SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [XXX]
Filed by a Party other than the
Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[XXX] Definitive Proxy Statement
[ ] Definitive Additional
Materials
[ ] Soliciting Material Pursuant
to Sec.. 240.14a-11(c) or Sec.
240.14a-12
TRAVELERS SERIES FUND INC.
(Name of Registrant as Specified
In Its Charter)
NANCY W. LE DONNE
(Name of Person(s) Filing Proxy
Statement)
Payment of Filing Fee (Check the
appropriate box):
[ ] $125 per Exchange Act Rules
0-11 (c) (1)(ii), 14a-6 (i)(1),
or 14a-6(j)(2) or the 1940 Act Rule
20a-1.
[ ] $500 per each party to the
controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below
per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities
to which transaction applies:
2) Aggregate number of securities to
which transaction applies:
3) Per unit price or other
underlying value of transaction
computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value
of transaction:
Set forth the amount on which the
filing fee is calculated and state how
it
was determined.
[ ] Check box if any part of the
fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the
filing for which the
offsetting fee was paid previously.
Identify the previous filing
by registration statement number, or
the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration
Statement No.:
3) Filing Party:
4) Date Filed:
September 17, 1996
Dear Shareholder:
The enclosed proxy statement relates to a meeting of the shareholders of
the Van Kampen American Capital Enterprise Portfolio (the "Portfolio") of
Travelers Series Fund Inc. (the "Fund"). VK/AC Holding, Inc., the corporate
parent
of the Portfolio's investment sub-adviser, Van Kampen American Capital Asset
Manage[HD] ment, Inc. (the "Sub-Adviser"), has entered into a merger
agreement with Morgan Stanley Group Inc. ("Morgan Stanley") and certain of
Morgan Stanley's affiliates. Pursuant to the merger agreement, the Sub-
Adviser will become an indirect subsidiary of Morgan Stanley. The Sub-
Adviser will continue to provide the Portfolio with investment advisory and
management services following the merger,
however, the primary purpose of the meeting is to permit the Portfolio's
sharehold[HD] ers to consider a new investment subadvisory agreement, to take
effect following the merger, as required by the federal securities laws. The new
investment subadvisory agreement among the Fund, its investment manager and the
Sub-Adviser will be substantially identical to the Portfolio's current
investment
subadvisory agreement, except for the dates of execution, effectiveness and
termination. The attached proxy statement seeks shareholder approval of the
proposed new investment subadvisory agreement.
Your vote is important and your participation
in the governance of the Portfolio does make a difference.
The proposal has been unanimously approved by the Directors of the Fund,
who recommend you vote "FOR" the proposal. Your immediate response will help
save
on the costs of additional solicitations. We look forward to your
participation.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE EN[HD]
CLOSED POSTAGE-PAID ENVELOPE.
Sincerely,
Heath B. McLendon
Chairman of the Board
SBT
TRAVELERS SERIES FUND INC. on behalf
of its
Van Kampen American Capital Enterprise
Portfolio
388 Greenwich Street
New York, New York 10013
Telephone (800) 224-7523
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
To be Held on October 25, 1996
A Special Meeting of Shareholders (the "Meeting") of the Van Kampen
American Capital Enterprise Portfolio (the "Portfolio"), a separate series
of Travelers Series Fund Inc. (the "Fund"), will be held at the offices of
the Fund, 388 Greenwich Street, 22nd Floor, New York, New York 10013 at
9:30 A.M. for
the following purposes:
1. With respect to the Fund on behalf of the Portfolio, to approve or
disapprove a new investment subadvisory agreement (the "New Subadvisory
Agreement");
2. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Shareholders of record of the Portfolio at the close of business on
September 6, 1996 are entitled to notice of and to vote at this meeting or any
adjournment thereof.
By Order of the Board of Directors
Christina T. Sydor
Secretary
September 17, 1996
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY
OF ITS MOST RECENT ANNUAL REPORT (AND THE MOST RECENT
SEMIANNUAL REPORT SUCCEEDING THE ANNUAL REPORT) TO A
SHAREHOLDER OF THE PORTFOLIO UPON REQUEST. ANY SUCH
REQUEST SHOULD BE MADE BY CALLING (800) 224-7523 OR
BY WRITING TO THE FUND AT 388 GREENWICH STREET, NEW
YORK, NEW YORK 10013.
SHAREHOLDERS OF THE PORTFOLIO ARE INVITED TO ATTEND THE
MEETING IN PERSON. IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE
INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND
SIGN THE PROXY CARD, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS
ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER
SOLICITATION, WE ASK THAT YOU MAIL YOUR PROXY PROMPTLY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU CAST YOUR
VOTE:
FOR APPROVAL OF THE NEW SUBADVISORY AGREEMENT.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
PROXY STATEMENT
TRAVELERS SERIES FUND INC. on behalf of
Van Kampen American Capital Enterprise Portfolio
388 Greenwich Street
New York, New York 10013
Telephone (800) 224-7523
SPECIAL MEETING OF SHAREHOLDERS
October 25, 1996
This proxy statement is furnished in connection with the solicitation by
the
Board of Directors (the "Directors" or the "Board") of the Travelers Series Fund
Inc. (the "Fund") on behalf of its series, Van Kampen American Capital
Enterprise
Portfolio (the "Portfolio") of proxies to be voted at a Special Meeting of
Shareholders, and all adjournments thereof (the "Meeting") of the Portfolio, to
be held at the offices of the Fund, 388 Greenwich Street, New York, New York
10013 on the 22nd floor, Friday, October 25, 1996, at 9:30 a.m. The
approximate mailing date of this proxy statement and accompanying form of
proxy is September 17, 1996.
