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FILE NO. 811-6421
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 (X)
AMENDMENT NO. 3 (X)
(CHECK APPROPRIATE BOX OR BOXES)
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AMERICAN CAPITAL SMALL CAPITALIZATION FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2800 POST OAK BOULEVARD, HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 993-0500
NORI L. GABERT
VICE PRESIDENT, ASSOCIATE GENERAL COUNSEL AND CORPORATE SECRETARY
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective:
(check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on February 28, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Exhibit Index required by Rule 483(a) under the Securities Act of 1933
is located at page of the manually signed copy of this Registration Statement.
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
Items 1, 2, 3 and 5A of Part A are omitted pursuant to Item F.4. of the General
Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
(a) (i) American Capital Small Capitalization Fund, Inc., a Maryland
corporation, (the "Fund") is a diversified, open-end management
investment company registered under the Investment Company Act of
1940 (the "1940 Act"). The Fund was incorporated on August 28,
1991.
(ii) The Fund's investment objective is to approximate the performance
of small capitalization sector of the equities market by
investment primarily in common stocks of small capitalization
companies. The Fund may also invest in money market obligations
such as government securities, certificates of deposit and
commercial paper and may enter into repurchase agreements. It may
also enter into futures contracts and options thereon.
The Fund has been created and is managed to provide a convenient
vehicle for the Publicly Offered Funds for which Van Kampen
American Capital Asset Management, Inc. (the "Adviser") serves as
investment adviser to participate conveniently and economically in
the "small capitalization" sector of the equity securities market.
To this end, it invests in a broadly diversified selection of
stocks of companies that have relatively small capitalization.
The Fund views companies with market capitalization smaller than
the 500 companies with the largest market capitalization as being
"small capitalization" companies; as of February 24, 1995,
companies with market capitalization of less than approximately
$1.87 billion would be included in that definition.
(b) INAPPLICABLE
(c) INAPPLICABLE
ITEM 5. MANAGEMENT OF THE FUND.
(a) The business of the Fund is managed under the direction of a Board of
eight Directors. The Adviser determines the investment of the Fund's
assets, provides administrative services and manages the Fund's
business and affairs.
(b) Van Kampen American Capital Asset Management, Inc., 2800 Post Oak
Boulevard, Houston, Texas 77056 serves as investment adviser to the
Fund.
The Adviser, together with its predecessors, has been in the investment
advisory business since 1926 and has served as investment adviser to
the Fund since its inception. The Adviser presently manages the assets
of 45 investment company portfolios with total assets of approximately
$16.2 billion as of January 31, 1995. The Adviser is a wholly owned
subsidiary of Van Kampen American Capital, Inc. ("VKAC"), which is a
wholly owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is
controlled, through the ownership of a substantial majority of its
common stock, by The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P.
is managed by Clayton, Dubilier & Rice, Inc. a New York based private
investment firm. The General Partner of C&D L.P. is Clayton & Dubilier
Associates IV 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. In addition,
certain officers, directors and employees of VKAC own, in the
aggregate, not more than 6% of the common stock of VK/AC Holding, Inc.
and have the right to acquire, upon the exercise of options,
approximately an additional 10% of the common stock of VK/AC Holding,
Inc.
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Mr. Don G. Powell is President and Director of the Fund, and President,
Chief Executive Officer and Director of the Adviser. Most other officers
of the Fund are also officers and/or directors of the Adviser.
The Fund retains the Adviser to manage the investment of its assets and
to place orders for the purchase and sale of its portfolio securities.
Under an investment advisory agreement dated December 20, 1994 (the
"Advisory Agreement"), the Adviser provides these services to the Fund
without cost, but the Fund pays its own expenses including reimbursement
of the Adviser for the cost of the Fund's accounting services, which
include maintaining its financial books and records and calculating its
daily net asset value.
(c) Ralph P. Goldsticker is primarily responsible for day-to-day management
of the Fund's portfolio. Mr. Goldsticker has been Director of Equity
Research for the Adviser since 1987.
(d) INAPPLICABLE
(e) ACCESS Investor Services, Inc. ("ACCESS"), P.O. Box 418256, Kansas
City, Missouri 64141-9256, serves as shareholder service agent for the
Fund. ACCESS, a wholly owned subsidiary of the Adviser's parent,
provides these services at cost plus a profit.
(f)The Fund's total annualized expense ratio for its most recent fiscal
year as a percentage of net assets is .30%.
(g)INAPPLICABLE
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
Information contained in Annual Report.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
(a) The holders of Registrant's shares of common stock will have equal
rights to participate in distributions made by the Fund, equal rights
to the Fund's assets upon dissolution and equal voting rights; the Fund
does not allow cumulative voting. Shares may be redeemed at any time at
net asset value with no charge.
(b) The Fund's shares are offered and sold only to American Capital
Comstock Fund, Inc., American Capital Enterprise Fund, Inc., American
Capital Equity Income Fund, Inc., American Capital Growth and Income
Fund, Inc., American Capital Life Investment Trust -- Common Stock
Portfolio, American Capital Life Investment Trust -- Multiple Strategy
Portfolio, American Capital Pace Fund, Inc., Common Sense Growth Fund,
Common Sense Growth and Income Fund, Common Sense Growth II Fund,
Common Sense Growth and Income II Fund, and Common Sense International
Equity II Fund (the "Publicly Offered Funds"), for all of which the
Adviser serves as the investment adviser and to other Funds for which
the Adviser may become investment adviser or subadviser. Since there
are twelve such Publicly Offered Funds, at any given time, one or more
of such funds may own more than ten percent of the outstanding shares
of the Fund. In the event any of such Publicly Offered Funds owned more
than 25% of the outstanding shares of the Fund, such Publicly Offered
Fund would be deemed to control the Fund within the meaning of the 1940
Act. As of February 23, 1995, American Capital Pace Fund, Inc. and
Common Sense Trust Growth Fund owned beneficially and of record
approximately 48% and 52%, respectively, of the outstanding shares of
the Fund, and therefore, may be deemed to control the Fund.
(c) INAPPLICABLE
(d) INAPPLICABLE
(e) Inquiries regarding the Fund or its shares should be made to the Fund
at 2800 Post Oak Boulevard, Houston, Texas 77056.
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(f) The Fund makes annual distributions of net investment income. The Fund
distributes realized capital gains to shareholders annually.
(g) The Fund intends to qualify as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As such, the Fund will distribute all of its net income and
capital gains to its shareholders and such distributions will be
taxable as such to its shareholders; while shareholders may be
proportionately liable for taxes on income and gains of the Fund,
shareholders not subject to tax on their income will not be required to
pay tax on amounts distributed to them; the Fund will inform its
shareholders of the amount and nature of such income and gains
distributed.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
(a) INAPPLICABLE
(b) Shares of the Fund are offered to eligible purchasers at net asset
value, which is determined as described under Item 8(a) below. There is
no sales charge on the sale of Fund shares.
(c) INAPPLICABLE
(d) INAPPLICABLE
(e) There is no continuing fee paid out of Fund assets to any dealer or any
persons who may be advising shareholders regarding the purchase, sale
or retention of Fund shares.
(f) INAPPLICABLE
ITEM 8. REDEMPTION OR REPURCHASE.
(a) Shareholders may redeem shares at net asset value at any time without
charge by submitting a written request in proper form to ACCESS at P.O.
Box 418256, Kansas City, Missouri 64141-9256.
