SPECIAL NOTICE TO SHAREHOLDERS OF SMITH BARNEY
SERIES FUND - EMERGING GROWTH PORTFOLIO
YOUR VOTE IS IMPORTANT
Dear Investor:
The attached proxy statement seeks shareholder approval of a new Investment
Advisory Agreement between American
Capital Asset Management, Inc. and Smith Barney Series Fund (the "Fund"),
on behalf of the Emerging Growth Portfolio.
New Investment Advisory Agreement
This proxy statement contains detailed information about a new investment
advisory agreement, and should be read
carefully. It is important to note that NO CHANGES IN THE PORTFOLIO'S
ADVISORY FEES, OBJECTIVES OR
POLICIES ARE PROVIDED FOR IN THE NEW AGREEMENT, and investors should
continue to receive the same high
quality shareholder services.
The new investment advisory agreement is necessary because of the proposed
sale of American Capital Management &
Research, Inc., the parent company of American Capital Asset Management,
Inc. to The Van Kampen Merritt Companies,
Inc.
The proposal has been approved by the Trustees of the Fund, who recommend
you vote "FOR" the proposal. We look
forward to your participation.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Sincerely,
Heath B. McLendon
Chairman
November 28, 1994
SMITH BARNEY SERIES FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
THE EMERGING GROWTH PORTFOLIO
To Be Held on December 20, 1994
To the Shareholders:
A Special Meeting of Shareholders of the Emerging Growth Portfolio (the
"Portfolio") of Smith Barney Series Fund
(the "Fund") will be held on December 20, 1994 at 9:00 A.M. at 388
Greenwich Street, New York, New York, for the
following purposes:
(1) To approve a new investment advisory agreement for the Portfolio
which is substantially the same as the
current agreement, to take effect upon the closing of the proposed
acquisition of American Capital Management &
Research, Inc. by The Van Kampen Merritt Companies, Inc. (the
"Transaction"); and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only owners of variable annuity contracts that were invested in the
Portfolio as of the close of business on November
20, 1994 are considered "shareholders of record" and are entitled to notice
of and to vote at the meeting.
Please mark, date and sign the enclosed proxy and return it in the prepaid
envelope enclosed for your convenience to
insure that your shares are represented. The prompt return of your proxy
will save the expense of further mailings. If
you attend the meeting you can revoke your proxy and vote your shares in
person if you wish.
By Order of the Board of Trustees
Christina T. Sydor
Secretary
New York, New York
November 28, 1994
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THE PROXY IN THE
ENCLOSED
PREPAID ENVELOPE.
SMITH BARNEY SERIES FUND
PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
THE EMERGING GROWTH PORTFOLIO
To be held on December 20, 1994
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Trustees of the Smith Barney
Series Fund (the "Fund") for use at a Meeting of Shareholders of the
Emerging Growth Portfolio (the "Portfolio"), to
be held at 388 Greenwich Street, 22nd Floor, New York, New York 10013, at
9:00 a.m. on Tuesday, December 20,
1994 or at any adjournment(s) thereof. If the enclosed form of proxy is
executed and returned, it nevertheless may be
revoked at any time before it has been exercised by signing and sending to
the Fund a later dated proxy or written
revocation, or by attending the meeting and voting in person. A proxy when
executed and not so revoked will be
voted and if it contains any specification will be voted accordingly. If
no choice is specified, it is the intention to vote
the proxy "FOR" the proposal.
The costs of soliciting proxies in the accompanying form for the meeting,
including the costs of preparing, printing and
mailing the accompanying Notice of Meeting and this Proxy Statement, the
costs of any solicitor and the costs of the meeting
with respect to the Portfolio will be borne equally by The Travelers Inc.
("Travelers") and The Van Kampen Merritt
Companies, Inc. if the Transaction (as defined under Proposal No. 1 below)
closes. Travelers is the indirect parent company
of American Capital Asset Management, Inc. ("ACAM"), the investment adviser
to the Portfolio. If the Transaction does not
close, such cost will be borne by Travelers or, under certain conditions,
by The Van Kampen Merritt Companies, Inc.
Proxy material for the Portfolio may also be distributed through brokers,
custodians and nominees to beneficial owners
and proxies may be solicited by telephone or telegraph by officers,
trustees and regular and temporary employees of the
Fund, Smith Barney Inc., the distributor of shares of the Portfolio, Smith
Barney Mutual Funds Management Inc., the
administrator for the Portfolio, The Boston Company Advisors, Inc., the
sub-administrator for the Portfolio and/or The
Shareholder Services Group, Inc., a subsidiary of First Data Corporation,
the transfer agent for the Portfolio. The mailing
address of the Fund is 388 Greenwich Street, New York, New York 10013. It
is anticipated that proxies and proxy
statements will be mailed to shareholders on or about November 28, 1994
In the event that sufficient votes in favor of the proposal set forth in
the Notice of Meeting and this Proxy Statement are not
received by the time scheduled for the meeting, the persons named as
proxies may move one or more adjournments of the
meeting to permit further solicitation of proxies with respect to the
proposal. Any such adjournment will require the
affirmative vote of a majority of the shares present at the meeting. The
persons named as proxies will vote in favor of such
adjournment those shares which they are entitled to vote and which have
voted in favor of the proposal.
A rule under the Investment Company Act of 1940 (the "1940 Act") provides
that any matter required by the provisions
of the 1940 Act or applicable state law, or otherwise, to be submitted to
the holders of the outstanding voting securities of an
investment company such as the Fund shall not be deemed to have been
effectively acted upon unless approved by the
requisite vote of the Portfolio affected by the matter.
Proposal 1 requires for approval the affirmative vote of a "majority of the
outstanding voting securities" of the Portfolio,
which, as defined in the 1940 Act means the affirmative vote of the lesser
of (a) more than 50% of the outstanding shares of
the Portfolio or (b) 67% or more of such shares present at a meeting if
more than 50% of the outstanding shares of the
Portfolio are represented at the meeting in person or by proxy. For
purposes of determining the presence of a quorum for
transacting business at the meeting, abstentions and broker "non-votes"
(that is, proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner
or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares
that are present but which have not been voted. For this reason,
abstentions and broker non-votes will have the effect of a
"no" vote for purposes of obtaining the requisite approval of the proposal.
Only owners of variable annuity contracts that were invested in the
Portfolio as of the close of business on November
20, 1994 (the "Record Date"), are considered "shareholders of record" and
are entitled to notice of and to vote at the
meeting. Each share of stock is entitled to one vote for the proposal. On
the Record Date, the Portfolio had outstanding
1,196,347.190 shares of voting securities.
On the Record Date, all of the outstanding shares were held by IDS Life
Insurance Company ("IDSLife") or IDSLife
Insurance Company of New York ("IDSLife of New York"), a wholly owned
subsidiary of IDS Life, for the benefit of
owners of annuity contracts ("Contract Owners") issued by IDSLife and IDS
Life of New York. IDSLife's address is IDS
Tower 10, Minneapolis, Minnesota 55440-0010. IDSLife of New York's address
is 20 Madison Avenue Extension, Albany,
New York 12203. Each share is entitled to one vote, and any fractional
share is entitled to a fractional vote. IDSLife and
IDS Life of New York will vote the shares as directed by the Contract
Owners who have allocated purchase payments to
annuity contract sub-accounts investing in the Portfolio. Each Contract
Owner has the right to direct the votes of that
number of shares of the Portfolio determined by multiplying the total
number of the Portfolio's outstanding shares by a
fraction, the numerator of which is the number of units held by such
Contract Owner in the Portfolio on the Record Date and
the denominator of which is the total number of units of the Portfolio
outstanding on the Record Date. Units reflect client
ownership in the separate account, while shares reflect ownership in the
Portfolio. IDS Life and IDS Life of New York will
vote all Portfolio shares related to the variable contracts for which they
have not received timely voting instructions in the
same proportion as the shares for which they have received timely
instructions. IDS Life and IDS Life of New York will
vote any shares they own directly in the same proportion as the shares for
which they received proper instructions.