The primary purpose of the Meeting is to permit the Portfolio's
shareholders to consider a New Subadvisory Agreement (defined below) to take
effect following the consummation of the transactions contemplated by an
Agreement
and Plan
of Merger, dated as of June 21, 1996 (the "Merger Agreement"), among Morgan
Stanley Group Inc. ("Morgan Stanley"), MSAM Holdings II, Inc., MSAM
Acquisition Inc. and VK/AC Holding, Inc. ("VKAC Holding"), the indirect
parent corporation of the Portfolio's investment sub-adviser. Pursuant to
the
Merger Agreement, the Portfolio's investment sub-adviser will become an indirect
subsidi[HD] ary of Morgan Stanley. The shareholder vote on the New Subadvisory
Agreement is required under the Investment Company Act of 1940, as amended (the
"1940
Act"), as a result of Morgan Stanley's contemplated acquisition of the
investment
sub-adviser. The Portfolio's New Subadvisory Agreement is substantially
identical
to the Portfolio's Current Subadvisory Agreement (defined below), except for the
dates of execution, effectiveness and termination.
The Board has fixed the close of business on September 6, 1996, as the
record date (the "Record Date") for the determination of holders of shares of
the
Portfolio entitled to vote at the Meeting (the "Shares"). Shareholders of the
Portfolio (the "Shareholders") on the Record Date will be entitled to one vote
per share with respect to each proposal submitted to the Shareholders of the
Portfolio, with no share having cumulative voting rights.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS
MOST RECENT ANNUAL REPORT (AND THE MOST RECENT SEMI-
ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT) TO A
SHAREHOLDER OF THE PORTFOLIO UPON REQUEST. ANY SUCH REQUEST SHOULD BE
DIRECTED TO THE FUND BY CALLING (800) 224-7523 OR BY WRITING TO THE
FUND, 388 GREENWICH STREET, NEW YORK, NEW YORK 10013.
There are no persons who, to the knowledge of the Fund, owned
beneficially
more than 5% of the Portfolio's outstanding Shares as of September 6, 1996.
As ofthe Record Date, the officers and Directors of the Fund beneficially
owned less than 1% of the outstanding shares of the Portfolio.
Voting
The voting requirement for passage of a particular proposal depends
on the
nature of the particular proposal. With respect to Proposal 1, a "vote of a
majority
of the outstanding voting securities" is required, which is defined under the
1940 Act as the lesser of (i) 67% or more of the voting securities of the
Portfolio entitled to vote thereon present in person or by proxy at the
Meeting, if the holders
of more than 50% of the outstanding voting securities entitled to vote thereon
are present in person or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Portfolio entitled to vote thereon.
THE BOARD RECOMMENDS THAT YOU CAST YOUR VOTE: FOR
APPROVAL OF THE NEW SUBADVISORY AGREEMENT.
All Shares of the Portfolio affected by a proposal will vote together
as a single class on such proposal. All properly executed proxies received
prior to the Meeting will be voted at the Meeting in accordance with the
instructions marked thereon.
Only owners of variable annuity contracts issued by the Travelers Insurance
Company and its subsidiary, Travelers Life and Annuity Company,
(collectively "Travelers Insurance") that were invested in the Portfolio as
of the close of business on the Record Date are considered "shareholders of
record" and are
entitled to notice of and to vote at the meeting. Each share of stock is
entitled to one vote for the proposal. On the Record Date the Portfolio had
6,198,690.97 shares of voting securities.
Travelers Insurance is the sole legal shareholder of the Portfolio,
since the Portfolio technically offers its shares only for purchases by
Travelers Insurance's separate accounts on behalf of its variable contracts.
Nevertheless, with respect to the meeting, Travelers Insurance will solicit and
accept timely
voting instructions from its contract owners who own units in a Travelers
Insurance separate account that correspond to shares in the Portfolio and vote
them in accordance with such
instructions. Travelers Insurance will vote all Portfolio shares related to the
variable contracts for which it has not received timely voting instructions
in the same proportion as the shares for which it has received timely
instructions.
Proxies received prior to the Meeting on which no vote is indicated will
be voted "for" the proposal. For purposes of determining the presence of a
quorum
for transacting business at the Meeting, abstentions and broker "non-votes"
(that is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled
to vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power) will be treated as shares that are
present but which
have not been voted. The Shares represented by a proxy that represents a broker
non-vote or an abstention will have the same effect as Shares voted "against"
the proposal. A majority of the outstanding Shares entitled to vote on the
proposal must be present in person or by proxy to have a quorum to conduct
business at the Meeting.
Shareholders who execute proxies may revoke them at any time before they
are voted by filing with the Fund a written notice of revocation, by delivering
a duly executed proxy bearing a later date or by attending the Meeting and
voting in person.