The net asset value per share is determined as of 2:00 p.m. eastern
time on each day on which the New York Stock Exchange (the "Exchange")
is open. The Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share is determined using prices as of 2:00
p.m. eastern time and (i) valuing securities listed or traded on a
national securities exchange at the last reported sale price, or if
there has been no sale that day, at the last reported bid price, (ii)
valuing options at the last sale price, or if there has been no sale
that day, at the mean between the bid and asked prices, (iii) valuing
over-the-counter securities for which the last sale price is available
from the National Association of Securities Dealers Automated
Quotations ("NASDAQ") at that price, (iv) valuing all other over-
the-counter securities for which market quotations are available at the
most recent bid quotation supplied by NASDAQ or broker-dealers, and (v)
valuing any securities for which market quotations are not readily
available, and any other assets as fair value as determined in good
faith by the Board of Directors of the Fund; for these purposes "last
price" means the last price reported at or before 2:00 p.m. eastern
time. The Fund reserves the right to redeem in kind.
(b) INAPPLICABLE
(c) INAPPLICABLE
(d) INAPPLICABLE
ITEM 9. PENDING LEGAL PROCEEDINGS.
INAPPLICABLE
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PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
ITEM 10. COVER PAGE
American Capital Small Capitalization Fund, Inc. (the "Fund") is a
diversified open-end management investment company.
This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in Part A and
should be read in conjunction with Part A. This Statement of Additional
Information is dated February 28, 1995. Part A may be obtained without charge by
calling or writing Van Kampen American Capital Distributors, Inc. at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, at (800) 421-5666.
ITEM 11. TABLE OF CONTENTS.
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PAGE
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1
General Information and History.............................................
1
Investment Objectives and Policies..........................................
2
Management of the Fund......................................................
5
Control Persons and Principal Holders of Securities.........................
5
Investment Advisory and Other Services......................................
6
Brokerage Allocation and Other Practices....................................
8
Capital Stock and Other Securities..........................................
8
Purchase, Redemption and Pricing of Securities Being Offered................
8
Tax Status..................................................................
8
Underwriters................................................................
8
Calculation of Performance Data.............................................
8
Financial Statements........................................................
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ITEM 12. GENERAL INFORMATION AND HISTORY.
The Fund and Van Kampen American Capital Asset Management, Inc., (the
"Adviser") have adopted Codes of Ethics designed to recognize the fiduciary
relationship between the Fund and the Adviser and its employees. The Codes
permit directors, officers and employees to buy and sell securities for their
personal accounts subject to preclearance and other procedures designed to
prevent conflicts of interest.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
(a) See Item 4.
(b) The Fund has adopted certain investment restrictions which may be
altered or rescinded only with the approval of the holders of the
lesser of (i) 67% or more of the Fund's shares present or represented
by proxy at a meeting of the holders of more than 50% of its
outstanding shares are present or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares. These restrictions provide
that the Fund shall not:
(1) Issue senior securities within the meaning of the Investment Company
Act of 1940 (the "1940 Act");
(2) Purchase securities on margin, except that the Fund may obtain such
short term credits as may be necessary for the clearance of purchases
and sales of securities. The deposit or payment by the Fund of an
initial or maintenance margin in connection with futures contracts or
related option transactions is not considered the purchase of a
security on margin;
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(3) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional
cost securities identical to those sold short;
(4) Borrow money, except that the Fund may borrow from banks to meet
redemptions or for other temporary or emergency purposes, with such
borrowing not to exceed five percent of the total assets of the Fund
at market value at the time of the borrowing. Any such borrowing may
be secured provided that not more than ten percent of the total
assets of the Fund at market value at the time of the pledging may be
used as security for such borrowings;
(5) Underwrite the securities of other issuers, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 by
virtue of disposing of portfolio securities;
(6) Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal
business activities in the same industry, except that this
restriction shall not apply to securities issued by the United States
Government, its agencies or instrumentalities;
(7) Invest more than five percent of its total assets at market value at
the time of purchase in the securities of any one issuer (other than
obligations of the United States Government, its agencies or
instrumentalities) or purchase more than ten percent of the
outstanding voting securities of any one issuer;
(8) Invest in real estate or real estate mortgage loans, except that the
Fund may purchase securities secured by real estate or interests
therein;
(9) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase, hold and sell listed futures contracts.
An additional fundamental policy provides that, under normal
circumstances, at least 80% of the Fund's total assets will be invested
in securities of companies with market capitalization no greater than
that of the company whose market capitalization ranks 500th among
publicly traded U.S. common stocks.
(c) INAPPLICABLE
(d) INAPPLICABLE
ITEM 14. MANAGEMENT OF THE FUND.
(a) The Fund's directors and principal executive officers and their
principal occupations for the past five years are listed below. All
persons named as Directors also serve in similar capacities for other
funds advised by the Adviser as indicated below.
FERNANDO SISTO, Chairman of the Board and Director. Stevens Institute of
Technology, Castle Point Station, Hoboken, New Jersey 07030. George M. Bond
Professor and formerly Dean of Graduate School and Chairman, Department of
Mechanical Engineering, Stevens Institute of Technology; Director, Dynalysis of
Princeton (engineering research).(1)
J. MILES BRANAGAN, Director. 2300 205th Street, Torrance, California
90501-1452. Co-Founder, Chairman and President, MDT Corporation (medical
equipment).(1)
RICHARD E. CARUSO, Director. Two Radnor Station, Suite 314, 290 King of
Prussia Road, Radnor, Pennsylvania 19087. Chairman and Chief Executive Officer,
Integra LifeSciences Corporation (biotechnology/life sciences); Trustee,
Susquehanna University; Trustee and First Vice President, The Baum School of Art
(community art school); Founder and Director, Uncommon Individual Foundation
(youth development); Director, International Board of Business Performance
Group, London School of Economics; formerly Director, First Sterling Bank;
formerly Director and Executive Vice President, LFC Financial Corporation
(leasing financing).(1)
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ROGER HILSMAN, Director. 251-1 Hamburg Cove, Lyme, Connecticut 06371.
Formerly Professor of Government and International Affairs, Columbia
University.(1)
*DON G. POWELL, President and Director. 2800 Post Oak Boulevard, Houston,
Texas 77056. President, Chief Executive Officer and Director of VK/AC Holding,
Inc., VKAC and the Adviser.(1)(2)(4)
DAVID REES, Director. 1601 Country Club Drive, Glendale, California 91208.
Senior Editor, Los Angeles Business Journal.(1)(3)
**LAWRENCE J. SHEEHAN, Director. 1999 Avenue of the Stars, Suite 700, Los
Angeles, California 90067-6035. Of Counsel to and formerly Partner (1969-1994)
of the law firm of O'Melveny & Myers, legal counsel to the Fund. (1)(3)(5)
WILLIAM S. WOODSIDE, Director. 712 Fifth Avenue, 40th Floor, New York, New
York 10019. Vice Chairman of the Board, Sky Chefs, Inc.(airline food catering);
formerly Director, Primerica Corporation (currently known as The Travelers
Inc.); formerly Chairman of the Board and Chief Executive Officer, old Primerica
Corporation (American Can Company); formerly Director, James River Corporation
(paper products); Trustee and formerly President, Whitney Museum of American
Art; Chairman, Institute for Educational Leadership, Inc., Board of Visitors,
Graduate School of The City University of New York, Academy of Political
Science; Committee for Economic Development; Director, Public Education Fund
Network, Fund for New York City Public Education; Trustee, Barnard College;
Member, Dean's Council, Harvard School of Public Health; Member, Mental Health
Task Force, Carter Center.(1)
NORI L. GABERT, Vice President and Secretary. 2800 Post Oak Boulevard,
Houston, Texas 77056. Vice President, Associate General Counsel and Corporate
Secretary of the Adviser.(4)
RALPH P. GOLDSTICKER, Vice President. 2800 Post Oak Boulevard, Houston,
Texas 77056. Vice President/Director Equity Research of the Adviser. Mr.