As of Record Date, to the knowledge of the Fund and the Board of Trustees
(i) no single shareholder or "group" (as that
term is used in Section 13(d) of the Securities Exchange Act of 1934),
beneficially owned more than 5% of the outstanding
shares of the Portfolio's shares and, (ii) the trustees and officers of the
Fund as a group beneficially owned less than 1% of
the outstanding shares of the Portfolio.
PROPOSAL NO. 1
TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT FOR THE PORTFOLIO WHICH IS
SUBSTANTIALLY THE SAME AS THE CURRENT AGREEMENT TO TAKE EFFECT UPON THE
CLOSING
OF THE PROPOSED ACQUISITION OF AMERICAN CAPITAL MANAGEMENT & RESEARCH, INC.
BY THE
VAN KAMPEN MERRITT
COMPANIES, INC.
BACKGROUND
In connection with the Transaction described below, shareholders of the
Portfolio are being asked to approve a new
advisory agreement ("Successor Advisory Agreement") with American Capital
Asset Management, Inc. ("ACAM") that is
substantially the same as the current advisory agreement with ACAM dated
November 23, 1993 ("Current Advisory
Agreement"). ACAM is a wholly-owned subsidiary of American Capital
Management & Research, Inc. ("ACMR"), which
is wholly-owned (in part indirectly) by Travelers. ACAM serves as
investment adviser or investment subadviser for 45
investment company portfolios (collectively, the "ACAM Advised Funds").
On August 24, 1994, Travelers and its wholly-owned subsidiary, Associated
Madison Companies, Inc. ("AMAD," and
together with Travelers, the "Sellers"), entered into a stock purchase
agreement (together with Amendment No. 1 thereto, the
"Stock Purchase Agreement") with The Van Kampen Merritt Companies, Inc.
(the "Buyer") and its parent company, VKM
Holding, Inc. ("VKM Holding"), providing for the sale by the Sellers to the
Buyer of all the issued and outstanding capital
stock of ACMR, the parent company of ACAM (the "Transaction"). ACAM acts
as the Portfolio's adviser pursuant to the
Current Advisory Agreement, which was initially submitted to and approved
by the shareholders of the Portfolio on
November 23, 1993. Pursuant to Section 15 of the Investment Company Act of
1940, as amended (the "1940 Act"), the
Portfolio's Current Advisory Agreement terminates automatically upon its
"assignment," which is deemed to include any
change of control of the investment adviser. Consummation of the
Transaction may be deemed to constitute such an
"assignment." Accordingly, because Section 15(a) of the 1940 Act prohibits
any person from serving as an investment
adviser to a registered investment company except pursuant to a written
contract that has been approved by the shareholders
of the registered investment company, in order for ACAM to continue to
provide investment advisory services to the
Portfolio after the closing of the Transaction, the shareholders of the
Portfolio must approve the Successor Advisory
Agreement between ACAM and the Fund (on behalf of the Portfolio). The form
of the Successor Advisory Agreement is
attached hereto as Appendix A. The advisory fee and expense limitations
applicable to the Successor Advisory Agreement
are the same as those applicable to the Current Advisory Agreement.
Shareholders should read it carefully. The Transaction,
which is subject to a number of conditions, is currently expected to close
in late December, 1994 (the "Closing"). Among
the conditions to the consummation of the Transaction is the approval of
other successor advisory agreements and successor
subadvisory agreements by the respective stockholders of ACAM Advised Funds
as to which ACAM or any other subsidiary
of ACMR will act as investment advisor, subadviser or manager following the
Closing having average aggregate assets of
not less than $13,869,450,000, determined over the 10-day period
immediately preceding the closing.
Upon the Closing, ACMR will become an indirect wholly-owned subsidiary of
VKM Holding (although the Buyer
currently expects that ACMR will be merged with and into the Buyer shortly
after the Closing as discussed below under
"Effects of Transaction on ACAM"). The Buyer is a wholly-owned subsidiary
of VKM Holding. The Buyer and its
affiliates sponsor, market and provide investment advisory services to
open- and closed-end investment companies, most of
which invest primarily in fixed-income securities. The Buyer and its
affiliates also sponsor and market unit investment trusts
and monitor and value their portfolios; provide investment advisory
services to insurance companies, pension funds,
municipalities, high net worth individuals and mutual funds sponsored by
third parties; and provide research services to
institutions, primarily through the Buyer's wholly-owned subsidiary,
McCarthy, Crisanti & Maffei, Inc. As of June 30,
1994, the Buyer and its affiliates had approximately $22.2 billion of
assets under management for all clients, including
approximately $16.0 billion for Van Kampen Merritt sponsored open- and
closed-end funds. VKM Holding is controlled,
through the ownership of a substantial majority of its common stock, by The
Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D
L.P. is managed by Clayton, Dubilier & Rice,
Inc., a private investment firm. The General Partner of C&D L.P. is
Clayton & Dubilier Associates IV Limited Partnership
("C&D Associates L.P."). The general partners of C&D Associates L.P. are
Joseph L. Rice, III, B. Charles Ames, Alberto
Cribiore, Donald J. Gogel and Hubbard C. Howe, each of whom is a principal
of Clayton, Dubilier & Rice, Inc.
Summary of the Transaction
The purchase price under the Stock Purchase Agreement consists of (i)
$427.4 million in cash (the "Cash Amount") and
(ii) an option (the "Travelers' Option") entitling Travelers, upon the
satisfaction of certain conditions discussed below, to
purchase from VKM Holding up to an aggregate number of shares of non-voting
Class B VKM Holding Common Stock
("VKM Class B Common") representing 5% of all shares of VKM Holding Common
Stock outstanding at the Closing, in
each case subject to adjustment as discussed below. In addition, pursuant
to the terms of the Transaction, Travelers will
purchase from VKM Holding at the Closing a number of shares of VKM Class B
Common representing 4.9% of all shares of
VKM Holding Common Stock outstanding at the Closing (the "Travelers'
Purchase"). Travelers will pay $200 per share of
VKM Class B Common purchased pursuant to the Travelers' Purchase (estimated
to be approximately $24 million in the
aggregate) and per share of VKM Class B Common purchased pursuant to the
Travelers' Option.
The Cash Amount is subject to adjustment at the Closing as follows: (i)
reduction (but not by more than $69,175,720)
based upon changes in the aggregate assets under management of the ACAM
Advised Funds, including the Portfolio, and
certain other mutual funds distributed by ACMR or its subsidiaries, (ii)
increase or reduction by an amount equal to the
difference (if any) between $340,214,154 and the adjusted net worth of ACMR
and its subsidiaries (determined as provided
in the Stock Purchase Agreement) as set forth on the audited balance sheet
of ACMR and its subsidiaries as of June 30, 1994
to be delivered to the Buyer prior to the Closing, and (iii) increase by an
amount equal to one-half of the after-tax net income
of ACMR from January 1, 1995 through the Closing in the event that the
Closing shall occur after December 31, 1994. The
Cash Amount will also be increased by the amount, if any (but not to exceed
$10,000,000), by which the Buyer's earnings
before interest, taxes, depreciation and amortization for the year ending
December 31, 1995 exceed $164,700,000. Pursuant
to the Stock Purchase Agreement, the Buyer will also pay or cause to be
paid at the Closing certain intercompany
indebtedness owed to AMAD by ACMR.