The Fund knows of no business other than that mentioned in Proposal 1 of
the Notice that will be presented for consideration at the Meeting. If any other
matters are properly presented, it is the intention of the persons named on the
enclosed proxy to vote proxies in accordance with their best judgment. In the
event a quorum is present at the Meeting but sufficient votes to approve the
proposal are not received, the persons named as proxies may propose one or more
adjournments of
the Meeting to permit further solicitation of proxies provided they determine
that such an adjournment and additional solicitation is reasonable and in
the interest of shareholders based on a consideration of all relevant
factors, including the
nature of the relevant proposal, the percentage of votes then cast, the
percentage of negative votes then cast, the nature of the proposed
solicitation activities and the nature of the reasons for such further
solicitation.
PROPOSAL 1: APPROVAL OF NEW SUBADVISORY AGREEMENT
The Sub-Adviser
Van Kampen American Capital Asset Management, Inc. (the "Sub-Adviser")
acts as investment subadviser for the Portfolio. The Sub-Adviser has acted as
investment subadviser for the Portfolio since the Portfolio commenced its
invest[HL] ment operations in June 1994.
The Sub-Adviser currently is a wholly-owned subsidiary of Van Kampen
Ameri[HD] can Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VKAC
Holding, which in turn is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of VKAC own, in
the aggregate, approximately 6% of the common stock of VKAC Holding and have
the
right to acquire, upon the exercise of options (whether or not vested),
approxi[HL] mately an additional 12% of the common stock of VKAC Holding.
Currently, and after giving effect to the exercise of such options, no officer
or director of the Fund owns or would own 5% or more of the common stock of VKAC
Holding. The addresses of VKAC Holding, VKAC and the Sub-Adviser are One
Parkview Plaza, Oakbrook Terrace, Illinois 60181 and 2800 Post Oak Blvd.,
Houston, Texas 77056.
Prior to December 1994, the Sub-Adviser provided investment advisory
services under the name "American Capital Asset Management, Inc."
Information Concerning Morgan Stanley
Morgan Stanley and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley & Co. Incorporated ("Morgan Stanley &
Co."), a
registered broker-dealer and investment adviser, and Morgan Stanley
International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and
trading; merger,acquisition, restructuring and other corporate finance
advisory activities;
merchant banking; stock brokerage and research services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities,
indices and interest rates); real estate advice, financing and investing; and
global custody, securities clearance services and securities lending. Morgan
Stanley Asset Management Inc. ("MSAM") also is a wholly-owned subsidiary of
Morgan Stanley. As of June 30, 1996, MSAM, together with its affiliated
investment advisory companies, had approximately $103.5 billion of assets under
management and fiduciary advice.
The Acquisition
Pursuant to the Merger Agreement, MSAM Acquisition Inc. will be merged
with and into VKAC Holding and VKAC Holding will be the surviving corporation
(the "Acquisition"). Following the Acquisition, VKAC Holding and the Sub-
Adviser will be indirect subsidiaries of Morgan Stanley.
The Sub-Adviser anticipates that the consummation of the Acquisition
will occur by the end of November 1996, provided that a number of conditions
set forth in the Merger Agreement are met or waived. The conditions require,
among other things,
that as of the closing the shareholders of certain investment companies
(including
the Portfolio) and investors in certain accounts advised by the Sub-Adviser
or its affiliates, which investment companies and accounts have aggregate
assets in excess of a specified minimum amount, have approved new investment
advisory agree[HL] ments or consented to the assignment of existing
investment advisory agreements. At the closing, MSAM Acquisition Inc. will
pay approximately $740 million (based on VKAC's long-term debt outstanding
as of July 31, 1996) in cash to the stockholders of VKAC Holding (excluding
certain management stockholders), and to persons owning options to purchase
stock of VKAC Holding, subject to certain
purchase price adjustments set forth in the Merger Agreement. As of July
31, 1996, VKAC had long-term debt outstanding of approximately $410 million.
To the extent that pre-tax income of VKAC prior to the closing of the
Acquisition permits the repayment of its long-term debt, the purchase price
for the equity
interests in VKAC Holding will be increased by the amount of long-term debt
repaid. The purchase price also is subject to certain adjustments based, among
other things, on assets under management of VKAC and its subsidiaries at the
time of closing. The Sub-Adviser also contemplates that, as part of the
Acquisition, certain officers and directors of VKAC Holding and its affiliates
will contribute to MSAM Holdings II, Inc. their existing shares of common stock
of VKAC Holding in exchange for approximately $25 million of shares of preferred
stock of MSAM Holdings II, Inc. which, in turn, will be exchangeable into common
stock, par value $1.00 per share, of Morgan Stanley at specified times over a
four year period. Such shares of preferred stock will represent, in the
aggregate, 5% of the combined voting power in MSAM Holdings II, Inc., the
remainder of which will be indirectly owned by
Morgan Stanley.
