<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997.
FILE NO. 811-7571
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2 [X]
</TABLE>
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THE DECLARATION OF TRUST)
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, IL 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (630) 684-6000
RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN AMERICAN CAPITAL, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, IL 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
================================================================================
<PAGE> 2
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Items 1, 2, 3 and 5A of Part A are omitted pursuant to Item F.4. of the General
Instructions to Form N-1A.
This Prospectus, which incorporates by reference the entire Statement of
Additional Information, concisely sets forth certain information about the Fund
that a prospective shareholder should know before investing in the Fund.
Shareholders should read this Prospectus carefully and retain it for future
reference. A copy of the Statement of Additional Information may be obtained
without charge by calling (800) 421-5666 or for Telecommunications Device for
the Deaf at (800) 421-2833. The Statement of Additional Information has been
filed with the Securities and Exchange Commission ("SEC") and is available along
with other related Fund materials at the SEC's internet web site
(http://www.sec.gov).
This Prospectus is dated April 25, 1997.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
(a) (i) Van Kampen American Capital Foreign Securities Fund (the "Fund"),
is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund was organized as a business trust under
the laws of Delaware on February 14, 1996.
The Fund has been created and is managed to provide a vehicle for
the publicly offered funds distributed by Van Kampen American
Capital Distributors, Inc. for which Van Kampen American Capital
Investment Advisory Corp. (the "Adviser") and Van Kampen American
Capital Asset Management, Inc. (the "Asset Management") serve as
investment adviser or sub-adviser to participate conveniently and
economically in foreign securities markets.
(ii) INVESTMENT OBJECTIVE. The investment objective of the Fund is to
provide long-term growth of capital through investments in an
internationally diversified portfolio of equity securities of
companies of any country. Normally, the Fund invests in securities
of issuers traded on markets of at least three of the world's
largest countries by market capitalization other than the United
States (Japan, United Kingdom, Germany, France, Canada,
Switzerland, Italy, Netherlands, Australia, Sweden and Spain), but
securities of issuers traded on quoted markets of other countries
are also considered for investment. Equity securities include
common stocks, preferred stocks and warrants or options to acquire
such securities. In selecting portfolio securities, the Fund
attempts to take advantage of the differences between economic
trends and the anticipated performance of securities markets in
various countries.
The investment objective and policies, the percentage limitations
and the kinds of securities in which the Fund may invest may be
changed by the Trustees unless expressly governed by those
limitations listed under Part B Item 13(b) which can be changed
only by action of the shareholders.
RISK FACTORS. An investment in the Fund involves risks similar to
those of investing directly in foreign equity securities.
Investment in equity securities of foreign issuers may subject the
Fund to risks of foreign, political, economic and legal conditions
and developments. Such conditions or developments might include
favorable or unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage),
expropriation of assets of the Fund or of issuers whose equity
securities are held by the Fund, imposition of withholding taxes
on dividend or interest payments, and possible difficulty in
obtaining and enforcing judgments against a foreign issuer. Also,
foreign equity securities may not be as liquid and may have more
volatile price fluctuations than comparable domestic equity
securities.
Furthermore, issuers of foreign equity securities are subject to
different, often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers. The Fund, in
A-1
<PAGE> 3
connection with its purchases and sales of foreign securities,
other than securities purchased or sold in United States dollars,
will incur transaction costs in converting currencies. Also,
brokerage costs incurred in purchasing and selling securities in
foreign securities markets generally are higher than such costs in
comparable transactions in domestic securities markets, and
foreign custodial costs relating to the Fund's portfolio
securities generally are higher than domestic custodial costs.
FOREIGN CURRENCY TRANSACTIONS. The value of the Fund's portfolio
securities may be affected by changes in currency exchange rates
and exchange control regulations. In addition, the Fund will incur
costs in connection with conversions between various currencies.