The number of shares of VKM Class B Common available for purchase pursuant
to the Travelers' Option will be
determined by reference to the average annual compounded rate of increase,
if any, during the period commencing on the
first day of the first calendar month following the second anniversary of
the Closing and ending on the fifth anniversary of
the Closing (subject to adjustment in the event of a change of control of
VKM Holding), in the net asset value of shares of
open-end investment companies advised by any subsidiary of VKM Holding as
to which certain affiliates of Travelers are
designated as broker of record. Such number of shares of VKM Class B
Common available for purchase pursuant to the
Travelers' Option may range from a minimum of no shares in the event that
the average annual compounded rate of increase
in such net asset value is less than 15%, to a maximum of that number of
shares which represents 5% of all shares of VKM
Holding Common Stock outstanding at the Closing in the event that the
average annual compounded rate of increase in such
net asset value is 30% or greater. The Travelers' Option shall not be
exercisable until the earlier of (i) the fifth anniversary
of the Closing, and (ii) immediately before a change in control of VKM
Holding, provided that the Travelers' Option shall
not be exercisable at any time prior to the second anniversary of the
Closing.
In the Stock Purchase Agreement, Travelers also agrees (i) to recommend or
to cause its affiliates to recommend for a
period of seven years after the Closing, subject to fiduciary obligations
where applicable and to reasonable performance (as
defined in the Stock Purchase Agreement) of the mutual funds involved, (A)
to the administrator of their respective 401(k)
programs, that certain mutual funds advised by ACAM be included in such
401(k) programs and (B) that ACAM or its
affiliates continue to serve as adviser or investment subadviser to the
Portfolio and one other fund included in certain
variable annuity programs and (ii) for a period of seven years after the
Closing, subject to reasonable performance (as
defined in the Stock Purchase Agreement) of the mutual funds involved, not
to permit Smith Barney Inc., an indirect wholly-
owned subsidiary of Travelers ("Smith Barney"), to have any investment
vehicle with objectives substantially similar to
those of one of such funds referred to in (i)(B) above and for which Smith
Barney or its affiliates acts as investment adviser
included in such variable annuity programs. The Stock Purchase Agreement
also provides, among other things, that
Travelers and its affiliates will (i) permit the use by ACMR and its
subsidiaries of certain computer facilities pursuant to
existing arrangements for a specified period of time, (ii) provide the
benefit of certain master purchasing or other similar
arrangements to ACMR and its subsidiaries for a specified period of time to
the extent mutually beneficial to the Buyer and
the Sellers, and (iii) continue to provide certain services and
arrangements that are currently provided to ACMR and its
subsidiaries for a specified period of time.
The Stock Purchase Agreement contemplates that the parties will, at or
prior to the Closing, enter into an agreement
relating to sales by Smith Barney or its subsidiaries of open-end mutual
funds advised (directly or as subadviser) by affiliates
of ACMR or the Buyer ("Buyer Advised Funds") having terms substantially as
described below and such other terms as the
parties shall agree. Pursuant to the Stock Purchase Agreement, it is
anticipated that such agreement will provide that for a
period of seven years from the Closing, Buyer Advised Funds, including the
Portfolio, will be accorded equivalent treatment
within the Smith Barney retail system (which for this purpose includes all
retail broker-dealers owned by Smith Barney or
any subsidiary thereof) to that of like (in terms of investment objective
and "load" structure and amount) open-end mutual
funds advised by Smith Barney or any other Travelers entity with respect to
direct and indirect compensation paid by Smith
Barney to its financial consultants for selling shares of Buyer Advised
Funds. The purpose of this arrangement is to
encourage the continued sale of ACAM Advised Funds within the Smith Barney
retail system and to enhance the sale within
the Smith Barney retail system of other Buyer Advised Funds. In the event
that Smith Barney increases the compensation
paid to its financial consultants for selling funds advised by Smith Barney
or other Travelers entities, the amount of
compensation paid to such financial consultants for selling Buyer Advised
Funds must also be increased, although such
increase is subject to a maximum cost to Smith Barney. Travelers'
obligation with respect to such equivalent compensation
will terminate in the event that certain specified financial institutions
that may be viewed as competitors of Smith Barney
acquire a majority voting interest in VKM Holding or otherwise acquire
Buyer or VKM Holding.
In the Stock Purchase Agreement, the Buyer and the Sellers have each agreed
to provide certain indemnities to the other
and their respective affiliates in connection with breaches of the
representations, warranties and covenants contained therein
and certain other matters specified therein.
The Transaction is also subject to the Buyer's obtaining adequate
financing. The Buyer and VKM Holding have
received commitments from certain financial institutions and from C&D L.P.
to provide debt and equity financing,
respectively, in connection with the Transaction (the "Proposed Financing")
on terms that are anticipated to be as follows:
(i) $360 million under an approximately seven-year term bank loan (with the
principal balance to be amortized over the final
six years); (ii) $100 million under an approximately seven-year bank
revolving credit facility; (iii) up to approximately $131
million in the form of an equity investment by C&D L.P. and other equity
investors in VKM Holding; and (iv)
approximately $24 million in the form of an equity investment by Travelers
or an affiliate of Travelers in VKM Holding.
The Portfolio will not have any liability, contingent or otherwise, in
respect of the Proposed Financing. Proceeds of the
foregoing arrangements in excess of the purchase price will be applied to
prepay amounts outstanding under the
Buyer's existing term and revolving bank facilities, to repay certain
intercompany indebtedness owed by ACMR to
AMAD, to pay expenses of the Transaction, the Proposed Financing and
related transactions, and to be available as
working capital for the Buyer. The amount actually drawn down under the
$100 million bank revolving credit facility
will depend on the amount of working capital that the Buyer, ACMR, and
their respective subsidiaries have on hand
as of the completion of the Transaction.
Although the Buyer and VKM Holding have indicated they believe that the
Proposed Financing will be available in the
amounts set forth above, the terms and conditions of the Proposed Financing
are still under discussion with the financial
institutions that are expected to provide the loans. It is anticipated
that the Proposed Financing will require, among other
things, a guarantee by VKM Holding, a pledge of all of the outstanding
stock of the Buyer and certain of its subsidiaries
(possibly including the stock of ACAM or its successor pursuant to the
possible merger described below) and the distribution
of earnings to the Buyer by its subsidiaries. Any such guarantees, pledges
and other security interests will also secure certain
existing indebtedness of the Buyer consisting of $150 million aggregate
principal amount of 9-3/4% Senior Secured Notes
due 2003. The terms of the Buyer's financing agreements (whether now
existing or to be entered into) in connection with
the Proposed Financing are expected to provide that in the event of a
default that is not timely cured, lenders holding any
class of indebtedness of the Buyer would be able to accelerate such
indebtedness, and secured lenders would be able to take
steps to exercise their rights under the pledge of stock of the Buyer and
any other security interest held by such lenders,
including without limitation foreclosure of the pledge and sale of the
stock of the Buyer. However, such exercise would be
subject to the terms and conditions of the 1940 Act including, to the
extent required, the consent of the Board of Trustees and
the shareholders of the Portfolio. Such foreclosure with respect to such
stock may likely constitute an assignment of the
Successor Advisory Agreement.
The Buyer believes that, based on the earnings experience of the Buyer and
ACMR, after the Transaction and
giving effect to the Proposed Financing, the operating revenue of the
combined company should be more than
sufficient to service the Buyer's debt and that the Buyer and ACAM should
be able to conduct their operations as now
conducted and as proposed to be conducted. Neither the Buyer nor ACAM
anticipates any reduction in the quality of
services now provided to the Portfolio, nor do they anticipate that the
Transaction or the Proposed Financing will
have any adverse effect on ACAM's ability to fulfill its obligations under
the Successor Advisory Agreement or to
operate its business in a manner consistent with past business practices.