Goldsticker also serves as Vice President of American Capital Life Investment
Trust.(4)
TANYA M. LODEN, Vice President and Controller. 2800 Post Oak Boulevard,
Houston, Texas 77056. Vice President and Controller of most of the investment
companies advised by the Adviser; formerly Tax Manager/Assistant Controller.(4)
CURTIS W. MORELL, Vice President and Treasurer. 2800 Post Oak Boulevard,
Houston, Texas 77056. Vice President and Treasurer of most of the investment
companies advised by the Adviser.(4)
ALAN T. SACHTLEBEN, Vice President. 2800 Post Oak Boulevard, Houston, Texas
77056. Executive Vice President of VK/AC Holding, Inc. and VKAC; Senior Vice
President -- Chief Investment Officer/ Equity and Director of the Adviser.(4)
J. DAVID WISE, Vice President and Assistant Secretary. 2800 Post Oak
Boulevard, Houston, Texas 77056. Vice President, Associate General Counsel and
Compliance Review Officer of the Adviser.(4)
PAUL R. WOLKENBERG, Vice President, 2800 Post Oak Boulevard, Houston, Texas
77056. Senior Vice President of the Adviser; President, Chief Operating Officer
and Director of Van Kampen American Capital Services, Inc.; Executive Vice
President, Chief Operating Officer and Director of Van Kampen American Capital
Trust Company; Executive Vice President and Director of ACCESS Investor
Services, Inc. ("ACCESS").(4)
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* Director who is an interested person of the Adviser and of the Fund within
the meaning of the 1940 Act by virtue of his affiliation with the Adviser.
** Director who is an interested person of the Fund and may be an interested
person of the Adviser within the meaning of the 1940 Act by virtue of his
affiliation with the legal counsel of the Fund.
(1) Also a director or trustee of American Capital Comstock Fund, Inc., American
Capital Corporate Bond Fund, Inc., American Capital Emerging Growth Fund,
Inc., American Capital Enterprise Fund, Inc., American Capital Equity Income
Fund, Inc., American Capital Federal Mortgage Trust, American Capital Global
Managed Assets Fund, Inc., American Capital Government Securities, Inc.,
American
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Capital Government Target Series, American Capital Growth and Income Fund,
Inc., American Capital Harbor Fund, Inc., American Capital High Yield
Investments, Inc., American Capital Life Investment Trust, American Capital
Municipal Bond Fund, Inc., American Capital Pace Fund, Inc., American
Capital Real Estate Securities Fund, Inc., American Capital Reserve Fund,
Inc., American Capital Tax-Exempt Trust, American Capital Texas Municipal
Securities, Inc., American Capital U.S. Government Trust for Income,
American Capital Utilities Income Fund, Inc. and American Capital World
Portfolio Series, Inc.
(2) A director/trustee/managing general partner of American Capital Bond Fund,
Inc., American Capital Convertible Securities, Inc., American Capital
Exchange Fund and American Capital Income Trust, investment companies
advised by the Adviser, and a trustee of Common Sense Trust, an open-end
investment company for which the Adviser serves as adviser for ten of the
portfolios.
(3) A director of Source Capital, Inc., a closed-end investment company not
advised by the Adviser.
(4) An officer and/or director/trustee of other investment companies advised or
subadvised by the Adviser.
(5) A director of FPA Capital Fund, Inc., FPA New Income, Inc., and FPA
Perennial Fund, Inc., investment companies not advised by the Adviser, and
TCW Convertible Securities Fund, Inc., a closed-end investment company not
advised by the Adviser.
The Executive Committee, consisting of Messrs. Hilsman, Powell, Sheehan and
Sisto, may act for the Board of Directors between Board meetings except where
board action is required by law.
(b) See Item 14(a).
(c) The directors and officers of the Fund as a group own less than one
percent of the outstanding shares of the Fund. During the fiscal year
ended October 31, 1994, the Directors who were not affiliated with the
Adviser or its parent received as a group $2,633 in directors' fees
from the Fund in addition to certain out-of-pocket expenses. Such
directors also receive compensation for serving as directors or
trustees of other investment companies advised by the Adviser as
identified in the notes to the foregoing table. For legal services
rendered during the fiscal year ended October 31, 1994, the Fund paid
legal fees of $3,583 to the law firm of O'Melveny & Myers of which Mr.
Sheehan is Of Counsel. The firm also serves as legal counsel to the
American Capital funds listed in Footnote 1 above.
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Additional information regarding compensation paid by the Fund and the
related mutual funds for which the Directors serve as directors or trustees
noted in Footnote 1 above for the fiscal year ended October 31, 1994, is set
forth below. Mr. Powell is not compensated for his service as Director, because
of his affiliation with the Adviser.
COMPENSATION TABLE
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TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM REGISTRANT
AGGREGATE BENEFITS ACCRUED AND FUND
COMPENSATION AS PART OF FUND COMPLEX PAID TO
NAME OF PERSON FROM REGISTRANT EXPENSES DIRECTORS(1)
----------------------------------- --------------- ---------------- ---------------
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J. Miles Branagan.................. $ 300 N/A $63,000
Dr. Richard E. Caruso.............. $ 300(2) N/A $63,000
Dr. Roger Hilsman.................. $ 300 N/A $65,000
David Rees......................... $ 300 N/A $63,000
Lawerence J. Sheehan............... $ 300 N/A $66,000
Dr. Fernando Sisto................. $ 375(2) N/A $81,000
William S. Woodside(3)............. $ 260 N/A $51,000
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(1) Represents 29 investment companies in the fund complex.
(2) Amount reflects deferred compensation of $300 and $265 for Messrs. Caruso
and Sisto, respectively.
(3) Prior to October 6, 1994, Mr. Woodside's compensation was paid by the
registrant's adviser. As a result, of the amounts reflected in columns 2 and
4, $30 and $3,000, respectively, were paid by the registrant.
(4) Includes the following amounts that were paid by the Adviser -- Branagan,
$2,000; Caruso, $2,000; Hilsman, $1,000; Rees, $2,000; Sheehan, $2,000;
Sisto, $2,000.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
(a) See Item 6(b).
(b) See Item 6(b).
(c) None of the Fund's officers or directors owns or is eligible to own
shares of the Fund's common stock.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
(a) (i) The Adviser and ACCESS are wholly owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC"), which is a wholly owned
subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is
controlled, through the ownership of a substantial majority of its
common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited
partnership. C&D L.P. is managed by Clayton, Dubilier & Rice, Inc.
a New York based private investment firm. The General Partner of
C&D L.P. is Clayton & Dubilier Associates IV 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. In addition, certain officers,
directors and employees of VKAC own, in the aggregate, not more
than 6% of the common stock of VK/AC Holding, Inc. and have the
right to acquire, upon the exercise of options, approximately an
additional 10% of the common stock of VK/AC Holding, Inc.
(ii) See Item 14(a).
(iii) The Fund and the Adviser are parties to an investment advisory
agreement dated December 20, 1994 (the "Agreement"), which
provides that the Adviser will provide investment advisory
services to the Fund at no fee. The Fund is, however, required to
reimburse the
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Adviser for the cost of accounting services provided by the
Adviser, which includes maintaining its financial books and
records and calculating its daily net asset value. See Item
16(b).
The Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Board of
Directors or (ii) by vote of a majority of the Fund's outstanding
voting securities and (b) by the affirmative vote of a majority
of the Directors who are not parties to the agreement or
interested persons of any such party by votes cast in person at a
meeting called for that purpose. The Agreement provides that it
may be terminated without penalty by either party on 30 days'
written notice.
(b) Under the Agreement, the Fund retains the Adviser to manage the
investment of its assets and to place orders for the purchase and sale
of its portfolio securities. The Adviser is responsible for obtaining
and evaluating economic, statistical and financial data and for
formulating and implementing investment programs in furtherance of the
Fund's investment objectives. The Adviser also furnishes at no cost to
the Fund (except as noted herein) the services of sufficient executive
and clerical personnel for the Fund as are necessary to prepare
registration statements, shareholder reports and notices and proxy
solicitation materials. In addition, the Adviser furnishes at no cost
to the Fund the services of a Chief Executive Officer and other
executive and clerical personnel as needed.
Under the Agreement, the Fund bears the cost of its accounting
services, which includes maintaining its financial books and records
and calculating its daily net asset value. The costs of such accounting
services include the salaries and overhead expenses of the Fund's
Principal Financial and Accounting Officer and personnel operating
under his direction. The Adviser receives no compensation for its
investment management services. During the fiscal year ended October
31, 1994, the Fund paid $6,422 for accounting services. A portion of
these amounts are paid to the Adviser in reimbursement of personnel,
facilities and equipment costs attributable to the provision of
accounting services to the Fund. The services provided by the Adviser
are at cost, which is allocated among the investment companies advised
by the Adviser. The Fund also pays shareholder service agency fees,
custodian fees, legal and auditing fees, the costs of reports to
shareholders and all other ordinary expenses not specifically assumed
by the Adviser.
The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by
the Adviser or any other direct or indirect majority owned subsidiary
of VK/AC Holding, Inc. in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses incurred by
such subsidiary of VK/AC Holding, Inc. in connection with obtaining
such commissions, fees, brokerage or similar payments. The Adviser
agrees to use its best efforts to recapture tender solicitation fees
and exchange offer fees for the Fund's benefit and to advise the
Directors of the Fund of any other commissions, fees, brokerage or
similar payments which may be possible for the Adviser or any other
direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to
receive in connection with the Fund's portfolio transactions or other
arrangements which may benefit the Fund.
(c) INAPPLICABLE
(d) INAPPLICABLE
(e) INAPPLICABLE
(f) INAPPLICABLE
(g) INAPPLICABLE
(h) The Custodian of all the Fund's assets is State Street Bank and Trust
Company located at 225 Franklin Street, Boston, Massachusetts 02110.
Price Waterhouse LLP, 1201 Louisiana, Houston, Texas 77002, are the
Independent Accountants for the Fund.
6
<PAGE> 11
(i) During the fiscal year ended October 31, 1994, ACCESS, shareholder
service agent for the Fund, received fees aggregating $7,500. These
services are provided at cost plus a profit.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
(a) The Adviser is responsible for decisions to buy and sell securities for
the Registrant and for the placement of its portfolio business and the
negotiation of the commissions paid on such transactions. It is the
policy of the Adviser to seek the best security price available with
respect to each transaction. In over-the-counter transactions, orders
are placed directly with a principal market maker unless it is believed
that a better price and execution can be obtained by using a broker.
Except to the extent that the Fund may pay higher brokerage commissions
for brokerage and research services (as described below) on a portion
of its transactions executed on securities exchanges, the Adviser seeks
the best security price at the most favorable commission rate.
(b) Brokerage commissions paid by the Fund on portfolio transactions for
the fiscal year ended October 31, 1994 totalled $29,523. During this
same period, the Fund paid $14,363 in brokerage commissions on
transactions totalling $11,704,468 to brokers selected primarily on the
basis of research services provided to the Adviser.
(c) In selecting dealers and in negotiating commissions, the Adviser
considers the firm's reliability, the quality of its execution services
on a continuing basis and its financial condition. When more than one
firm is believed to meet these criteria, preference may be given to
firms which also provide research services to the Fund or the Adviser.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an
account to pay a broker or dealer who supplies brokerage and research
services, a commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged
for effecting the transaction. Brokerage and research services include
(a) furnishing advice as to the value of securities, the advisability
of investing in, purchasing or selling securities, and the availability
of securities or purchasers or sellers of securities, (b) furnishing
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts, and (c) effecting securities transactions and performing
functions incidental thereto (such as clearance, settlement and
custody).
Pursuant to provisions of the investment advisory agreement, the Fund's
Board of Directors has authorized the Adviser to cause the Fund to
incur brokerage commissions in an amount higher than the lowest
available rate in return for research services provided to the Adviser.
The Adviser is of the opinion that the continued receipt of
supplemental investment research services from dealers is essential to
its provision of high quality portfolio management services to the
Fund. The Adviser undertakes that such higher commissions will not be
paid by the Fund unless (a) the Adviser determines in good faith that
the amount is reasonable in relation to the services in terms of the
particular transaction or in terms of the Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion, (b) such payment is made in compliance with the
provisions of Section 28(e) and other applicable state and federal
laws, and (c) in the opinion of the Adviser, the total commissions paid
by the Fund are reasonable in relation to the expected benefits to the
Fund over the long term. The investment advisory fee paid by the Fund
under the investment advisory agreement is not reduced as a result of
the Adviser's receipt of research services.
The Adviser places portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by
firms through which the Fund effects its securities transactions may be
used by the Adviser in servicing all of its accounts; not all of such
services may be used by the Adviser in connection with the Fund. In the
opinion of the Adviser, the benefits from research services to each of
the accounts (including the Fund) managed by the Adviser cannot be
measured separately. Because the volume and nature of the trading
activities of the accounts are not uniform, the amount of commissions
in excess of the lowest available rate paid by each account for
7
<PAGE> 12
brokerage and research services will vary. However, in the opinion of
the Adviser, such costs to the Fund will not be disproportionate to the
benefits received by the Fund on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the
Fund and another advisory account. In some cases, this procedure could
have an adverse effect on the price or the amount of securities
available to the Fund. In making such allocations among the Fund and
other advisory accounts, the main factors considered by the Adviser are
the respective investment objectives, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash
for investment, the size of investment commitments generally held, and
opinions of the persons responsible for recommending the investment.
(d) INAPPLICABLE
(e) INAPPLICABLE
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
See Item 6.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
(a) See Item 7.
(b) See Item 8.
(c) INAPPLICABLE
ITEM 20. TAX STATUS.
See Item 6(g).
ITEM 21. UNDERWRITERS.
(a) INAPPLICABLE
(b) See Item 21(a).
(c) INAPPLICABLE
ITEM 22. CALCULATION OF PERFORMANCE DATA.
INAPPLICABLE
ITEM 23. FINANCIAL STATEMENTS.
Financial Statements including Investment Portfolio, Statement of Assets
and Liabilities, Statement of Operations, Statements of Changes in Net Assets,
Notes to Financial Statements, Financial Highlights and Report of Independent
Accountants on such financial statements, are hereby incorporated by reference
to the Fund's Annual Report previously filed with the Securities and Exchange
Commission on or about January 10, 1995.