The Fund's foreign currency exchange transactions generally will
be conducted on a spot basis (that is, cash basis) at the spot
rate for purchasing or selling currency prevailing in the foreign
currency exchange market. The Fund purchases and sells foreign
currency on a spot basis in connection with the settlement of
transactions in securities traded in such foreign currency. The
Fund does not intend to purchase and sell foreign currencies as an
investment, but may enter into contracts with banks or other
foreign currency brokers or dealers to purchase or sell foreign
currencies at a future date ("forward contracts") and purchase and
sell foreign currency futures contracts to hedge against changes
in foreign currency exchange rates. A foreign currency forward
contract is a negotiated agreement between the contracting parties
to exchange a specified amount of currency at a specified future
time at a specified rate. The rate can be higher or lower than the
spot rate between the currencies that are the subject of the
contract.
The Fund may attempt to hedge against changes in the value of the
United States dollar in relation to a foreign currency by entering
into a forward contract for the purchase or sale of the amount of
foreign currency invested or to be invested, or by buying or
selling a foreign currency futures contract for such amount. Such
hedging strategies may be employed before the Fund purchases a
foreign security traded in the hedged currency which the Fund
anticipates acquiring or between the date the foreign security is
purchased or sold and the date on which payment therefor is made
or received. Hedging against a change in the value of a foreign
currency in the foregoing manner does not eliminate fluctuations
in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging
transactions reduce or preclude the opportunity for gain if the
value of the hedged currency should move in the direction opposite
to the hedged position. The Fund will not speculate in foreign
currency forward or futures contracts or through the purchase and
sale of foreign currencies.
TEMPORARY SHORT-TERM INVESTMENTS. It is the Fund's policy, in
normal market conditions, to be fully invested in foreign equity
securities. However, the Fund may hold a portion of its assets in
cash to meet redemptions and other day-to-day operating expenses.
The Fund may invest cash held for such purposes in obligations of
the United States and of foreign governments, including their
political subdivisions, commercial paper, bankers' acceptances,
certificates of deposit, repurchase agreements collateralized by
these securities, and other short-term evidences of indebtedness.
The Fund will only purchase commercial paper if it is rated
Prime-1 or Prime-2 by Moody's Investors Service, Inc. or A-1 or
A-2 by Standard & Poor's Ratings Group. The Fund also may invest
cash held for such purposes in short-term, investment grade
foreign debt securities. Investment grade foreign debt securities
are those debt securities of foreign issuers which the Adviser
determines to have creditworthiness substantially equivalent to
that of domestic issuers of debt securities rated investment
grade.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase
agreements with domestic or foreign banks or broker/dealers in
order to earn a return on temporarily available cash. The Fund
will not invest in repurchase agreements maturing in more than
seven days if any such investment, together with any other
illiquid securities held by the Fund, exceeds 15% of the value of
the Fund's net assets.
A-2
<PAGE> 4
For the purpose of investing in repurchase agreements, the Adviser
may aggregate the cash that certain funds advised or subadvised by
the Adviser or certain of its affiliates would otherwise invest
separately into a joint account. The cash in the joint account is
then invested and the funds that contributed to the joint account
share pro rata in the net revenue generated.
RESTRICTED SECURITIES. The Fund may invest up to 15% of its net
assets in restricted securities and other illiquid assets. As used
herein, restricted securities are those that have been sold in the
United States without registration under the Securities Act of
1933 ("1933 Act") and are thus subject to restrictions on resale.
Excluded from the limitation, however, are any restricted
securities which are eligible for resale pursuant to Rule 144A
under the 1933 Act and which have been determined to be liquid by
the Trustees or by the Advisers pursuant to Board-approved
guidelines. The determination of liquidity is based on the volume
of reported trading in the institutional secondary market for each
security. Since market quotations are not readily available for
restricted securities, such securities will be valued by a method
that the Fund's Trustees believe accurately reflects fair value.
SHORT SALES AGAINST THE BOX. The Fund may from time to time make
short sales of securities it owns or has the right to acquire
through conversion or exchange of other securities it owns. The
Fund may not make short sales or maintain a short position if to
do so would cause more than 25% of its total assets, taken at
market value, to be held as collateral for such sales.
USING OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS. The Fund is
authorized to utilize options, futures contracts and options
thereon.
