0000950129-95-000848.txt : 19950811 0000950129-95-000848.hdr.sgml : 19950811 ACCESSION NUMBER: 0000950129-95-000848 CONFORMED SUBMISSION TYPE: NSAR-B PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950731 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CAPITAL RESERVE FUND INC CENTRAL INDEX KEY: 0000005114 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 741794065 FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: NSAR-B SEC ACT: 1940 Act SEC FILE NUMBER: 811-02482 FILM NUMBER: 95557315 BUSINESS ADDRESS: STREET 1: 2800 POST OAK BLVD 46TH FL CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7139930500 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL RESERVE FUND INC DATE OF NAME CHANGE: 19830912 NSAR-B 1 N-SAR (3.0.A) PAGE 1 000 B000000 05/31/95 000 C000000 0000005114 000 D000000 N 000 E000000 NF 000 F000000 Y 000 G000000 N 000 H000000 N 000 I000000 3.0.a 000 J000000 A 001 A000000 AMERICAN CAPITAL RESERVE FUND, INC. 001 B000000 811-2482 001 C000000 7139930500 002 A000000 2800 POST OAK BLVD. 002 B000000 HOUSTON 002 C000000 TX 002 D010000 77056 003 000000 N 004 000000 N 005 000000 N 006 000000 N 007 A000000 N 007 B000000 0 007 C010100 1 007 C010200 2 007 C010300 3 007 C010400 4 007 C010500 5 007 C010600 6 007 C010700 7 007 C010800 8 007 C010900 9 007 C011000 10 008 A000001 VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT 008 B000001 A 008 C000001 801-8286 008 D010001 HOUSTON 008 D020001 TX 008 D030001 77056 011 A000001 VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC 011 B000001 8-19903 011 C010001 HOUSTON 011 C020001 TX 011 C030001 77056 012 A000001 ACCESS INVESTOR SERVICES,INC. 012 B000001 84-01621 012 C010001 KANSAS CITY 012 C020001 MO 012 C030001 64141 012 C040001 9256 013 A000001 PRICE WATERHOUSE LLP 013 B010001 HOUSTON PAGE 2 013 B020001 TX 013 B030001 77002 015 A000001 STATE STREET BANK & TRUST CO. 015 B000001 C 015 C010001 BOSTON 015 C020001 MA 015 C030001 02110 015 E010001 X 018 000000 Y 019 A000000 Y 019 B000000 34 019 C000000 ACFHOUSTON 020 C000001 0 020 C000002 0 020 C000003 0 020 C000004 0 020 C000005 0 020 C000006 0 020 C000007 0 020 C000008 0 020 C000009 0 020 C000010 0 021 000000 0 022 A000001 SALOMON BROTHERS, INC. 022 B000001 13-3082694 022 C000001 5426514 022 D000001 0 022 A000002 LEHMAN BROTHERS, INC. 022 B000002 13-2518466 022 C000002 2355791 022 D000002 43879 022 A000003 SBC CAPITAL MARKETS, INC. 022 B000003 13-2639550 022 C000003 2340123 022 D000003 0 022 A000004 STATE STREET & TRUST CO. 022 B000004 04-1867445 022 C000004 720896 022 D000004 0 022 A000005 FIRST BOSTON CORP. 022 B000005 13-5659485 022 C000005 260227 022 D000005 0 022 A000006 BANK AMERICA CORP. 022 B000006 94-1687665 022 C000006 208648 022 D000006 0 022 A000007 PRUDENTIAL SECURITIES 022 B000007 22-2347336 022 C000007 179408 022 D000007 0 PAGE 3 022 A000008 MERRILL LYNCH, INC. 022 B000008 13-5674085 022 C000008 114273 022 D000008 0 022 A000009 CHEVRON OIL FINANCE 022 B000009 ---- 022 C000009 109425 022 D000009 0 022 A000010 MORGAN STANLEY & CO., INC. 022 B000010 13-2655998 022 C000010 77010 022 D000010 0 023 C000000 12075737 023 D000000 43879 024 000000 Y 025 A000001 SBC CAPITAL MARKETS, INC. 025 B000001 ---- 025 C000001 D 025 D000001 65000 025 A000002 STATE STREET BANK & TRUST CO. 025 B000002 04-1867445 025 C000002 D 025 D000002 55905 025 A000003 PRUDENTIAL FUNDING CORP. 025 B000003 22-2347336 025 C000003 D 025 D000003 16841 025 D000004 0 025 D000005 0 025 D000006 0 025 D000007 0 025 D000008 0 026 A000000 Y 026 B000000 Y 026 C000000 Y 026 D000000 Y 026 E000000 N 026 F000000 N 026 G010000 N 026 G020000 N 026 H000000 N 027 000000 Y 028 A010000 217552 028 A020000 1986 028 A030000 0 028 A040000 281671 028 B010000 236024 028 B020000 1776 028 B030000 0 028 B040000 253820 028 C010000 200878 PAGE 4 028 C020000 1376 028 C030000 0 028 C040000 273414 028 D010000 298785 028 D020000 1555 028 D030000 0 028 D040000 307287 028 E010000 244445 028 E020000 1380 028 E030000 0 028 E040000 243956 028 F010000 324056 028 F020000 1621 028 F030000 0 028 F040000 365118 028 G010000 1521740 028 G020000 9694 028 G030000 0 028 G040000 1725266 028 H000000 0 029 000000 N 030 A000000 0 030 B000000 0.00 030 C000000 0.00 031 A000000 0 031 B000000 0 032 000000 0 033 000000 0 034 000000 Y 035 000000 3 036 A000000 N 036 B000000 0 037 000000 N 038 000000 0 039 000000 N 040 000000 Y 041 000000 Y 042 A000000 0 042 B000000 0 042 C000000 100 042 D000000 0 042 E000000 0 042 F000000 0 042 G000000 0 042 H000000 0 043 000000 616 044 000000 0 045 000000 Y 046 000000 N 047 000000 Y 048 000000 0.000 PAGE 5 048 A010000 150000 048 A020000 0.500 048 B010000 100000 048 B020000 0.450 048 C010000 100000 048 C020000 0.400 048 D010000 0 048 D020000 0.000 048 E010000 0 048 E020000 0.000 048 F010000 0 048 F020000 0.000 048 G010000 0 048 G020000 0.000 048 H010000 0 048 H020000 0.000 048 I010000 0 048 I020000 0.000 048 J010000 0 048 J020000 0.000 048 K010000 350000 048 K020000 0.350 049 000000 N 050 000000 N 051 000000 N 052 000000 N 053 A000000 N 054 A000000 Y 054 B000000 N 054 C000000 N 054 D000000 N 054 E000000 N 054 F000000 N 054 G000000 Y 054 H000000 Y 054 I000000 N 054 J000000 Y 054 K000000 N 054 L000000 N 054 M000000 Y 054 N000000 N 054 O000000 Y 055 A000000 N 055 B000000 N 056 000000 N 057 000000 N 058 A000000 N 059 000000 Y 060 A000000 Y 060 B000000 Y 061 000000 500 PAGE 6 062 A000000 Y 062 B000000 0.0 062 C000000 24.6 062 D000000 37.2 062 E000000 0.0 062 F000000 0.0 062 G000000 0.0 062 H000000 0.0 062 I000000 60.7 062 J000000 0.0 062 K000000 0.0 062 L000000 0.0 062 M000000 0.0 062 N000000 0.0 062 O000000 0.0 062 P000000 0.0 062 Q000000 0.0 062 R000000 0.0 063 A000000 25 063 B000000 0.0 064 A000000 Y 064 B000000 N 066 A000000 N 070 A010000 Y 070 A020000 Y 070 B010000 N 070 B020000 N 070 C010000 N 070 C020000 N 070 D010000 N 070 D020000 N 070 E010000 N 070 E020000 N 070 F010000 N 070 F020000 N 070 G010000 N 070 G020000 N 070 H010000 N 070 H020000 N 070 I010000 N 070 I020000 N 070 J010000 N 070 J020000 N 070 K010000 N 070 K020000 N 070 L010000 N 070 L020000 N 070 M010000 N 070 M020000 N 070 N010000 Y 070 N020000 N PAGE 7 070 O010000 Y 070 O020000 N 070 P010000 Y 070 P020000 N 070 Q010000 N 070 Q020000 N 070 R010000 N 070 R020000 N 071 A000000 0 071 B000000 0 071 C000000 0 071 D000000 0 072 A000000 12 072 B000000 22971 072 C000000 0 072 D000000 0 072 E000000 0 072 F000000 1897 072 G000000 0 072 H000000 0 072 I000000 1495 072 J000000 0 072 K000000 0 072 L000000 59 072 M000000 23 072 N000000 112 072 O000000 0 072 P000000 0 072 Q000000 101 072 R000000 21 072 S000000 20 072 T000000 616 072 U000000 0 072 V000000 0 072 W000000 13 072 X000000 4357 072 Y000000 0 072 Z000000 18614 072AA000000 0 072BB000000 0 072CC010000 0 072CC020000 0 072DD010000 18623 072DD020000 17 072EE000000 0 073 A010000 0.0000 073 A020000 0.0000 073 B000000 0.0000 073 C000000 0.0000 074 A000000 128 074 B000000 120905 PAGE 8 074 C000000 276574 074 D000000 0 074 E000000 0 074 F000000 0 074 G000000 0 074 H000000 0 074 I000000 0 074 J000000 0 074 K000000 0 074 L000000 786 074 M000000 44 074 N000000 398437 074 O000000 0 074 P000000 452 074 Q000000 0 074 R010000 0 074 R020000 0 074 R030000 0 074 R040000 73526 074 S000000 0 074 T000000 324459 074 U010000 319695 074 U020000 4778 074 V010000 0.00 074 V020000 0.00 074 W000000 0.0000 074 X000000 43026 074 Y000000 0 075 A000000 434839 075 B000000 0 076 000000 0.00 077 A000000 Y 077 B000000 Y 077 C000000 Y 077 D000000 N 077 E000000 N 077 F000000 N 077 G000000 N 077 H000000 N 077 I000000 N 077 J000000 N 077 K000000 N 077 L000000 N 077 M000000 N 077 N000000 N 077 O000000 N 077 P000000 N 077 Q010000 Y 077 Q020000 N 077 Q030000 N 078 000000 N PAGE 9 080 A000000 ICI MUTUAL INSURANCE COMPANY 080 B000000 N/A 080 C000000 60000 081 A000000 Y 081 B000000 33 082 A000000 Y 082 B000000 100 083 A000000 N 083 B000000 0 084 A000000 N 084 B000000 0 085 A000000 Y 085 B000000 N 086 A010000 0 086 A020000 0 086 B010000 0 086 B020000 0 086 C010000 0 086 C020000 0 086 D010000 0 086 D020000 0 086 E010000 0 086 E020000 0 086 F010000 0 086 F020000 0 SIGNATURE TANYA LODEN TITLE CONTROLLER EX-27.1 2
6 0000005114 AC RESERVE FUND 1 CLASS A SHARES 12-MOS MAY-31-1995 JUN-01-1994 MAY-31-1995 394,478,709 397,478,709 786,579 43,829 127,602 398,436,719 0 0 73,978,180 73,978,180 3,244,731 321,161,934 319,694,843 463,815,535 51,874 0 0 0 0 324,458,539 0 22,971,502 0 4,357,387 18,614,115 0 0 18,614,115 0 18,623,009 0 0 3,148,142,161 3,310,885,862 18,623,009 (139,368,774) 78,252 0 0 0 1,896,937 0 4,357,387 434,401,940 1.00 .043 0 .043 0 0 1.00 1.00 0 0
EX-27.2 3
6 0000005114 AC RESERVE FUND 2 CLASS B SHARES 2-MOS MAY-31-1995 APR-18-1995 MAY-31-1995 0 0 0 0 0 0 0 0 0 0 0 0 4,189,806 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15,317 0 0 21,754,203 17,579,714 15,317 0 0 0 0 0 0 0 0 2,307,039 1.00 .005 0 .005 0 0 1.00 1.76 0 0 EXPENSE RATIO IS ANNUALIZED
EX-27.3 4
6 0000005114 AC RESERVE FUND 3 CLASS C SHARES 2-MOS MAY-31-1995 APR-18-1995 MAY-31-1995 0 0 0 0 0 0 0 0 0 0 0 0 588,487 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,167 0 0 3,049,049 2,462,729 2,167 0 0 0 0 0 0 0 0 315,677 1.00 .005 0 .005 0 0 1.00 1.76 0 0 EXPENSE RATIO IS ANNUALIZED
EX-99.1 5 1 N-SAR ITEM 77C a) A Special Meeting of Shareholders was held on December 16, 1994. b) Inapplicable c) The following was voted on at the meeting: 1) Approval of a new investment advisory agreement between the Registrant and American Capital Asset Management, Inc. to take effect upon the closing of the proposed acquisition of American Capital Management & Research, Inc. by The Van Kampen Merritt Companies, Inc. For 250,790,115.671 Against 10,907,189.509 2) Approval of amendments to the Fund's Articles of Incorporation authorizing the issuance of additional classes of shares of the Fund. For 241,812,894.559 Against 17,258,397.830 d) Inapplicable EX-99.2 6 1 Sub-Item 77I: Terms of New or Amended Securities (a) N/A (b) Effective April 18, 1995, the Fund established a new Dual Distribution System, which offers investors the option of purchasing shares either subject to a conventional front-end sales load or subject to a contingent deferred sales charge. Under the Dual Distribution System, the Fund has created a new class of shares, Class B shares, which are sold to investors subject to a contingent deferred sales charge. These shares are in addition to the currently authorized class of shares, Class A shares, which are sold on a front-end sales load basis. Each Class A share and Class B share represent identical interests in the Fund. The two classes have identical voting, dividend, liquidation and other rights, except that holders of Class B shares bear higher distribution fees and transfer agency costs as a result of the deferred sales charge and bear any other expenses identified in the future resulting from the deferred sales charge arrangement. In addition, approximately six years after their issuance, Class B shares will automatically convert to Class A shares. The two classes also have different exchange privileges. Because the deferred sales charge is imposed only against Class B shares, the charge will not affect the net asset value of Class A shares, and will have no impact on investors currently holding the Fund's outstanding securities. The shares currently issued and outstanding have been reclassified as "Class A shares" and will continue to have the same voting, dividend, liquidation and other rights. EX-99.3 7 1 AMERICAN CAPITAL RESERVE FUND, INC. ARTICLES OF AMENDMENT American Capital Reserve Fund, Inc., a Maryland corporation having its principal office in Baltimore City, Maryland (which is hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended as follows: (a) Paragraph(1) of Article FIFTH of the charter is amended to read as follows: "(1)(a) The total number of shares of stock of all classes and series which the Corporation has authority to issue is One Billion (1,000,000,000) shares of capital stock (par value $.01 per share), amounting in aggregate par value to Ten Million Dollars ($10,000,000). All of the authorized shares of capital stock of the Corporation are classified as "Common Stock", which shall have three classes of shares, designated Class A, Class B and Class C, consisting, until further changed, of Seven Hundred Fifty Million (750,000,000) Class A shares, One Hundred Twenty-Five Million (125,000,000) Class B shares and One Hundred Twenty-Five Million (125,000,000) Class C shares. The Board of Directors may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares of stock. "(b) The Class A, Class B and Class C shares of Common Stock shall represent the same interest in the Corporation and have identical voting, dividend, liquidation, and other rights; provided, however, that notwithstanding anything in the charter of the Corporation to the contrary: "(i) The Class A, Class B and Class C shares of Common Stock may be issued and sold subject to such different sales loads or charges, whether initial, deferred or contingent, or any combination thereof, as the Board of Directors may from time to time establish in accordance with the Investment Company Act of 1940, or any applicable exemptive order issued by the Securities and Exchange Commission, and applicable rules and regulations of the National Association of Securities Dealers, Inc. "(ii) Expenses related solely to a particular class of Common Stock (including, without limitation, distribution expenses under a Rule 12b-1 