8
<PAGE> 13
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
<TABLE>
<CAPTION>
INCLUDED IN
PART B
-----------
<S> <C>
Investment Portfolio
October 31, 1994 *
Statement of Assets and Liabilities
October 31, 1994 *
Statement of Operations
November 23, 1993 through October 31, 1994 *
Statement of Changes in Net Assets
November 23, 1993 through October 31, 1994 *
Notes to Financial Statements *
Financial Highlights *
Report of Independent Accountants *
</TABLE>
- ---------------
* Such financial statements are hereby incorporated by reference to the Fund's
Annual Report previously filed with the Securities and Exchange Commission on
or about January 10, 1995.
(b) Exhibits
<TABLE>
<S> <C>
1 -- Articles of Incorporation dated August 27, 1991 incorporated herein
by reference (Exhibit 1 to Form N-1A of Registrant's Registration No.
811-6421, Initial Registration Statement, filed on September 27,
1991).
2 -- Bylaws (as amended December 1, 1994).
3 -- INAPPLICABLE.
4 -- Copy of specimen stock certificate of Registrant incorporated herein
by reference (Exhibit 4 to Form N-1A of Registrant's Registration No.
811-6421, Initial Registration Statement, filed on September 27,
1991).
5 -- Investment Advisory Agreement dated December 20, 1994.
6 -- INAPPLICABLE.
7 -- INAPPLICABLE.
8.1 -- Form of Custodian Agreement dated December 2, 1993 incorporated
herein by reference (Exhibit 8 to Form N-1A of American Capital
Global Managed Assets Fund, Inc., Registration No. 33-74024,
Pre-Effective Amendment No. 2, filed on May 6, 1994).
9.1 -- Transfer Agency and Service Agreement dated November 23, 1993
incorporated herein by reference (Exhibit 8.2 to Form N-1A of
Registrant's Registration No. 811-6421, Amendment No. 2, filed on
February 25, 1994).
9.2 -- Form of Data Access Services Agreement dated December 2, 1993
incorporated herein by reference (Exhibit 9.2 to Form N-1A of
American Capital Utilities Income Fund, Inc., Registration No.
33-68452, Post-Effective Amendment No. 1, filed on May 19, 1994).
10 -- INAPPLICABLE. (Omitted pursuant to Item 24(b).)
11 -- Consent of Independent Accountants.
12 -- INAPPLICABLE. (Omitted pursuant to Item 24(b).)
</TABLE>
1
<PAGE> 14
<TABLE>
<S> <C>
13 -- INAPPLICABLE.
14 -- INAPPLICABLE.
15 -- INAPPLICABLE.
16 -- INAPPLICABLE. (Omitted pursuant to Item 24(b).)
27 -- Financial Data Schedule.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
AS OF JANUARY 31, 1995:
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
Common Stock 3
</TABLE>
ITEM 27. INDEMNIFICATION.
Item 27 is incorporated herein by reference to Form N-1A of Registrant's
Registration No. 811-6421, Amendment No. 2, filed on February 25, 1994.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
During the last two fiscal years, the investment adviser has not engaged in
any business of a substantial nature except as investment adviser to the
American Capital Funds Group (listed below) and to the Emerging Growth Portfolio
of the Smith Barney Series Fund, and as subadviser to Common Sense Trust,
Western Reserve Life -- Emerging Growth Portfolio and Smith Barney/Travelers
Series Fund Inc. -- American Capital Enterprise Portfolio, all registered
open-end investment companies. The American Capital Funds Group and Common Sense
Trust are all located at 2800 Post Oak Boulevard, Houston, Texas 77056. The
Emerging Growth Portfolio of the Smith Barney Series Fund and the American
Capital Enterprise Portfolio of the Smith Barney/Travelers Series Fund Inc. are
located at Two World Trade Center, New York, New York 10048. Western Reserve
Life -- Emerging Growth Portfolio is located at 201 Highland Avenue, Largo,
Florida 34640.
The American Capital Funds Group of registered investment companies for
which Van Kampen American Capital Asset Management, Inc. (formerly American
Capital Asset Management, Inc.) currently serves as investment adviser are
listed below:
American Capital Bond Fund, Inc.
American Capital Comstock Fund, Inc.
American Capital Convertible Securities, Inc.
American Capital Corporate Bond Fund, Inc.
American Capital Emerging Growth Fund, Inc.
American Capital Enterprise Fund, Inc.
American Capital Equity Income Fund, Inc.
American Capital Exchange Fund
American Capital Federal Mortgage Trust
American Capital Global Managed Assets Fund, Inc.
American Capital Government Securities, Inc.
American Capital Government Target Series
American Capital Growth and Income Fund, Inc.
American Capital Harbor Fund, Inc.
American Capital High Yield Investments, Inc.
American Capital Income Trust
2
<PAGE> 15
American Capital Life Investment Trust
American Capital Municipal Bond Fund, Inc.
American Capital Pace Fund, Inc.
American Capital Real Estate Securities Fund, Inc.
American Capital Reserve Fund, Inc.
American Capital Small Capitalization Fund, Inc.
American Capital Tax-Exempt Trust
American Capital Texas Municipal Securities, Inc.
American Capital U.S. Government Trust for Income
American Capital Utilities Income Fund, Inc.
American Capital World Portfolio Series, Inc.
Mosher, Inc.
During the last two fiscal years, no officer or director of the investment
adviser has engaged in any other business, profession, vocation or employment of
a substantial nature except as follows:
William N. Brown; Senior Vice President
Vice President and Director;
ACCESS Investor Services, Inc.
Advantage Capital Corporation
American Capital Shareholders Corporation
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Custodial Services, Inc.
Van Kampen American Capital Exchange Corp.
Van Kampen American Capital Services, Inc.
Van Kampen American Capital T.A., Inc.
Van Kampen American Capital Trust Company
Vice President;
Advantage Capital Credit Services, Inc.
American Capital Contractual Services, Inc.
Huey P. Falgout, Jr.; Vice President and Assistant Secretary
Vice President and Assistant Corporate Secretary;
ACCESS Investor Services, Inc.
Advantage Capital Corporation
Advantage Capital Credit Services, Inc.
Advantage Capital Insurance Agency, Inc.
Advantage Capital Insurance Agency of Alabama, Inc.
Advantage Capital Insurance Agency of Hawaii, Inc.
Advantage Capital Insurance Agency of Massachusetts, Inc.
Advantage Capital Insurance Agency of Ohio, Inc.
Advantage Capital Insurance Agency of Oklahoma, Inc.
Advantage Capital Insurance Agency of Texas, Inc.
American Capital Contractual Services, Inc.
American Capital Shareholders Corporation
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Custodial Services, Inc.
Van Kampen American Capital Exchange Corp.
Van Kampen American Capital Services, Inc.
Van Kampen American Capital T.A., Inc.
Van Kampen American Capital Trust Company
3
<PAGE> 16
Nori L. Gabert; Vice President, Associate General Counsel and Secretary
Vice President, Corporate Secretary and Counsel;
American Capital Contractual Services, Inc.
Vice President and Corporate Secretary;
American Capital Shareholders Corporation
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Custodial Services, Inc.
Van Kampen American Capital Exchange Corp.
Van Kampen American Capital T.A., Inc.
Vice President and Assistant Corporate Secretary;
ACCESS Investor Services, Inc.
Advantage Capital Corporation
Advantage Capital Credit Services, Inc.
Van Kampen American Capital Services, Inc.
Van Kampen American Capital Trust Company
Wayne D. Godlin; Vice President -- Portfolio Manager
Vice President;
Van Kampen American Capital Advisors, Inc.