Effect of Transaction on ACAM
Pursuant to the Stock Purchase Agreement, the Buyer may elect to acquire,
or to cause VKM Holding (the parent of the
Buyer) or one or more subsidiaries of the Buyer to acquire, the stock of
one or more of the subsidiaries of ACMR. In order
to simplify and rationalize the corporate structure of the combined group
of companies, after the Transaction, the Buyer is
expected to cause ACMR to be merged into the Buyer, with the combined
company being renamed "Van Kampen/
American Capital, Inc.," and may, in addition, arrange the following
restructuring transaction. With the approval of the
Board of Trustees of the Fund, the Buyer may cause ACAM to be merged into
Van Kampen Merritt Investment Advisory
Corp. ("VKMIA"), a registered investment advisor that currently provides
investment management services to the Van
Kampen Merritt family of mutual funds, or may cause some or substantially
all of the employees and assets of ACAM
(including, with the approval of the Board of Directors of the Fund, the
Successor Advisory Agreement) to be transferred to
VKMIA, with VKMIA being renamed "Van Kampen/American Capital Investment
Advisers, Inc."
The Buyer currently contemplates that ACAM will continue to operate out of
its Texas offices after the Closing. In the
event of a merger of ACAM and VKMIA or a transfer of ACAM's assets to VKMIA
after the Closing, Buyer currently
contemplates that the combined business would continue to operate out of
ACAM's Texas office and out of VKMIA's Oak
Brook Terrace, Illinois office. There may, however, be a limited number of
employee relocations. In addition, certain key
members of ACAM's senior management have been offered employment by the
Buyer. Don G. Powell, will become Chief
Executive Officer of the Buyer. It is expected that Mr. Powell, Donald A.
McMullen, Jr., Alan T. Sachtleben, Paul R.
Wolkenberg and William N. Brown will enter into employment agreements which
are intended to assure that their services
are available to ACAM for terms of from three to five years. Mr. Powell is
President, Chief Executive Officer and a Di-
rector of ACAM, and President and Director of certain ACAM Advised Funds.
Mr. McMullen is a Director of ACAM. Mr.
Sachtleben is Senior Vice President-Chief Investment Officer/Equity and a
Director of ACAM and Vice President of certain
ACAM Advised Funds. Mr. Wolkenberg is a Senior Vice President of ACAM and
Vice President of certain ACAM
Advised Funds. Mr. Brown is a Senior Vice President of ACAM. It is
expected that upon the Closing, John C. Merritt will
resign from his current positions as Chairman and Chief Executive Officer
of each of the Van Kampen Merritt companies,
including VKM Holding and the Buyer.
While it is expected that there will be some staff reductions resulting
from the combination of the two groups of
companies, neither the Buyer nor ACAM currently expects that there will be
material changes in senior portfolio
management personnel, and each believes that the Portfolio and its
shareholders will experience no discontinuity or
reduction in the quality of the services that they currently receive as a
result of any such staff reductions or changes. There
can be no assurance, however, that all investment professionals will
continue to serve in their current capacities. It is
anticipated that when the employee benefit plans and policies of the Buyer
and ACMR are integrated and rationalized,
employees of ACMR and its subsidiaries will have benefits that are, in the
aggregate, at least as favorable as those they
currently enjoy.
As a means of incentivizing management, certain employees of ACMR or its
subsidiaries (including ACAM) are also
expected to be given the opportunity to purchase shares of VKM Holding
Common Stock and to be granted options to
purchase additional shares of VKM Holding Common Stock in an aggregate
amount of up to approximately 9.3% of VKM
Holding Common Stock. Under such arrangements, Messrs. Powell, McMullen,
Sachtleben, Wolkenberg and Brown will
have the opportunity to purchase or receive options to purchase up to an
aggregate of approximately 4% of VKM Holding
Common Stock. Any such purchase will be at the same price as the purchases
by Travelers as contemplated by the Stock
Purchase Agreement, but may be subject to certain additional arrangements
with VKM Holding under which, among other
things, such individual could be required, or have the right, to dispose of
such stock ownership to VKM Holding in the event
such individual's employment terminates. The Buyer or its affiliates may
agree to guarantee certain indebtedness incurred by
the foregoing individuals in connection with their purchase of such Common
Stock. Pursuant to certain existing
arrangements, certain employees of VKM Holding and its subsidiaries also
own shares of VKM Holding Common Stock and
have options to purchase additional shares of such Common Stock in an
aggregate amount approximately equal to the
amount that employees of ACMR or its subsidiaries will have the right to
purchase or receive in option awards under the
arrangements described above.
It is a condition to the Closing that all directors of ACMR and its
subsidiaries, including ACAM, whose resignations
have been requested by the Buyer not less than five days prior to the
Closing shall have resigned or been removed from
office, effective as of the Closing. Such resignations or removals, if any,
are currently expected to involve only persons who
will remain affiliated with the Sellers after the Closing. None of such
resignations or removals is expected to affect the
composition of the Board of Trustees of the Fund.
Section 15(f) of the 1940 Act provides that an investment advisor or any of
its affiliated persons may receive any
amount or benefit in connection with a sale of securities of, or a sale of
any other interest in, such investment advisor which
results in any assignment of an advisory agreement with a registered
investment company if two conditions are satisfied.
The first condition to the availability of the "safe harbor" created by
Section 15(f) is that an "unfair burden" not be imposed
on the investment company for which the investment advisor acts in such
capacity as a result of the sale of such interest, or
any express or implied terms, conditions or understandings applicable
thereto. The term "unfair burden," as defined in the
1940 Act, includes any arrangement during the two-year period after the
transaction whereby the investment advisor (or
predecessor or successor adviser) or any interested person of any such
adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide
investment advisory and other services) or from any person in connection
with the purchase or sale of securities or other
property to, from or on behalf of the investment company (other than
ordinary fees for bona fide principal underwriting
services). Management of the Portfolio is aware of no circumstances
arising from the Transaction or the Proposed Financing
that will result in the imposition of an "unfair burden" on the Portfolio.
The second condition of Section 15(f) is that during the three-year period
immediately following a transaction of the
type described in Section 15(f), at least 75% of the subject investment
company's board of trustees not be "interested
persons" (as defined in the 1940 Act) of such investment company's
investment adviser or predecessor adviser. The Board
of Trustees of the Fund presently consists of four Trustees, none of whom
is an interested person of ACAM.
Under the Stock Purchase Agreement, the Buyer has covenanted to conduct its
business and, subject to applicable
fiduciary duties to the ACAM Advised Funds, use its reasonable best efforts
to cause each of its affiliates to conduct its
business so as to assure that, insofar as is within the control of the
Buyer or its affiliates:
(i) for a period of three years after the Closing, at least 75% of the
members of the board of directors of each
registered investment company advised by ACAM or an affiliate which
continues after the Closing its existing or a
replacement investment advisory agreement are not (a) "interested persons"
of the investment manager of such fund
after the Closing, or (b) "interested persons" of the present investment
manager of such fund; and
(ii) there is not imposed on any of the ACAM Advised Funds, including the
Portfolio, an "unfair burden" as a
result of the transactions contemplated by the Stock Purchase Agreement,
any payments in connection therewith, or
understandings applicable thereto.
In addition, the Buyer has covenanted in the Stock Purchase Agreement that
it will not, for a period of two years from
the Closing, voluntarily engage in any transaction which would constitute
an assignment of any investment advisory
agreement with any ACAM Advised Fund, including the Portfolio, to which the
Buyer or any affiliate is a party without first
obtaining a covenant in all material respects the same as that set forth in
the previous paragraph.
The Successor Advisory Agreement, if approved by the shareholders, will
commence on the Closing of the Transaction
or, if later, on the date on which it receives such shareholder approval.