VKAC Holding will engage in certain preparatory transactions prior to
the Acquisition, including the distribution to stockholders of VKAC Holding of
(i) all of VKAC Holding's investment in McCarthy, Crisanti & Maffei, Inc., a
whollyowned subsidiary engaged in the business of distributing research and
financial information, (ii) all of VKAC Holding's investment in Hansberger
Global Inves[HL] tors, Inc., a company in which VKAC Holding made a minority
investment in
May 1996, and (iii) certain related cash amounts.
There is no financing condition to the closing of the Acquisition. VKAC
has been advised by Morgan Stanley that as of August 30, 1996, no determination
has been made whether any additional indebtedness will be incurred by Morgan
Stanley and its affiliates or VKAC and its affiliates in connection with the
Acquisition. In addition, the disposition of VKAC's outstanding long-term
indebtedness (including its bank loans and senior notes) in connection with the
Acquisition has not yet been determined.
The operating revenue of VKAC and its subsidiaries for the fiscal year
ended December 31, 1995, less expenses for the same period, was more than
adequate to service VKAC's outstanding debt. VKAC prepaid $80 million of its
long-term debt
in 1995, and has continued to make debt prepayments during 1996. VKAC Holding
and VKAC believe, based on the earnings experience of VKAC and its
subsidiaries, that after the Acquisition the operating revenue of VKAC and its
subsidiaries should be more than sufficient to service their debt and that VKAC
and its subsidiaries should be able to conduct their respective operations as
now conducted and as proposed to be conducted.
The Merger Agreement does not contemplate any changes, other than
changes in the ordinary course of business, in the management or operation of
the SubAdviser relating to the Portfolio, the personnel managing the Portfolio
or other services or business activities of the Portfolio. The Acquisition is
not expected to result in material changes in the business, corporate structure
or composition
of the senior management or personnel of the Sub-Adviser, or in the manner in
which the SubAdviser renders services to the Portfolio. Morgan Stanley has
agreed in the Merger Agreement that, for a period of two years from the date
of the Acquisition, it will cause the Sub-Adviser to provide compensation
and employee benefits which are substantially comparable in the aggregate to
those presently
provided. The Sub Adviser does not anticipate that the Acquisition or any
ancillary transactions will cause a reduction in the quality of services now
provided to the Portfolio, or have
any adverse effect on the Sub-Adviser's ability to fulfill its respective
obligations under the New Subadvisory Agreement or operate its business in a
manner consistent with past business practices.
Certain officers of the Sub-Adviser previously entered into employment
agree[HL] ments with VKAC Holding which expire from between 1997 and 2000.
Certain officers of the Sub-Adviser also previously entered into retention
agreements with VKAC Holding which will remain in place for two years following
the consumma[HL] tion of the Acquisition. The Merger Agreement contemplates that
Morgan Stanley will, and will cause VKAC Holding to, honor such employment and
retention
agreements. The employment agreements and retention agreements are intended to
assure that the services of the officers are available to the Sub-Adviser (and
thus to the Portfolio) for a remaining term of two to four years. As described
above, certain officers and employees of VKAC and the Sub-Adviser are
expected to contribute their existing shares of common stock of VKAC Holding
to MSAM Holdings
II, Inc. in exchange for approximately $25 million of preferred stock in
MSAM Holdings II, Inc. which, in turn, will be exchangeable into common
stock, par value $1.00 per share, of Morgan Stanley at specified times over a
four year period. Such shares of preferred stock will represent, in the
aggregate, 5% of the combined voting power in MSAM Holdings II, Inc.
The Subadvisory Agreements
Consummation of the Acquisition may constitute an "assignment" (as
defined in the 1940 Act) of the investment subadvisory agreement currently in
effect among the Fund on behalf of the Portfolio, the Sub-Adviser and the
investment
manager, Travelers Investment Adviser, Inc. (the "Manager") (the "Current
Subadvisory Agreement"). As required by the 1940 Act, the Current
Subadvisory Agreement provides for its automatic termination in the event
of an assignment. See "The Current Subadvisory Agreement" below.
In anticipation of the Acquisition and in order for the Sub-Adviser to
continue to serve as investment sub-adviser to the Portfolio after
consummation of the
Acquisi[HD] tion, a new investment subadvisory agreement (the "New Subadvisory
Agree[HD] ment") among the Fund, on behalf of the Portfolio, the Sub-Adviser
and the Manager must be approved (i) by a majority of the Directors of the
Fund who
are not parties to the New Subadvisory Agreement or interested persons of
any such party ("Disinterested Directors") and (ii) by the holders of a
majority of the
outstanding voting securities (within the meaning of the 1940 Act) of the
Portfolio. See "The New Subadvisory Agreement" below.
The following summary of the Current Subadvisory Agreement and the New
Subadvisory Agreement set forth herein is qualified by reference to Annex
A.
The Current Subadvisory Agreement. The Current Subadvisory Agreement
for the Fund on behalf of the Portfolio, dated as of December 20, 1994, was last
approved by a majority of the Directors, including a majority of the
Disinterested Directors, voting in person at a meeting called for that purpose
on June 4, 1996, to continue in effect for a period of one year. The Current
Subadvisory Agreement was last approved by shareholders of the Portfolio at a
meeting held on December 9, 1994 relating to the acquisition of the Sub-
Adviser's corporate parent by The Van Kampen Merritt Companies, Inc.