(b) See Item (a).
(c) See Item (a).
ITEM 5. MANAGEMENT OF THE FUND.
(a) The business and affairs of the Fund are managed under the direction of
the Board of Trustees of the Fund. Subject to the Trustees' authority,
the Adviser determines the investment of the Fund's assets, provides
administrative services and manages the Fund's business and affairs. Van
Kampen American Capital Investment Advisory Corp. provides advisory
services to the Fund without cost.
(b) The Adviser is located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
The Adviser is a wholly-owned subsidiary of Van Kampen American Capital,
Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail
investor accounts, extensive capabilities for managing institutional
portfolios, and more than $57 billion under management or supervision.
Van Kampen American Capital's more than 40 open-end and 38 closed-end
funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide.
Van Kampen American Capital is a wholly-owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM
Holdings II, Inc. which, in turn, is a wholly-owned subsidiary of Morgan
Stanley Group Inc.
Morgan Stanley Group Inc. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley & Co. Incorporated, a
registered broker-dealer and investment adviser, and Morgan Stanley
International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and
trading; merger, acquisition, restructuring and other corporate finance
advisory activities; merchant banking; stock brokerage and research
services; asset management; trading of futures, options, foreign
exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing
and investing; and global custody, securities clearance services and
securities lending.
A-3
<PAGE> 5
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover
& Co. announced that they had entered into an Agreement and Plan of
Merger to form a new company to be named Morgan Stanley, Dean Witter,
Discover & Co. Subject to certain conditions being met, it is currently
anticipated that the transaction will close in mid-1997. Thereafter, Van
Kampen American Capital Asset Management, Inc. will be an indirect
subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three
major businesses: full service brokerage, credit services and asset
management of more than $100 billion in customer accounts.
(c) Mr. John Cunniff is primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Cunniff is a Vice President of
the Adviser and has been employed with Asset Management, an affiliate of
the Adviser, since October 1995. Prior to that time, Mr. Cunniff was
Vice President, Portfolio Manager at Templeton Quantitative Advisors.
(d) INAPPLICABLE
(e) ACCESS Investor Services, Inc. ("ACCESS"), P.O. Box 418256, Kansas
City, Missouri 64141-9256, serves as shareholder service agent for the
Fund. ACCESS, a wholly-owned subsidiary of Van Kampen American Capital,
provides these services at cost plus a profit. ACCESS waived its fees
for the period ended December 31, 1996.
(f) The Fund's total expense ratio for the period ended December 31, 1996,
as a percentage of average net assets was 0.45%.
Under its investment advisory agreement with the Adviser, the Fund has
agreed to assume and pay the charges and expenses of the Fund's
operation, including the compensation of the Trustees of the Fund (other
than those who are affiliated persons, as defined in the 1940 Act, of
the Adviser, Van Kampen American Capital Distributors, Inc. or Van
Kampen American Capital), the charges and expenses of independent
accountants, legal counsel, any transfer or dividend disbursing agent
and the custodian (including fees for safekeeping of securities), costs
of calculating net asset value, costs of acquiring and disposing of
portfolio securities, interest (if any) on obligations incurred by the
Fund, membership dues in the Investment Company Institute or any similar
organization, reports and notices to shareholders, costs of registering
shares of the Fund under the federal securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental
agencies.
(g) INAPPLICABLE
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
INAPPLICABLE
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
(a) The holders of Registrant's shares of beneficial interest will have
equal rights to participate in distributions made by the Fund, equal
rights to the Fund's assets upon dissolution and equal voting rights;
the Fund does not allow cumulative voting. Shares may be redeemed at any
time at net asset value with no charge.