Thereafter, the Successor Advisory Agreement will
remain in effect for an initial two-year term and will continue in effect
from year to year thereafter, but only so long as such
continuance is approved at least annually by (a) the vote of a majority of
the Fund's Trustees who are not party to the
agreement or interested persons of any such parties, cast in person at a
meeting called for the purpose of voting on such
approval, and (b) a vote of a majority of the Fund's Board or a majority of
the Portfolio's outstanding voting securities. The
Successor Advisory Agreement will terminate automatically in the event of
its "assignment" (as defined in the 1940 Act).
After careful consideration, the Board recommends that shareholders vote
"FOR" the Successor Advisory Agreement to
replace the Current Advisory Agreement upon consummation of the
Transaction. See "Evaluation by the Board" below.
The Investment Adviser
ACAM is a wholly-owned subsidiary of ACMR, which is located at 2800 Post
Oak Blvd., Houston, Texas 77056.
Eighty-three percent of the outstanding voting securities of ACMR are owned
by AMAD, and 17% of the outstanding voting
securities of ACMR are owned by Travelers. AMAD is a wholly-owned
subsidiary of Travelers. The address of AMAD
and Travelers is 65 East 55th Street, New York, New York 10022.
ACAM, together with its predecessors, has been in the investment advisory
business since 1926. It presently manages
the assets of 45 investment company portfolios with total net assets of
over $16.8 billion at August 31, 1994.
ACAM's executive officers and trustees, together with their principal
occupations, are listed below. Each is located at
2800 Post Oak Blvd., Houston, Texas 77056
Name Position with ACAM Principal Occupation if Different
Don G. Powell President, Chief Chairman of the Board,
Executive Officer Chief Executive Officer and
and Director Director of ACMR; Executive
Vice President and Director of
American Capital Marketing, Inc.
("Marketing") and American
Capital Companies Shareholder
Services, Inc. ("ACCESS")
Donald A. Director President and Director of ACMR;
McMullen, Jr. President, Chief Executive Officer
and Director of Marketing, ACCESS
and American Capital Trust Company
("Trust Company"); Chief Executive
Officer and Director of American
Capital Services, Inc. ("Services")
Robert C. Peck, Jr. Senior Vice Executive Vice President and Director
President, Chief of ACMR
Investment Officer/
Fixed Income and
Director
Alan T. Sachtleben Senior Vice Executive Vice President and
Director
President, Chief of ACMR
Investment Officer/
Equity and Director
Paul A. Hilstad Senior Vice Senior Vice President, General
President and Counsel, Secretary and Director of
General Counsel ACMR; formerly Vice President and
Deputy General Counsel of IDS
Financial Services Inc.
Name Position with ACAM
Principal Occupation if Different
William N. Brown Senior Vice Senior Vice President, Chief
President, Chief Financial Officer, Treasurer and
Financial Officer Director of ACMR; Vice President,
and Treasurer Chief Financial Officer, Treasurer and
Director of Trust Company and
ACCESS; Vice President and Chief
Financial Officer of Marketing
Paul R. Wolkenberg Senior Vice Executive Vice President and
Director
President of ACMR; President, Chief
Operating Officer and Director of
Services; Executive Vice President,
Chief Operating Officer and Director
of Trust Company; Executive Vice
President and Director of ACCESS;
Executive Vice President, Chief
Operating Officer and Director of
Marketing
Nori L. Gabert Vice President, Not Applicable
Associate General
Counsel and
Secretary
J. David Wise Vice President, Not Applicable
Associate General
Counsel and
Compliance Review
Officer
Ralph P. Goldsticker Vice President Not Applicable
and Director/Equity
Research
Rosemary Pretty Vice President Not Applicable
and Director/Equity
Trading
ACAM is paid an advisory fee at the annual rate of 0.75% of the Portfolio's
average daily net assets. For the period
December 3, 1993 (date of inception) through October 30, 1994, ACAM would
have been entitled to receive advisory fees
totalling $54,604. ACAMhas waived a portion of its advisory fees during
this period; from December 3, 1993 through
October 30, 1994, ACAM received advisory fees in respect of the Portfolio
totalling $44,330. Appendix B indicates the size
of each investment company advised or subadvised by ACAM and the advisory
fee rate paid by each such investment
company to ACAM. Average net assets are calculated on a daily basis for
open-end funds and on a weekly basis for closed-
end funds.
No Trustee of the Fund has owned any securities of or has had any other
material interest in, or a material interest in a
material transaction with, ACAM or its respective affiliates since the
beginning of the Fund's most recent fiscal year.
The audited balance sheet of ACAM, as of December 31, 1993, is attached to
this proxy statement as Appendix C.
The Successor Advisory Agreement
On October 19, 1994, the Board approved the Successor Advisory Agreement
between the Fund (on behalf of the Portfolio)
and ACAM. The Board recommends that the shareholders approve the Successor
Advisory Agreement, which will
supersede the Current Advisory Agreement upon the Closing. If the
shareholders of the Portfolio fail to approve the
Successor Advisory Agreement, the Current Advisory Agreement will remain in
effect until the Closing, at which time it will
terminate. If the Successor Advisory Agreement is not approved or in the
event that the Transaction does not close, the
Board will take whatever action it believes to be in the best interest of
the Portfolio's shareholders at the time. The
description of the Successor Advisory Agreement made herein is qualified by
reference to Appendix A.
The terms of the Successor Advisory Agreement are the same in all
material respects as those of the Current Advisory Agreement.
Under the Successor Advisory Agreement, the Fund retains ACAM to (i) manage
the Portfolio's holdings in accordance
with the Portfolio's investment objective and policies as stated in the
Fund's master trust agreement, current prospectus and
statement of additional information; (ii) make investment decisions for the
Portfolio; (iii) maintain a trading desk and place
purchase and sale orders for portfolio transactions; and (iv) employ
professional portfolio managers and securities analysts
who provide research services to the Portfolio. The Successor Advisory
Agreement also provides that ACAM will not be
liable to the Portfolio for any actions or omissions if it acted without
willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
ACAM bears all expenses in connection with the performance of its services
to the Portfolio. The Portfolio bears certain
other expenses incurred in its operation, including but not limited to,
investment advisory and administration fees, fees for
necessary professional and brokerage services, fees for any pricing
service, the costs of regulatory compliance and costs
associated with maintaining the
Portfolio's legal existence and shareholder relations.
The Successor Advisory Agreement may be terminated as a whole at any time,
without the payment of any penalty, on
60 days' written notice by (i) the Fund's Board, (ii) a vote of the holders
of a majority of the Portfolio's outstanding voting
securities (as defined in the 1940 Act), or (iii) by ACAM, on 90 days'
written notice.
The advisory fee under the Successor Advisory Agreement for the Portfolio
is the same as the fee under the Current
Advisory Agreement for the Portfolio. The Portfolio's average net assets
are determined by taking the average of all
determinations of the net assets during a given calendar month. Average
net assets of the Portfolio are calculated on a daily
basis. The advisory fee is payable for each calendar month on the first
business day after the end of that month. The
Successor Advisory Agreement does not provide for any reduction of the fee
payable to ACAM in consideration of
brokerage commissions payable to Smith Barney for effecting Portfolio
transactions, although such an offset is now
permitted under the rules of the various stock exchanges of which Smith
Barney is a member.
Evaluation by the Board
On October 19, 1994, the Board met and discussed the Transaction, its
possible effect on the Portfolio and related
matters and determined to approve the Successor Advisory Agreement and
submit it to shareholders for their
approval. In evaluating the Successor Advisory Agreement, the Board
reviewed materials furnished by ACAM and
the Buyer relevant to its decision. Those materials included information
regarding ACAM, the Buyer, their respective
affiliates and their personnel and operations and the terms of the
Transaction. The Board was advised by management
that the Transaction was not expected to have any effect on the Portfolio
and the Portfolio's shareholders. In its
deliberations, the Board considered the terms of the Transaction and also
took into account the representations of
management that the quality of services being provided to the Portfolio
will not be diminished as a result of the
Transaction. In addition, the Board reviewed and discussed the terms and
provisions of the Successor Advisory
Agreement.
