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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / /Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
(File No. 811-5845; CIK No. 853180)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Item 22(a)(2) of Schedule 14A.
/X/ Fee paid previously with preliminary materials.
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IMPORTANT NOTICE
TO VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST SHAREHOLDERS
MARCH 1996
While we encourage you to read the full text of the enclosed proxy
statement, here is a brief overview of the matters to be voted upon.
QUESTIONS
& ANSWERS
Although we recommend you read the complete proxy statement, for your
convenience, we've provided a brief overview of the issues to be voted on.
Q WHY AM I RECEIVING THIS PROXY NOTICE?
A The Board of Trustees of Van Kampen American Capital Prime Rate Income
Trust have approved a new investment advisory agreement that provides for the
reduction of investment advisory fees payable by the Trust on average daily net
assets over $4 billion.
Q WHY AM I BEING ASKED TO VOTE?
A The Investment Company Act of 1940 requires that any material changes to
an investment advisory agreement be approved by a majority of shareholders of
the Trust.
Q WILL MY VOTE MAKE A DIFFERENCE?
A Yes! Your vote is important and will make a difference in the
developments of the Trust, no matter how many shares you own.
Q WHAT OTHER PROPOSALS ARE THERE?
A The Trustees are seeking approval of eight nominees for the Board of
Trustees and the ratification of KPMG Peat Marwick LLP as the Trust's
independent auditors.
Q HOW DOES THE BOARD OF TRUSTEES RECOMMEND THAT I VOTE?
A They recommend that you vote either "For" or "Granting" as to the
appropriate proposal(s) on the enclosed proxy card.
Q WHERE DO I CALL FOR MORE INFORMATION?
A Please call Investor Services at 1-800-421-5666 (TDD users call
1-800-772-8889) from 7:00 a.m. to 7:00 p.m. Central time, Monday through
Friday.
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ABOUT THE PROXY CARD
Please vote on each issue using blue or black ink to mark an X in one of the
boxes provided on the proxy card.
ITEM 1. (advisory fees) mark "For", "Against" or "Abstain".
ITEM 2. (election of trustees) mark "Granting" or "Withholding".
To withhold authority for any nominee, strike a line through the nominee's
name.
ITEM 3. (ratification of independent auditors) mark "For", "Against" or
"Abstain".
Then sign, date and return the proxy card in the enclosed postage-paid
envelope. All registered owners of an account, as shown in the address, must
sign the card. If you are signing for a corporation, trust or estate, please
indicate your title or position.
PROXY VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
SPECIAL MEETING OF SHAREHOLDERS--APRIL 18, 1996
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
1. FOR / / AGAINST / / ABSTAIN XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX.
2. GRANTING / / WITHHOLDING / / AUTHORITY TO VOTE FOR THE ELECTION
AS TRUSTEE EACH NOMINEE NAMED BELOW:
XXXXXXX, XXXXXXX, XXXXXXX
3. FOR / / AGAINST / / ABSTAIN XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SAMPLE
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March 8, 1996
Dear Van Kampen American Capital Prime Rate Income Trust Shareholder:
The Board of Trustees of Van Kampen American Capital Prime Rate Income Trust
(the "Fund") has approved a new investment advisory agreement that provides for
the reduction of investment advisory fees payable by the Fund on average daily
net assets in excess of $4 billion. The affect of the new agreement will be to
reduce the investment advisory fee payable by the Fund, as a percentage of net
assets, whenever the Fund's average daily net assets exceed $4 billion. In
addition, we are seeking approval of nominees for the Board of Trustees and
ratification of the Fund's independent auditors for the 1996 fiscal year. The
attached proxy statement seeks shareholder approval on these items.
Your vote is important and your participation
in the affairs of your Fund does make a difference.
The proposals have been approved by the Trustees of the Fund, who recommend
you vote "FOR APPROVAL" on these proposals. YOUR IMMEDIATE RESPONSE WILL HELP
SAVE ON THE COSTS OF ADDITIONAL SOLICITATIONS. PLEASE SIGN AND RETURN YOUR PROXY
CARD. We look forward to your participation, and we thank you for your continued
confidence in Van Kampen American Capital.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Sincerely,
Don G. Powell
Chief Executive Officer
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VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 1996
TO THE SHAREHOLDERS OF VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST:
Notice is hereby given to the holders of common shares of beneficial interest,
par value $.01 per share (the "Shares"), of Van Kampen American Capital Prime
Rate Income Trust (the "Fund") that a Special Meeting of the shareholders of the
Fund will be held at the offices of the Fund, One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, on Thursday, April 18, 1996, at 2:00 p.m., for the
following purposes:
1. To ratify or reject a material change in the terms of the Fund's
investment advisory agreement with Van Kampen American Capital Investment
Advisory Corp. (the "Adviser");
2. To elect eight trustees to serve until the next meeting of shareholders
of the Fund or until their successors shall have been duly elected and
qualified;
3. To ratify or reject the selection of KPMG Peat Marwick LLP as independent
auditors for the Fund's fiscal year ending July 31, 1996; and
4. To transact such other business as may properly come before the meeting.
Holders of record of the Shares at the close of business on March 1, 1996 are
entitled to notice of and to vote at the Special Meeting and any adjournment
thereof.
By order of the Board of Trustees
RONALD A. NYBERG, Vice President and
Secretary
March 8, 1996
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THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT
AND ITS MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT (WHEN SUCH
REPORT BECOMES AVAILABLE) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD
BE DIRECTED TO THE FUND BY CALLING (800) 341-2911 OR BY WRITING TO VAN KAMPEN
AMERICAN CAPITAL PRIME RATE INCOME TRUST, ONE PARKVIEW PLAZA, OAKBROOK TERRACE,
ILLINOIS 60181.
SHAREHOLDERS ARE INVITED TO ATTEND THE SPECIAL 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 IT, 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 TO THE FUND OF FURTHER SOLICITATION,
WE ASK THAT YOU MAIL YOUR PROXY PROMPTLY.
MANAGEMENT OF THE FUND RECOMMENDS THAT YOU CAST YOUR VOTE:
- FOR APPROVAL OF A MATERIAL CHANGE IN THE TERMS OF THE INVESTMENT ADVISORY
AGREEMENT;
- IN FAVOR OF THE NOMINEES FOR THE BOARD OF TRUSTEES LISTED IN THE PROXY
STATEMENT; AND
- FOR THE RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS FOR THE FUND'S FISCAL YEAR ENDING JULY 31, 1996.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
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PROXY STATEMENT
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 341-2911
SPECIAL MEETING OF SHAREHOLDERS
APRIL 18, 1996
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees (the "Trustees") of Van Kampen American Capital Prime Rate
Income Trust (the "Fund") of proxies to be voted at a Special Meeting of
shareholders of the Fund, and at any and all adjournments thereof (the
"Meeting"), to be held at the offices of the Fund, One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, on Thursday, April 18, 1996 at 2:00 p.m. The
approximate mailing date of this Proxy Statement and accompanying proxy card is
March 8, 1996.
The Trustees have fixed the close of business on March 1, 1996 as the record
date (the "Record Date") for the determination of holders of common shares of
beneficial interest of the Fund ("Shares") entitled to vote at the Meeting.
Holders of Shares on the Record Date will be entitled to one vote for each Share
held, with no Share having cumulative voting rights. As of March 1, 1996, there
were 413,821,690 issued and outstanding Shares.