(b) The Fund's shares are offered and sold only to publicly offered funds
distributed by Van Kampen American Capital Distributors, Inc. and
advised or subadvised by the Adviser or Asset Management. In the event
any of such publicly offered funds owns more than 25% of the outstanding
shares of the Fund, such publicly offered fund would be deemed to
control the Fund within the meaning of the 1940 Act. As of April 4,
1997, Van Kampen American Capital Pace Fund and Common Sense Growth Fund
owned beneficially and of record 40.94% and 48.68%, respectively, of the
outstanding shares of the Fund, and therefore, may be deemed to control
the Fund. Van Kampen American Capital Pace Fund is a Delaware business
trust and Common Sense Growth Fund is a series of Common Sense Trust, a
Massachusetts business trust. Both trusts are located at One Parkview
A-4
<PAGE> 6
Plaza, Oakbrook Terrace, Illinois 60181. As of April 4, 1997, Van Kampen
American Capital Distributors, Inc., One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, owned beneficially and of record 10.38% of the
Fund's outstanding shares.
(c) INAPPLICABLE
(d) INAPPLICABLE
(e) Inquiries regarding the Fund or its shares should be made to the Fund's
Secretary, Ronald A. Nyberg, at One Parkview Plaza, Oakbrook Terrace, IL
60181.
(f) The Fund makes annual distributions of net investment income. The Fund
distributes realized capital gains to shareholders annually.
(g) The Fund intends to qualify as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As such, the Fund will distribute all of its net investment
income and capital gains to its shareholders and such distributions will
generally be taxable as such to its shareholders; while shareholders may
be proportionately liable for taxes on income and gains of the Fund,
shareholders not subject to tax on their income will not be required to
pay tax on amounts distributed to them; the Fund will inform its
shareholders of the amount and nature of such income and gains
distributed.
(h) INAPPLICABLE
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
(a) INAPPLICABLE
(b) Shares of the Fund are offered to eligible purchasers based on the next
calculation of a net asset value, which is determined as described under
Item 8(a) below, after the order is placed. There is no sales charge on
the sale of Fund shares.
(c) INAPPLICABLE
(d) INAPPLICABLE
(e) There is no continuing fee paid out of Fund assets to any dealer or any
persons who may be advising shareholders regarding the purchase, sale or
retention of Fund shares.
(f) INAPPLICABLE
ITEM 8. REDEMPTION OR REPURCHASE.
(a) Shareholders may redeem shares at net asset value at any time without
charge by submitting a written request in proper form to ACCESS at P.O.
Box 418256, Kansas City, Missouri 64141-9256.
The net asset value per share is determined as of 2:00 p.m. eastern time
on each day on which the New York Stock Exchange (the "Exchange") is
open or such earlier time as determined by the Trustees when the
Exchange closes before 4:00 p.m. eastern time.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close
of business on each business day in New York (i.e., a day on which the
Exchange is open). In addition, European or Far Eastern securities
trading generally or in a particular country or countries may not take
place on all business days in New York. Furthermore, trading takes place
on all business days in Japanese markets on certain Saturdays and in
various foreign markets on days which are not business days in New York
and on which the Fund's net asset value is not calculated and on which
the Fund does not effect sales, redemptions and repurchases of its
shares. There may be significant variations in the net asset value of
Fund shares on days when net asset value is not calculated and on which
shareholders cannot redeem on account of changes in prices of stocks
traded in foreign stock markets.
A-5
<PAGE> 7
The Fund calculates net asset value per share, and therefore effects
sales, redemptions and repurchases of its shares, as of the close of the
Exchange once on each day on which the Exchange is open. Such
calculation does not take place contemporaneously with the determination
of the prices of the majority of the portfolio securities used in such
calculation. If events materially affecting the value of such securities
occur between the time when their price is determined and the time when
the Fund's net asset value is calculated, such securities will be valued
at fair value as determined in good faith by the Trustees.
The net asset value of the Fund is computed by (i) valuing securities
listed or traded on a national securities exchange at the last reported
sale price, or if there has been no sale that day at the last reported
bid price, using prices as of the close of trading on the Exchange, (ii)
valuing unlisted securities for which over-the-counter market quotations
are readily available at the most recent bid price as supplied by the
National Association of Securities Dealers Automated Quotations
("NASDAQ") or by broker/dealers, and (iii) valuing any securities for
which market quotations are not readily available and any other assets
at fair value as determined in good faith by the Trustees. Options on
stocks, options on stock indexes, and stock index futures contracts and
options thereon, which are traded on exchanges, are valued at their last
sale or settlement price as of the close of such exchanges, or, if no
sales are reported, at the mean between the last reported bid and asked
prices. Debt securities with a remaining maturity of 60 days or less are
valued on an amortized cost basis which approximates market value. The
Fund reserves the right to redeem in kind.
