to the
FUND's American Capital Global Equity Fund ("Global Equity") and American
Capital Global Government Securities Fund ("Global Government") (collectively,
the "Portfolios"), 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 FUND establishes one or more portfolios other than the
Portfolios 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 FUND in writing
whereupon such portfolio shall become a Portfolio hereunder and the compensation
payable by such new portfolio to the ADVISER will be as agreed in writing at the
time.
2. Subadvisers
It is understood that the ADVISER, subject to the prior approval of the FUND's
Board of Directors, will from time to time employ or associate itself with such
person or persons as the ADVISER may believe to be particularly fitted to assist
it in the performance of this Agreement, provided, however, that the
compensation of such person or persons shall be paid by the ADVISER and that the
ADVISER shall be as fully responsible to the FUND for the acts and omissions of
any subadviser as it is for its own acts and omissions. Without limiting the
generality of the foregoing, it is agreed that subadvisory services to the
Portfolios may be provided by John Govett & Co. Limited pursuant to a
subadvisory agreement with the ADVISER ("Subadvisory Agreement").
3. Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the overall policies, control, direction, supervision
and review of the FUND's Board of Directors (the "Board") and in conformity with
applicable laws, the FUND's Articles of Incorporation, Bylaws, registration
statements, prospectuses and stated investment objectives, policies and
restrictions of each Portfolio, shall:
<PAGE> 2
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 Portfolios, and formulation and implementation of
investment programs;
b. place all orders for the purchase and sale of portfolio investments for the
account of each Portfolio of the FUND 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, reports, and
amendments thereto, and the furnishing of legal services except for services
provided by outside counsel to the FUND selected by the Board of Directors; and
d. pay the compensation of each FUND director 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 and each Portfolio the most
favorable price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the FUND's Board of Directors 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. 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 directors 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
2
<PAGE> 3
participation in the production of the FUND's registration statements,
prospectuses, proxy solicitation materials and reports to stockholders; (v) fees
of outside counsel to and of independent accountants of the FUND selected by the
Board of Directors; (vi) custodian, registrar and transfer agent fees and
expenses; (vii) expenses related to the repurchase or redemption of its shares;
(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 stockholders including proxy solicitations therefor; (xii) expenses
for servicing stockholder 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 Board of Directors; 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 directors with
respect thereto. To the extent that any of the foregoing expenses are allocated
between the FUND and any other party, such allocations shall be pursuant to
methods approved by the Board of Directors.
4. Restriction on the ADVISER's Powers
The ADVISER shall not commit any Portfolio to any extent beyond the amount of
the cash and securities placed by such Portfolio under the control of the
ADVISER.
In carrying out its duties hereunder the ADVISER shall comply with all
reasonable instructions of the Portfolio in connection therewith. Such
instructions may be given by the Board or by any other person authorized by a
resolution of the Board provided a certified copy of such resolution has been
supplied to the ADVISER.
All securities, cash, and other assets of each Portfolio shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Board as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the 1940 Act) is approved by
the Board as sub-custodians.
Persons authorized by resolution of the Board shall have the right to inspect
and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Portfolio's transactions at the
registered office of the ADVISER at any time during normal business hours.
3
<PAGE> 4
5. 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 any of the
stockholders, directors, officers and employees of the FUND may be a
stockholder, 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, the ADVISER shall not be subject to liability to the FUND, or to
any stockholder 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.
6. Compensation Payable to ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered and
expenses paid by the ADVISER, with respect to the Global Equity, a monthly fee
computed at 1.00%, per annum, of the Portfolio's average daily net assets and
with respect to Global Government, a monthly fee computed at .75%, per annum of
the Portfolio's average daily net assets.
For purposes of these calculations, assets of each Portfolio shall be considered
separately in calculating the investment advisory fee. Average daily net assets
of these Portfolios 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 Articles of Incorporation. 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 6 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 American Capital Management & Research, Inc., or
its successor, in connection with the purchase and sale of portfolio investments
of the FUND, less any direct expenses incurred by the ADVISER, or any other
direct or indirect majority owned subsidiary of American Capital Management &
Research, Inc., or its successor, in connection with obtaining such commissions,
fees, brokerage or similar payments. The ADVISER shall use its best efforts to
4
<PAGE> 5
recapture all available tender offer solicitation fees and exchange offer fees
in connection with the FUND's portfolio transactions and shall advise the Board
of Directors 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 American Capital Management & Research, Inc., or its successor, 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, calculated
separately for each Portfolio, 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 include the investment advisory fee and
other operating costs paid by the FUND except (i) for interest and taxes; (ii)
for 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 directors and the ADVISER
in accordance with applicable state and federal laws as a result of such
litigation; and (vi) amounts paid to American Capital Marketing, Inc., the
distributor of the FUND's shares in connection with a distribution plan adopted
by the FUND's Board of Directors 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.