The Trustees recommend that you cast your vote FOR APPROVAL of a material
change in the terms of the Investment Advisory Agreement with Van Kampen
American Capital Investment Advisory Corp. (the "Adviser"), IN FAVOR of the
nominees for the Board of Trustees listed in the Proxy Statement and FOR the
ratification of the selection of KPMG Peat Marwick LLP as independent auditors
for the Fund's fiscal year ending July 31, 1996. 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.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, Shares
represented by a proxy will be voted "FOR" each proposal as to which it is
entitled to vote. Abstentions do not constitute votes "for" or "against" a
matter and will be
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disregarded in determining the "votes cast" on an issue. Broker non-votes (i.e.,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other person entitled to vote shares
on a particular matter with respect to which the broker or nominees do not have
discretionary power) will be treated the same as abstentions.
A majority of the outstanding Shares entitled to vote on a proposal must be
present in person or by proxy to have a quorum to conduct such business at the
Meeting. Abstentions and broker non-votes will be deemed present for quorum
purposes. In the event a quorum is present at the Meeting but sufficient votes
to approve any of the proposals 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.
The cost of preparing, printing and mailing the enclosed proxy, the
accompanying Notice and Proxy Statement, and all other costs in connection with
the solicitation of proxies will be paid by the Fund. Additional solicitation
may be made by letter, telephone or telegraph by officers of the Fund, by
officers or employees of the Adviser or by financial intermediaries and their
representatives.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT
AND ITS MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT (WHEN SUCH
REPORT BECOMES AVAILABLE) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD
BE DIRECTED TO THE FUND BY CALLING (800) 341-2911 OR BY WRITING TO THE FUND AT
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.
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PROPOSAL 1: APPROVAL OF INVESTMENT ADVISORY AGREEMENT
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THE CURRENT INVESTMENT ADVISORY AGREEMENT
The Adviser has acted as investment adviser for the Fund since the
commencement of the Fund's operations on October 4, 1989. The original
investment advisory agreement (the "Original Agreement") between the Fund and
the Adviser was last approved by a majority of the Trustees and by a majority of
those Trustees who are not interested persons of the Fund or the Adviser (the
"Disinterested Trustees") within the meaning of the Investment Company Act of
1940 (the "1940 Act"), voting in person at a meeting on May 12, 1995. The
purpose of the meeting, among
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other things, was consideration of the annual reapproval of the Original
Agreement. The Original Agreement was last approved by the shareholders of the
Fund at a meeting held on January 14, 1993 relating to the acquisition by CDV
Acquisition Corporation of the Adviser's corporate parent from Xerox Financial
Services, Inc. A copy of the Original Agreement is attached hereto as Appendix
A. The Original Agreement may be terminated by either party, at any time,
without penalty, upon 60 days written notice, and will automatically terminate
in the event of its assignment.
The Adviser is a wholly-owned subsidiary of Van Kampen American Capital, Inc.,
which in turn 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, 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 Van Kampen American Capital, Inc.
own, in the aggregate, not more than 7% of the common stock of VK/AC Holding,
Inc. and have the right to acquire, upon the exercise of options, approximately
an additional 13% of the common stock of VK/AC Holding, Inc. Presently, and
after giving effect to the exercise of such options, no officer or trustee of
the Fund owns or would own 5% or more of the common stock of VK/AC Holding, Inc.
The Original Agreement provides that the Adviser will supply investment
research and portfolio management, including the selection of securities for the
Fund to purchase, hold or sell and the selection of brokers through which the
Fund's portfolio transactions are executed. The Adviser also administers the
business affairs of the Fund, furnishes offices, necessary facilities and
equipment, provides administrative services, and permits its officers and
employees to serve without compensation as trustees and officers of the Fund if
duly elected to such positions.
The Original Agreement provides that the Adviser shall not be liable for any
error of judgment or of law, or for any loss suffered by the Fund in connection
with the matters to which the Original Agreement relates, except a loss
resulting from willful misfeasance, bad faith, or gross negligence on the part
of the Adviser in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under the Original
Agreement.
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The Adviser's activities are subject to the review and supervision of the
Board of Trustees to whom the Adviser renders regular periodic reports of the
Fund's investment activities.
For the services provided by the Adviser under the Original Agreement, the
Fund pays the Adviser an annual fee payable monthly of 0.95% of the average net
assets of the Fund. For the fiscal year ended July 31, 1995, advisory fees paid
to the Adviser by the Fund were $16,722,752. For the fiscal year ended July 31,
1995, the Fund paid no brokerage commissions to any broker-dealer affiliated
with the Fund, the Adviser or the Fund's administrator.
Under the Original Agreement, the Fund pays all other expenses incurred in the
operation of the Fund including, but not limited to, direct charges relating to
the purchase and sale of its portfolio securities, interest charges, fees and
expenses of legal counsel and independent auditors, taxes and governmental fees,
cost of share certificates and any other expenses (including clerical expenses)
of issuance, sale or repurchase of the Fund's common shares, expenses in
connection with the Fund's dividend reinvestment plan, membership fees in trade
associations, expenses of registering and qualifying shares of the Fund for sale
under federal and state securities laws, expenses related to printing and
distribution, expenses of filing reports and other documents filed with
governmental agencies, expenses of annual and special meetings of trustees and
shareholders, fees and disbursements of the transfer agents, custodians and
sub-custodians, expenses of disbursing dividends and distributions, fees and
out-of-pocket costs of the trustees, insurance premiums, indemnification and
other expenses not expressly provided for in the Original Agreement, and any
extraordinary expenses of a nonrecurring nature. The Fund also compensates the
Adviser and Van Kampen American Capital, Inc., the parent of the Adviser ("Van
Kampen American Capital"), for certain non-advisory services provided pursuant
to agreements discussed below.
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THE NEW INVESTMENT ADVISORY AGREEMENT
The Board of Trustees approved a new investment advisory agreement (the "New
Agreement") between the Fund and the Adviser on November 10, 1995, the form of
which agreement is attached hereto as Appendix B. The form of the New Agreement
is substantially identical to the Original Agreement, except that the investment
advisory fee payable by the Fund would be reduced on average net assets of the
Fund in excess of $4 billion as follows:
AVERAGE DAILY FEE AS A PERCENT
NET ASSETS OF AVERAGE DAILY
(MILLIONS) NET ASSETS
- -------------------- ----------------
First $4.0 billion.................... 0.950%
Next $3.5 billion..................... 0.900%
Next $2.5 billion..................... 0.875%
Over $10.0 billion.................... 0.850%
To the extent that the Fund's average daily net assets are over $4 billion,
the effect of the new fee schedule would be to reduce the investment advisory
fee payable by the Fund to the Adviser as a percentage of net assets. As of
March 1, 1996, the net assets of the Fund were approximately $4,146,493,330. If
the investment advisory fee proposed under the New Agreement had been in effect
for the fiscal year ended July 31, 1995, advisory fees paid to the Adviser by
the Fund would have been the same as advisory fees actually paid to the Adviser
because the average net assets of the Fund did not exceed $4 billion during the
1995 fiscal year.
Background. In connection with the Board of Trustees' annual review of the
Original Agreement on May 12, 1995, the Trustees considered the recent growth in
the net assets of the Fund and whether the addition of one or more "breakpoints"
to the Fund's advisory fee schedule had become appropriate in light of such
growth. As part of their deliberations, the Trustees reviewed a report with
respect to the fees and expenses paid by other senior loan funds prepared by a
nationally recognized analytical services consultant based on publicly available
industry data. The Trustees requested that, at the next quarterly meeting of the
Trustees, management of the Adviser provide the Trustees with additional
information with respect to expenses incurred by the Adviser in performing its
obligations under the Original Agreement. The Trustees then reapproved the
Original Agreement for an interim period while the Adviser prepared the
information requested by the Trustees and the Trustees considered further the
addition of breakpoints to the Fund's advisory fee schedule.