(b) INAPPLICABLE
(c) INAPPLICABLE
(d) Payment for shares redeemed may be postponed or the right of redemption
suspended as provided by the rules of the SEC.
ITEM 9. PENDING LEGAL PROCEEDINGS.
INAPPLICABLE
A-6
<PAGE> 8
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE
Van Kampen American Capital Foreign Securities Fund (the "Fund"), is a
diversified, open-end management investment company.
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's prospectus (the "Prospectus") dated as of the same date as this Statement
of Additional Information. This Statement of Additional Information does not
include all of the information a prospective investor should consider before
purchasing shares of the Fund. Investors should obtain and read the Prospectus
prior to purchasing shares of the Fund. A Prospectus may be obtained without
charge by writing or calling Van Kampen American Capital Distributors, Inc. at
One Parkview Plaza, Oakbrook Terrace, Illinois 60181 at (800) 421-5666.
This Statement of Additional Information is dated April 25, 1997.
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
General Information and History............................. B-1
Investment Objective and Policies........................... B-1
Management of the Fund...................................... B-3
Control Persons and Principal Holders of Securities......... B-10
Investment Advisory and Other Services...................... B-10
Brokerage Allocation and Other Practices.................... B-12
Capital Stock and Other Securities.......................... B-13
Purchase, Redemption and Pricing of Securities Being
Offered..................................................... B-13
Tax Status.................................................. B-13
Underwriters................................................ B-13
Calculation of Performance Data............................. B-13
Report of Independent Accountants........................... B-14
Financial Statements........................................ B-15
Notes to Financial Statements............................... B-23
</TABLE>
ITEM 12. GENERAL INFORMATION AND HISTORY.
See Item 4.
The Fund and Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") have adopted Codes of Ethics designed to recognize the fiduciary
relationship between the Fund and the Adviser and its employees. The Codes
permit directors, trustees, officers and employees to buy and sell securities
for their personal accounts subject to certain restrictions. Persons with access
to certain sensitive information are subject to preclearance and other
procedures designed to prevent conflicts of interest.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
(a) See Item 4.
(b) The Fund has adopted certain investment restrictions which may be
altered or rescinded only with the approval by the vote of a majority
of its outstanding voting shares, which is defined by the Investment
Company Act of 1940, as amended (the "1940 Act"), as the lesser of (i)
67% or more
B-1
<PAGE> 9
of the voting securities present at a meeting, if the holders of more
than 50% of the outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding voting
securities. These restrictions provide that the Fund shall not:
1. Engage in the underwriting of securities of other issuers, except
that the Fund may sell an investment position even though it may be
deemed to be an underwriter under the federal securities laws.
2. Purchase any security (other than obligations of the United States
Government, its agencies, or instrumentalities) if more than 25% of
its total assets (taken at current value) would then be invested in a
single industry.
3. Invest more than 5% of its total assets (taken at current value) in
securities of a single issuer other than the United States
Government, its agencies or instrumentalities, or hold more than 10%
of the outstanding voting securities of an issuer.
4. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of
its net assets, or pledge more than 10% of its net assets in
connection with permissible borrowings or purchase additional
securities when money borrowed exceeds 5% of its net assets. Margin
deposits or payments in connection with the writing of options or in
connection with the purchase or sale of forward contracts, futures,
foreign currency futures and related options are not deemed to be a
pledge or other encumbrance.
5. Make short sales of securities, unless at the time of the sale it
owns or has the right to acquire an equal amount of such securities;
provided that this prohibition does not apply to the writing of
options or the sale of forward contracts, futures, foreign currency
futures or related options.