Ronald A. Nyberg; Senior Vice President and General Counsel
Executive Vice President, General Counsel and Corporate Secretary;
Van Kampen American Capital, Inc.
VK/AC Holding, Inc.
Executive Vice President, General Counsel and Director;
Van Kampen American Capital Distributors, Inc.
Van Kampen American Capital Investment Advisory Corp.
Van Kampen American Capital Management, Inc.
Vice President, General Counsel and Assistant Corporate Secretary;
American Capital Shareholders Corporation
Van Kampen American Capital Custodial Services, Inc.
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Exchange Corp.
Vice President and Assistant Corporate Secretary;
American Capital Contractual Services, Inc.
Vice President;
ACCESS Investor Services, Inc.
Advantage Capital Corporation
Advantage Capital Credit Services, Inc.
Van Kampen American Capital Services, Inc.
Van Kampen American Capital T.A., Inc.
Van Kampen American Capital Trust Company
General Counsel and Assistant Secretary;
McCarthy, Crisanti & Maffei, Inc.
McCarthy, Crisanti & Maffei Acquisition Corporation
Robert C. Peck, Jr.; Senior Vice President, Chief Investment
Officer -- Fixed-Income Department and Director
Senior Vice President, Chief Investment Officer -- Fixed-Income Department
and Director;
Van Kampen American Capital Advisors, Inc.
4
<PAGE> 17
Don G. Powell; President, Chief Executive Officer and Director
President, Chief Executive Officer and Director;
Van Kampen American Capital, Inc.
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Custodial Services, Inc.
Van Kampen American Capital Exchange Corp.
Van Kampen American Capital Holding, Inc.
VK/AC Holding, Inc.
Chairman, Chief Executive Officer and Director;
Van Kampen American Capital Distributors, Inc.
Van Kampen American Capital Investment Advisory Corp.
Van Kampen American Capital Management, Inc.
Executive Vice President and Director;
ACCESS Investor Services, Inc.
Advantage Capital Corporation
Advantage Capital Credit Services, Inc.
American Capital Contractual Services, Inc.
American Capital Shareholders Corporation
Van Kampen American Capital Services, Inc.
Van Kampen American Capital T.A., Inc.
Van Kampen American Capital Trust Company
Director;
McCarthy, Crisanti & Maffei, Inc.
McCarthy, Crisanti & Maffei Acquisition Corporation
William R. Rybak; Senior Vice President, Chief Financial Officer and Treasurer
Executive Vice President, Chief Financial Officer and Director;
Van Kampen American Capital Distributors, Inc.
Van Kampen American Capital Investment Advisory Corp.
Van Kampen American Capital Management, Inc.
Executive Vice President and Chief Financial Officer;
Van Kampen American Capital, Inc.
VK/AC Holding, Inc.
Vice President, Chief Financial Officer and Treasurer;
ACCESS Investor Services, Inc.
American Capital Shareholder Services, Inc.
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Custodial Services, Inc.
Van Kampen American Capital Exchange Corp.
Van Kampen American Capital Services, Inc.
Van Kampen American Capital T.A., Inc.
Van Kampen American Capital Trust Company
Vice President and Chief Financial Officer;
Advantage Capital Corporation
American Capital Contractual Services, Inc.
Vice President and Treasurer;
Advantage Capital Credit Services, Inc.
5
<PAGE> 18
Treasurer;
Advantage Capital Insurance Agency, Inc.
Advantage Capital Insurance Agency of Alabama, Inc.
Advantage Capital Insurance Agency of Hawaii, Inc.
Advantage Capital Insurance Agency of Massachusetts, Inc.
Advantage Capital Insurance Agency of Ohio, Inc.
Advantage Capital Insurance Agency of Oklahoma, Inc.
Alan T. Sachtleben; Senior Vice President, Chief Investment Officer -- Equity
Department and Director
Executive Vice President;
Van Kampen American Capital, Inc.
VK/AC Holding, Inc.
Senior Vice President, Chief Investment Officer -- Equity Department and
Director;
Van Kampen American Capital Advisors, Inc.
J. David Wise; Vice President, Associate General Counsel, Compliance Review
Officer and Assistant Secretary
Vice President, General Counsel and Corporate Secretary;
Van Kampen American Capital Trust Company
Vice President and Assistant Corporate Secretary;
Van Kampen American Capital Services, Inc.
Vice President;
ACCESS Investor Services, Inc.
Paul R. Wolkenberg; Senior Vice President
President, Chief Operating Officer and Director;
Van Kampen American Capital Services, Inc.
Executive Vice President, Chief Operating Officer and Director;
Van Kampen American Capital Trust Company
Executive Vice President and Chief Operating Officer;
Van Kampen American Capital Custodial Services, Inc.
Executive Vice President and Director;
ACCESS Investor Services, Inc.
Executive Vice President;
American Capital Shareholders Corporation
Vice President and Director;
Van Kampen American Capital T.A., Inc.
Director;
Advantage Capital Corporation
Advantage Capital Credit Services, Inc.
American Capital Contractual Services, Inc.
Lea S. Zeitman; Assistant Secretary
Senior Vice President, Chief Administrative Officer, General Counsel and
Corporate Secretary;
Advantage Capital Corporation
Vice President, General Counsel and Corporate Secretary;
Advantage Capital Credit Services, Inc.
Advantage Capital Insurance Agency, Inc.
6
<PAGE> 19
Advantage Capital Insurance Agency of Alabama, Inc.
Advantage Capital Insurance Agency of Hawaii, Inc.
Advantage Capital Insurance Agency of Ohio, Inc.
Advantage Capital Insurance Agency of Oklahoma, Inc.
Vice President and Assistant Corporate Secretary;
Van Kampen American Capital T.A., Inc.
Vice President;
American Capital Contractual Services, Inc.
Van Kampen American Capital Trust Company
Assistant Corporate Secretary;
Van Kampen American Capital Advisors, Inc.
Clerk;
Advantage Capital Insurance Agency of Massachusetts, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS.
INAPPLICABLE
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Unless otherwise stated below, the books or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are in the physical possession of:
Fund Treasurer
Mutual Fund Accounting
2800 Post Oak Boulevard
Houston, Texas 77056
<TABLE>
<CAPTION>
RULE LOCATION OF REQUIRED RECORDS
- ------ ------------------------------------------------------------------
<S> <C> <C>
31a-l (b)(2)(iii) Van Kampen American Capital Asset Management, Inc.
(b)(4)-(6) 2800 Post Oak Boulevard
(b)(9)-(11) Houston, Texas 77056
(b)(2)(iv) ACCESS Investor Services, Inc.
7501 Tiffany Springs Parkway
Kansas City, Missouri 64153
</TABLE>
ITEM 31. MANAGEMENT SERVICES.
INAPPLICABLE
ITEM 32. UNDERTAKINGS.
INAPPLICABLE
7
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940 the
Registrant (Fund) has duly caused this Amendment to this Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Houston, State of Texas, on the day of February, 1995.
AMERICAN CAPITAL SMALL CAPITALIZATION
FUND, INC.
By /s/ NORI L. GABERT
----------------------------------------
(Nori L. Gabert, Vice President)
<PAGE> 21
AMERICAN CAPITAL SMALL CAPITALIZATION FUND, INC.
INDEX TO EXHIBITS TO FORM N-1A REGISTRATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- -----------------------------------------------------------------------------------
<S> <C> <C>
2 -- Bylaws (as amended December 1, 1994).
5 -- Investment Advisory Agreement dated December 20, 1994.
11 -- Consent of Independent Accountants.