Under the Current Subadvisory Agreement, the Sub-Adviser, subject to the
supervision, direction and approval of the Directors and the Manager, conducts a
continual program of investment, evaluation and, if appropriate in the view of
the Sub-Adviser, sale and reinvestment of the Portfolio's assets. Under the
Current Subadvisory Agreement, the Sub-Adviser is responsible for the day-to-day
opera[HD] tions and investment decisions for the Portfolio and is authorized, in
its sole discretion and without prior consultation with the Manager, to: (a)
manage the Portfolio's assets in accordance with its investment objective(s) and
policies; (b) make investment decisions; (c) place purchase and sale orders for
portfolio transactions; and (d) employ professional portfolio managers and
securities analysts who provide research services.
The Current Subadvisory Agreement provides that the Sub-Adviser shall
not be liable for any error of judgment or mistake of law, or for any loss
suffered by the
Portfolio in connection with the matters to which the Current Subadvisory
Agree[HD] ment relates, except a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties under
the Current Subadvisory Agreement.
Under the Current Subadvisory Agreement the Manager pays the Sub-Adviser
as compensation for services rendered an annual fee calculated at the rate of
0.325% of the Portfolio's average daily net assets. The subadvisory fee is
payable for each calendar month as soon as practicable after the end of that
month. The Manager paid the Sub-Adviser $41,601 for services rendered for the
last fiscal year.
Annex B contains a schedule of brokerage commissions paid by the
Portfolio on portfolio transactions during the past fiscal year, including such
commissions paid by the Fund to affiliated brokers, Smith Barney Inc. and
Robinson Humphrey, Inc.
The Sub-Adviser's activities are subject to the review and supervision
of the Board to which the Sub-Adviser renders periodic reports with respect to
the Portfolio's investment activities. The Current Subadvisory Agreement may be
terminated at any time without payment of any penalty, on 60 days written notice
by (i) the Directors, (ii) the holders of a majority of the Portfolio's
outstanding voting securities or (iii) the Sub-Adviser. The Current Subadvisory
Agreement will automatically terminate in the event of its assignment.
Annex C indicates the net assets and the advisory fee rate of each
investment company advised or subadvised by the Sub-Adviser that has an
investment objective similar to that of the Portfolio.
The Sub-Adviser bears all expenses (excluding brokerage costs, custodian
fees, auditors fees or other expenses borne by the Portfolio or the Fund) in
connection with the performance of its services under the Current Subadvisory
Agreement.
The Portfolio bears certain other expenses incurred in its operation, including,
but not limited to, investment advisory fees, sub-advisory fees (other than sub
advisory fees paid pursuant to the Current Subadvisory Agreement) and
administration fees; fees for necessary professional and brokerage services;
costs relating to local administration of securities; fees for any pricing
service; the costs of regulatory compliance; and pro rata costs associated with
maintaining the Fund's legal existence and shareholder relations. All other
expenses not specifically assumed by the Sub-Adviser under the Current
Subadvisory Agreement or by the Manager
under the investment management agreement are borne by the Portfolio or the
Fund.
The New Subadvisory Agreement. The Board approved the proposed New
Subadvisory Agreement among the Fund on behalf of the Portfolio, the Manager
and the Sub-Adviser on September 3, 1996, the form of which is attached hereto
as Annex A. The form of the proposed New Subadvisory Agreement is substantially
identical to the Current Subadvisory Agreement among the Fund on behalf of the
Portfolio, the Manager and the Sub-Adviser, except for the dates of execution,
effectiveness and termination.
The investment subadvisory fee as a percentage of net assets payable by
the Portfolio will be the same under the New Subadvisory Agreement as under the
Current Subadvisory Agreement. If the investment subadvisory fee under the New
Subadvisory Agreement had been in effect for the Portfolio's most recently
completed fiscal year, advisory fees paid to the Sub-Adviser by the Portfolio
would have been identical to those paid under the Current Subadvisory Agreement.
The Board met on September 3, 1996, at which meeting the Directors,
including the Disinterested Directors, concluded that if the Acquisition occurs,
entry by the
Fund into a New Subadvisory Agreement would be in the best interest of the
Portfolio and the shareholders of the Portfolio. The Board, including the
Disinter[HD] ested Directors, unanimously approved the New Subadvisory Agreement
for the Portfolio and recommended such agreement for approval by the
shareholders of the Portfolio at the Meeting. The New Subadvisory Agreement
would take effect
as to the Portfolio upon the later to occur of (i) the obtaining of shareholder
approval or (ii) the closing of the Acquisition. The New Subadvisory Agreement
will continue in effect for an initial two year term and thereafter for
successive annual periods as long as such continuance is approved in
accordance with the 1940 Act.
In evaluating the New Subadvisory Agreement, the Board took into account
that the Portfolio's Current Subadvisory Agreement and its New Subadvisory
Agree[HD] ment, including the terms relating to the services to be provided
thereunder by the Sub-Adviser and the fees and expenses payable by the
Portfolio, are substantially identical except for the dates of execution,
effectiveness and
termination. The Directors also considered other possible benefits to the Sub-
Adviser and Morgan Stanley that may result from the Acquisition, including the
continued use, to the extent permitted by law, of Morgan Stanley & Co. and its
affiliates for brokerage services.