6. Purchase securities on margin but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales
of securities. The deposit or payment by the Fund of initial or
maintenance margin in connection with forward contracts, futures,
foreign currency futures or related options is not considered the
purchase of a security on margin.
7. Buy or sell real estate or interests in real estate including real
estate limited partnerships, provided that the foregoing prohibition
does not apply to a purchase and sale of publicly traded (i)
securities which are secured by real estate, (ii) securities
representing interests in real estate, and (iii) securities of
companies principally engaged in investing or dealing in real estate.
8. Invest in commodities or commodity contracts, except that the Fund
may enter into transactions in options, futures contracts or related
options including foreign currency futures contracts and related
options and forward contracts.
9. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making
and collateralizing any permitted borrowings, (ii) making any
permitted loans of its portfolio securities or (iii) entering into
repurchase agreements, utilizing options, futures contracts, options
on futures contracts, forward contracts, forward commitments and
other investment strategies and instruments that would be considered
"senior securities" but for the maintenance by the Fund of a
segregated account with its custodian or some other form of "cover".
(c) INAPPLICABLE
(d) The Adviser expects portfolio turnover not to exceed 400% annually.
B-2
<PAGE> 10
ITEM 14. MANAGEMENT OF THE FUND.
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and other executive officers of the Fund's investment
adviser and their principal occupations for the last five years and their
affiliations, if any, with VK/AC Holding, Inc. ("VKAC Holding"), Van Kampen
American Capital, Inc. ("Van Kampen American Capital" or "VKAC"), Van Kampen
American Capital Investment Advisory Corp. ("Advisory Corp."), Van Kampen
American Capital Asset Management, Inc. ("Asset Management"), Van Kampen
American Capital Distributors, Inc., the distributor of the Fund's shares (the
"Distributor") and ACCESS Investors Services Inc., the Fund's transfer agent
("ACCESS"). Advisory Corp. and Asset Management sometimes are referred to herein
collectively as the "Advisers". For purposes hereof, the term "Fund Complex"
includes each of the open-end investment companies advised by the Advisory Corp.
and each of the open-end investment companies advised by the Asset Management
(excluding the American Capital Exchange Fund and the Common Sense Trust).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to August 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT
Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a
Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which
develops, manufactures, markets and services medical and
scientific equipment. Trustee of each of the funds in the
Fund Complex.
Linda Hutton Heagy........................ Partner, Ray & Berndtson, Inc. An executive recruiting
Sears Tower and management consulting firm. Formerly, Executive Vice
233 South Wacker Drive President of ABN AMRO, N.A., a Dutch bank holding
Suite 4020 company. Prior to 1992, Executive Vice President of La
Chicago, IL 60606 Salle National Bank. Trustee of each of the funds in the
Date of Birth: 06/03/48 Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation. Trustee of
each of the funds in the Fund Complex.
Dennis J. McDonnell*...................... President and a Director of VKAC. President, Chief
One Parkview Plaza Operating Officer and a Director of the Advisers.
Oakbrook Terrace, IL 60181 Director or officer of certain other subsidiaries of
Date of Birth: 05/20/42 VKAC. Prior to November 1996, Executive Vice President
and a Director of VKAC Holding. President and Trustee of
each of the funds in the Fund Complex. President,
Chairman of the Board and Trustee of other investment
companies advised by the Advisers or their affiliates.
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee of each of the funds
in the Fund Complex.
</TABLE>
B-3
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Jerome L. Robinson........................ President, Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director, Pacesetter Software, a software
Date of Birth: 10/10/22 programming company specializing in white collar
productivity. Director, Panasia Bank. Trustee of each of
the funds in the Fund Complex.
Phillip B. Rooney......................... Private investor. Director, Illinois Tool Works, Inc., a
348 East Third Street manufacturing company; Director, The Servicemaster
Hinsdale, IL 60521 Company, a business and consumer services company;
Date of Birth: 07/08/44 Director, Urban Shopping Centers Inc., a retail mall
management company; Director, Stone Container Corp., a
paper manufacturing company. Trustee, University of Notre
Dame. Formerly, President and Chief Executive Officer,
WMX Technologies Inc., an environmental services company,
and prior to that President and Chief Operating Officer,
WMX Technologies Inc. Trustee of each of the funds in the
Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee of each of the funds in the
Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, open-end funds advised by Van Kampen American
Date of Birth: 08/22/39 Capital Management, Inc. and closed-end funds advised by
Advisory Corp. Trustee of each of the funds in the Fund
Complex, open-end funds advised by Van Kampen Capital
Management, Inc. and closed-end funds advised by Advisory
Corp.