plan and administrative expenses under an administration or service agreement, plan or other arrangement, however designated) shall be borne by that class and shall be appropriately reflected (in the manner 2 determined by the Board of Directors) in the net asset value, dividends, distribution and liquidation rights of the shares of that class. "(iii) Except as otherwise provided hereinafter, (A) on the sixth anniversary of the first business day of the month following the month in which Class B shares were purchased by a holder thereof, such shares (as well as a pro rata portion of any Class B shares purchased through the reinvestment of dividends or other distributions paid on all Class B shares held by such holder) shall automatically convert to Class A shares on the basis of the respective net asset values of the Class B shares and the Class A shares on the conversion date; and (B) on the tenth anniversary of the first business day of the month following the month in which Class C shares were purchased by a holder thereof, such shares (as well as a pro rata portion of any Class C shares purchased through the reinvestment of dividends or other distributions paid on all Class C shares held by such holder) shall automatically convert to Class A shares on the basis of the respective net asset values of the Class C shares and the Class A shares on the conversion date. Any conversion of Class B shares or Class C shares shall be subject to the continuing availability of an opinion of counsel to the effect that (i) the assessment of the expenses referred to in sub-paragraph (ii) above with respect to the Class B shares or the Class C shares, as the case may be, does not result in the Corporation's dividends or distributions constituting "preferential dividends" under the Internal Revenue Code of 1986, as amended, and (iii) such conversion does not constitute a taxable event under federal income tax law. The Board of Directors, in its sole discretion, may suspend the conversion of Class B or Class C shares if such opinion is no longer available. "(iv) The Class A, Class B and Class C shares of Common Stock shall vote together as a single class ("Single Class Voting"); provided, however, that (i) as to any matter with respect to which a separate vote of the holders of any class is required by the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, any applicable exemptive order issued by the Securities and Exchange Commission, or the Maryland General Corporation Law (including, without limitation, approval of any plan, agreement or other arrangement referred to in sub-paragraph (ii) above), such requirement as to a separate vote by such holders shall apply in lieu of Single Class Voting; (ii) in the event that the separate vote requirement referred to in clause (i) above applies with -2- 3 respect to one or more classes, then, subject to clause (iii) below, the holders of shares of all other classes shall vote as a single class; and (iii) the holders of a particular class shall not be entitled to vote as to any matter which does not affect the interest of that class, except as otherwise required by the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, any exemptive order issued by the Securities and Exchange Commission, or the Maryland General Corporation law." (b) The first sentence of sub-paragraph (a) of paragraph (3) of Article FIFTH of the charter is amended to read as follows: "(a) Each holder of the capital stock of the Corporation, upon proper written request (including signature guarantees, if required by the Board of Directors) to the Corporation accompanied, when stock certificates representing such shares are outstanding, by surrender of the appropriate stock certificate or certificates in proper form for transfer, or any such other form as the Board of Directors may provide, shall be entitled to require the Corporation to redeem all or any part of the capital stock standing in the name of such holder on the books of the Corporation, at a redemption price equal to the net asset value of such shares less such redemption fee or deferred sales charge, if any, as may be established from time to time by the Board of Directors in its sole discretion." (c) The first sentence of sub-paragraph (f) of paragraph (8) of Article SEVENTH of the charter is amended to read as follows: "(f) Payment of the redemption price of capital stock of the Corporation properly surrendered to it for redemption shall be made by the Corporation within seven days after tender of such stock to the Corporation for such purpose plus any period of time during which the right of the holders of the capital stock of the Corporation to require the Corporation to redeem such capital stock has been suspended." SECOND: All of the currently outstanding shares of capital stock of the Corporation are hereby reclassified as Class A Common Stock. THIRD: The amendment does not increase the authorized capital stock of the Corporation. FOURTH: The foregoing amendment to the charter of the Corporation has been advised by the Board of Directors and approved by the stockholders of the Corporation. -3- 4 IN WITNESS WHEREOF, American Capital Reserve Fund, Inc. has caused these presents to be signed in its name and on its behalf by its Vice President and witnessed by its Assistant Secretary on the 17th day of April, 1995. WITNESS: AMERICAN CAPITAL RESERVE FUND, INC. /s/ Huey Falgout By: /s/ Nori L. Gabert - ------------------- ------------------------------- Huey Falgout Nori L. Gabert The undersigned Vice President of American Capital Reserve Fund, Inc., who executed on behalf of said Corporation the foregoing Articles of Amendment of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Amendment to be the corporate act of said Corporation and hereby certifies that to the best of her knowledge, information and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ Nori L. Gabert ------------------------------- Nori L. Gabert EX-99.4 8 1 AMERICAN CAPITAL RESERVE FUND, INC. ARTICLES SUPPLEMENTARY American Capital Reserve Fund, Inc., a Maryland corporation having its principal office in Baltimore City, Maryland (which is hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Corporation is registered as an open-end investment company under the Investment Company Act of 1940. SECOND: In accordance with Section 2-105(c) of the Maryland General Corporation Law, the Board of Directors has increased the authorized capital stock of the Corporation. THIRD: (a) As of immediately before the increase, the total number of shares of stock of all classes which the Corporation had authority to issue was One Billion (1,000,000,000) shares, of which no shares were Preferred Stock and One Billion (1,000,000,000) shares were Common Stock (par value $.01 per share). The Common Stock has three classes of shares, designated Class A, Class B and Class C, consisting of Seven Hundred and Fifty Million (750,000,000) Class A shares, One Hundred Twenty-Five Million (125,000,000) Class B shares and One Hundred Twenty-Five Million (125,000,000) Class C shares. (b) As increased, the total number of shares of stock of all classes which the Corporation has authority to issue is Two Billion (2,000,000,000) shares, of which no shares are Preferred Stock and Two Billion (2,000,000,000) shares are Common Stock (par value $.01 per share), which shall consist, until further changed, of One Billion (1,000,000,000) Class A shares, Five Hundred Million (500,000,000) Class B shares and Five Hundred Million (500,000,000) Class C shares. The terms of the Class A, Class B and Class C shares are set forth in the Charter of the Corporation. (c) The aggregate par value of all shares having a par value is $10,000,000 before the increase and $20,000,000 as increased. IN WITNESS WHEREOF, American Capital Reserve Fund, Inc. has caused these presents to be signed in its name and on its behalf by its Vice President and witnessed by its Assistant Secretary on the 17th day of April, 1995. WITNESS: AMERICAN CAPITAL RESERVE FUND, INC. /s/ Huey Falgout By: /s/ Nori L. Gabert - ------------------- ------------------------------- Huey Falgout Nori L. Gabert 2 -2- The undersigned Vice President of American Capital Reserve Fund, Inc., who executed on behalf of said Corporation the foregoing Articles Supplementary of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that to the best of her knowledge, information and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ Nori L. Gabert ------------------------------- Nori L. Gabert EX-99.5 9 1 AMERICAN CAPITAL RESERVE FUND, INC. BY-LAWS (As amended March 3, 1995) ARTICLE I. STOCKHOLDERS SECTION 1.01. Annual Meeting. So long as the Corporation is registered as an investment company under the Investment Company Act of 1940, the Corporation shall not be required to hold an annual meeting in any year in which the election of directors is not required to be acted upon under the Investment Act of 1940. In the event that the Corporation is required to hold an annual meeting of its stockholders by the Investment Company Act of 1940, such meeting shall be held: (a) at a date and time set by the Board of Directors in accordance with the Investment Company Act of 1940 ("40 Act") if the purpose of the meeting is to elect Directors or to approve an investment advisory agreement or distribution agreement; and (b) on a date fixed by the Board of Directors (i) in the fiscal year immediately following the fiscal year in which independent accountants were appointed if the purpose of the meeting is to ratify the selection of such independent accountants or (ii) in any fiscal year if an annual meeting is to be held for any reason other than as specified in the foregoing. Any stockholders' meeting held in accordance with the preceding sentence shall for all purposes constitute the annual meeting of stockholders for the fiscal year of the Corporation in which the meeting is held. At any such meeting, the stockholders shall elect Directors to hold the offices of any Directors who have held office for more than one year or who have been elected by the Board of Directors to fill vacancies which result from any cause. Except as the Charter or statute provides otherwise, any business may be considered at an annual meeting without the purpose of the meeting having been specified in the notice. Failure to hold an annual meeting does not invalidate the Corporation's existence or affect any otherwise valid corporate acts. SECTION 1.02 Special Meeting. At any time in the interval between stockholders' meetings, a special meeting of the stockholders may be called by the Chairman of the Board or the President or by a majority of the Board of Directors by vote at a meeting or in writing (addressed to the Secretary of the Corporation) with or without a meeting. Special meetings of stockholders shall also be called by the Secretary upon the written request of the holders of not less than ten percent (10%) of all the shares entitled to vote at such meeting. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. No special meeting need be called upon the request of the holders of less than a majority of all the shares entitled to vote at such meeting to consider any matter which 1 2 is substantially the same as a matter voted upon at any special meeting of stockholders held during the preceding twelve months. SECTION 1.03. Place of Meetings. Meetings of stockholders shall be held at such place in the United States as is set from time to time by the Board of Directors. SECTION 1.04. Notice of Meetings; Waiver of Notice. Not less than ten nor more than 90 days before each stockholders' meeting, the Secretary shall give written notice of the meeting to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to him, left at his residence or usual place of business, or mailed to him at his address as it appears on the records of the Corporation. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if he before or after the meeting signs a waiver of the notice which is filed with the records of stockholders' meetings, or is present at the meeting in person or by proxy. SECTION 1.05. Quorum; Voting. Unless statute or the Charter provides otherwise, at a meeting of stockholders the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting constitutes a quorum, and a majority of all the votes cast at a meeting at which a quorum is present is sufficient to approve any matter which properly comes before the meeting, except that a plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a director. SECTION 1.06. Adjournments. Whether or not a quorum is present, a meeting of stockholders convened on the date for which it was called may be adjourned from time to time by the stockholders present in person or by proxy by a majority vote. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at any such adjourned meeting at which a quorum shall be present. No further notice of an adjourned meeting other than by announcement shall be necessary if held on a date not more than 120 days after the original record date. SECTION 1.07. General Right to Vote; Proxies. Unless the Charter provides for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders. In all elections for directors, each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A stockholder may vote the stock the stockholder owns of record either in person or by proxy. A stockholder may sign a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholder's authorized agent signing the writing or causing the stockholder's signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, a telegram, cablegram, 2 3 datagram, or other means of electronic transmission to the person authorized to act as proxy or to a proxy solicitation firm, proxy support service organization, or other person authorized by the person who will act as proxy to receive the transmission. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for so long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities. SECTION 1.08. List of Stockholders. At each meeting of stockholders, a full, true and complete list of all stockholders entitled to vote at such meeting, showing the number and class of shares held by each and certified by the transfer agent for such class or by the Secretary, shall be furnished by the Secretary. SECTION 1.09. Conduct of Voting. At all meetings of stockholders, unless the voting is conducted by inspectors, the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided, by the chairman of the meeting. If demanded by stockholders, present in person or by proxy, entitled to cast 10% in number of votes entitled to be cast, or if ordered by the chairman, the vote upon any election or question shall be taken by ballot, and upon like demand or order, the voting shall be conducted by two inspectors, in which event the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided, by such inspectors. Unless so demanded or ordered, no vote need be by ballot and voting need not be conducted by inspectors. The stockholders at any meeting may choose an inspector or inspectors to act at such meeting, and in default of such election the chairman of the meeting may appoint an inspector or inspectors. No candidate for election as a director at a meeting shall serve as an inspector thereat. SECTION 1.10. Informal Action by Stockholders. Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if there is filed with the records of stockholders' meetings a unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter and a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at it. ARTICLE II. BOARD OF DIRECTORS SECTION 2.01. Function of Directors. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. All powers of the 3 4 Corporation may be exercised by or under authority of the Board of Directors, except as conferred on or reserved to the stockholders by statute or by the Charter or By-Laws. SECTION 2.02. Number of Directors. The business and property of the Corporation shall be conducted and managed by a Board of Directors consisting of not less than five (5) nor more than seventeen (17) Directors, which number may be increased or decreased as herein provided. By vote of a majority of the entire Board of Directors, the number of Directors fixed by these Bylaws may be increased or decreased from time to time, but the tenure of office of a Director shall not be affected by any decrease in the number of Directors to hold office until the next annual meeting and until their successors are elected and qualify. Directors need not be stockholders. SECTION 2.03. Election and Tenure of Directors. At each annual meeting, the stockholders shall elect directors to hold office until the next annual meeting and until their successors are elected and qualify; provided, however, that through June 30, 1996 the term of office of each director shall end at the time such director reaches the age of 76 1/2 or 74 1/2 for persons first elected on or after January 1, 1986 as a director of any open end investment company managed by Van Kampen American Capital Asset Management, Inc. and that on and after July 1, 1996 the term of office of each director shall end at the time such director reaches the age of 76 1/2 or 72 1/2 for persons first elected on or after January 1, 1986 as a director of any open end investment company managed by Van Kampen American Capital Asset Management, Inc. SECTION 2.04. Removal of Director. Unless statute or the Charter provides otherwise, the stockholders may remove any director, with or without cause, by the affirmative vote of a majority of the outstanding voting securities as defined in Section 2(a)(42) of the 40 Act. Such action may be taken at a special meeting of stockholders called for such purpose upon the request of the holders of not less than 10% of the shares entitled to vote pursuant to Section 1.02 hereof. Whenever ten or more stockholders of record who have been such for at least six months preceding the date of application, and who hold in the aggregate either shares having a net asset value of at least $25,000 or at least 1 per centum of the outstanding shares, whichever is less, shall apply to the Board of Directors in writing, stating that they wish to communicate with other stockholders with a view to obtaining signatures to a request for a special meeting to remove any director and accompanied by a form of communication and request which they wish to transmit, the Board shall within five business days after receipt of such application either: (a) afford to such applicants access to a list of the names and addresses of all stockholders as recorded on the books of the Corporation; or (b) inform such applicants as to the approximate number of stockholders of record, and the approximate cost of mailing to them the proposed communication and form of request. 4 5 If the Board elects to follow the course specified in paragraph (b), the Board, upon the written request of such applicants, accompanied by a tender of the material to be mailed and of the reasonable expenses of mailing, shall, with reasonable promptness, mail such material to all stockholders of record at their addresses as recorded on the books, unless within five business days after such tender the Board shall mail to such applicants and file with the Securities and Exchange Commission (the "Commission") together with a copy of the material to be mailed, a written statement signed by at least a majority of the directors to the effect that in their opinion either such material contains untrue statements of fact or omits to state facts necessary to make the statements contained therein not misleading, or would be in violation of applicable law, and specifying the basis of such opinion. If the Commission shall enter an order refusing to sustain any of such objections, or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all objections so sustained have been met, and shall enter an order so declaring, the Board shall mail copies of such material to all stockholders with reasonable promptness after the entry of such order and the renewal of such tender. SECTION 2.05. Vacancy on Board. The stockholders may elect a successor to fill a vacancy on the Board of Directors which results from the removal of a director. A director elected by the stockholders to fill a vacancy which results from the removal of a director serves for the balance of the term of the removed director. A majority of the remaining directors, whether or not sufficient to constitute a quorum, may fill a vacancy on the Board of Directors which results from any cause except an increase in the number of directors and a majority of the entire Board of Directors may fill a vacancy which results from an increase in the number of directors. A director elected by the Board of Directors to fill a vacancy serves until the next annual meeting of stockholders and until his successor is elected and qualifies. The Board of Directors may not fill more than two directorships resulting from an increase in the number of directors during the period between any two successive annual meetings of stockholders. SECTION 2.06. Regular Meetings. Any regular meeting of the Board of Directors shall be held on such date and at any place as may be designated from time to time by the Board of Directors. SECTION 2.07. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President or by a majority of the Board of Directors by vote at a meeting, or in writing with or without a meeting. A special meeting of the Board of Directors shall be held on such date and at any place as may be designated from time to time by the Board of Directors. In the absence of designation such meeting shall be held at such place as may be designated in the call. SECTION 2.08. Notice of Meeting. Except as provided in Section 2.06, the Secretary shall give notice to each director of each regular and special meeting of the Board of 5 6 Directors. The notice shall state the time and place of the meeting. Notice is given to a director when it is delivered personally to him, left at his residence or usual place of business, or sent by telegraph or telephone, at least 24 hours before the time of the meeting or, in the alternative, by mail to his address as it shall appear on the records of the Corporation, at least 72 hours before the time of the meeting. Unless the By-Laws or a resolution of the Board of Directors provides otherwise, the notice need not state the business to be transacted at or the purposes of any regular or special meeting of the Board of Directors. No notice of any meeting of the Board of Directors need be given to any director who attends (except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully convened), or to any director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Any meeting of the Board of Directors, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement. SECTION 2.09. Action by Directors. Unless statute or the Charter or By-Laws requires a greater proportion, the action of a majority of the directors present at a meeting at which a quorum is present is action of the Board of Directors. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business. In the absence of a quorum, the directors present by majority vote and without notice other than by announcement may adjourn the meeting from time to time until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the Board and filed with the minutes of proceedings of the Board. SECTION 2.10. Meeting by Conference Telephone. Members of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at a meeting. SECTION 2.11. Compensation. By resolution of the Board of Directors a fixed sum and expenses, if any, for attendance at each regular or special meeting of the Board of Directors or of committees thereof, and other compensation for their services as such or on committees of the Board of Directors, may be paid to directors. A director who serves the Corporation in any other capacity also may receive compensation for such other services, pursuant to a resolution of the directors. 6 7 ARTICLE III. COMMITTEES SECTION 3.01. Committees. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of two or more directors and delegate to these committees any of the powers of the Board of Directors, except the power to declare dividends or other distributions on stock, elect directors, issue stock other than as provided in the next sentence, recommend to the stockholders any action which requires stockholder approval, amend the Articles of Incorporation or By-Laws, approve any merger or share exchange which does not require stockholder approval, elect or remove officers or members of any such committee, fix the compensation or any member of such committee, or any other power prohibited by law. If the Board of Directors has given general authorization for the issuance of stock, a committee of the Board, in accordance with a general formula or method specified by the Board by resolution or by adoption of a stock option or other plan, may fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. SECTION 3.02. Committee Procedure. Each committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the committee. The members of a committee present at any meeting, whether or not they constitute a quorum, may appoint a director to act in the place of an absent member. Any action required or permitted to be taken at a meeting of a committee may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the committee and filed with minutes of the committee. The members of a committee may conduct any meeting thereof by conference telephone in accordance with the provisions of Section 2.10. SECTION 3.03. Emergency. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Corporation by its directors and officers as contemplated by the Charter and the By-Laws, any two or more available members of the then incumbent Executive Committee shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Corporation in accordance with the provisions of Section 3.01. In the event of the unavailability, at such time, of a minimum of two members of the then incumbent Executive Committee, the available directors shall elect an Executive Committee consisting of any two members of the Board of Directors, whether or not they be officers of the Corporation, which two members shall constitute the Executive Committee for the full conduct and management of the affairs of the Corporation in accordance with the aforegoing provisions of this Section. This Section shall be subject to implementation by resolution of the Board of Directors passed from time to time for that purpose, and any provisions of the By-Laws (other than this Section) and any 7 8 resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary resolutions shall be suspended until it shall be determined by any interim Executive Committee acting under this Section that it shall be to the advantage of the Corporation to resume the conduct and management of its affairs and business under all the other provisions of the By-Laws. ARTICLE IV. OFFICERS SECTION 4.01. Executive and Other Officers. The Corporation shall have a President, a Secretary, and a Treasurer who shall be the executive officers of the Corporation. The Board of Directors may designate an officer to serve as Chief Executive Officer, having general supervision of the business and affairs of the Corporation, or as Chief Operating Officer, having supervision of the operations of the Corporation; in the absence of designation the President shall serve as Chief Executive Officer and Chief Operating Officer. The Corporation may also have one or more Vice Presidents, assistant officers, and subordinate officers as may be established by the Board of Directors. A person may hold more than one office in the Corporation but may not serve concurrently as both President and Vice President or as President and Secretary of the Corporation. Officers may also be directors. SECTION 4.02. Chairman of the Board. The Chairman of the Board, if one be elected, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present; and, in general, he shall perform all such duties as are from time to time assigned to him by the Board of Directors. The Chairman of the Board shall be a director. The Chairman of the Board, if one be elected, shall not be an officer of the corporation unless expressly designated as an officer by the Board of Directors; the Chairman shall be an executive officer if also expressly designated as the Chief Executive Officer of the Corporation. SECTION 4.03. President. The President, in the absence of the Chairman of the Board, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present; he may sign and execute, in the name of the Corporation, all authorized deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall have been expressly delegated to some other officer or agent of the Corporation; and, in general, he shall perform all duties usually performed by a president of a corporation and such other duties as are from time to time assigned to him by the Board of Directors or the Chief Executive Officer of the Corporation. SECTION 4.04. Vice Presidents. The Vice President or Vice Presidents, at the request of the Chief Executive Officer or the President, or in the President's absence or during his inability to act, shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall 8 9 perform any of such duties or exercise any of such functions, of if such determination is not made by the Board of Directors, the Chief Executive Officer, or the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties or exercise any of such functions. The Vice President or Vice Presidents shall have such other powers and perform such other duties, and have such additional descriptive designations in their titles (if any), as are from time to time assigned to them by the Board of Directors, the Chief Executive Officer, or the President. SECTION 4.05. Secretary. The Secretary shall keep the minutes of the meetings of the stockholders, of the Board of Directors and of any committees (unless a committee has elected a different person as secretary), in books provided for the purpose; he shall see that all notices are duly given in accordance with the provisions of the By-Laws or as required by law; he shall be custodian of the records of the Corporation; he may witness any document on behalf of the Corporation, the execution of which is duly authorized, see that the corporate seal is affixed where such document is required or desired to be under its seal, and when so affixed, may attest the same; and, in general, he shall perform all duties incident to the office of a secretary of a corporation, and such other duties as are from time to time assigned to him by the Board of Directors, the Chief Executive Officer, or the President. SECTION 4.06. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Directors; he shall render to the President and to the Board of Directors, whenever requested an account of the financial condition of the Corporation; and, in general, he shall perform all the duties incident to the office of a treasurer of a corporation, and such other duties as are from time to time assigned to him by the Board of Directors, the Chief Executive Officer, or the President. SECTION 4.07. Assistant and Subordinate Officers. The assistant and subordinate officers of the Corporation are all officers below the office of Vice President, Secretary, or Treasurer. The assistant or subordinate officers shall have such duties as are from time to time assigned to them by the Board of Directors, the Chief Executive Officer, or the President. SECTION 4.08. Election, Tenure and Removal of Officers. The Board of Directors shall elect the officers. The Board of Directors may from time to time authorize any committee or officer to appoint assistant and subordinate officers. The President serves for one year. All other officers shall be appointed to hold their offices, respectively, during the pleasure of the Board. The Board of Directors (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board) may remove an officer at any time. The removal of an officer does not prejudice any of his contract rights. The Board of Directors (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board) may fill a vacancy which occurs in any office for the unexpired portion of the term. 9 10 SECTION 4.09. Compensation. The Board of Directors shall have power to fix the salaries and other compensation and remuneration, of whatever kind, of all officers of the Corporation. It may authorize any committee or officer, upon whom the power of appointing assistant and subordinate officers may have been conferred, to fix the salaries, compensation and remuneration of such assistant and subordinate officers. ARTICLE V. STOCK SECTION 5.01. Certificates for Stock. Upon written request therefor in accordance with such procedures as may be established by the Board of Directors from time to time, each stockholder is entitled to certificates which represent and certify the shares of stock he holds in the Corporation. Each stock certificate shall include on its face the name of the corporation that issues it, the name of the stockholder or other person to whom it is issued, and the class of stock and number of shares it represents. It shall be in such form, not inconsistent with law or with the Charter, as shall be approved by the Board of Directors or any officer or officers designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the Chairman of the Board, the President, or a Vice President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. SECTION 5.02. Transfers. The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock; and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined. SECTION 5.03. Record Date and Closing of Transfer Books. The Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend, or be allotted other rights. The record date may not be more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. SECTION 5.04. Stock Ledger. The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual 10 11 inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock, or, if none, at the principal office in the State of Texas or the principal executive offices of the Corporation. SECTION 5.05. Certification of Beneficial Owners. The Board of Directors may adopt by resolution a procedure by which a stockholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may certify; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books, within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board considers necessary or desirable. On receipt of a certification which complies with the procedure adopted by the Board in accordance with this Section, the person specified in the certification is, for the purpose set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification. SECTION 5.06. Lost Stock Certificates. The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation. In their discretion, the Board of Directors or such officer or officers may refuse to issue such new certificate save upon the order of some court having jurisdiction in the premises. ARTICLE VI. FINANCE SECTION 6.01. Checks, Drafts, Etc. All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall, unless otherwise provided by resolution of the Board of Directors, be signed by the President, a Vice President or an Assistant Vice President and countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary. SECTION 6.02. Annual Statement of Affairs. The President shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of the stockholders and, within 20 days after the meeting, placed on file at the Corporation's principal office. SECTION 6.03. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. 11 12 SECTION 6.04. Dividends. If declared by the Board of Directors at any meeting thereof, the Corporation may pay dividends on its shares in cash, property, or in shares of the capital stock of the Corporation, unless such dividend is contrary to law or to a restriction contained in the Charter. ARTICLE VII. SUNDRY PROVISIONS SECTION 7.01. Books and Records. The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any executive or other committee when exercising any of the powers of the Board of Directors. The books and records of a Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of the By-Laws shall be kept at the principal office of the Corporation. SECTION 7.02. Corporate Seal. The Board of Directors shall provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. If the Corporation is required to place its corporate seal to a document, it is sufficient to meet the requirement of any law, rule, or regulation relating to a corporate seal to place the word "Seal" adjacent to the signature of the person authorized to sign the document on behalf of the Corporation. SECTION 7.03. Bonds. The Board of Directors may require any officer, agent or employee of the Corporation to give a bond to the Corporation, conditioned upon the faithful discharge of his duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. SECTION 7.04. Voting Upon Shares in Other Corporations. Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the President, a Vice President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution. SECTION 7.05. Mail. Any notice or other document which is required by these By-Laws to be mailed shall be deposited in the United States mails, postage prepaid. 12 13 SECTION 7.06. Execution of Documents. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. SECTION 7.07. Amendments. Subject to the special provisions of Section 2.02, (a) any and all provisions of these By-Laws may be altered or repealed and new by-laws may be adopted at any annual meeting of the stockholders, or at any special meeting called for that purpose, and (b) the Board of Directors shall have the power, at any regular or special meeting thereof, to make and adopt new by-laws, or to amend, alter or repeal any of the By-Laws of the Corporation. ARTICLE VIII. CUSTODIAN SECTION 8.01. Employment of Custodian. All assets of the Corporation shall be held by one or more custodian banks or trust companies meeting the requirements of the Investment Company Act of 1940, as amended (the "1940 Act"), and having capital, surplus and undivided profits of at least $2,000,000 and may be registered in the name of the Corporation, including the designation of the particular class or series to which such assets belong, or any such custodian, or the nominee of either of them. The terms of any such custodian agreement shall be determined by the Board of Directors, which terms shall be in accordance with the provisions of the 1940 Act. If so directed by vote of the holders of a majority of the outstanding shares of a particular class or series or by vote of the Board of Directors, the custodian of the assets belonging to such class or series shall deliver and pay over such assets as specified in such vote. Subject to such rules, regulations and orders as the Securities and Exchange Commission (the "Commission") may adopt, the Corporation may direct a custodian to deposit all or any part of the securities owned by the Corporation in a system for the central handling of securities established by the Federal Reserve system or by a national securities exchange or a national securities association registered with the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system, all securities of a particular class or issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without the physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Corporation or a custodian. 13 14 ARTICLE IX. INDEMNIFICATION SECTION 9.01. Indemnification of Directors and Officers. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than a proceeding by or in the right of the Corporation in which such person shall have been adjudged to be liable to the Corporation), by reason of being or having been a director or officer of the Corporation, or serving or having served at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another entity in which the Corporation has an interest as a shareholder, creditor or otherwise (a "Covered Person"), against all liabilities, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable expenses (including attorney's fees) actually incurred by the Covered Person in connection with such action, suit or proceeding, except (a) liability in connection with any proceeding in which it is determined that (i) the act or omission of the Covered Person was material to the matter giving rise to the proceeding, and was committed in bad faith or was the result of active and deliberate dishonesty, or (ii) the Covered Person actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal proceeding, the Covered Person had reasonable cause to believe that the act or omission was unlawful and (b) liability to the Corporation or its security holders to which the Covered Person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office (any or all of the conduct referred to in clauses (a) and (b) being hereinafter referred to as "Disabling Conduct"). SECTION 9.02. Procedure for Indemnification. Any indemnification under this By-law shall (unless ordered by a court) be made by the Corporation only as authorized for a specific proceeding by (a) a final decision on the merits by a court or other body before whom the proceeding was brought that the Covered Person to be indemnified was not liable by reason of Disabling Conduct, (b) dismissal of the proceeding against the Covered Person for insufficiency of evidence of any Disabling Conduct, or (c) a reasonable determination, based upon a review of the facts, by a majority of a quorum of the directors who are neither "interested persons" of the Corporation as defined in the 40 Act nor parties to the proceeding ("disinterested, non-party directors"), or an independent legal counsel in a written opinion, that the Covered Person was not liable by reason of Disabling Conduct. The termination of any proceeding by judgment, order or settlement shall not create a presumption that the Covered Person did not meet the required standard of conduct; the termination of any proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, shall create a rebuttable presumption that the Covered Person did not meet the required standard of conduct. Any determination pursuant to this Section IX shall not prevent recovery from any Covered Person of any amount paid to him in accordance with this By-Law as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction to be liable by reason of Disabling Conduct. 14 15 SECTION 9.03. Advance Payment of Expenses. Reasonable expenses (including attorney's fees) incurred by a Covered Person may be paid or reimbursed by the Corporation in advance of the final disposition of an action, suit or proceeding upon receipt by the Corporation of (a) a written affirmation by the Covered Person of his good faith belief that the standard of conduct necessary for indemnification under this By-Law has been met and (b) a written undertaking by or on behalf of the Covered Person to repay the amount if it is ultimately determined that such standard of conduct has not been met, so long as either (i) the Covered Person has provided a security for his undertaking, (ii) the Corporation is insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the disinterested, non-party directors, or an independent legal counsel in a written opinion, has determined, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification. SECTION 9.04. Exclusivity, Etc. The indemnification and advance of expenses provided by this By-Law shall not be deemed exclusive of any other rights to which a Covered Person seeking indemnification or advance of expenses may be entitled under any law (common or statutory), or any agreement, vote of stockholders or disinterested directors, or other provision that is consistent with law, both as to action in an official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, shall continue in respect of all events occurring while the Covered Person was a director or officer after such Covered Person has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such Covered person. All rights to indemnification and advance of expenses under the Charter and hereunder shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law, provided that no such amendment shall diminish the rights of any Covered Person hereunder with respect to events occurring or claims made before its adoption or as to claims made after its adoption in respect of events occurring before its adoption. Any repeal or modification of this By-Law shall not in any way diminish any rights to indemnification or advance of expenses of a Covered Person or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this By-Law or any provision hereof is in force. SECTION 9.05. Insurance. The Corporation may purchase and maintain insurance on behalf of any Covered Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such; provided, however, that the Corporation shall not purchase insurance to indemnify any Covered Person against liability for Disabling Conduct. SECTION 9.06. Severability: Definitions. The invalidity or unenforceability of any provision of this Article IX shall not affect the validity or enforceability of any other provision hereof. The phrase "this By-Law" in this Article IX means this Article IX in its entirety. 15 EX-99.6 10 1 INVESTMENT ADVISORY AGREEMENT AGREEMENT (herein so called) made this 20th day of December, 1994, by and between AMERICAN CAPITAL RESERVE FUND, INC., a Maryland corporation (hereinafter referred to as the "FUND"), and AMERICAN CAPITAL ASSET MANAGEMENT, INC., a Delaware corporation (hereinafter referred to as the "ADVISER"). The FUND and the ADVISER agree as follows: (1.) Services Rendered and Expenses Paid by ADVISER The ADVISER, subject to the control, direction and supervision of the FUND's Directors and in conformity with applicable laws, the FUND's Articles of Incorporation ("Articles of Incorporation"), By-laws, registration statements, prospectus and stated investment objectives, policies and restrictions, shall: a. manage the investment and reinvestment of the FUND's assets including, by way of illustration, the evaluation of pertinent economic, statistical, financial and other data, determination of the industries and companies to be represented in the FUND's portfolio, and formulation and implementation of investment programs; b. maintain a trading desk and place all orders for the purchase and sale of portfolio investments for the FUND's account with brokers or dealers selected by the ADVISER; c. conduct and manage the day-to-day operations of the FUND including, by way of illustration, the preparation of registration statements, prospectuses, reports, proxy solicitation materials and amendments thereto, the furnishing of routine legal services except for services provided by outside counsel to the FUND selected by the Directors, and the supervision of the FUND's Treasurer and the personnel working under his direction; and d. furnish to the FUND office space, facilities, equipment and personnel adequate to provide the services described in paragraphs a., b., and c. above and pay the compensation of each FUND director and FUND officer who is an affiliated person of the ADVISER, except the compensation of the FUND's Treasurer and related expenses as provided below. In performing the services described in paragraph b. above, the ADVISER shall use its best efforts to obtain for the FUND the most favorable price and execution available and shall maintain records adequate to demonstrate compliance with this requirement. Subject to prior authorization by the FUND's Directors of appropriate policies and procedures, the ADVISER may, to the extent authorized 2 by law, cause the FUND to pay a broker or dealer that provides brokerage and research services to the ADVISER an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction. In the event of such authorization and to the extent authorized by law, the ADVISER shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of such action. Except as otherwise agreed, or as otherwise provided herein, the FUND shall pay, or arrange for others to pay, all its expenses other than those expressly stated to be payable by the ADVISER hereunder, which expenses payable by the FUND shall include (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase and sale of portfolio investments; (iii) compensation of its directors and officers other than those who are affiliated persons of the ADVISER; (iv) compensation of its Treasurer, compensation of personnel working under the Treasurer's direction, and expenses of office space, facilities, and equipment used by the Treasurer and such personnel in the performance of their normal duties for the FUND which consist of maintenance of the accounts, books and other documents which constitute the record forming the basis for the FUND's financial statements, preparation of such financial statements and other FUND documents and reports of a financial nature required by federal and state laws, and participation in the production of the FUND's registration statement, prospectuses, proxy solicitation materials and reports to shareholders; (v) fees of outside counsel to and of independent accountants of the FUND selected by the Directors; (vi) custodian, registrar and shareholder service agent fees and expenses; (vii) expenses related to the repurchase or redemption of its shares including expenses related to a program of periodic repurchases or redemptions; (viii) expenses related to the issuance of its shares against payment therefor by or on behalf of the subscribers thereto; (ix) fees and related expenses of registering and qualifying the FUND and its shares for distribution under state and federal securities laws; (x) expenses of printing and mailing of registration statements, prospectuses, reports, notices and proxy solicitation materials of the FUND; (xi) all other expenses incidental to holding meetings of the FUND's shareholders including proxy solicitations therefor; (xii) expenses for servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage and errors and omissions insurance; (xiv) dues for the FUND's membership in trade associations approved by the Directors; and (xv) such nonrecurring expenses as may arise, including those associated with actions, suits or proceedings to which the FUND is a party and the legal obligation which the FUND may have to indemnify its officers and directors with respect thereto. To the extent that any of the foregoing expenses are allocated between the FUND and any other party, such allocations shall be pursuant to methods approved by the Directors. 2 3 (2.) Role of ADVISER The ADVISER, and any person controlled by or under common control with the ADVISER, shall be free to render similar services to others and engage in other activities, so long as the services rendered to the FUND are not impaired. Except as otherwise required by the Investment Company Act of 1940 (the "1940 Act"), any of the shareholders, directors, officers and employees of the FUND may be a shareholder, trustee, director, officer or employee of, or be otherwise interested in, the ADVISER, and in any person controlled by or under common control with the ADVISER, and the ADVISER, and any person controlled by or under common control with the ADVISER, may have an interest in the FUND. Except as otherwise agreed, in the absence of willful misfeasance, bad faith, negligence or reckless disregard of obligations or duties hereunder on the part of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or to any shareholder of the FUND, for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. (3.) Compensation Payable to ADVISER The FUND shall pay to the ADVISER, as compensation for the services rendered, facilities furnished and expenses paid by the ADVISER, a monthly fee computed at the following annual rate(s): .50% on the first $150 million of the Fund's average daily net assets, .45% on the next $100 million, .40% on the next $100 million and .35% over $350 million Average daily net assets shall be determined by taking the average of the net assets for each business day during a given calendar month calculated in the manner provided in the FUND's Articles of Incorporation. Such fee shall be payable for each calendar month as soon as practicable after the end of that month. The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall be reduced by any commissions, tender solicitation and other fees, brokerage or similar payments received by the ADVISER, or any other direct or indirect majority owned subsidiary of American Capital Management & Research, Inc., or its successor, in connection with the purchase and sale of portfolio investments of the FUND, less any direct expenses incurred by such person, in connection with obtaining such commissions, fees, brokerage or similar payments. The ADVISER shall use its best efforts to recapture all available tender offer solicitation fees and exchange offer fees in connection with the FUND's portfolio transactions and shall advise the Directors of any other commissions, fees, 3 4 brokerage or similar payments which may be possible for the ADVISER or any other direct or indirect majority owned subsidiary of American Capital Management & Research, Inc., or its successor, to receive in connection with the FUND's portfolio transactions or other arrangements which