27 -- Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 2
AMERICAN CAPITAL SMALL CAPITALIZATION FUND, INC.
BY-LAWS
(As amended December 1, 1994)
ARTICLE I.
STOCKHOLDERS
SECTION 1.01. Annual Meetings. The Corporation is not required to
hold an annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940. If the Corporation is required by the Investment Company Act of 1940 to
hold a meeting of stockholders to elect directors, such meeting shall be held
at a date and time set by the Board of Directors in accordance with the
Investment Company Act of 1940 and no later than 120 days after the occurrence
of the event requiring the meeting. 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. 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 Meetings. At any time in the interval
between annual meetings, a special meeting of 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. The Secretary of the Corporation shall
call a special meeting of stockholders on the written request of stockholders
entitled to cast at least ten percent of all the votes entitled to be cast at
the meeting. A request for a special meeting shall state the purpose of the
meeting and the matters proposed to be acted on at it. The Secretary shall
inform the stockholders who make the request of the reasonably estimated costs
of preparing and mailing a notice of the meeting and, on payment of these costs
to the Corporation, notify each stockholder entitled to notice of the meeting.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of stockholders held in the preceding 12 months.
SECTION 1.03. Place of Meetings. Meetings of stockholders shall be
held at 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
1
<PAGE> 2
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 without further notice by a majority vote of the
stockholders present in person or by proxy to a date not more than 120 days
after the original record date. 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.
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 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.
2
<PAGE> 3
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 or series of shares held by
each and certified by the transfer agent for such class or series or by the
Secretary, shall be furnished by the Secretary.
SECTION 1.09. Conduct of Business and 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, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by these
By-Laws, the charter or law, shall be decided or determined by the chairman of
the meeting. If demanded by stockholders, present in person or by proxy,
entitled to cast ten percent 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 one
or more 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 an
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. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions of the
Corporation and the Investment Company Act of 1940. The Board, however, may
delegate the duty of management of the assets and the administration of the
day-to-day operations of the Corporation to one or more entities or individuals
pursuant to a written contract or contracts which have obtained the approvals,
including the approval of renewals thereof, required by the Investment Company
Act of 1940.
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SECTION 2.02. Number of Directors. The Corporation shall have at
least three directors; provided that, if there is no stock outstanding, the
number of directors may be less than three but not less than one, and, if there
is stock outstanding and so long as there are fewer than three stockholders,
the number of directors may be less than three but not less than the number of
stockholders. The Corporation shall have the number of directors provided in
its charter until changed as herein provided. A majority of the entire Board
of Directors may alter the number of directors set by the charter to not exceed
25 nor less than the minimum number then permitted herein, but the action may
not affect the tenure of office of any director.
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, 1995 the term of office of each director shall
end at the time such director reaches the age of 76 1/2 or 73 1/2 for persons
first elected on or after January 1, 1986 as a director of any open end
investment company managed by American Capital Asset Management, Inc. and that
on and after July 1, 1995 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 American Capital Asset Management, Inc.
SECTION 2.04. Removal of Directors. 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 all the votes entitled to be
cast for the election of directors.
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 by the stockholders. 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. Unless otherwise
provided by statute or the charter, 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.
SECTION 2.06. Regular Meetings. After each meeting of stockholders
at which directors shall have been elected, the Board of Directors shall meet
as soon as practicable for the purpose of organization and the transaction of
other business. In the event that no other time and place are specified by
resolution of the Board, the President or Chairman with notice in accordance
with Section 2.08, the Board of Directors shall meet immediately following the
close of, and at the place of, such stockholders' meeting. Any other 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.
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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 our 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 Meetings; Waiver of Notice. 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, facsimile transmission 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 statute, 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, or to any director who, in a 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 the 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. Unless otherwise provided by statute or regulation, any
action required or permitted to be taken at a meeting of the Board of Directors
may be taken without a meeting, if an 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. Telephone Meetings. 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. Unless provided otherwise by statute or
regulation, participation in a meeting by these means constitutes presence in
person at the 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
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other capacity also may receive compensation for such other services, pursuant
to a resolution of the Board of 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 By-Laws, or approve any merger or share
exchange which does not require stockholder approval. 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 action of a
majority of those present at a meeting at which a quorum is present shall be
action 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 an unanimous written
consent which sets forth the action is signed by each member of the committee
and filed with the minutes of the committee. The members of a committee may
conduct any meeting thereof by 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 these 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
composed 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 foregoing 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
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contrary to the provisions of this Section or to the provisions of any such
implementing 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 these By-Laws.
ARTICLE IV.
OFFICERS
SECTION 4.01. Executive and Other Officers. The Corporation shall
have a President, a Secretary and a Treasurer. It may also have a Chairman of
the Board. The Board of Directors shall designate who shall serve as chief
executive officer, who shall have general supervision of the business and
affairs of the Corporation, and may designate a chief operating officer, who
shall have supervision of the operations of the Corporation. In the absence of
any designation the President, shall serve as chief executive 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 except that no person may
serve concurrently as both President and Vice- President of the Corporation.
The other officers may 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. Unless otherwise provided by resolution
of the Board of Directors, 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. Unless otherwise specified by the
Board of Directors, the President shall be the chief operating officer of the
Corporation and perform the duties customarily performed by chief operating
officers. 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. 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-President. 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
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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, or 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, in books provided for that 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 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 of the Corporation. The Board of
Directors may from time to time authorize any committee or officer to appoint
assistant and subordinate officers. Election or appointment of an officer,
employee or agent shall not of itself create contract rights. All 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.
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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.
INDEMNIFICATION
SECTION 5.01. Indemnification of Directors and Officers. The
Corporation shall indemnify each of its directors and officers, whether serving
the Corporation or at its request any other 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
expenses, including fees of legal counsel, reasonably incurred or paid by such
a Covered Person in connection with any action, suit or other proceeding,
whether civil or criminal, before any court of administrative or legislative
body, in which the Covered Person may be or may have been involved as a party
or otherwise or with which the Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or having been a
director or officer of the Corporation, except with respect to any matter as to
which there has been a final adjudication that the Covered Person (i) did not
act in good faith in the reasonable belief that his action was in or not
opposed to the best interests of the Corporation, or (ii) was liable to the
Corporation or its security holders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Expenses, including fees of legal counsel, but
excluding amounts paid in satisfaction of judgments, in compromise, or as fines
or penalties, so incurred by any such Covered Person may be paid from time to
time by the Corporation in advance of a final disposition of any such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
Covered Person to repay the advance unless it is ultimately determined that he
is entitled to indemnification hereunder, so long as either (i) the Covered
Person shall have provided a security for his undertaking, (ii) the Corporation
shall be insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the directors who are neither "interested
persons" of the Corporation as defined in the Investment Company Act of 1940
nor parties to the proceeding ("disinterested, non-party directors"), or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that such Covered Person ultimately will be
found entitled to indemnification under this By-Law. Any such determination or
opinion shall not prevent recovery from any Covered Person of any amount paid
to him in accordance with this By-Law if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation or to be liable to the Corporation or its
security holders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
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SECTION 5.02. Compromise Payment. As to any matter disposed of
(whether by a compromise payment, pursuant to a consent decree or otherwise)
without a final decision on the merits by a court or by any other body before
whom the proceeding was brought, indemnification shall be provided only if a
majority of a quorum of the disinterested, non-party directors, or an
independent legal counsel in a written opinion, shall have reasonably
determined, based upon a review of the facts, that the Covered Person acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and was not liable to the Corporation or
its security holders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
SECTION 5.03. Exclusivity, Etc. The indemnification and advance
of expenses provided by the charter and these By-Laws shall not be deemed
exclusive of any other rights to which a 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 his 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 a person was a director or officer after such person has ceased
to be a director or officer, and shall inure to the benefit of the estate,
heirs, executors and administrators of such 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 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 such director
or officer 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 5.04. Severability: Definitions. The invalidity or
unenforceability of any provision of this Article V shall not effect the
validity or enforceability of any other provision hereof. The phrase "this
By-Law" in this Article V means this Article V in its entirety.