</TABLE>
- ---------------
* Such trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. McDonnell is an interested person of the Advisers and
the Fund by reason of his positions with VKAC and its affiliates. Mr. Whalen
is an interested person of the Fund by reason of his firm currently acting as
legal counsel to the Fund and is an interested person of Asset Management with
respect to certain funds advised by Asset Management by reason of his firm in
the past acting as legal counsel to Asset Management.
OFFICERS
Messrs. Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin, Wetherell and Hill
are located at One Parkview Plaza, Oakbrook Terrace, IL 60181. The Fund's
officers other than Messrs. Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin,
Wetherell and Hill are located at 2800 Post Oak Blvd., Houston, TX 77056.
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Peter W. Hegel.............. Vice President Executive Vice President of the Advisers.
Date of Birth: 06/25/56 Director of Asset Management. Officer of
certain other subsidiaries of VKAC. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.
</TABLE>
B-4
<PAGE> 12
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Curtis W. Morell............ Vice President and Chief Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 Accounting Officer President and Chief Accounting Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel
Date of Birth: 07/29/53 and Secretary of VKAC. Executive Vice
President, General Counsel, Assistant
Secretary and a Director of the Advisers
and the Distributor. Executive Vice
President, General Counsel and Assistant
Secretary of ACCESS. Director or officer of
certain other subsidiaries of VKAC.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute. Prior to
November 1996, Executive Vice President,
General Counsel and Secretary of VKAC
Holding. Vice President and Secretary of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
Don G. Powell Chairman, President, Chief Executive
2800 Post Oak Blvd. Officer and a Director of VKAC. Chairman,
Houston, TX 77056 Chief Executive Officer and a Director of
Date of Birth: 10/19/39 the Advisers and the Distributor. Chairman
and a Director of ACCESS. Director or
officer of certain other subsidiaries of
VKAC. Chairman of the Board of Governors
and the Executive Committee of the
Investment Company Institute. Prior to
November, 1996, President, Chief Executive
Officer and a Director of VKAC Holding.
President, Chief Executive Officer and a
Trustee/Director of certain investment
companies advised by Asset Management and
prior to July 1996, President, Chief
Executive Officer and a Trustee of the
funds in the Fund Complex and closed-end
investment companies advised by Advisory
Corp.
Alan T. Sachtleben.......... Vice President Executive Vice President of the Advisers.
Date of Birth: 04/20/42 Director of Asset Management. Director or
officer of certain other subsidiaries of
VKAC. Vice President of each of the funds
in the Fund Complex and certain other
investment companies advised by the
Advisers or their affiliates.
</TABLE>
B-5
<PAGE> 13
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Paul R. Wolkenberg.......... Vice President Executive Vice President of the VKAC, the
Date of Birth: 11/10/44 Advisers and the Distributor. President,
Chief Executive Officer and a Director of
ACCESS. Director or officer of certain
other subsidiaries of VKAC. Vice President
of each of the funds in the Fund Complex
and certain other investment companies
advised by the Advisers or their
affiliates.
Edward C. Wood III.......... Vice President and Chief Senior Vice President of the Advisers. Vice
Date of Birth: 01/11/56 Financial Officer President and Chief Financial Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
John L. Sullivan............ Treasurer First Vice President of the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Tanya M. Loden.............. Controller Vice President of the Advisers. Controller
Date of Birth: 11/19/59 of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or the affiliates.
Nicholas Dalmaso............ Assistant Secretary Assistant Vice President and Senior
Date of Birth: 03/01/65 Attorney of VKAC. Assistant Vice President
and Assistant Secretary of the Advisers and
the Distributor. Officer of certain other
subsidiaries of VKAC. Assistant Secretary
of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or the affiliates.