may benefit the FUND. In the event that the ordinary business expenses of the FUND for any fiscal year should exceed 1% of average daily net assets, the compensation due the ADVISER for such fiscal year shall be reduced by the amount of such excess. The ADVISER's compensation shall be so reduced by a reduction or a refund thereof, at the time such compensation is payable after the end of each calendar month during such fiscal year of the FUND, and if such amount should exceed such monthly compensation, the ADVISER shall pay the FUND an amount sufficient to make up the deficiency, subject to readjustment during the FUND's fiscal year. For purposes of this paragraph, all ordinary business expenses of the FUND shall include the investment advisory fee and other operating expenses paid by the FUND except (i) for interest and taxes; (ii) brokerage commissions; (iii) as a result of litigation in connection with a suit involving a claim for recovery by the FUND; (iv) as a result of litigation involving a defense against a liability asserted against the FUND, provided that, if the ADVISER made the decision or took the actions which resulted in such claim, it acted in good faith without negligence or misconduct; (v) any indemnification paid by the FUND to its officers and directors and the ADVISER in accordance with applicable state and federal laws as a result of such litigation; and (vi) amounts paid to American Capital Marketing, Inc., the distributor of the FUND's shares, in connection with a distribution plan adopted by the FUND's Directors pursuant to Rule 12b-1 under the Investment Company Act of 1940. If the ADVISER shall serve for less than the whole of any month, the foregoing compensation shall be prorated. (4.) Books and Records In compliance with the requirements of Rule 31a-3 under the 1940 Act, the ADVISER hereby agrees that all records which it maintains for the FUND are the property of the FUND and further agrees to surrender promptly to the FUND any of such records upon the FUND's request. The ADVISER further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the Act. (5.) Duration of Agreement This Agreement shall have an initial term of 2 years from the date hereof, and shall continue in force from year to year thereafter, but only so long as such continuance is approved at least annually 4 5 by the vote of a majority of the FUND's Directors who are not parties to this Agreement or interested persons of any such parties, cast in person at a meeting called for the purpose of voting on such approval, and by a vote of a majority of the FUND's Directors or a majority of the FUND's outstanding voting securities. This Agreement shall terminate automatically in the event of its assignment. The Agreement may be terminated at any time by the FUND's Directors, by vote of a majority of the FUND's outstanding voting securities, or by the ADVISER, on 60 days' written notice, or upon such shorter notice as may be mutually agreed upon. Such termination shall be without payment of any penalty. (6.) Miscellaneous Provisions For the purposes of this Agreement, the terms "affiliated person," "assignment," "interested person," and "majority of the outstanding voting securities" shall have their respective meanings defined in the 1940 Act and the Rules and Regulations thereunder, subject, however, to such exemptions as may be granted to either the ADVISER or the FUND by the Securities and Exchange Commission (the "Commission"), or such interpretive positions as may be taken by the Commission or its staff, under the 1940 Act, and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. The parties hereto each have caused this Agreement to be signed in duplicate on its behalf by its duly authorized officer on the above date. AMERICAN CAPITAL RESERVE FUND, INC. By: /s/ Curtis W. Morell ---------------------------------- Name: Curtis W. Morell ---------------------------------- Its: Vice President ---------------------------------- AMERICAN CAPITAL ASSET MANAGEMENT, INC. By: /s/ Nori L. Gabert ---------------------------------- Name: Nori L. Gabert ---------------------------------- Its: Vice President ---------------------------------- 5 EX-99.7 11 [DESCRIPTION] Price Waterhouse LLP 1 [LOGO] [PRICE WATERHOUSE LLP LETTERHEAD] June 30, 1995 To the Board of Directors of American Capital Reserve Fund,Inc. In planning and performing our audit of the financial statements of the American Capital Reserve Fund, Inc. (the Fund) for the year ended May 31, 1995, we considered its internal control structure, including procedures for safeguarding securities, in order to determine our auditing procedures for the purposes of expressing our opinion on the financial statements and to comply with the requirements of Form N-SAR, and not to provide assurance on the internal control structure. The management of the Fund is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. Two of the objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are appropriately safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management's authorization and recorded properly to permit preparation of financial statements in conformity with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that it may become inadequate because of changes in conditions or that the degree of effectiveness of the design and operation may deteriorate. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. 2 [LOGO] June 30, 1995 Page 2 However, we noted no matters involving the internal control structure, including procedures for safeguarding securities, that we consider to be material weaknesses as defined above as of May 31, 1995. This report is intended solely for the information and use of management and the Securities and Exchange Commission. /s/ PRICE WATERHOUSE LLP 3 [LOGO] [PRICE WATERHOUSE LLP LETTERHEAD] June 30, 1995 To the Board of Directors and Management of the American Capital Reserve Fund, Inc. We have examined the accompanying description of the specific control objectives and the control procedures that achieve those objectives of the American Capital Reserve Fund, Inc. (the Fund) relating to that segment of its system for allocating the results of operations of the Fund to separate classes of shares and calculating the respective net asset values and dividends and distributions (the Multiple Class System) as of May 31, 1995. Our examination included procedures to obtain reasonable assurance about whether (1) the accompanying description presents fairly, in all material respects, the aspects of the Fund's policies and procedures that may be relevant to understanding the internal control structure relating to the Multiple Class System, and (2) the control structure policies and procedures included in the description were suitably designed to achieve the control objectives specified in the description, if those policies and procedures were complied with satisfactorily, and (3) such policies and procedures had been placed in operation as of May 31, 1995. The control objectives were specified by management of the Fund. Our examination was performed in accordance with standards established by the American Institute of Certified Public Accountants and included those procedures we considered necessary in the circumstances to obtain a reasonable basis for rendering our opinion. In our opinion, the accompanying description of the Multiple Class System presents fairly, in all material respects, the relevant aspects of the Fund's policies and procedures that had been placed in operation as of May 31, 1995. Also, in our opinion, the policies and procedures, as described, are suitably designed to provide reasonable assurance that the specified control objectives would be achieved if the described policies and procedures were complied with satisfactorily. In addition to the procedures we considered necessary to render our opinion as expressed in the previous paragraph, we applied tests to specific policies and procedures in the Multiple Class System as listed in the Appendix (Price Waterhouse LLP Tests of Operating Effectiveness) to obtain evidence about the effectiveness of such policies and procedures in meeting the control objectives during the year ended May 31, 1995. The specific policies and procedures and the nature, timing, extent, and results of the tests are listed in the Appendix of this report. In our 4 [LOGO] June 30, 1995 Page 2 opinion, the policies and procedures that were tested were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance that the control objectives specified were achieved during the period indicated. The description of specific policies and procedures of the Fund's Multiple Class System is as of May 31, 1995, and information about tests of the operating effectiveness of specified policies and procedures covered the period from June 1, 1994 to May 31, 1995. Any projection of such information to the future is subject to the risk that, because of change, the description may no longer portray the system in existence. The potential effectiveness of specific policies and procedures for the Multiple Class System is subject to inherent limitations and, accordingly, errors or irregularities may occur and not be detected. Furthermore, the projection of any conclusions, based on our findings, to future periods is subject to the risk that changes may alter the validity of such conclusions. This report is intended solely for use by the Directors and management of the Fund and the Securities and Exchange Commission and should not be used for any other purpose. /s/ PRICE WATERHOUSE LLP EX-99.8 12 [DESCRIPTION] Price Waterhouse LLP Tests Of Operating 1 APPENDIX (Page 1 of 2) PRICE WATERHOUSE LLP TESTS OF OPERATING EFFECTIVENESS AMERICAN CAPITAL MUTUAL FUNDS NET ASSET VALUE ("NAV") AND DIVIDEND/DISTRIBUTION DETERMINATION FOR MULTIPLE CLASS OF SHARES The following are the tests of operating effectiveness which we performed with respect to the Fund's use of the Multiple Class System. We randomly selected days throughout the year ended May 31, 1995, in which to test the operating effectiveness of the Fund's policies and procedures. In addition, we tested the net investment income and capital gain distributions for the Fund. Finally, we reviewed the disclosure of the Fund as included in the May 31, 1995 financial statements. Our performance of the tests of operating effectiveness, described below, did not result in any exceptions.
Price Waterhouse LLP Control Objective Tests of Operating Effectivenes ----------------- -------------------------------- 1. That the direct expenses attributable For the days selected, we to each class of shares are correctly obtained the Worksheet and recorded in the Fund accounting related trial balances and records as charged to each class of noted full completion and shares. evidence of approval and performed the following procedures: o We recalculated the relative class allocation percentages 2. That income, other operating expenses Net Assets by Class" and "% of and realized and unrealized (i.e., "% of Dividend assets by gains/losses are allocated properly Class"). To arrive at these to each class of shares based upon allocation percentages, we the relative "% of Net Assets by agreed the calculation to the Class", or the relative "% of Fund's primary accounting Dividend Share Value by Class", as records. appropriate. o We agreed income, fund-level operating expenses, and realized and unrealized gain/loss amounts, as listed on the Worksheet, to the Fund's primary accounting records. o We recomputed the allocation of income, fund-level operating expenses and realized and unrealized gain/loss amounts to each share class based upon the relative "% of Net Assets by Class" or the relative "% of Dividend Assets by Class", as appropriate.
2 APPENDIX (Page 2 of 2)
Price Waterhouse LLP Control Objective Tests of Operating Effectiveness ----------------- -------------------------------- o We recalculated the class-level 12b-1 fees for the Fund which represented the current-day accrual calculated using the beginning of day's net assets attributable to each class based on the respective class rate per the Fund's prospectus. o We agreed the capital stock activity for each respective class to the Fund's primary accounting records. o We recalculated NAV per share by class by dividing the ending total net assets applicable to a class by the number of shares outstanding relating to that class. 3. That the dividend rates and daily NAV o For the distributions selected per share for each class of shares for testing, we recalculated reflect the proper allocation of the distributions rates for income, expense, gain, and loss each class of shares and amounts, and the proper amount of any determined that they reflected of shares. the proper allocation of income, expense, gain, and loss amounts, and the proper amount of any direct expenses charged to each class of shares. We agreed periodic distribution rates to memoranda received from management or to the Prospectus. 4. That the financial statements of each o We read the Fund's Fund reflect appropriate disclosures statements included in the for each class of shares. May 31, 1995 Annual Report, concluding that the financial statement disclosures relating to the Multiple Class System complied in all material respects with generally accepted accounting principles and the Fund's exemptive order.