7. 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
<PAGE> 6
8. Duration and Termination
This Agreement will become effective with respect to the Portfolios on the date
hereof, and with respect to any additional Portfolios, on the date of receipt by
the FUND 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
Portfolio, 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 each Portfolio 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 Portfolio for successive periods of twelve months each, or such
shorter period as may be agreed upon, provided such continuance is specifically
approved at least annually, (a) by the vote of a majority of those members of
the FUND's Directors 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 vote of a majority of the FUND's Directors or by vote
of a majority of the outstanding voting securities of such Portfolio.
Notwithstanding the foregoing this Agreement may be terminated as to any
Portfolio at any time, without the payment of any penalty, by the FUND (by vote
of the FUND's Directors or by vote of a majority of the outstanding voting
securities of such Portfolio), or by the ADVISER, on sixty days' written notice.
This Agreement will immediately terminate in the event of its assignment.
This Agreement shall terminate forthwith by notice in writing on the happening
of any of the following events:
a. if the FUND or the ADVISER 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
b. 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.
Termination shall be without prejudice to the completion of any transactions
which the ADVISER shall have committed to on behalf of a Portfolio prior to the
time of termination. The ADVISER shall not effect and the FUND shall not be
entitled to instruct the ADVISER to effect any further transactions on behalf of
a Portfolio subsequent to the time termination takes effect.
6
<PAGE> 7
On the termination of this Agreement and completion of all matters referred to
in the foregoing paragraph, the ADVISER shall deliver or cause to be delivered
to the FUND all documents, records, books and any other properties which are in
its possession, power or control and which are valid and in force at the date of
termination.
9. 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 a particular Portfolio
until approved by vote of a majority of the outstanding voting series of such
Portfolio.
10. Miscellaneous Provisions
(a) Definitions
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 Investment Company Act of 1940 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, 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.
(b) Indemnity for U.K. Taxes
i) Notwithstanding any other provision of this Agreement, the FUND shall
indemnify and save the ADVISER harmless from, against, for and in respect of all
liabilities incurred pursuant to Section 3.4 of the Subadvisory Agreement.
ii) The FUND will not be liable under this indemnification provision with
respect to any liabilities incurred by the ADVISER'S willful misfeasance, bad
faith, or gross negligence in the performance of the ADVISER'S duties or by
reason of the ADVISER'S reckless disregard of obligations and duties under this
Agreement or to the FUND.
iii) The FUND will not be liable under this indemnification provision with
respect to any claim made against the ADVISER unless the ADVISER shall have
notified the FUND in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been
7
<PAGE> 8
served upon the ADVISER (or after the ADVISER shall have received notice of such
service on any designated agent). In case any such action is brought against the
ADVISER, the FUND will be entitled to participate, at its own expense, in the
defense thereof. The FUND also will be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
the FUND to such party of the FUND's election to assume the defense thereof,
such party will bear the fees and expenses of any additional counsel retained by
it, and the FUND 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.
(c) 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 State of Texas.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer as of the above date.
AMERICAN CAPITAL WORLD PORTFOLIO SERIES, INC.
By: /s/ Curtis W. Morell
-------------------------------------
Name: Curtis W. Morell
-----------------------------------
Its: Vice President
-----------------------------------
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ Nori L. Gabert
-------------------------------------
Name: Nori L. Gabert
----------------------------------
Its: Vice President
----------------------------------
Executed: as of
------------------------------
8
<PAGE> 1
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
and
JOHN GOVETT & CO. LIMITED
THIS AGREEMENT is made as of this 20th day of December, 1994 by and between JOHN
GOVETT & CO. LIMITED ("JOHN GOVETT") of Shackleton House, 4 Battle Bridge Lane,
London SE1 2HR, England, and AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("ACAM") of
2800 Post Oak Boulevard, Houston, Texas 77056.
WHEREAS, ACAM has heretofore sponsored and acts as Investment Adviser to
American Capital World Portfolio Series, Inc. - American Capital Global Equity
Fund (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, ACAM 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 ACAM with investment advisory services on the terms and
conditions hereinafter set forth; and
WHEREAS, ACAM 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 ACAM 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
Board of Directors, JOHN GOVETT shall keep under review the non-U.S. investments
of the Fund and continuously furnish to the Fund and to ACAM (1) investment
advice primarily for investments in securities for which the principal trading
market(s) are in non-U.S. countries; (2) economic, statistical and research
information 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
<PAGE> 2
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 Board shall make the final determination since the Board
retains in all events the control and management of the business and affairs of
the Fund.