Based on its review, the Board approved the Successor Advisory Agreement
and determined to recommend that
shareholders of the Portfolio vote to approve the Successor Advisory
Agreement as being in the best interests of the
Portfolio's shareholders. In this regard, it was noted that the Buyer does
not currently expect that there will be
material changes in senior portfolio management personnel (although there
can be no assurance that changes in
personnel will not occur) and that the fees payable under the Successor
Advisory Agreement are identical to the fees
presently in effect under the Current Advisory Agreement. Accordingly,
after consideration of the above, and such
other factors and information as it deemed relevant, the Board, including
all members of the Board present at the
meeting who are not interested persons (as such term is defined by the 1940
Act), approved the Successor Advisory
Agreement and voted to recommend its approval to the Portfolio's
shareholders.
Portfolio Transactions And Brokerage
Most of the purchases and sales of securities for the Portfolio, whether
effected on a securities exchange or over-
the-counter, are effected in the primary trading market for the securities.
Decisions to buy and sell securities for the
Portfolio are made by ACAM, which also is responsible for placing these
transactions, subject to the overall review of
the Fund's Trustees. Although investment decisions for the Portfolio are
made independently from those of the other
accounts managed by ACAM, investments of the type the Portfolio may make
also may be made by those other
accounts. When the Portfolio and one or more other accounts managed by
ACAM are prepared to invest in, or desire
to dispose of, the same security, available investments or opportunities
for sales will be allocated in a manner
believed by ACAM to be equitable to each. In some cases, this procedure
may adversely affect the price paid or
received by the Portfolio or the size of the position obtained or disposed
of by the Portfolio.
Transactions on U.S. stock exchanges and some foreign stock exchanges
involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated,
the cost of transactions may vary
among different brokers. Commissions generally are fixed on most foreign
exchanges. There is generally no stated
commission in the case of securities traded in U.S. or foreign over-the-
counter markets, but the prices of those
securities include undisclosed commissions or mark-ups. The cost of
securities purchased from underwriters
includes an underwriting commission or concession and the prices at which
securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. government
securities generally are purchased from
underwriters or dealers, although certain newly issued U.S. government
securities may be purchased directly from the
United States Treasury or from the issuing agency or instrumentality.
In selecting brokers or dealers to execute securities transactions on
behalf of the Portfolio, ACAM seeks the best
overall terms available. In assessing the best overall terms available for
any transaction, ACAM considers the factors
that it deems relevant, including the breadth of the market in the
security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, the Current
Advisory Agreement between the Fund and
ACAM authorizes ACAM, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best
overall terms available, to consider the brokerage and research services
(as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Fund and/or other
accounts over which ACAM or its affiliates
exercise investment discretion. The fees under the Current Advisory
Agreement between the Fund and ACAM are
not reduced by reason of it receiving such brokerage and research services.
The Fund's Board of Trustees in its
discretion may authorize ACAM to cause the Portfolio to pay a broker that
provides such brokerage and research
services a brokerage commission in excess of that which another broker
might have charged for effecting the same
transaction, in recognition of the value of such brokerage and research
services. The Fund's Board of Trustees
periodically will review the commissions paid by the Portfolio to determine
if the commissions paid over
representative periods of time were reasonable in relation to the benefits
inuring to the Fund.
To the extent consistent with applicable provisions of the 1940 Act
and the rules and exemptions adopted by the
SEC thereunder, the Fund's Board of Trustees has determined that portfolio
transactions for the Portfolio may be executed
through Smith Barney and other affiliated broker-dealers if, in the
judgment of ACAM, the use of such broker-dealer is
likely to result in price and execution at least as favorable as those of
other qualified broker-dealers, and if, in the transaction,
such broker-dealer charges the Portfolio a rate consistent with that
charged to comparable unaffiliated customers in similar
transactions. In addition, pursuant to an exemption granted by the SEC,
the Portfolio may engage in transactions involving
certain money market instruments with Smith Barney or certain affiliates
acting as principal. Over-the-counter purchases
and sales are transacted directly with principal market makers except in
those cases in which better prices and executions
may be obtained elsewhere.
The Portfolio will not purchase any security, including U.S.
government securities, during the existence of any
underwriting or selling group relating thereto of which Smith Barney is a
member, except to the extent permitted by the SEC.
The Portfolio may use Smith Barney as a commodities broker in
connection with entering into futures contracts and
options on futures contracts. Smith Barney has agreed to charge the
Portfolio commodity commissions at rates comparable
to those charged by Smith Barney to its most favored clients for the
comparable trades in comparable accounts.
During the period June 30, 1994 through September 30, 1994, the
Portfolio paid $5,835.00 in commissions. None of
these transactions were effected through Smith Barney and accordingly,
Smith Barney did not receive any commissions.
ACAM's brokerage practices are monitored on a quarterly basis by the Fund's
Trustees.
The Distribution Agreement
Pursuant to a distribution agreement with the Fund, Smith Barney acts as
the Distributor of the Fund's shares for
which it receives no separate fee from the Fund; however, IDS Life or IDS
Life of New York pays Smith Barney for
the services it provides and the expenses it bears in distributing annuity
contracts, including payment of commissions
for the sales of annuity contracts. As is the case with the Successor
Advisory Agreement, the distribution agreement
terminates automatically in the event of its assignment. The distribution
agreement may be terminated at any time,
without penalty, by the Trustees of the Fund or by vote of a "majority of
the outstanding voting securities" of the
Fund on 60 days' written notice to Smith Barney, or by Smith Barney on the
same notice to the Fund, and continues
in effect only so long as continuance is specifically approved at least
annually by the Trustees or by vote of a
"majority of outstanding voting securities" of the Fund and, in either case
by the majority of the Trustees who are not
parties to the distribution agreement or "interested persons." Fund
officers who are also employed by Smith Barney
in various capacities are as follows: Stephen J. Treadway is an Executive
Vice President of Smith Barney; John C.
Bianchi, Harry P. Cohen, James B. Conroy, Jack S. Levande, Richard P.
Roelofs, Phyllis Zahorodny, Lewis E.
Daidone and Christina T. Sydor are Managing Directors of Smith Barney;
George Mueller is Senior Vice President of
Smith Barney; Caren Cunningham is Vice President of Smith Barney. Smith
Barney is a wholly-owned subsidiary of
Smith Barney Holdings Inc., which is, in turn, a wholly-owned subsidiary of
Travelers.
The Board of the Trustees recommends that shareholders of the Emerging
Growth Portfolio vote FOR approval
of the Successor Advisory Agreement.
OTHER MATTERS
The Board of Trustees of the Fund knows of no other matters that may come
before the meeting. If any such
matters should properly come before the meeting, it is the intention of the
persons named in the enclosed form of
proxy to vote such proxy in accordance with their best judgment.
SHAREHOLDERS PROPOSALS
The Fund does not hold shareholder meetings annually. Shareholders wishing
to submit proposals for
consideration for inclusion in a proxy statement for the next shareholder
meeting should send their written proposals
to Smith Barney Series Fund, 388 Greenwich Street, New York, NY 10013, c/o
Christina T. Sydor, Secretary.
Proposals must be received at a reasonable time prior to the date of a
meeting of shareholders to be considered for
inclusion in the materials for that meeting. Timely submission of a
proposal does not necessarily mean that such
proposal will be included
You are requested to mark, date, sign and return the enclosed proxy
promptly. No postage is required on the
enclosed envelope.