EX-99.9 13 [DESCRIPTION] Multiple Shares NAV Worksheet 1 EXHIBIT III AMERICAN CAPITAL REPORT # R707 NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND FOR THE PERIOD 10/12/93 THROUGH 10/13/93 REPORT IDENTIFIER NAV-P NAV WORKSHEET FOR TOTAL FUND - ---------------------------- NET ASSETS - PRIOR DAY CAPITAL STOCK ACTIVITY AS OF PRIOR DAY ADJUSTED NET ASSETS CLASS ALLOCATION ON ADJUSTED NET ASSETS NET INVESTMENT INCOME: GROSS INVESTMENT INCOME EXPENSES: DISTRIBUTION FEES SERVICE FEES OTHER EXPENSES NET ADJUSTMENT TO EXPENSES NET EXPENSES NET INVESTMENT INCOME UNDISTRIBUTED INCOME - PRIOR DAY INCOME AVAILABLE FOR DISTRIBUTION INCOME AVAILABLE PER SHARE DIVIDENDS DECLARED GAINS DISTRIBUTIONS DECLARED GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS: NET REALIZED GAINS/LOSSES NET UNREALIZED GAINS/LOSSES INCREASE/DECREASE IN NET ASSETS NET ASSETS - CURRENT DAY CAPITAL SHARES OUTSTANDING CURRENT DAY FOR STATISTICAL USE ONLY ------------------------ NAV PER SHARE: UNROUNDED ROUNDED PRIOR DAY NAV - ROUNDED CHANGE IN NAV (CENTS) NET ASSETS FOR TOTAL FUND PER NAV WORKSHEET NET ASSETS FOR TOTAL FUND PER R403 DIFFERENCE 2 EXHIBIT III AMERICAN CAPITAL REPORT # R707 NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND FOR THE PERIOD 10/12/93 THROUGH 10/13/93 NAV WORKSHEET FOR CLASS A SHARES - -------------------------------- NET ASSETS - PRIOR DAY CAPITAL STOCK ACTIVITY AS OF PRIOR DAY ADJUSTED NET ASSETS CLASS ALLOCATION ON ADJUSTED NET ASSETS NET INVESTMENT INCOME: GROSS INVESTMENT INCOME EXPENSES: SERVICE FEES OTHER EXPENSES NET ADJUSTMENT TO CLASS A EXPENSES NET EXPENSES NET INVESTMENT INCOME UNDISTRIBUTED INCOME - PRIOR DAY INCOME AVAILABLE FOR DISTRIBUTION INCOME AVAILABLE PER SHARE DIVIDENDS DECLARED GAINS DISTRIBUTIONS DECLARED GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS: NET REALIZED GAINS/LOSSES NET UNREALIZED GAINS/LOSSES INCREASE/DECREASE IN NET ASSETS NET ASSETS - CURRENT DAY CAPITAL SHARES OUTSTANDING CURRENT DAY NAV PER SHARE: UNROUNDED ROUNDED PRIOR DAY NAV - ROUNDED CHANGE IN NAV (CENTS) CLASS A FRONT-END LOAD FACTOR (1 - LOAD) MAXIMUM OFFERING PRICE (CLASS A) NET ASSETS FOR CLASS A PER NAV WORKSHEET NET ASSETS FOR CLASS A PER R403 DIFFERENCE 3 EXHIBIT III AMERICAN CAPITAL REPORT # R707 NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND FOR THE PERIOD 10/12/93 THROUGH 10/13/93 NAV WORKSHEET FOR CLASS B SHARES - -------------------------------- NET ASSETS - PRIOR DAY CAPITAL STOCK ACTIVITY AS OF PRIOR DAY ADJUSTED NET ASSETS CLASS ALLOCATION ON ADJUSTED NET ASSETS NET INVESTMENT INCOME: GROSS INVESTMENT INCOME EXPENSES: DISTRIBUTION FEES SERVICE FEES OTHER EXPENSES NET EXPENSES NET INVESTMENT INCOME UNDISTRIBUTED INCOME - PRIOR DAY INCOME AVAILABLE FOR DISTRIBUTION INCOME AVAILABLE PER SHARE DIVIDENDS DECLARED GAINS DISTRIBUTIONS DECLARED GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS: NET REALIZED GAINS/LOSSES NET UNREALIZED GAINS/LOSSES INCREASE/DECREASE IN NET ASSETS NET ASSETS - CURRENT DAY CAPITAL SHARES OUTSTANDING CURRENT DAY NAV PER SHARE: UNROUNDED ROUNDED PRIOR DAY NAV - ROUNDED CHANGE IN NAV (CENTS) CLASS B FRONT-END LOAD FACTOR (1 - LOAD) MAXIMUM OFFERING PRICE (CLASS B) NET ASSETS FOR CLASS B PER NAV WORKSHEET NET ASSETS FOR CLASS B PER R403 DIFFERENCE 4 EXHIBIT III AMERICAN CAPITAL REPORT # R707 NAV-P MULTIPLE SHARES NAV WORKSHEET - PERIODIC DIVIDEND FUND FOR THE PERIOD 10/12/93 THROUGH 10/13/93 NAV WORKSHEET FOR CLASS C SHARES - -------------------------------- NET ASSETS - PRIOR DAY CAPITAL STOCK ACTIVITY AS OF PRIOR DAY ADJUSTED NET ASSETS CLASS ALLOCATION ON ADJUSTED NET ASSETS NET INVESTMENT INCOME: GROSS INVESTMENT INCOME EXPENSES: DISTRIBUTION FEES SERVICE FEES OTHER EXPENSES NET EXPENSES NET INVESTMENT INCOME UNDISTRIBUTED INCOME - PRIOR DAY INCOME AVAILABLE FOR DISTRIBUTION INCOME AVAILABLE PER SHARE DIVIDENDS DECLARED GAINS DISTRIBUTIONS DECLARED GAINS/LOSSES - ALLOCATED ON ADJUSTED NET ASSETS: NET REALIZED GAINS/LOSSES NET UNREALIZED GAINS/LOSSES INCREASE/DECREASE IN NET ASSETS NET ASSETS - CURRENT DAY CAPITAL SHARES OUTSTANDING CURRENT DAY NAV PER SHARE: UNROUNDED ROUNDED PRIOR DAY NAV - ROUNDED CHANGE IN NAV (CENTS) CLASS C FRONT-END LOAD FACTOR (1 - LOAD) MAXIMUM OFFERING PRICE (CLASS C) NET ASSETS FOR CLASS C PER NAV WORKSHEET NET ASSETS FOR CLASS C PER R403 DIFFERENCE EX-99.10 14 [DESCRIPTION] Multiple Class Funds 1 AMERICAN CAPITAL MUTUAL FUNDS MULTIPLE CLASS FUNDS SECTION I DESCRIPTION OF THE ALTERNATE PURCHASE PLANS Mutual Funds that adopt a multiple class of share structure are required to maintain records that account for each class of shares of the fund. Shares which are subject to contingent deferred sales load (CDSL) versus paying only a front-end sales load (FESL) are charged with a higher distribution fee (12b-1 fee) on a daily basis. Since the 12b-1 fees charged will be higher for CDSL shares and multiple classes of shares exist, separate Net Asset Values (NAV) and dividend/distributions must be calculated for each class of shares. NAV CALCULATIONS Income: Income of the Fund (all classes combined) will be allocated to the individual classes based on the relative adjusted net assets of each class or the relative value of adjusted dividend qualifying shares of each class (the net assets at the beginning of the day after reflecting the prior day's capital share transactions) as appropriate, depending on the type of fund. Expenses: Expenses of the Fund not specific to one or more classes will be allocated to all classes based on the adjusted net assets of each class or the relative value of adjusted dividend qualifying shares of each class. Expenses attributable to a particular class will be charged only to that class. Expenses attributable to a particular class may include the following: o Rule 12b-1 fees o Transfer agent cost UNREALIZED APPRECIATION/DEPRECIATION AND REALIZED GAINS/LOSSES The change in the market value of investments will be allocated each day based on the relative adjusted net assets of each class or the relative value of adjusted dividend qualifying shares of each class as appropriate, depending on the type of fund. Realized gains and losses will be allocated to the classes on the same basis. DIVIDEND/DISTRIBUTIONS PAID TO SHAREHOLDERS The amount of dividends and distribution of gains paid to shareholders of each class will be determined by the dividend/distribution calculation methodology described below. The actual amounts paid to each class will be used to calculate the net asset value of each class. 2 PRICING WORKSHEET The Multiple Shares NAV Worksheet (Exhibit III) will be used in the daily net asset value calculation. Utilizing data reviewed by the fund accountant, the computer system generates the above worksheet for the total fund and each respective class. For non-daily dividend funds, the class allocation is based on the relative adjusted net assets of each class. The allocation is derived by taking prior day's net assets plus the actual dollars booked from prior day capital stock activity for each class compared to the total fund. For daily dividend funds, the class allocation is based on the relative value of adjusted dividend qualifying shares of each class. The allocation is derived by using dividend shares times prior day's NAV compared to the fund total. This class allocation is used to allocate income, non-class-specific expenses, and realized and unrealized gains and losses. Class specific expenses and dividend/distributions are applied to the appropriate class. This determines the net assets for the current day which is divided by outstanding shares for the NAV per share for each class. DIVIDEND/DISTRIBUTIONS CALCULATION METHODOLOGY The amount available for dividends, or the projected amount available, will be based on the combined undistributed net investment income of the Fund. The per share dividend rates for each class will differ by approximately the expense rate differential, based on average daily NAV, between the classes of shares for the applicable period, i.e. daily, monthly, etc. The maximum distribution rate per share for net realized gains will be determined by dividing the total fund shares outstanding on the ex-dividend date into the undistributed net realized gains of the fund (all classes combined) for the applicable period. SECTION II SPECIFIED CONTROL OBJECTIVES The following are the specific control objectives of the system of internal accounting control relating to the allocation of income and expenses and the calculation of net asset values and dividend distribution amounts for the multiple classes of shares contemplated above: 1. That the expenses attributable to a particular class are properly recorded for that class. 2. That income, other operating expenses, and realized and unrealized gains and losses are allocated properly to each class as described in Section I. 3. That capital share transactions, including dividends and distributions, are properly allocated as described in Section I. 4. That net asset value is properly calculated as described in Section I. - 2 - 3 SECTION III POLICIES AND PROCEDURES TO ACHIEVE SPECIFIED CONTROL OBJECTIVES The following procedures are designed to account for the various classes of shares in each fund. From time to time, policies and procedures may be revised to improve or enhance operations and maintain adherence to specified control objectives. 1. On a daily basis, the fund accountant completes the "Daily Net Asset Reconciliation and NAV Proof" (proof sheet) on Exhibit II. 2. Using the proof sheet, the fund accountant reviews the allocation of daily income and expenses and realized and unrealized gains and losses of each class. 3. The fund accountant verifies the shares outstanding on the proof sheet to the amounts supplied by the Transfer Agent. 