The Board of Trustees considered materials relating to the Fund's advisory
fees prepared by the Adviser at its next regular quarterly meeting on August 11,
1995 and consulted with legal counsel as to the use of breakpoints within the
mutual fund industry. The materials included, among other things, information
with respect to: expenses and profitability of the Fund; investment advisory
operations of the Fund in light of the nature of its portfolio securities and a
comparison of such operations
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to the operations of other types of investment companies; the ability of the
Fund and the Adviser to realize economies of scale; and expenses and risks
incurred by the Adviser in connection with the distribution of the Fund's
shares. Representatives of the Adviser were present at the meeting to discuss
the materials with the Trustees and answer questions raised by the Trustees.
After considering the materials presented to the Trustees, the Board of Trustees
decided, pending further study and analysis, to defer the proposal. The Trustees
requested that the Adviser revise its materials to address additional issues
raised by the Trustees and directed the Adviser to make a proposal, consistent
with the Trustees' deliberations, with respect to adding breakpoints to the
Fund's advisory fee schedule at the Trustees' next regularly scheduled quarterly
meeting.
The Board of Trustees considered the breakpoint schedule proposed by the
Adviser at a meeting held on November 10, 1995. The Board of Trustees, including
the Disinterested Trustees, based on its evaluation of the factors set forth
below approved the advisory fee structure proposed by the Adviser in the New
Agreement, the terms of the New Agreement and the submission of the New
Agreement for the consideration of the shareholders of the Fund. In reaching
their decision to approve the New Agreement, the Board of Trustees considered
many factors including among others: the findings of the report from the
independent analytical services consultant regarding the Fund's current
management fee structure and total expense ratio; an analysis of the Fund's
advisory fee, total expense ratio and performance data; the complexity of the
securities which comprise substantially all of the Fund's investment portfolio;
the Fund's policy of not investing more than $50 million in any one senior loan
credit and the additional research expenses incurred by the Adviser in
connection with such policy; the need of the Adviser to devote additional
personnel and resources to managing the Fund and to retain key personnel
currently employed by the Adviser in order to continue providing a comparable
level of investment management services; and the short- and long-term record of
investment performance under the Adviser.
Shareholder Approval. The New Agreement must be approved by a majority of the
outstanding voting securities of the Fund. The vote of a majority of the
outstanding voting securities means the lesser of the vote of (i) 67% or more of
the Shares 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. The New Agreement went
into effect as of November 10, 1995 and, if approved by shareholders, it will
remain in effect until November 10, 1997 and thereafter on an annual basis if
specifically approved by the Board of Trustees of the Fund or the shareholders
and by the Disinterested Trustees in compliance with the requirements of the
1940 Act. If the New Agreement is not approved at the Meeting, the Original
Agreement will be reinstated and remain in effect until May 12, 1996 and
thereafter on an annual basis if specifically approved by the Board of Trustees
of the Fund or the shareholders
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and by the Disinterested Trustees in compliance with the requirements of the
1940 Act.
The New Agreement was approved by the Trustees, and the Disinterested
Trustees, after consideration of all factors which they determined to be
relevant to their deliberations, including those discussed above. The Trustees
also determined to submit the New Agreement for consideration by the
shareholders. THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS A VOTE "FOR
APPROVAL" OF THE NEW AGREEMENT.
NON-ADVISORY AGREEMENTS
The Fund has entered into certain other agreements with the Adviser, the
Distributor or Van Kampen American Capital, as the case may be, as follows:
Administration Agreement. The Fund has entered into an Administration
Agreement pursuant to which Van Kampen American Capital provides administrative
services, including without limitation monitoring the provisions of the senior
loans in which the Fund invests with respect to assignment, maintaining records
with respect to the senior loans in which the Fund invests, preparation and
dissemination of shareholder reports and proxy materials, and negotiating the
terms and provisions of custodial and dividend disbursing arrangements into
which the Fund may enter. In consideration for such administrative services, the
Fund pays Van Kampen American Capital a fee, accrued daily and paid monthly, at
the annualized rate of 0.25% of the Fund's average weekly managed assets. Under
the Administration Agreement, the Fund paid Van Kampen American Capital
$4,400,724 for the fiscal year ended July 31, 1995. The address of Van Kampen
American Capital is One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Legal Services Agreement. The Fund and each of the other Van Kampen American
Capital funds advised by the Adviser and distributed by Van Kampen American
Capital Distributors, Inc., the principal underwriter of the Shares (the
"Distributor"), have entered into a Legal Services Agreement pursuant to which
Van Kampen American Capital provides legal services, including without
limitation maintenance of the funds' minute books and records, preparation and
oversight of the funds' regulatory reports, and other information provided to
shareholders, as well as responding to day-to-day legal issues on behalf of the
funds. Management believes that Van Kampen American Capital can render such
legal services on a more cost effective basis than other providers of such
services. Payment by the Fund for such services is made on a cost basis for the
employment of personnel as well as the overhead and equipment necessary to
render such services. Other funds distributed by the Distributor also receive
legal services from Van Kampen American Capital. Of the total costs for legal
services provided to funds distributed by the Distributor, 50% of such costs are
allocated equally to each fund. The remaining 50% of such costs are allocated to
specific funds based on specific time allocations, or in the event services are
attributable only to types of funds (i.e.
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closed-end or open-end), the relative amount of time spent on each type of fund
and then further allocated among funds of that type based upon their respective
net asset values. Under the Legal Services Agreement, the Fund paid Van Kampen
American Capital $552,500 for the fiscal year ended July 31, 1995.
Support Services Agreement. Prior to July 10, 1995, the Fund was a party to a
support service agreement with Van Kampen American Capital. Under the Support
Services Agreement, the Fund received support services for shareholders,
including the handling of all written and telephonic communications, except
initial order entry and other distribution related communications. Payment by
the Fund for such services was made on a cost basis for the employment of the
personnel and the equipment necessary to render the support services. Under the
Support Services Agreement, the Fund paid Van Kampen American Capital $2,302,518
for the fiscal year ended July 31, 1995. The Support Services Agreement was
terminated on July 10, 1995.
PRINCIPAL EXECUTIVE OFFICERS OF THE ADVISER.
The names, addresses and principal occupations of the principal executive
officers and the directors of the Adviser not set forth below under "Proposal 2"
of this Proxy Statement are set forth below. The address of each such principal
executive officer is One Parkview Plaza, Oakbrook Terrace, IL 60181.
NAME PRINCIPAL OCCUPATION
- ---------------------------- ------------------------------------------
Ronald A. Nyberg............ Executive Vice President, General Counsel
and Director
William R. Rybak............ Executive Vice President, Chief Financial
Officer and Director
Robert J. Froehlich......... Executive Vice President
Peter W. Hegel.............. Executive Vice President
Alan T. Sachtleben.......... Executive Vice President
Scott E. Martin............. Senior Vice President, Deputy General
Counsel and Secretary
Charles G. Millington....... Senior Vice President and Treasurer
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SHAREHOLDER APPROVAL
The vote of a majority of the outstanding voting securities of the Fund is
required for approval of this Proposal 1. The affirmative vote of a majority of
the outstanding voting securities is defined in the 1940 Act as the lesser of
(i) 67% or more of the voting securities entitled to vote thereon present in
person or by proxy at a meeting, if holders of more than 50% of the outstanding
voting securities are present in person or represented by proxy at such meeting,
or (ii) more than 50% of the outstanding voting securities of a fund. THE BOARD
OF TRUSTEES OF THE FUND RECOMMENDS A VOTE "FOR APPROVAL" OF THIS PROPOSAL 1.