By Order of the Board of Trustees
Christina T. Sydor
Secretary
New York, New York
November 28, 199
APPENDIX B
The following table indicates the size of each investment company advised
or subadvised by ACAM and the advisory
fee rate paid to ACAM for the last fiscal year. Average net assets are
calculated on a daily basis for open-end funds and on a
weekly basis for closed-end funds.
Annual
Management
Fee as
Net Assets on Percent of
August 31, 1994 Average Net
Name (In Millions) Assets
ACAM
OPEN END:
American Capital Comstock
Fund, Inc 961.8 (12)
American Capital Corporate
Bond Fund, Inc 175.1 (1)
American Capital Emerging
Growth Fund, Inc 953.9 (20)
American Capital Enterprise Fund, Inc.
Fund, Inc 886.3 (12)
American Capital Equity
Income Fund, Inc 482.9 (1)
American Capital Exchange
Fund 39.1 (2)
American Capital Federal
Mortgage Trust 79.1 (3)
American Capital Global
Managed Assets Fund, Inc. 17.2 (15)
American Capital Government
Securities, Inc. 3,182.3 (4)
American Capital Government
Target Series Portfolio '97 18.0 (2
Annual
Management
Fee as
Net Assets on Percent of
August 31, 1994 Average Net
Name (In Millions) Assets
ACAM
OPEN END:
American Capital Growth and
Income Fund, Inc. 234.2 (1)
American Capital Harbor Fund,
Inc 479.1 (17)
American Capital High
Yield Investments, Inc. 446.9 (5)
American Capital Life Investment Trust
Common Stock Portfolio 70.8 (6)
Domestic Strategic Income
Portfolio 28.2 (6)
Government Portfolio 67.7 (6)
Money Market Portfolio 28.5 (6)
Multiple Strategy Portfolio 62.6 (6)
American Capital Municipal
Bond Fund, Inc. 361.1 (2)
American Capital Pace Fund,
Inc 2,286.1 (12)
American Capital Real Estate
Securities Fund, Inc. 8.0 (15)
American Capital Reserve
Fund, Inc 396.8 (1)
American Capital Small
Capitalization Fund, Inc. 21.1 (23)
American Capital Tax-Exempt
Trust High Yield Municipal
Portfolio 599.1 (7)
Annual
Management
Fee as
Net Assets on Percent of
August 31, 1994 Average Net
Name (In Millions) Assets
Insured Municipal
Portfolio 114.5 (7)
American Capital Texas
Municipal Securities, Inc. 23.1 (16)
American Capital U.S.
Government Trust for
Income 348.2 (18)
American Capital Utilities
Income Fund, Inc. 19.9 (25)
American Capital World
Portfolio Series, Inc.
American Capital Global
Equity Fund 113.1 (15)
American Capital Global Government
Securities Fund 225.6 (14)
Common Sense Trust
Common Sense
Government Fund 345.5 (13)
Common Sense Growth Fund 2,182.9 (9)
Common Sense Growth
and Income Fund 725.4 (9)
Common Sense
Money Market Fund 54.8 (10)
Common Sense Municipal
Bond Fund 113.1 (11)
Common Sense II
Government Fund 6.2 (13)
Common Sense II
Growth Fund 5.6 (9)
Annual
Management
Fee as
Net Assets on Percent of
August 31, 1994 Average Net
Name (In Millions) Assets
Common Sense II Growth
and Income Fund 4.6 (9)
Smith Barney Shearson Series Fund
Emerging Growth Portfolio 11.4 (21)
Smith Barney/Travelers Series, Inc. - American
Capital Enterprise Portfolio 4.9 (24)
WRL Series Fund, Inc. Emerging
Growth Portfolio 176.9 (19)
CLOSED-END:
American Capital
Bond Fund, Inc. 222.7 (1)
American Capital
Convertible Securities, Inc. 4.7 (1)
American Capital
Income Trust 116.7 (8)
Mosher, Inc. 37.0 (22)
_________________
(1) 0.50% on the first $150 million; 0.45% on the next $100 million;
0.40% on the next $100 million; and 0.35% on
the excess over $350 million.
(2) 0.50% on the Fund's average net assets.
(3) 0.50% on the first $1 billion; 0.475% on the next $1 billion; 0.45%
on the next $1 billion; 0.40% on the next $1
billion; and 0.35% on the excess over $4 billion.
(4) 0.540% on the first $1 billion; 0.515% on the next $1 billion; 0.490%
on the next $1 billion; 0.440% on the next
$1 billion; 0.390% on the next $1 billion; 0.340% on the next $1 billion;
0.290% on the next $1 billion; and
0.240% on the excess over $7 billion.
(5) 0.625% on the first $150 million; 0.55% on the next $150 million; and
0.50% on the next $300 million.
(6) 0.50% on the first $500 million of the combined net assets of all
Portfolios; 0.45% on the next $500 million; and
0.40% on the excess over $1 billion.
(7) 0.60% on the first $300 million of the combined net assets of all
Portfolios; 0.55% on the next $300 million; and
0.50% on the excess over $600 million.
(8) 0.65% of the Fund's average weekly net assets.
(9) 0.65% on the first $1 billion; 0.60% on the next $1 billion; 0.55% on
the next $1 billion; 0.50% on the next $1
billion; and 0.45% on the excess over $4 billion.
(10) 0.50% on the first $2 billion; 0.475% on the next $2 billion; and
0.45% on the excess over $4 billion.
(11) 0.60% on the first $1 billion; 0.55% on the next $1 billion; 0.50% on
the next $1 billion; and 0.45% on the
excess over $3 billion.
(12) 0.50% on the first $1 billion; 0.45% on the next $1 billion; 0.40% on
the next $1 billion; and 0.35% on the
excess over $3 billion.
(13) 0.60% on the first $1 billion; 0.55% on the next $1 billion; 0.50% on
the next $1 billion; 0.45% on the next $1
billion; 0.40% on the next $1 billion; and 0.35% on the excess over $5
billion.
(14) 0.75% of the Fund's average daily net assets.
(15) 1.00% of the Fund's average daily net assets.
(16) 0.60% on the first $300 million; 0.55% on the next $300 million; and
0.50% on the excess over $600 million.
(17) 0.55% on the first $350 million; 0.50% on the next $350 million;
0.45% on the next $350 million; and 0.40% on
the excess over $1.05 billion.
(18) 0.60% of the Fund's average daily net assets.
(19) 50% of the fees received by WRL pursuant to the following schedule;
0.80% of the average daily net assets of
the Portfolio.
(20) 0.575% on the first $350 million; 0.525% on the next $350 million;
0.475% on the next $350 million; and
0.425% on the excess over $1.05 billion.
(21) 0.75 of 1.00% of the Portfolio's average daily net assets.
(22) 0.45% on the Fund's average weekly net assets.
(23) ACAM serves as Adviser without fee for American Capital Small
Capitalization Fund, Inc. ("Small Cap"), the shares
of which are held by other American Capital Funds listed above. The assets
in Small Cap are also reflected in the
assets of the Funds that own shares of Small Cap.
(24) 0.325% of the Portfolio's average daily net assets.
(25) 0.65% of the Fund's average daily net assets.
APPENDIX C
BALANCE SHEET OF ACAM
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
December 31, 1993
ASSETS
Cash and cash equivalents $ 352,842
Management fees receivable 5,712,456
Receivables from affiliates 31,536,298
Marketable equity securities 5,226,888
Cost of contracts purchased, net of accumulated amortization of
$50,484,462 227,067,043
Excess of cost over net assets acquired, net of accumulated
amortization of $1,007,796 12,024,854
Investment in joint venture 2,654,265
Other assets 7,402,720
Total assets $ 291,977,366
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Payables to affiliates $ 1,842,622
Accrued compensation 4,188,580
Accounts payable and other liabilities 3,018,373
Deferred federal income tax 78,701,482
Total liabilities 87,751,057
Stockholder's equity
Preferred stock (par value $10 per share; 5,200 shares authorized;
no shares issued and outstanding)
Common stock (par value $10 per share; 30 shares authorized;
issued and outstanding) 300
Capital in excess of par value 202,041,385
Retained earnings 2,184,624
Total stockholder's equity 204,226,309
Total liabilities and stockholder's equity $291,977,366
See accompanying notes to consolidated statement of financial
position.