The Board also considered the terms of the Merger Agreement and the
possible effects of the Acquisition upon VKAC's and the Sub-Adviser's
organization and
upon the ability of the Sub-Adviser to provide advisory services to the
Portfolio.
The Board considered the skills and capabilities of the Sub-Adviser and the
representations that no material change was planned in the current management or
facilities of the Sub-Adviser. In this regard, the Board was informed of the
resources of Morgan Stanley to be made available to VKAC and the Sub-Adviser,
after giving effect to the Acquisition, to secure for the Portfolio quality
investment research, investment advice and other client services. The Board
considered the financial resources of Morgan Stanley and Morgan Stanley's
representation to the Board that it will provide sufficient capital to
support the operations of the SubAdviser. The Board also considered the
reputation, expertise and resources of
Morgan Stanley and its affiliates in domestic and international financial
markets.
The Board considered the continued employment of members of senior manage[HD]
ment of the Sub-Adviser and VKAC pursuant to employment and retention
agreements and the incentives provided to such members and other key employees
of the Sub-Adviser and VKAC, to be important to help to assure continuity of
the personnel primarily responsible for maintaining the quality of investment
subadvisory and other services for the Portfolio.
The Board also considered the effects on the Portfolio of the Sub-Adviser
becoming an affiliated person of Morgan Stanley. Following the Acquisition, the
1940 Act will prohibit or impose certain conditions on the ability of the
Portfolio to engage in certain transactions with Morgan Stanley and its
affiliates. For example, absent exemptive relief, the Portfolio will be
prohibited from purchasing securities from Morgan Stanley & Co., a wholly-owned
broker-dealer subsidiary of Morgan Stanley, in transactions in which Morgan
Stanley & Co. acts as a principal, and the Portfolio will have to satisfy
certain conditions in order to engage in securities transactions in which
Morgan Stanley & Co. acts as a broker or to purchase securities in an
underwritten offering in which Morgan Stanley & Co. is
acting as an underwriter. In this connection, management of the Sub-Adviser does
not believe these prohibitions or conditions will have a material effect on the
management or performance of the Portfolio.
The Board was advised that Section 15(f) of the 1940 Act is
applicable to
the Acquisition. Section 15(f) of the 1940 Act permits, in the context of a
change in control of an investment adviser to a registered investment
company, the
receipt by such investment adviser, or any of its affiliated persons, of an
amount or benefit in connection with such sale, as long as two conditions
are satisfied.
First, an "unfair burden" must not be imposed on the investment company for
which the investment
adviser acts in such capacity as a result of the sale of such interest, or any
express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden," as defined in the 1940 Act, includes any
arrangement during the two-year period after the transaction whereby the
investment adviser (or predecessor or
successor adviser) or any "interested person," as defined in the 1940 Act, of
any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory and other services), or
from any person in connection
with the purchase or sale of securities or other property to, from or on behalf
of the investment company (other than ordinary fees for bona fide principal
underwriting services).
Management of the Portfolio is aware of no circumstances arising from
the Acquisition, preparatory transactions to the Acquisition or any potential
financing that might result in the imposition of an "unfair burden" on the
Portfolio. Moreover, Morgan Stanley has agreed in the Merger Agreement that,
upon
consummation of the Acquisition, it will take no action which would have the
effect, directly or indirectly, of violating any of the provisions of Section
15(f) of the 1940 Act in respect of the Acquisition. In this regard the
Merger Agreement provides that Morgan Stanley will use its reasonable best
efforts to assure that
(i) no "unfair burden" will be imposed on the Portfolio as a result of the
transactions contemplated by the Merger Agreement and (ii) except as provided
in the Merger Agreement, that the investment subadvisory fees paid by the
Portfolio will not be increased for a period of two years from the closing of
the Acquisition and that, during such period, subadvisory fee waivers shall not
be permitted to expire except in accordance with their terms. The Sub-Adviser
may permit a voluntary fee waiver unilaterally adopted by it to expire at any
time and no
assurance can be given that voluntary waivers will not be permitted to expire
during the two year period. During the two year period following the
Acquisition, the SubAdviser does not intend to change its policies with respect
to the circumstances under which voluntary fee waivers may be permitted to
expire. Following the Acquisition, to the extent permitted by applicable law,
VKAC anticipates that the Portfolio will continue to use Morgan Stanley & Co.
and its affiliates for brokerage services.
The second condition of Section 15(f) is that during the three-year
period immediately following a transaction to which Section 15(f) is applicable,
at least 75% of the subject investment company's board of directors must not be
"interested persons" (as defined in the 1940 Act) of such investment company's
investment adviser or predecessor adviser. The current composition of the Board
would be in
compliance with such condition subsequent to the Acquisition.
Based upon its review, the Board concluded that the New Subadvisory
Agree[HD] ment is in the best interest of the Portfolio and the Shareholders of
the Portfolio. Accordingly, after consideration of the above factors, and such
other factors and information that the Directors deemed relevant, the Directors,
including the Disinterested Directors, unanimously approved the New Sub-Advisory
Agreement
and voted to recommend its approval to the Shareholders of the Portfolio.