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PROPOSAL 2: ELECTION OF TRUSTEES
- ------------------------------------------------------------------------------
At the Meeting, eight Trustees are to be elected to serve until the next
meeting of shareholders, if any, or until their successors are duly elected and
qualified. It is the intention of the persons named in the enclosed proxy to
vote the Shares represented by them for the election of the nominees listed
below unless the proxy is marked otherwise.
Dennis J. McDonnell, Theodore A. Myers, Rod Dammeyer, David C. Arch and Wayne
W. Whalen have acted as Trustees since their election to the Board of Trustees
in August of 1989 and were last elected by shareholders at a meeting held on
January 14, 1993. Howard J Kerr was appointed as a Trustee of the Fund on
October 26, 1992 to fill a vacant Trustee position in connection with the
expansion of the Board from seven to eight Trustees and was last elected by
shareholders at a meeting held on January 14, 1993. Hugo F. Sonnenschein was
appointed as a Trustee of the Fund on February 25, 1994 to fill a vacant Trustee
position in connection with the retirement from the Board of Trustees of Clyde
H. Keith on the same date. Don G. Powell was appointed as a Trustee of the Fund
on January 28, 1995, to fill a vacant Trustee position in connection with the
resignation from the Board of Trustees of John C. Merritt on the same date. Mr.
Merritt, who had been a trustee and chairman of the Fund, the other closed-end
investment companies and open-end investment companies advised by the Adviser,
also resigned as the chairman of the board, chief executive officer and a
director of the Adviser, Van Kampen Merritt Management Inc., Van Kampen Merritt
Inc., and chairman, chief executive officer, president, chief operating officer
and director of The Van Kampen Merritt Companies, Inc. and VKM Holding, Inc. Mr.
Merritt's resignation from these Van Kampen Merritt-related entities was related
to the acquisition of American Capital Management & Research, Inc. (the
"Acquisition"). At or subsequent to the closing of the Acquisition, Mr. Merritt
exercised options and sold approximately 49,740 shares of the common stock of
Van Kampen American Capital at a price of $200 per share. In addition, Mr.
Merritt had a severance agreement with Van Kampen American Capital entitling him
to approximately $550,000 payable during 1995. Mr. Merritt was also a Director
of McCarthy,
9
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Crisanti & Maffei, Inc., MCM Asia Pacific Company, Limited, a limited partner of
R.L. Renck & Co., Inc., and Vice Chairman of the Municipal Securities Rulemaking
Board. Messrs. Sonnenschein and Powell have not previously been elected to the
Board of Trustees by shareholders. Each of the nominees has agreed to serve as a
Trustee if elected; however, should any nominees become unable or unwilling to
accept nomination or election, the proxies will be voted for one or more
substitute nominees designated by the present Board of Trustees.
The Declaration of Trust of the Fund provides that the Board of Trustees shall
consist of not less than three nor more than eleven trustees. Following the
Meeting, the Fund does not contemplate holding regular meetings of shareholders
to elect Trustees or otherwise. In the event a vacancy occurs on the Board of
Trustees by reason of death, resignation or a reason other than removal by the
shareholders, the remaining Trustees shall appoint a person to fill the vacancy
for the entire unexpired term.
The following sets forth the names, ages, principal occupations and other
information respecting the Trustee nominees.
Nominees for Trustees are:
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ---------------------------- ------------------------------------------
Don G. Powell*.............. Chairman and Trustee. Mr. Powell is
2800 Post Oak Blvd. President, Chief Executive Officer and a
Houston, TX 77056 Director of VK/AC Holding, Inc. and Van
Age: 56 Kampen American Capital, and is Chairman,
Chief Executive Officer and a Director of
the Distributor, the Adviser and Van
Kampen American Capital Asset Management,
Inc. (the "AC Adviser"), Chairman,
Director and President of Van Kampen
American Capital Services, Inc., Director,
President and Chief Executive Officer of
Van Kampen American Capital Advisors, Inc.
and Van Kampen American Capital Exchange
Corp., Former Director and Executive Vice
President of Advantage Capital
Corporation, ACCESS Investor Services,
Inc. and Van Kampen American Capital Trust
Company. Director of McCarthy, Crisanti &
Maffei, Inc. He is also President and
Director, Trustee or Managing General
Partner of each of the funds advised by
the AC Adviser. Mr. Powell is Trustee of
the open-end investment companies advised
by the Adviser. Mr. Powell is Chairman of
the Board of the closed-end investment
companies advised by the Adviser.
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PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ---------------------------- ------------------------------------------
Dennis J. McDonnell*........ President, Chief Executive Officer and
One Parkview Plaza Trustee. Mr. McDonnell is President, Chief
Oakbrook Terrace, IL 60181 Operating Officer and a Director of the
Age: 53 Adviser, the AC Adviser, Van Kampen
American Capital Advisors Inc., VCJ Inc.
and Van Kampen American Capital
Management, Inc. He is also an Executive
Vice President and Director of VK/AC
Holding, Inc., and Van Kampen American
Capital. Chairman and Director of MCM Asia
Pacific Company, Limited and VSM, Inc.,
Chief Executive Officer of McCarthy,
Crisanti & Maffei, Inc., President of Van
Kampen Merritt Equity Advisors Corp.,
Director of Van Kampen Merritt Equity
Holdings Corp. and McCarthy, Crisanti &
Maffei, S.A. Mr. McDonnell is the
President, Chief Executive Officer and a
Trustee of other investment companies
advised by the Adviser and the AC Adviser.
Theodore A. Myers........... Trustee. Mr. Myers is an Executive Vice
1940 East 6th Street President and Chief Financial Officer of
Cleveland, OH 44114 Qualitech Steel Corporation, a producer of
Age: 65 high quality engineered steels for
automotive, transportation and capital
goods industries. He is also a Director of
McLouth Steel and a member of the Arthur
Anderson Chief Financial Officer Advisory
Committee. Prior to August, 1993, Mr.
Myers was Senior Vice President, Chief
Financial Officer and a Director of
Doskocil Companies, Inc., a food
processing and distribution company. Mr.
Myers is also a Trustee of other
investment companies advised by the
Adviser.
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PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ---------------------------- ------------------------------------------
Rod Dammeyer................ Trustee. Mr. Dammeyer is President, Chief
Two North Riverside Plaza Executive Officer and Director of Anixter
Chicago, IL 60606 International Inc. (formerly known as Itel
Age: 55 Corporation), a value-added provider of
integrated networking and cabling
solutions that support business informa-
tion and network infrastructure
requirements, and Great American
Management & Investment, Inc., a
diversified manufacturing company. He is
also a Director of Lukens, Inc., Falcon
Building Products, Inc., Revco D.S., Inc.,
Jacor Communications, Inc., Kent State
University Foundation, National Advisory
Board of Chemical Bank, Capsure Holdings
Corp., The Vigoro Corporation and Antec
Corporation. Mr. Dammeyer was previously a
Director of Santa Fe Energy Resources,
Inc., Lomas Financial Corporation, Santa
Fe Pacific Corporation, Q-Tel, S.A. de
C.V. and Servicios Financieros Quadrum,
S.A. Mr. Dammeyer is also a Trustee of
other investment companies advised by the
Adviser.