c) Unless otherwise instructed by ACAM or the Board, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by ACAM or by the Board, 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 Board 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 Charter and shall comply
with all statutory and regulatory restrictions, limitations and requirements
applicable to the activity of the Fund.
e) Unless otherwise instructed by ACAM or the Board, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by ACAM or by the Board, 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
2
<PAGE> 3
ii) Reporting of all transactions to ACAM and to other entities as directed by
ACAM or by the Board.
f) JOHN GOVETT shall provide the Board at least quarterly, in advance of the
regular meetings of the Board, 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 Board. JOHN GOVETT shall also make an investment
officer available to attend such meetings of the Board as the Board 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 the JOHN GOVETT.
(b) In carrying out its duties hereunder JOHN GOVETT shall comply with all
reasonable instruction of the Fund or ACAM in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Board or by any other person authorized by a resolution of the
Board 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 Board 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 Board as sub-custodians.
(d) Persons authorized by resolution of the Board 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
Board, 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
3
<PAGE> 4
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.
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 Board.
2. Duties of ACAM
2.1 Provision of Information
ACAM 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, ACAM 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) 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 ACAM pursuant to the investment advisory fee schedule set forth in
the Investment Advisory Agreement between the Fund and ACAM taking into account
any waiver or return to the Fund of any or all of such advisory fee by ACAM
(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 ACAM to JOHN GOVETT within
five (5) business days after the last day of the valuation period.
4
<PAGE> 5
3. Miscellaneous
3.1 Activities of JOHN GOVETT
The services of JOHN GOVETT as Sub-Adviser to ACAM 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, directors, officers and
employees of JOHN GOVETT may become interested in the Fund or ACAM as a
shareholder, trustee, officer, partner or otherwise.
3.2 Services to Other Clients
ACAM 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, ACAM 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. ACAM 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 ACAM 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 ACAM.
3.4 Indemnity for Taxes
a) Notwithstanding any other provision of this Agreement, ACAM shall indemnify
and save JOHN GOVETT and each of its affiliates, officers, directors and
employees (each an "Indemnified Party") harmless from, against, for and in
respect of all taxes imposed by
5
<PAGE> 6
the United Kingdom on ACAM 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 ACAM or the Fund.
b) ACAM 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) ACAM 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 ACAM in writing within a reasonable time after the summons or
other 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, ACAM will be entitled to
participate, at its own expense, in the defense thereof. ACAM also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from ACAM to such party of ACAM's election to
assume the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and ACAM 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 pursuant to paragraph b or c below, shall
have an initial term of two years, and thereafter shall continue in effect from
year to year, provided its continued applicability is specifically approved at
least annually by the Board 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 Directors 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 ACAM 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 Board or, by the vote of a majority of the outstanding voting securities
of such Fund), on sixty (60) days' written notice to both ACAM and JOHN GOVETT.
This Agreement shall automatically terminate in the event of the
6
<PAGE> 7
termination of the investment advisory agreement between ACAM 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 ACAM 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
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
7
<PAGE> 8
with a copy to:
650 California Street
28th Floor
San Francisco, CA 94108
telecopy: (415) 249-0554
attn: Michael J. Mayer
and a copy to:
650 California Street
28th Floor
San Francisco, CA 94108
telecopy: (415) 249-0553
attn: Robert A. Cornman, Esq.
and a copy to:
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
telecopy: (415) 772-6268
attn: Mitchell E. Nichter, Esq.
If to ACAM, to:
2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4300
attn: Don Powell
with a copy to:
2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4317
attn: Nori L. Gabert, 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.
8
<PAGE> 9
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 ACAM 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) ACAM 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.
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
JOHN GOVETT & CO. LIMITED
By: /s/ KEVIN PAKENHAM
------------------------------------
Name: The Honorable K.J.T. Pakenham
---------------------------------
Its: Chief Executive
----------------------------------
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ NORI L. GABERT
------------------------------------
Name: Nori L. Gabert
---------------------------------
Its: Vice President
---------------------------------
9
<PAGE> 1
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
and
JOHN GOVETT & CO. LIMITED
THIS AGREEMENT is made as of this 20th day of December, 1994 by and between JOHN
GOVETT & CO. LIMITED ("JOHN GOVETT") of Shackleton House, 4 Battle Bridge Lane,
London SE1 2HR, England, and AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("ACAM") of
2800 Post Oak Boulevard, Houston, Texas 77056.
WHEREAS, ACAM has heretofore sponsored and acts as Investment Adviser to
American Capital World Portfolio Series, Inc. - American Capital Global
Government Securities Fund (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, ACAM 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 ACAM with investment advisory services on the terms and
conditions hereinafter set forth; and
WHEREAS, ACAM 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 ACAM 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
Board of Directors, JOHN GOVETT shall keep under review the non-U.S. investments
of the Fund and continuously furnish to the Fund and to ACAM (1) investment
advice primarily for investments in securities for which the principal trading
market(s) are in non-U.S. countries; (2) economic, statistical and research
information 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
<PAGE> 2
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 Board shall make the final determination since the Board
retains in all events the control and management of the business and affairs of
the Fund.