AMERICAN CAPITAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION
December 31, 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Capital Asset Management, Inc. (the "Company") is a wholly-owned
subsidiary of American Capital
Management & Research, Inc. (the "Parent") and is registered under the
Investment Advisers Act of 1940. The Company's
principal activity is that of investment advisor and manager to numerous
registered management investment companies (the
"American Capital Funds").
Consolidation
The consolidated statement of financial position includes the accounts of
the Company and its wholly-owned
subsidiaries, American Capital Exchange Corporation and American Capital
Partner, Inc. Investment in an unconsolidated
50%-owned joint venture is accounted for using the equity method. All
material intercompany accounts and transactions
have been eliminated in consolidation.
Cash Equivalents and Marketable Equity Securities
Cash equivalents, securities which have original maturities of three months
or less, are carried at cost, which approximates
market value. The primary securities held at December 31, 1993 were
investments in Eurodollar time deposits and American
Capital Reserve Fund, Inc., a money market fund managed by the Company.
Marketable equity securities are carried at the lower of aggregate cost or
market value. Unrealized depreciation of
marketable equity securities, if any, is reflected directly in
stockholder's equity and, accordingly, has no effect on income.
At December 31, 1993, market value exceeded cost by $523,000. Gross
unrealized gains and losses were approximately
$527,000 and $4,000, respectively, at December 31, 1993.
Effective January 1, 1994, the Company will be required to adopt the
provisions of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Company will
classify its marketable equity securities as available-
for-sale which will require such securities to be carried at market value.
Transactions with Affiliates
The Company provides investment advice to a 50%-owned joint venture with an
affiliate. This joint venture manages
the portfolios of the Common Sense Trust, a diversified, open-end
management investment company.
During 1993, the Company entered into a subadvisory agreement with an
affiliate to assist the Company in performing it
investment advisory function with respect to one American Capital Fund.
The Company provides services for payment and funding of payroll and
accounts payable for its Parent and subsidiaries
of its Parent. The Company also provides legal and accounting services to
subsidiaries of its Parent and allocates a portion
of its expenses for providing such services. An affiliate provides data
processing, administrative and other office services to
the Company. Certain salary-related costs, including costs of benefit
plans of the Parent, are allocated to the Company. The
Company's Parent is obligated under a long-term lease for office space and
allocates a portion of its costs to the Company
based on space utilized.
Cost of Contracts Purchased
The cost of purchasing certain fund advisory and management contracts is
amortized over 10 to 28 years using the
straight-line method.
Excess of Cost Over Net Assets Acquired
Excess of cost over net assets acquired is amortized on a straight-line
basis over 40 years.
Income Taxes
The Company is included in its ultimate parent's consolidated federal
income tax return. The ultimate parent's
allocation of federal income taxes to its subsidiaries is based on the
computation of tax that would have been payable by or
refundable to each subsidiary assuming each filed separate tax returns and
to the extent such income or loss is utilized in the
ultimate parent's consolidated federal income tax return. The allocated
current and deferred income tax assets or liabilities
are reflected in the intercompany accounts of each subsidiary. Deferred
income taxes represent the tax effect of temporary
differences in the recognition of income and expense for tax purposes and
financial reporting purposes and are provided
based on the tax rate at which the items of income and expense are expected
to be settled in the ultimate parent's
consolidated tax return.
The Company's net deferred tax asset included in intercompany accounts at
December 31, 1993, was approximately
$1,966,000 and consisted primarily of temporary differences related to
benefit plans, the amortization of the cost of
management contracts and deferred compensation. The deferred income tax
liability presented separately in the
accompanying consolidated statement of financial position relates to the
cost of management contracts purchased.
(2) Marketable Equity Securities
Marketable equity securities held by the Company at December 31, 1993,
include investments in American Capital
Funds.
At December 31, 1993, the Company's investment at market value in the
American Capital Exchange Fund ("ACEF"), a
California limited partnership, was approximately $491,000. Under the
terms of the partnership agreement, the Company
and a subsidiary serve as nonmanaging general partners and are obligated to
hold an aggregate of at least one percent of
ACEF's outstanding partnership units. Accordingly, at December 31, 1993,
the Company held approximately 4,409, or
1.3%, ACEF partnership units.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Capital Asset Management, Inc.:
We have audited the accompanying consolidated statement of financial
position of American Capital Asset
Management, Inc. and subsidiaries (the "Company") as of December 31, 1993.
This consolidated financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this consolidated financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated statement of financial position is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated statement of financial position. An audit also includes
assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall consolidated
statement of financial position presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated statement of financial position referred
to above presents fairly, in all material respects,
the financial position of American Capital Asset Management, Inc. and
subsidiaries as of December 31, 1993, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK
Houston, Texas
January 28, 1994
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
...........................................................................
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SMITH BARNEY SERIES FUND - Emerging Growth Portfolio This Proxy is Solicited on
Behalf of the Trustees of
Smith Barney Series Fund
The undersigned holder of shares of the Emerging Growth Portfolio (the
"Portfolio"), a subtrust of Smith Barney Series Fund, a Massachusetts business
trust, hereby appoints Heath B. McLendon, Christina T. Sydor, Lee D. Augsburger
and Caren Cunningham attorneys and proxies for the undersigned with full
powers of
substitution and revocation, to represent the undersigned and
to vote on behalf of
the undersigned all shares of the Portfolio that the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Portfolio to be held at the
offices of the Portfolio, 22nd Floor, 388 Greenwich Street, New York, New York
10013 on Tuesday, December 20, 1994 at 9:00 P.M., and any adjournment or
adjournments thereof. The undersigned hereby acknowledges
receipt of the Notice
of Special Meeting and Proxy Statement dated November 28, 1994 and hereby
instructs said attorneys and proxies to vote said shares
as indicated hereon. In their discretion, the proxies are authorized
to vote upon such other business as may properly come before
the Special Meeting. A majority or the proxies present
and acting at the Special Meeting in person or by substitute (or, if only one
shall be so present, then that one)
shall have and may exercise all the power and
authority of said proxies hereunder. The undersigned hereby revokes an proxy
previously given.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as your name
appears on this Proxy. If joint
owners, EITHER may sign this Proxy.
When signing as attorney, executor,
administrator, trustee, guardian or
corporate officer, please give your
full title.
DATE:__________________________________
_______
_______________________________________
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_______________________________________
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Signature(s) (Title(s), if applicable)
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
.............................................................................
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Please indicate your vote by an "X" in the appropriate box below.
This proxy, if properly executed, will be voted in the manner
directed herein by
the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
Please refer to the Proxy Statement for a discussion of the Proposal.
1. APPROVAL OF A NEW ADVISORY AGREEMENT FOR
THE EMERGING GROWTH PORTFOLIO SUBSTANTIALLY THE
SAME AS THE CURRENT AGREEMENT WHICH WILL TAKE
EFFECT UPON THE CLOSING OF THE PROPOSED
ACQUISITION OF AMERICAN CAPITAL MANAGEMENT &
RESEARCH, INC. BY THE VAN KAMPEN MERRITT
COMPANIES INC.
FOR
AGAINST
A
BSTAIN
Please sign on the reverse side. xxx