David C. Arch............... Trustee. Mr. Arch is Chairman and Chief
1800 Swift Drive Executive Officer of Blistex Inc., a
Oak Brook, IL 60521 consumer health care products
Age: 50 manufacturer. Mr. Arch is also a Trustee
of other investment companies advised by
the Adviser.
Howard J Kerr............... Trustee. Mr. Kerr is President and Chief
736 North Western Ave. Executive Officer of Pocklington
P.O. Box 317 Corporation, Inc., an investment holding
Lake Forest, IL 60045 company. Mr. Kerr is also a Director of
Age: 60 Canbra Foods, Ltd., a Canadian oilseed
crushing, refining, processing and
packaging operation. Mr. Kerr is a Trustee
of other investment companies advised by
the Adviser.
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PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ---------------------------- ------------------------------------------
Hugo F. Sonnenschein........ Trustee. Mr. Sonnenschein is President of
5801 South Ellis Avenue the University of Chicago. Mr.
Suite 502 Sonnenschein is a member of the Board of
Chicago, IL 60637 trustees of the University of Rochester
Age: 55 and a member of its investment committee.
Prior to July, 1993, Mr. Sonnenschein was
Provost of Princeton University and Dean
of the School of Arts and Sciences at the
University of Pennsylvania. Mr.
Sonnenschein is a member of the National
Academy of Sciences and a fellow of the
American Academy of Arts and Sciences. Mr.
Sonnenschein is also a trustee of other
investment companies advised by the
Adviser.
Wayne W. Whalen*............ Trustee. Mr. Whalen is a partner in the
333 West Wacker Drive law firm of Skadden, Arps, Slate, Meagher
Chicago, IL 60606 & Flom. Mr. Whalen is also a Trustee of
Age: 56 other investment companies advised by the
Adviser.
- ---------------
* Such nominees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Messrs. Powell and McDonnell are interested persons of the
Adviser and the Fund by reason of their positions with the Adviser. Mr. Whalen
is an interested person of the Fund by reason of his firm acting as legal
counsel for the Fund.
Messrs. Powell and McDonnell own, or have the opportunity to purchase, an
equity interest in VK/AC Holding, Inc., the parent company of Van Kampen
American Capital, and have entered into employment contracts (for a term of five
years) with Van Kampen American Capital.
During the fiscal year ended July 31, 1995, the Board of Trustees held seven
meetings. All of the Trustees attended 100% of the meetings of the Board of
Trustees and all of the committee meetings thereof of which such Trustee was a
member in the fiscal year ended July 31, 1995, except for Mr. Powell who was not
appointed to the Board of Trustees until January 28, 1995 and Mr. McDonnell who
attended six of the meetings. During the fiscal year ended July 31, 1995, the
Board of Trustees had no standing committees with the exception of an audit
committee.
The Fund's audit committee consists of Messrs. Arch, Dammeyer, Kerr, Myers and
Sonnenschein, who are not "interested persons" of the Fund as defined in the
1940 Act. The committee is primarily responsible for supervision of the Fund's
independent auditors and the annual review of the investment advisory agreement
and any other matters requiring the approval of the Trustees who are not
"interested persons" of the Fund pursuant to the 1940 Act. During the fiscal
year ending July 31, 1995, the audit committee held two meetings.
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20
The Trustees select and nominate trustees to fill any vacancies in
trusteeships and are prepared to review nominations from shareholders.
Nominations from shareholders should be in writing and addressed to the Trustees
at the Fund's office. The Trustees expect to be able to identify from their own
resources an ample number of qualified candidates.
Each of the trustees nominated herein holds the same position with each of 35
other Van Kampen American Capital investment companies (together with the Fund,
the "Fund Complex"). Each trustee who is not an affiliated person of the
Adviser, the Distributor or Van Kampen American Capital (each a "Non-Affiliated
Trustee") is compensated by an annual retainer and meeting fees for services to
the funds in the Fund Complex. Each fund in the Fund Complex provides a deferred
compensation plan to its Non-Affiliated Trustees that allows trustees to defer
receipt of his compensation and earn a return on such deferred amounts based
upon the return of the common shares of the funds in the Fund Complex as more
fully described below.
The compensation of each Non-Affiliated Trustee includes a retainer from the
Fund in an amount equal to $2,500 per calendar year, due in four quarterly
installments on the first business day of each calendar quarter. Each
Non-Affiliated Trustee receives a per meeting fee from the Fund in the amount of
$250 per meeting attended by the Non-Affiliated Trustee, due on the date of such
meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in
connection with his services as a trustee.
Each Non-Affiliated Trustee can elect to defer until retirement receipt of all
or a portion of the compensation earned by such Non-Affiliated Trustee. Amounts
deferred are retained by the Fund and earn a rate of return determined by
reference to the return on common shares of the Fund or other funds in the Fund
Complex as selected by the respective Non-Affiliated Trustee. To the extent
permitted by the 1940 Act, the Fund anticipates it will invest in securities of
those mutual funds selected by the Non-Affiliated Trustees in order to match the
deferred compensation obligation. The deferred compensation plan is not funded
and obligations thereunder represent general unsecured claims against the
general assets of each Fund.
Under the Fund's retirement plan, a Non-Affiliated Trustee who is receiving
trustee's fees from the Fund prior to such Non-Affiliated Trustee's retirement,
has at least ten years of service and retires at or after attaining the age of
60 is eligible to receive a retirement benefit equal to $2,500 per year for each
of the ten years following such trustee's retirement. Under certain conditions,
reduced benefits are available for early retirement provided the trustee has
served at least five years.
14
21
Additional information regarding compensation before deferral from the Fund
and the other funds in the Fund Complex is set forth in the table below.
1995 COMPENSATION TABLE(1)
TOTAL
COMPENSATION
AGGREGATE PENSION OR BEFORE
COMPENSATION RETIREMENT ESTIMATED DEFERRAL
BEFORE BENEFITS ACCRUED ANNUAL FROM THE FUND
DEFERRAL AS PART BENEFITS COMPLEX PAID
FROM THE OF FUND UPON TO
TRUSTEE(2) FUND(3) EXPENSES(4) RETIREMENT(5) TRUSTEES(6)
- ------------------------------------ ---------------- ------------- -------------
Theodore A. Myers....... $3,765 $ 314 $ 2,500 $ 144,625
Rod Dammeyer............ 3,765 592 2,500 144,625
David C. Arch........... 3,765 2,288 2,500 144,625
Howard J Kerr........... 3,765 428 2,500 144,625
Hugo F. Sonnenschein.... 3,765 1,126 2,500 144,625
Wayne W. Whalen......... 3,750 674 2,500 144,125
- ---------------
(1) The "Registrant" is the Fund. The amounts in the table relate either to the
applicable trustees during the Registrant's last fiscal year ended July 31,
1995 or the Fund Complex' last calendar year ended December 31, 1995, as
indicated in the applicable footnotes below.
(2) Messrs. Powell and McDonnell, trustees of the Fund, are affiliated persons
of the Adviser and are not eligible for compensation or retirement benefits
from the Registrant.