In the event that Shareholders of the Portfolio do not approve the New
Subadvisory Agreement with respect to the Portfolio and the Acquisition is
consummated, the Board would seek to obtain for such Portfolio interim
investment
advisory services at the lesser of cost or the current fee rate either from the
SubAdviser or from another advisory organization. Thereafter, the Board would
either negotiate a new investment subadvisory agreement with an advisory
organization selected by the Board or make appropriate arrangements, in either
event subject to approval of the Shareholders of the Portfolio. In the event the
Acquisition is not consummated, the Sub-Adviser would continue to serve as
investment subadviser of the Portfolio pursuant to the terms of the Current
Subadvisory Agreement.
Shareholder Approval
To become effective, the New Subadvisory Agreement must be approved by a
majority of the outstanding voting securities of the Portfolio. The "vote of a
majority of the outstanding voting securities" is defined under the 1940 Act as
the lesser of the vote of (i) 67% or more of the Shares of the Portfolio
entitled to vote thereon present at the Meeting if the holders of more than
50% of such
outstanding Shares are present in person or represented by proxy; or (ii) more
than 50% of such outstanding Shares of the Portfolio entitled to vote thereon.
The New Subadvisory Agreement was unanimously approved by the Board after
consideration of all
factors which they determined to be relevant to their deliberations, including
those discussed above. The Board also unanimously determined to submit the New
Subadvisory Agreement for consideration by the Shareholders of the Portfolio.
THE BOARD OF DIRECTORS OF THE PORTFOLIO RECOMMENDS A
VOTE " FOR " APPROVAL OF THE NEW SUBADVISORY AGREEMENT.
OTHER INFORMATION
Directors and Officers of the Sub-Adviser
The following table sets forth certain information concerning the
principal executive officers and directors of the Sub-Adviser. The address of
each of the following persons is noted below.
Name and Address
Principal Occupation
Don G. Powell 2800 Post Oak Blvd.
Houston, TX 77056 President, Chief Executive Officer
and a Director of VKAC Holding and VKAC and
Chairman, Chief Executive Officer and a Director of Van Kampen
American Capital Distributors, Inc. ("Distributors"), the Sub-
Adviser, Van Kampen American Capital Management, Inc., Van
Kampen American Capital Investment Advisory Corp. (the "VK
Adviser"), and Van Kampen American Capital Advisors, Inc.
Chairman, President and a Director of Van Kampen American
Capital Exchange Corporation, American Capital Contractual
Services, Inc. and American Capital Shareholders Corporation.
Chairman and a Director of ACCESS Investor Services, Inc.
("ACCESS"), Van Kampen Merritt Equity Advisors Corp., McCarthy,
Crisanti & Maffei, Inc., and Van
Kampen American Capital Trust Company, Chairman, President and a
Director of Van Kampen American Capital Services, Inc. Director,
Trustee or Managing General Partner of other open-end investment
companies and closed-end investment companies advised by the Sub-
Adviser. Prior to July 1996, Chairman and Director of VSM Inc.
and VCJ Inc. Prior to July 1996, President, Chief Executive
Officer and a Trustee/Director of certain openend investment
companies and closed-end investment companies advised by the Sub
Adviser and the VK Adviser.
Dennis J. McDonnell One Parkview Plaza
Oakbrook Terrace, IL 60181 President, Chief Operating Officer
and a Director of the Sub-Adviser, the VK Adviser,
Van Kampen American Capital
Management, Inc. Executive Vice President
and a Director of VKAC Holding and
VKAC. President and Director of Van
Kampen Merritt Equity Advisors Corp.
Director of Van Kampen Merritt Equity
Holding Corp. and McCarthy, Crisanti &
Maffei, S.A. Chief Executive Officer
McCarthy, Crisanti & Maffei, Inc.
Chairman and a Director of MCM Asia
Pacific Company, Limited. President
and a Trustee/Director of open-end
investment companies and closed-end
investment
companies advised by the Sub-Adviser
and the VK Adviser. Prior to December,
1991, Senior Vice President of Van
Kampen Merritt Inc.
Ronald A. Nyberg One Parkview
Plaza Oakbrook Terrace, IL 60181
Executive Vice President, General
Counsel and Secretary of VKAC and VKAC
Holding. Executive Vice President,
General Counsel and a Director of
Distributors, the SubAdviser, the VK
Adviser, Van Kampen American Capital
Management, Inc., Van Kampen Merritt
Equity Advisors Corp. Executive Vice
President, General Counsel and
Assistant Secretary of Van Kampen
American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital
Exchange Corporation, ACCESS, Van
Kampen American Capital Services,
Inc., and American Capital
Shareholders Corporation. Executive
Vice President, General Counsel,
Assistant Secretary and Director of
Van Kampen American Capital Trust
Company. General Counsel of McCarthy,
Crisanti & Maffei, Inc. Vice President
of open-end investment companies and
closed-end investment companies
advised by the Adviser. Vice President
and Secretary of open-end investment
companies and closedend investment
companies advised by the VK Adviser.