4. On a daily basis, the fund supervisor reviews the allocations and the net asset value calculation. On a test basis, the supervisor verifies the amounts entered by the fund accountant on the proof sheet by agreeing the amounts entered to source documents and reviewing for reasonableness. The supervisor initials the worksheet to evidence this review. 5. On a monthly basis, the fund supervisor reviews the monthly financial statement including the calculations of all income and expense items. 6. For periodic distributions (monthly, quarterly or annually, as applicable), the calculation is performed by the fund accountant according to the methodology described in Section I. The calculation is verified by a supervisor by agreeing the amounts to the source documents. This review is documented by the supervisor's initials on the calculation. SECTION IV FINANCIAL STATEMENT DISCLOSURE FOR FUNDS WITH MULTIPLE CLASSES OF SHARES Portfolio of Investments o Will be shown in accordance with standard reporting practices. Statement of Assets and Liabilities o Assets and liabilities will be disclosed on a combined basis. o Net asset value and offering price per share data will be presented for each class. o The composition of net assets (Summary of Shareholders Equity) will be presented on a combined basis, but will include a description of each class (par, outstanding shares, etc.). Statement of Operations o A standard reporting format will be used. -3- 4 Statement of Changes in Net Assets o A standard reporting format will be used with separate disclosure of dividends and capital gain distributions to shareholders and dollar value of capital share transactions for each class. Financial Highlights o A standard reporting format will be used and the per share data and ratios will be shown for each class (portfolio turnover which will be shown in total). Notes to Financial Statements The notes to the financial statements will include the following additional disclosures in the footnotes: o Description of each class of shares and the related class-specific expenses. o Information on the 12b-1 fee arrangements for each class. o Capital shares transactions for each class for the most recent period and the prior year. -4- EX-99.11 15 [DESCRIPTION] Daily Net Asset Reconciliation and NAV Proof 1 Exhibit II DAILY NET ASSET RECONCILIATION AND NAV PROOF Page 1 FUND: ________________ DATE: _________________ DAILY NAV PROOF
________________________________________________________________________________ Line Activity CLASS A CLASS B CLASS C TOTAL FUND ________________________________________________________________________________ Current Shares Outstanding _______ ________ _______ _________ 1 Prior Day's NAV (4 decimals) _______ ________ _______ _________ PER SHARE IMPACT ON NAV CAPITAL SHARE TRANSACTIONS 2 Capital Share Transactions _______ ________ _______ _________ (from Page 3) _______ ________ _______ _________ NET INVESTMENT INCOME 3 Today's Net Investment Income* $_______ $________ $_______ *(from R707 Cost-P) 4 Net Investment Income _______ ________ _______ _________ _______ ________ _______ _________ EX-DIVIDEND/DISTRIBUTION 5 Income Dividend (from Page 3) (_______) (________) (_______) (_________) (_______) (________) (_______) (_________) Capital Gain Distribution per class (_______) (________) (_______) (_________) (_______) (________) (_______) (_________) MARKET VALUE ACTION 7 Per Class Allocation (9 DECIMALS FROM R707) _______ ________ _______ 8 Total impact (line 23 x line 7) $_______ $________ $_______ 9 Per Share Effect of Market Change _______ ________ _______ _________ _______ ________ _______ _________ 10 Calculated Price Per Share _______ ________ _______ _________ (SUM OF LNES 1,2,4,5,6,&9) 11 System Generated Price (_______) (________) (_______) (_________) 12 Difference should not exceed .0002 _______ ________ _______ _________ _______ ________ _______ _________ MARKET VALUE ACTION 13 R403 Current Market Value of all Investments _______ 14 R403 Today's Mark-to Market on Futures _______ 15 P/D R403 Prior Day's Market Value (________) 16 R314 Today's Discount Earned (________) 17 R314 Today's Accretion of OID (________) 18 R314 Today's Amortization of Premium ________ 19 R309 Investments purchased - at c (________) 20 R309 Investments sold - at proceeds ________ 21 R810 P I K / I O Adjustments (________) R309 Adjusting Marks on Futures Trades ________ Subtotal (_______) 23 Change in Market Value _______ _______
2 Exhibit II DAILY NET ASSET RECONCILIATION AND NAV PROOF Page 1 FUND: ______________________________ DATE: _______________ DAILY NET ASSET RECONCILIATION
________________________________________________________________________________ G/L PRIOR Percentage Line Report Activity ACCT DAY Amount of change ________________________________________________________________________________ DAILY ACCRUALS INCOME 1 R303 Dividend Income CP05 ____ ____ __% 2 R810 Bond Interest Income Non-taxable CP10 ____ ____ __% 3 R810 Bond Interest Income Taxable CP13 ____ ____ __% 4 R810 Short-term Interest Income Non-taxable CP16 ____ ____ __% 5 R810 Short-term Interest Income Taxable CP19 ____ ____ __% 6 R314 Acquisition Discount Earned CP31 ____ ____ __% 7 R314 Accretion of OID - Taxable CP34 ____ ____ __% 8 R314 Accretion of OID - Non-taxable CP35 ____ ____ __% 9 R314 Amortization of Premium - Taxable CP37 (____) (____ __% 10 R314 Amortization of Premium - Non-taxable CP38 (____) (____) __% 11 Other Income CP45 ____ ____ __% 12 Interim Income Adjustments CP46 ____ ____ __ 13 GROSS INVESTMENT INCOME ____ EXPENSES 14 Operating Expense Accrual CP5095 (____) 15 12-b 1 Expense Accrual CP53/CP54B/CP54C +\-____ Direct Expense Payments +/-____ 16 NET INVESTMENT INCOME TODAY ____ To Page 1, line 3 TF To Page 2, Line 18 NET ASSETS AT COST RECONCILIATION 17 R701 Prior Day's Net Assets at Cost ____ 18 Today's Net Investment Income (Line 16, page 2) ____ 19 Today's Total Net Share Activity (Line 6, page 3) ____ 20 R302 Today's Net Gain/Loss (excl. Futures) ____ 21 R309 Mark-to-Market on Futures ____ 22 R810 PIK/IO Adjustments _________________________ (____) 23 Today's Distributions (Line 31, page 3 or amounts from Line 5 & 6, page 1) (____) 24 Below Adjustments *____ 25 R701 TODAY'S NET ASSETS AT COST ____ ____ (Pre-priced) * DETAIL OF ADJUSTMENTS $ ____________________________ $ ____________________________ $ ____________________________ $ ____________________________
3 EXHIBIT II DAILY NET ASSET RECONCILIATION AND NAV PROOF Page 3 FUND: ______________________________ DATE: ________________
______________________________________________________________________________ Line Report Activity Amount ______________________________________________________________________________ Current Shares Outstanding CAPITAL SHARE TRANSACTIONS-IMPACT ON NAV CLASS A CLASS B CLASS C 1 S/R Today's Net Dollars to Fund _______ _______ _______ 2 Est. Today's Net Est. Dollars _______ _______ _______ 3 P/D Reverse P/D Net Est. Dollars _______ _______ _______ 4 Reinvestment Dollars to Fund _______ _______ _______ 5 Today's Dollar Impact = _______ = _______ = _______ 6 TODAY'S TOTAL DOLLAR IMPACT A+B+C = _______ 7 S/R Today's Net Shares to Fund _______ _______ _______ 8 Est. Today's Net Est. Shares _______ _______ _______ 9 P/D Reverse P/D Net Est. Shares _______ _______ _______ 10 Reinvestment Shares to Fund _______ _______ _______ 11 Today's Share Impact per ( = _______ = _______ = _______ 12 Prior Day's NAV x _______ x _______ x _______ 13 = (_______)= (_______)= (_______) 15 Change in Capital Shares(L5-L13) _______ = _______ = _______ PER SHARE EFFECT ** _______ _______ _______ _______ _______ _______ +A+B+C = _______ 18 **IF ANSWER EXCEEDS +/-.0005 NOTIFY SUPERVISOR PER SHARE TF _______ _______ Equalization Factor _______ _______ _______ CLASS A CLASS B CLASS C 19 S/R Current Shares Outstanding _______ _______ _______ 20 Est. Share Estimates - Sales _______ _______ _______ 21 Est. Share Est - Redemptions (_______) (_______) (_______) 22 Est. Share Est - Reinvestments _______ _______ _______ 23 Adj Shares Outstanding GL Total= _______ _______ _______ 24 S/R Unsettled Sales CS80A (______)CS80B(_____)CS80C(____) 25 S/R Unsettled Redemptions CS90A ______ CS90B _____ CS90C ____ 26 Current Distribution Shares GL Total___ _______ _______ TOTAL OUTSTANDING SHARES A+B+C ____________________________ ____________________________ DIVIDENDS AND DISTRIBUTIONS 27 S/R T/A Reported Amount ______ ______ _______ 28 P/D Estimate Div ______ ______ _______ 29 Tie-in Adjustment Needed ______ ______ _______ 30 Current Day's Total Dividend ** ______ ______ _______ ** Line 23 or 26 x Line 31 31 Dividend Rate ______ ______ _______
4 DAILY NET ASSET RECONCILIATION AND NAV PROOF Page FUND:__________________________________________ DATE: _______________ PAR/SHARES AND COST RECONCILIATION
POSITIONS Line Report Activity Long Short Par/ Par/ Shares Cost Shares Cost 1 P/D R104 Prior Day's Total Par/Shares&Cost +______ ____ +_____ ____ 2 Trade Tkts Purchases - L/T Inv. +______ ____ +_____ ____ 3 Trade Tkts Purchases - S/T Inv. +______ ____ +_____ ____ 4 Trade Tkts Opening Contracts +______ ____ +_____ ____ 5 R302 Sales -______ ____ -_____ ____ 6 P/D R104 Maturities -______ ____ -_____ ____ 7 R302 Closing Contracts -______ ____ -_____ ____ 8 R104 Current Day's Ttl Par/Shares&Cost =______ ____ =_____ ____ 9 R301/04/05 Capital Change Impact +______ ____ _____ ____ 10 Corrct Tkts Correcting Adjustments +/-______ ____+/-_____ ____ 11 R104 Rev Revised Par/Shares & Cost =______ ____ =_____ ____ 12 R104 Subtract Futures Par & Cost -______ ____ -_____ ____ 13 Total Par & Cost =______ ____ =_____ ____ G/L Acct G/L Acct GENERAL LEDGER COST RECONCILIATION 12 R701 Investments at Cost/Written Options AS10+____ LS10+______ 13 R701 Short-term Investments (cost) AS70+____ ______ 14 R701 Short Securities ____ LS20+______ 16 Total Reconciled Cost Above (Line 13) =____ =______ 17 Proof of R403 Par/Shares ____ ______ Prepared by _______________________ Reviewer's initials: _____________