(3) The amounts shown in this column are the Aggregate Compensation before
Deferral from the Fund during its last fiscal year ended July 31, 1995. The
Fund's deferred compensation plan commenced in September 1994. The following
trustees deferred compensation from the Registrant during the fiscal year
ended July 31, 1995: Mr. Dammeyer, $3,765; Mr. Kerr, $3,765; Mr. Hugo,
$3,765; and Mr. Whalen, $3,750. Amounts deferred are retained by the Fund
and earn a rate of return determined by reference to the return on the
common shares of the Fund or other funds in the Fund Complex as selected by
the respective Non-Affiliated Trustee. To the extent permitted by the 1940
Act, it is anticipated that the Fund will invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation.
(4) The amounts shown in this column are the Retirement Benefits accrued by the
Fund during its last fiscal year ended July 31, 1995.
(5) The amounts shown in this column are the maximum annual benefit payable per
year for the 10-year period commencing in the year of such trustee's
retirement by the Fund assuming: the trustee has 10 or more years of service
on the Board and retires at or after attaining the age of 60. Trustees
retiring prior to the age of
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22
60 or with fewer than 10 years but more than five years of service may receive
reduced retirement benefits.
(6) The amounts shown in this column are accumulated from the Aggregate
Compensation before Deferral of each of the 36 funds in the Fund Complex, as
of December 31, 1995. The Adviser and its affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. Powell, McDonnell and Whalen, the trustees were not
trustees of such investment companies. Combining the Fund Complex with other
investment companies advised by the Adviser and its affiliates, Mr. Whalen
received Total Compensation of $268,857 during the calendar year ended
December 31, 1995. The following trustees deferred aggregate compensation
from the Registrant and the Fund Complex during the calendar year ended
December 31, 1995 as follows: Mr. Dammeyer, $144,625; Mr. Kerr, $144,625;
Mr. Hugo, $144,625; and Mr. Whalen, $144,125. Amounts deferred are retained
by the respective fund for which they are deferred and earn a rate of return
determined by reference to the return of the common shares of such fund or
other funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee. To the extent permitted by the 1940 Act, it is anticipated that
each fund will invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation.
The following table sets forth certain information (other than information
concerning Messrs. Powell and McDonnell, which is set forth above) concerning
the executive officers of the Fund, each of whom holds the same office with each
of the other open-end and closed-end investment companies advised by the
Adviser. The officers serve for one year or until their respective successors
are chosen and qualified. The Fund's officers receive no compensation from the
Fund but are officers of the Adviser or Van Kampen American Capital and receive
compensation in such capacities.
NAME, OFFICE AND AGE OTHER PRINCIPAL OCCUPATIONS IN PAST 5 YEARS
- --------------------------- ---------------------------------------------------
Peter W. Hegel............. Executive Vice President and Portfolio Manager of
Vice President the Adviser. Executive Vice President of Van Kampen
Age: 39 American Capital Asset Management, Inc. (the "AC
Adviser"), Van Kampen American Capital Advisors,
Inc. Director of McCarthy, Crisanti & Maffei, Inc.
Vice President of each of the open-end funds and
closed-end funds advised by the Adviser.
Jeffrey W. Maillet......... Senior Vice President and Portfolio Manager of the
Vice President Adviser. Senior Vice President of Van Kampen
Age: 39 American Capital Management, Inc., and the AC
Adviser.
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NAME, OFFICE AND AGE OTHER PRINCIPAL OCCUPATIONS IN PAST 5 YEARS
- --------------------------- ---------------------------------------------------
Ronald A. Nyberg........... Executive Vice President, General Counsel and
Vice President and Secretary of Van Kampen American Capital and VK/AC
Secretary Holding, Inc. Executive Vice President, General
Age: 42 Counsel and a Director of the Distributor,
Executive Vice President and General Counsel of the
Adviser and the AC Adviser, Van Kampen American
Capital Management, Inc., VSM Inc., VCJ, Inc., Van
Kampen Merritt Equity Advisors Corp., and Van
Kampen Merritt Equity Holdings Corp. Executive Vice
President, General Counsel and Assistant Secretary
of Van Kampen American Capital Advisors, Inc.,
American Capital Contactual Services, Inc., Van
Kampen American Capital Exchange Corporation,
ACCESS Investor Services, Inc., American Capital
Shareholders Corporation, and Van Kampen American
Capital Trust Company. General Counsel of McCarthy,
Crisanti & Maffei, Inc. Secretary of each of the
Van Kampen American Capital funds advised by the
Adviser and the AC Adviser. Secretary of the
closed-end funds advised by the Adviser. Director
of ICI Mutual Insurance Co., a provider of
insurance to members of the Investment Company
Institute.
Edward C. Wood III......... Senior Vice President of the Adviser and the AC
Vice President, Treasurer Adviser. Vice President and Chief Financial Officer
and Chief Financial of each of the open-end investment companies
Officer advised by the Adviser and the AC Adviser. Vice
Age: 40 President, Treasurer and Chief Financial Officer of
the closed-end investment companies advised by the
Adviser.
Nicholas Dalmaso........... Assistant Vice President and Senior Attorney of Van
Assistant Secretary Kampen American Capital. Assistant Vice President
Age: 31 and Assistant Secretary of the Distributor, the
Adviser, the AC Adviser, and Van Kampen American
Capital Management, Inc. Assistant Vice President
of Van Kampen American Capital Advisors, Inc.
Assistant Secretary of each of the open-end and
closed-end investment companies advised by the
Adviser. Prior to May 1992, attorney for Cantwell &
Cantwell, a Chicago law firm.
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NAME, OFFICE AND AGE OTHER PRINCIPAL OCCUPATIONS IN PAST 5 YEARS
- --------------------------- ---------------------------------------------------
Scott E. Martin............ Senior Vice President, Deputy General Counsel and
Assistant Secretary Assistant Secretary of, VK/AC Holding, Inc., Van
Age: 39 Kampen American Capital, Inc. Senior Vice
President, Deputy General Counsel and Secretary of
the Adviser, the AC Adviser the Distributor, Van
Kampen American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc., VSM Inc.,
VCJ Inc., American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, ACCESS Investor Services, Inc., Van
Kampen Merritt Equity Advisors Corp., Van Kampen
Merritt Equity Holdings Corp., American Capital
Shareholders Corporation. Secretary and Deputy
General Counsel of McCarthy, Crisanti & Maffei,
Inc. Chief Legal Officer of McCarthy, Crisanti &
Maffei, S.A. Assistant Secretary of each of the
open-end and closed-end investment companies
advised by the Adviser.
Weston B. Wetherell........ Vice President, Associate General Counsel and
Assistant Secretary Assistant Secretary of Van Kampen American Capital,
Age: 39 the Adviser the AC Adviser, the Distributor, Van
Kampen American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc. Assistant
Secretary of each of the open-end and closed-end
investment companies advised by the Adviser.
John L. Sullivan........... First Vice President of the Adviser and AC Adviser.
Controller Treasurer of each of the open-end investment
Age: 40 companies advised by the Adviser and the AC
Adviser, and Controller of each of the closed-end
investment companies advised by the Adviser.
Steven M. Hill............. Assistant Vice President of the Adviser and the AC
Assistant Treasurer Adviser. Assistant Treasurer of each of the
Age: 31 open-end and closed-end investment companies
advised by the Adviser.
With respect to the Fund, as of March 1, 1996, the trustees and officers as a
group owned less than 1% of the outstanding shares of the Fund. At such date,
the "interested persons" of the Fund as a group owned an aggregate of less than
5% of the outstanding shares of the Fund and no person owned 5% or more of the
outstanding shares of the Fund.
SHAREHOLDER APPROVAL
The affirmative vote of a plurality of the Shares of the Trust present in
person or by proxy is required to elect the nominees to the Board of Trustees of
the Trust. THE BOARD OF TRUSTEES RECOMMENDS A VOTE "IN FAVOR" OF EACH OF THE
NOMINEES.