c) Unless otherwise instructed by ACAM or the Board, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by ACAM or by the Board, 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 Board 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 Charter and shall comply
with all statutory and regulatory restrictions, limitations and requirements
applicable to the activity of the Fund.
e) Unless otherwise instructed by ACAM or the Board, and subject to the
provisions of this Agreement and to any guidelines or limitations specified from
time to time by ACAM or by the Board, 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 ACAM and to other entities as directed by
ACAM or by the Board.
2
<PAGE> 3
f) JOHN GOVETT shall provide the Board at least quarterly, in advance of the
regular meetings of the Board, 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 Board. JOHN GOVETT shall also make an investment
officer available to attend such meetings of the Board as the Board 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 the JOHN GOVETT.
(b) In carrying out its duties hereunder JOHN GOVETT shall comply with all
reasonable instruction of the Fund or ACAM in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Board or by any other person authorized by a resolution of the
Board 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 Board 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 Board as sub-custodians.
(d) Persons authorized by resolution of the Board 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
Board, 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.
3
<PAGE> 4
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 Board.
2. Duties of ACAM
2.1 Provision of Information
ACAM 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, ACAM 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) 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 ACAM pursuant to the investment advisory fee schedule set forth in
the Investment Advisory Agreement between the Fund and ACAM taking into account
any waiver or return to the Fund of any or all of such advisory fee by ACAM
(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 ACAM 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 ACAM 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, directors, officers and
employees of JOHN GOVETT may become interested in the Fund or ACAM as a
shareholder, trustee, officer, partner or otherwise.
4
<PAGE> 5
3.2 Services to Other Clients
ACAM 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, ACAM 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. ACAM 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 ACAM 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 ACAM.
3.4 Indemnity for Taxes
a) Notwithstanding any other provision of this Agreement, ACAM shall indemnify
and save JOHN GOVETT and each of its affiliates, officers, directors and
employees (each an "Indemnified Party") harmless from, against, for and in
respect of all taxes imposed by the United Kingdom on ACAM 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
ACAM or the Fund.
b) ACAM 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.
5
<PAGE> 6
c) ACAM 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 ACAM in writing within a reasonable time after the summons or
other 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, ACAM will be entitled to
participate, at its own expense, in the defense thereof. ACAM also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from ACAM to such party of ACAM's election to
assume the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and ACAM 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 pursuant to paragraph b or c below, shall
have an initial term of two years, and thereafter shall continue in effect from
year to year, provided its continued applicability is specifically approved at
least annually by the Board 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 Directors 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 ACAM 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 Board or, by the vote of a majority of the outstanding voting securities
of such Fund), on sixty (60) days' written notice to both ACAM and JOHN GOVETT.
This Agreement shall automatically terminate in the event of the termination of
the investment advisory agreement between ACAM 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.
6
<PAGE> 7
e) This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
i) if ACAM 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
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:
650 California Street
28th Floor
San Francisco, CA 94108
telecopy: (415) 249-0554
attn: Michael J. Mayer
7
<PAGE> 8
and a copy to:
650 California Street
28th Floor
San Francisco, CA 94108
telecopy: (415) 249-0553
attn: Robert A. Cornman, Esq.
and a copy to:
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
telecopy: (415) 772-6268
attn: Mitchell E. Nichter, Esq.
If to ACAM, to:
2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4300
attn: Don Powell
with a copy to:
2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4317
attn: Nori L. Gabert, 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.
3.7 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 ACAM 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) ACAM is a professional investor and (c) the subject matter of this Agreement
is a scheme management activity.
8
<PAGE> 9
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.
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
JOHN GOVETT & CO. LIMITED
By: /s/ KEVIN PAKENHAM
------------------------------------
Name: The Honorable K.J.T. Pakenham
---------------------------------
Its: Chief Executive
---------------------------------
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ NORI L. GABERT
-----------------------------------
Name: Nori L. Gabert
---------------------------------
Its: Vice President
---------------------------------
9