Director of ICI Mutual Insurance Co.,
a provider of insurance to members of
the Investment Company Institute. Prior
to July 1996, Executive Vice President
and General Counsel of VSM Inc., and
Executive Vice President, General
Counsel and Director of VCJ Inc.
William R. Rybak One Parkview Plaza
Oakbrook Terrace, IL 60181 Executive
Vice President and Chief Financial
Officer of VKAC Holding, and VKAC since
February 1993, and Treasurer of VKAC Holding through December 1993.
Executive Vice President, Chief Financial Officer and Director of
Distributors, the Sub-Adviser, the VK Adviser and Van Kampen
American
Capital Management, Inc. Executive Vice President, Chief Financial
Officer, Treasurer and Director of Van Kampen Merritt Equity
Advisors Corp. Executive Vice President and Chief Financial Officer
of Van Kampen American Capital Advisors, Inc., Van
Kampen American Capital Exchange Corporation, Van Kampen American
Capital Trust Company, ACCESS and American
Capital Contractual Services, Inc. and Van Kampen Merritt Equity
Holdings Corp. Chief Financial Officer and Treasurer of McCarthy,
Crisanti and Maffei, Inc.
Chairman of the Board of Hinsdale Financial Corp., a savings and
loan
holding company. Prior to July 1996, Executive Vice President,
Chief Financial Officer and a Director of VCJ Inc., and Executive
Vice President and Chief Financial Officer of VSM Inc.
Peter W. Hegel One Parkview Plaza
Oakbrook Terrace, IL 60181 Executive Vice President of the Sub
Adviser, the VK Adviser and Van Kampen American
Capital Advisors, Inc. Director of
McCarthy, Crisanti & Maffei, Inc. and
Van Kampen American Capital Management,
Inc. Vice President of open-end
investment companies and closed-end
investment companies advised by the Sub-
Adviser and the VK Adviser. Prior to
July 1996, Director of VSM Inc.
Robert C. Peck, Jr 2800 Post Oak
Blvd.
Houston, TX 77056 Executive Vice
President of the VK Adviser. Executive
Vice President and Director of the Sub-
Adviser. Vice President of certain
openend investment companies and closed
end investment companies advised by the
SubAdviser and the VK Adviser.
Alan T. Sachtleben 2800 Post Oak
Blvd.
Houston, Texas 77056 Executive Vice
President of the VK Adviser. Executive
Vice President and Director of the Sub-
Adviser. Vice President of certain
openend investment companies and closed
end investment companies advised by the
SubAdviser and the VK Adviser.
None of the Directors or officers of the Fund are officers of the Sub-
Adviser.
As of September 6, 1996, the Directors and officers of the Fund as a group
owned less than 1% of the outstanding shares of the Portfolio. At such date the
"interested persons" of the Portfolio as a group owned an aggregate of less
than 5% of the outstanding shares of the Portfolio.
No Director has owned any securities of or has had any other material interest
in, or a material interest in a material transaction with, the Sub-Adviser or
its respective affiliates since the beginning of such Fund's most recent
fiscal year.
EXPENSES
VKAC Holding will bear the expense of preparing, printing and mailing the
enclosed form of proxy, the accompanying Notice and this Proxy Statement.
In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph or personal interview
by representatives
of the Fund, the Sub-Adviser or VKAC, or by First Data Investors Services
Group,
a solicitation firm located in Boston, Massachusetts that has been engaged to
assist
in proxy solicitations at an estimated cost of approximately $7,500.
SHAREHOLDER PROPOSALS
As a general matter, the Portfolio does not hold regular annual meetings
of shareholders. Any Shareholder who wishes to submit proposals for
consideration at a meeting of the Portfolio should send such proposal to the
Portfolio at 388 Green[HD]
wich Street, New York, New York 10013. To be considered for presentation at a
shareholders' meeting, rules promulgated by the SEC require that, among other
things, a shareholder's proposal must be received at the offices of the Fund a
reasonable time before a solicitation is made. Timely submission of a proposal
does not necessarily mean that such proposal will be included.
GENERAL
Management of the Portfolio does not intend to present and does not have
reason to believe that others will present any other items of business at the
Meeting.
However, if other matters are properly presented to the Meeting for a vote,
the proxies will be voted upon such matters in accordance with the judgment
of the persons acting under the proxies.
A list of shareholders of the Portfolio entitled to be present and
vote at
the Meeting will be available at the offices of the Portfolio, 388 Greenwich
Street, New York, New York 10013, for inspection by any shareholder during
regular business hours for ten days prior to the date of the Meeting.
Failure of a quorum to be present at the Meeting for the Portfolio may
necessitate adjournment and may subject the Portfolio to additional expense.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED
TO FILL IN, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
Christina T. Sydor
Secretary
September 17, 1996
ANNEX B
BROKERAGE FOR FISCAL YEAR ENDED OCTOBER 31,
1995
Fund Name
Total Commissions
Aggregate Amount of Commissions Paid to Affiliated
Brokers(1)(2) % of Aggregate Commissions Paid to Affiliated
Brokers
Travelers Series Fund Inc.
Van Kampen American Capital
Enterprise Portfolio $63,974 $2,382
3.72[WW]
(1) Smith Barney Inc.
(2) Robinson Humphrey, Inc.