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- ------------------------------------------------------------------------------
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
The Board, including a majority of the Disinterested Trustees, have selected
the firm of KPMG Peat Marwick LLP, independent auditors, to examine the
financial statements for the current fiscal year of the Fund. The Fund knows of
no direct or indirect financial interest of such firm in the Fund. Such
appointment is subject to ratification or rejection by the shareholders of the
Fund. Unless a contrary specification is made, the accompanying proxy will be
voted in favor of ratifying the selection of such auditors. It is expected that
KPMG Peat Marwick LLP will also act as independent auditors for VK/AC Holding,
Inc., Van Kampen American Capital, the Adviser and the Distributor.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting and will be available to respond to questions from shareholders and will
have the opportunity to make a statement if they so desire.
SHAREHOLDER APPROVAL
The shareholders, voting as a single class, are entitled to vote on this
issue. An affirmative vote of a majority of the Shares of the Fund present in
person or by proxy and voting is required to ratify the selection of the
auditors for the Fund. THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR"
RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR THE FUND'S
FISCAL YEAR ENDING JULY 31, 1996.
- ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ------------------------------------------------------------------------------
As a general matter, the Fund does not hold regular annual meetings of
shareholders. Any shareholder who wishes to submit proposals for consideration
at a meeting of the Fund should send such proposal to the Secretary of the Fund
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. To be considered for
presentation at a shareholders' meeting, rules promulgated by the Securities and
Exchange Commission 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 Fund does not intend to present and does not have reason to
believe that others will present any other items of business at the Meeting.
However, if other matters are properly presented to the Meeting for a vote, the
19
26
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 Fund entitled to be present and vote at the
Meeting will be available at the offices of the Fund, One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, for inspection by any shareholder during
regular business hours for ten days prior to the date of the Meeting.
Failure of a quorum to be present at the Meeting may necessitate adjournment
and subject the Fund to additional expense.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
RONALD A. NYBERG,
Vice President and Secretary
March 8, 1996
20
27
APPENDIX A
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of February 17, 1993, by and
between VAN KAMPEN MERRITT PRIME RATE INCOME TRUST (the "Fund"), a Massachusetts
business trust (the "Trust"), and VAN KAMPEN MERRITT INVESTMENT ADVISORY CORP.
(the "Advisor"), a Delaware corporation.
1. (a) Retention of Advisor by Fund. The Fund hereby employs the Advisor to
act as the investment adviser for and to manage the investment and reinvestment
of the assets of the Fund in accordance with the Fund's investment objective and
policies and limitations, and to administer its affairs to the extent requested
by, and subject to the review and supervision of, the Board of Trustees of the
Fund for the period and upon the terms herein set forth. The investment of funds
shall be subject to all applicable restrictions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as may from time to time be in force and delivered or made
available to the Advisor.
(b) Advisor's Acceptance of Employment. The Advisor accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to the Board of Trustees of the Fund, and to permit any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
(c) Independent Contractor. The Advisor shall be deemed to be an independent
contractor under this Agreement and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed as agent of the Fund.
(d) Non-Exclusive Agreement. The services of the Advisor to the Fund under
this Agreement are not to be deemed exclusive, and the Advisor shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. (a) Fee. For the services and facilities described in Section 1, the Fund
will accrue daily and pay to the Advisor at the end of each calendar month an
A-1
28
investment management fee equal to .95% of the average daily net assets of the
Fund.
(b) Determination of Net Asset Value. The net asset value of the Fund shall be
calculated as of the close of the New York Stock Exchange on the last day the
Exchange is open for trading in each calendar week or as of such other time or
times as the trustees may determine in accordance with the provisions of
applicable law and of the Declaration of Trust and By-Laws of the Trust, and
resolutions of the Board of Trustees of the Fund as from time to time in force.
For the purpose of the foregoing computations, on each such day when net asset
value is not calculated, the net asset value of a share of beneficial interest
of the Fund shall be deemed to be the net asset value of such share as of the
close of business of the last day on which such calculation was made.
(c) Proration. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Advisor's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
3. Expenses. In addition to the fee of the Advisor, the Fund shall assume and
pay any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian and for calculating the net asset value of the
Fund as provided above. The Advisor shall not be required to pay, and the Fund
shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Advisor), charges and expenses of independent accountants, of legal counsel and
of any transfer or dividend disbursing agent, costs of acquiring and disposing
of portfolio securities, cost of listing shares of the New York Stock Exchange
or other exchange interest (if any) on obligations incurred by the Fund, costs
of share certificates, membership dues in the Investment Company Institute or
any similar organization, costs of reports and notices to shareholders, costs of
registering shares of the Fund under the federal securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of
corporation documents or otherwise. The Fund shall not pay or incur any
obligation for any management or administrative expenses for which the Fund
intends to seek reimbursement from the Advisor without first obtaining the
written approval of the Advisor. The Advisor shall arrange, if desired by the
Fund, for officers or employees of the Advisor to serve, without compensation
from the Fund, as trustees, officers or agents of the Fund if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by law.
4. Interested Persons. Subject to applicable statutes and regulations, it is
understood that trustees, officers, shareholders and agents of the Fund are or
may
A-2
29
be interested in the Advisor as directors, officers, shareholders, agents or
otherwise and that the directors, officers, shareholders and agents of the
Advisor may be interest in the Fund as trustees, officers, shareholders, agents
or otherwise.
5. Liability. The Advisor shall not be liable for any error of judgment or of
law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Advisor in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) Term. This Agreement shall become effective on the date hereof and
shall remain in full force until December 31, 1994, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only as long as such continuance is specifically approved as
least annually in the manner required by the Investment Company Act of 1940 (the
"1940 Act"), as amended.
(b) Termination. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time without the payment
of any penalty by the Fund or by the Advisor on sixty (60) days written notice
to the other party. The Fund may effect termination by action of the Board of
Trustees or by vote of a majority of the outstanding shares of stock of the
Fund, accompanied by appropriate notice. This Agreement may be terminated at any
time without the payment of any penalty and without advance notice by the Board
of Trustees or by vote of a majority of the outstanding shares of the Fund in
the event that it shall have been established by a court of competent
jurisdiction that the Advisor or any officer or director of the Advisor has
taken any action which results in a breach of the covenants of the advisor set
forth herein.
(c) Payment upon Termination. Termination of this Agreement shall not affect
the right of the Advisor to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
7. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
8. Notices. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
9. Disclaimer. The Advisor acknowledges and agrees that, as provided by
Section 5.5 of the Declaration of Trust of the Trust, the shareholders,
trustees, officers, employees and other agents of the Trust and the Fund shall
not personally
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be bound by or liable hereunder, nor shall resort be had to their private
property for the satisfaction of any obligation or claim hereunder.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this Agreement to be
executed on the day and year first above written.
VAN KAMPEN MERRITT
INVESTMENT
ADVISORY CORP.
By: /s/ EDWARD C. WOOD III
------------------------------
First Vice President
VAN KAMPEN MERRITT
PRIME RATE
INCOME TRUST
By: /s/ EDWARD C. WOOD III
------------------------------
Vice President and Treasurer
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APPENDIX B
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of November 10, 1995, by and
between VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST (the "Fund"), a
Massachusetts business trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP. (the "Advisor"), a Delaware corporation.