ARTICLE VI.
STOCK
SECTION 6.01. Certificates for Stock. If the Board of Directors
authorizes the issue of a class or series of stock with certificates, each
holder of shares of that class or series, upon written request therefor in
accordance with such procedures as may be established by the Board from time to
time, is entitled to certificates which represent and certify the shares of
that class or series he holds in the Corporation. Each stock certificate shall
include on its face the name of the Corporation, the name of the stockholder or
other person to whom it is issued, and the
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class or series 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 of 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.
The Board of Directors may authorize the issue of some or all of the shares of
any or all classes or series without certificates. Such authorization shall
not affect shares already represented by certificates until they are
surrendered to the Corporation. At the time of issue or transfer of shares
without certificates the Corporation shall send each stockholder a written
statement of the information required by the Maryland General Corporation Law.
SECTION 6.02. 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 shares of stock; and may
appoint transfer agents and registrars thereof. The duties of transfer agent
and registrar may be combined.
SECTION 6.03. 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 prior to the close of business on the
day the record date is fixed nor, subject to Section 1.06, 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 6.04. 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 or series 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 or series of stock, or, if none, at the
principal office in the State of Maryland or the principal executive offices of
the Corporation.
SECTION 6.05. 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
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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 who makes the certification.
SECTION 6.06. 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, including the requirement that the owner furnish a bond as indemnity
against any claim that may be made against the Corporation in respect of the
lost, stolen or destroyed certificate, 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 VII.
FINANCE
SECTION 7.01. 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 7.02. Annual Statement of Affairs. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Corporation, to include a statement of net assets and a
financial statement of operations for the preceding fiscal year. The statement
of affairs shall be placed on file at the Corporation's principal office within
120 days after the end of the fiscal year.
SECTION 7.03. Fiscal Year. The fiscal year of the Corporation
shall be the twelve-calendar-month period ending October 31 in each year,
unless otherwise provided by the Board of Directors.
SECTION 7.04. 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 of the
Corporation.
SECTION 7.05. Net Asset Value. Except in the event of emergency
conditions or as otherwise permitted by the Investment Company Act of 1940, the
net asset value per share of each class or series of stock shall be determined
no less frequently than once daily, Monday
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through Friday, at such time or times as the Board of Directors sets at least
annually. In valuing portfolio investments for the determination of the net
asset value per share of any class or series, securities for which market
quotations are readily available shall be valued at prices which, in the
opinion of the Board of Directors or the person designated by the Board of
Directors to make the determination, most nearly represent the current market
value of such securities, and other securities and assets shall be valued on
the basis of their fair value as determined by or pursuant to the direction of
the Board of Directors, which in the case of debt obligations, commercial paper
and repurchase agreements may, but need not, be on the basis of yields for
securities of comparable maturity, quality and type, or on the basis of
amortized cost.
SECTION 7.06. Employment of Custodian. The Corporation shall place
and maintain its securities and similar investments in the custody of one or
more custodians meeting the requirements of the Investment Company Act of 1940
or may serve as its own custodian but only in accordance with such rules and
regulations or orders as the Securities and Exchange Commission may from time
to time prescribe for the protection of investors. Securities held by a
custodian 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. Subject to such rules,
regulations, and orders as the Commission may adopt as necessary or appropriate
for the protection of investors, the Corporation or any custodian, with the
consent of the Corporation, may deposit all or any part of the securities owned
by the Corporation in a system for the central handling of securities, pursuant
to which system all securities of a particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities.
ARTICLE VIII.
SUNDRY PROVISIONS
SECTION 8.01. 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
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 these By-Laws shall be kept at the principal office of the Corporation.
SECTION 8.02. 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"
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adjacent to the signature of the person authorized to sign the document on
behalf of the Corporation.
SECTION 8.03. 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 8.04. Voting Shares in Other Corporations. Shares 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 8.05. 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 8.06. 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 8.07. Amendments. Subject to the special provisions of
Section 2.02, (i) 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 (ii) 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.
* * *
14
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 20th day of December, 1994, by and between AMERICAN
CAPITAL SMALL CAPITALIZATION FUND, 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. Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of the FUND's
Board of Directors and in conformity with applicable laws, the FUND's Articles
of Incorporation, Bylaws, registration statements, prospectus and stated
investment objectives, policies and restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by way
of illustration, the preparation of registration statement and amendments
thereto, the furnishing of routine legal services except for services provided
by outside counsel to the FUND selected by the Board of Directors, and the
supervision of the FUND's Treasurer and the personnel working under his
direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND 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 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
<PAGE> 2
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction. In the event of such authorization and to the
extent authorized by law the ADVISER shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its 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 participation in the production
of the FUND's registration statement, 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 including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the FUND and its shares for distribution under state and federal
securities laws, if any; (x) expenses for servicing stockholder accounts; (xi)
insurance premiums for fidelity coverage and errors and omissions insurance;
(xii) dues for the FUND's membership in trade associations approved by the
Board of Directors; and (xiii) 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.
2. Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
2
<PAGE> 3
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.
3. Compensation Payable to ADVISER
The ADVISER shall provide to the FUND the services provided for herein without
charge.
The FUND's obligation to reimburse the ADVISER for certain expenses as
described in Section 1 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 such person, in connection with obtaining such commissions, fees,
brokerage or similar payments. The ADVISER shall use its best efforts to
recapture all available tender offer solicitation fees and exchange offer fees
in connection with the FUND's portfolio transactions and shall advise the 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.
4. Duration of Agreement
This Agreement shall have an initial term of two years and shall continue in
force from year to year thereafter, but only so long as such continuance is
approved at least annually by the vote of a majority of the FUND's directors
who are not parties to this Agreement or interested persons of any such
parties, cast in person at a meeting called for the purpose of voting on such
approval, and by a vote of a majority of the FUND's Board of Directors or a
majority of the FUND's outstanding voting securities.
This Agreement shall terminate automatically in the event of its
3
<PAGE> 4
assignment. The Agreement may be terminated at any time by the FUND's Board of
Directors, by vote of a majority of the FUND's outstanding voting securities,
or by the ADVISER, on not more than 60 days', nor less than 30 days' written
notice, or upon such shorter notice as may be mutually agreed upon. Such
termination shall be without payment of any penalty.
5. Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the 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 Securities and Exchange Commission or its staff, under said Act,
and the term "brokerage and research services" shall have the meaning given in
the Securities Exchange Act of 1934 and the Rules and Regulations thereunder.
The 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 SMALL CAPITALIZATION FUND, 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
4
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Amendment No. 3 to the
registration statement on Form N-1A (the "Registration Statement") of our report
dated December 8, 1994, relating to the financial statements and financial
highlights appearing in the October 31, 1994 Annual Report to Shareholders of
American Capital Small Capitalization Fund, Inc., which is also incorporated by
reference into the registration statement.
/s/ PRICE WATERHOUSE LLP
Houston, Texas
December 8, 1994
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<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-23-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 20,502,824
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