1. (a) Retention of Advisor by Fund. The Fund hereby employs the Advisor to
act as the investment adviser for and to manage the investment and reinvestment
of the assets of the Fund in accordance with the Fund's investment objective and
policies and limitations, and to administer its affairs to the extent requested
by, and subject to the review and supervision of, the Board of Trustees of the
Fund for the period and upon the terms herein set forth. The investment of funds
shall be subject to all applicable restrictions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as may from time to time be in force and delivered or made
available to the Advisor.
(b) Advisor's Acceptance of Employment. The Advisor accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to the Board of Trustees of the Fund, and to permit any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
(c) Independent Contractor. The Advisor shall be deemed to be an independent
contractor under this Agreement and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed as agent of the Fund.
(d) Non-Exclusive Agreement. The services of the Advisor to the Fund under
this Agreement are not to be deemed exclusive, and the Advisor shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. (a) Fee. For the services and facilities described in Section 1, the Fund
will accrue daily and pay to the Advisor at the end of each calendar month an
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investment management fee equal to a percentage of the average daily net assets
of the fund as follows:
FEE PERCENT OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
----------------------------------- --------------
First $4.0 billion................. .950 of 1%
Next $3.5 billion.................. .900 of 1%
Next $2.5 billion.................. .875 of 1%
Over $10 billion................... .850 of 1%
(b) Determination of Net Asset Value. The net asset value of the Fund shall be
calculated as of the close of the New York Stock Exchange on the last day the
Exchange is open for trading in each calendar week or as of such other time or
times as the trustees may determine in accordance with the provisions of
applicable law and of the Declaration of Trust and By-Laws of the Trust, and
resolutions of the Board of Trustees of the Fund as from time to time in force.
For the purpose of the foregoing computations, on each such day when net asset
value is not calculated, the net asset value of a share of beneficial interest
of the Fund shall be deemed to be the net asset value of such share as of the
close of business of the last day on which such calculation was made.
(c) Proration. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Advisor's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
3. Expenses. In addition to the fee of the Advisor, the Fund shall assume and
pay any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian and for calculating the net asset value of the
Fund as provided above. The Advisor shall not be required to pay, and the Fund
shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Advisor), charges and expenses of independent accountants, of legal counsel and
of any transfer or dividend disbursing agent, costs of acquiring and disposing
of portfolio securities, cost of listing shares of the New York Stock Exchange
or other exchange interest (if any) on obligations incurred by the Fund, costs
of share certificates, membership dues in the Investment Company Institute or
any similar organization, costs of reports and notices to shareholders, costs of
registering shares of the Fund under the federal securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of
corporation documents or otherwise. The Fund shall not pay or incur any
obligation for any management or administrative expenses for which the Fund
intends to seek reimbursement from the Advisor
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without first obtaining the written approval of the Advisor. The Advisor shall
arrange, if desired by the Fund, for officers or employees of the Advisor to
serve, without compensation from the Fund, as trustees, officers or agents of
the Fund if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law.
4. Interested Persons. Subject to applicable statutes and regulations, it is
understood that trustees, officers, shareholders and agents of the Fund are or
may be interested in the Advisor as directors, officers, shareholders, agents or
otherwise and that the directors, officers, shareholders and agents of the
Advisor may be interest in the Fund as trustees, officers, shareholders, agents
or otherwise.
5. Liability. The Advisor shall not be liable for any error of judgment or of
law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Advisor in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) Term. This Agreement shall become effective on the date hereof and
shall remain in full force until the second anniversary of the date hereof
unless sooner terminated as hereinafter provided. This Agreement shall continue
in force from year to year thereafter, but only as long as such continuance is
specifically approved as least annually in the manner required by the Investment
Company Act of 1940, as amended.
(b) Termination. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time without the payment
of any penalty by the Fund or by the Advisor on sixty (60) days written notice
to the other party. The Fund may effect termination by action of the Board of
Trustees or by vote of a majority of the outstanding shares of stock of the
Fund, accompanied by appropriate notice. This Agreement may be terminated at any
time without the payment of any penalty and without advance notice by the Board
of Trustees or by vote of a majority of the outstanding shares of the Fund in
the event that it shall have been established by a court of competent
jurisdiction that the Advisor or any officer or director of the Advisor has
taken any action which results in a breach of the covenants of the advisor set
forth herein.
(c) Payment upon Termination. Termination of this Agreement shall not affect
the right of the Advisor to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
7. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
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8. Notices. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
9. Disclaimer. The Advisor acknowledges and agrees that, as provided by
Section 5.5 of the Declaration of Trust of the Trust, the shareholders,
trustees, officers, employees and other agents of the Trust and the Fund shall
not personally be bound by or liable hereunder, nor shall resort be had to their
private property for the satisfaction of any obligation or claim hereunder.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this Agreement to be
executed on the day and year first above written.
VAN KAMPEN AMERICAN
CAPITAL INVESTMENT
ADVISORY CORP.
By:
----------------------------
Senior Vice President
VAN KAMPEN AMERICAN
CAPITAL PRIME RATE
INCOME TRUST
By:
----------------------------
Vice President and Treasurer
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FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free
Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal
Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment adviser for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
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[VKAC LOGO]
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PROXY VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
SPECIAL MEETING OF SHAREHOLDERS--APRIL 18, 1996
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of common shares of VAN KAMPEN AMERICAN
CAPITAL PRIME RATE INCOME TRUST (the "Fund"), a Massachusetts
business trust, hereby appoints Ronald A. Nyberg and Edward C.
Wood III, and each of them, with full power of substitution and
revocation, as proxies to represent the undersigned at the
Special Meeting of shareholders to be held at the offices of the
Fund, One Parkview Plaza, Oakbrook Terrace, Illinois 60181, on
April 18, 1996, at 2:00 p.m., and at any and all adjournments
thereof, and thereat to vote all common shares of the Fund which
the undersigned would be entitled to vote, with all powers the
undersigned would possess if personally present, in accordance
with the following instructions:
1. FOR / / AGAINST / / ABSTAIN / / as to the proposal to
approve a material change
in the terms of the
Investment Advisory
Agreement with Van Kampen
American Capital
Investment Advisory Corp.
2. GRANTING / / WITHHOLDING / / authority to vote for the
election as trustee each
nominee named below:
Messrs. Powell, McDonnell, Arch,
Dammeyer, Kerr, Myers,
Sonnenschein and Whalen
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME.
3. FOR / / AGAINST / / ABSTAIN / / as to the proposal to
ratify the selection of
KPMG Peat Marwick LLP to
act as the independent
auditors of the Fund for
its fiscal year ending
July 31, 1996.
4. Upon any and all other business which may come before the
Special Meeting or any adjournment thereof.
If more than one of the proxies, or their substitutes, are
present at the Special Meeting or any adjournment thereof, they
jointly (or, if only one is present and voting, then that one)
shall have authority and may exercise all powers granted hereby.
This Proxy, when properly executed, will be voted in accordance
with the instructions marked hereon by the undersigned. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS DESCRIBED ABOVE AND IN THE DISCRETION OF THE PROXIES
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued from other side)
Account Number No. of Shares Proxy No.
The undersigned hereby acknowledges receipt of the accompanying
Notice of Special Meeting and Proxy Statement for the Special
Meeting to be held on April 18, 1996.Dated: , 1996
----------------------------
----------------------------
Signature(s)
Please sign exactly as your
name or names appear on this
Proxy. When signing as
attorney, trustee, executor,
administrator, custodian,
guardian or corporate
officer, please give full
title. If shares are held
jointly, each holder should
sign.