Huey P. Falgout, Jr......... Assistant Secretary Assistant Vice President and Senior
Date of Birth: 11/15/63 Attorney of VKAC. Assistant Vice President
and Assistant Secretary of the Advisers,
the Distributor and ACCESS. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of VKAC.
Senior Vice President, Deputy General
Counsel and Secretary of the Advisers, the
Distributor and ACCESS. Officer of certain
other subsidiaries of VKAC. Prior to
November 1996, Senior Vice President,
Deputy General Counsel and Assistant
Secretary of VKAC Holding. Assistant
Secretary of each of the funds in the Fund
Complex and other investment companies
advised by the Advisers or the affiliates.
</TABLE>
B-6
<PAGE> 14
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Weston B. Wetherell......... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: 06/15/56 and Assistant Secretary of VKAC, the
Advisers and the Distributor. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
Steven M. Hill.............. Assistant Treasurer Assistant Vice President of the Advisers.
Date of Birth: 10/16/64 Assistant Treasurer of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
M. Robert Sullivan.......... Assistant Controller Assistant Vice President of the Advisers.
Date of Birth: 03/30/33 Assistant Controller of each of the funds
in the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
</TABLE>
Each of the trustees holds the same position with each of the funds in the
Fund Complex. As of December 31, 1996, there were 51 funds in the Fund Complex.
Each trustee who is not an affiliated person of VKAC, the Advisers, the
Distributor, ACCESS or Morgan Stanley (each a "Non-Affiliated Trustee") is
compensated by an annual retainer and meeting fees for services to the funds in
the Fund Complex. Each fund in the Fund Complex provides a deferred compensation
plan to its Non-Affiliated Trustees that allows trustees to defer receipt of
their compensation and earn a return on such deferred amounts based upon the
return of the common shares of the funds in the Fund Complex as more fully
described below. Each fund in the Fund Complex also provides a retirement plan
to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
The compensation of each Non-Affiliated Trustee from each fund in the Fund
Complex advised by Advisory Corp. (each a "VK Fund" and collectively the "VK
Funds") includes an annual retainer in an amount equal to $2,500 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. Each Non-Affiliated Trustee receives a per meeting fee from
each VK Fund in the amount of $125 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee
from each VK Fund in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.
The compensation of each Non-Affiliated Trustee from the funds in the Fund
Complex advised by Asset Management (each an "AC Fund" or collectively the "AC
Funds") includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting
fee in the amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.
B-7
<PAGE> 15
The trustees approved an aggregate compensation cap with respect to funds
in the Fund Complex of $84,000 per Non-Affiliated Trustee per year (excluding
any retirement benefits) for the period July 22, 1995 through December 31, 1996,
subject to the net assets and the number of funds in the Fund Complex as of July
21, 1995 and certain other exceptions. For the calendar year ended December 31,
1996, certain trustees received aggregate compensation from the funds in the
Fund Complex over $84,000 due to compensation received but not subject to the
cap, including compensation from new funds added to the Fund Complex after July
22, 1995 and certain special meetings in 1996. In addition, each of Advisory
Corp. or Asset Management, as the case may be, agreed to reimburse each fund in
the Fund Complex through December 31, 1996 for any increase in the aggregate
trustee's compensation over the aggregate compensation paid by such fund in its
1994 fiscal year, provided that if a fund did not exist for the entire 1994
fiscal year appropriate adjustments will be made.
Each Non-Affiliated Trustee generally can elect to defer receipt of all or
a portion of the compensation earned by such Non-Affiliated Trustee until
retirement. Amounts deferred are retained by the Fund and earn a rate of return
determined by reference to the return on the common shares of such Fund or other
funds in the Fund Complex as selected by the respective Non-Affiliated Trustee,
with the same economic effect as if such Non-Affiliated Trustee had invested in
one or more funds in the Fund Complex. To the extent permitted by the 1940 Act,
the Fund may invest in securities of those funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The deferred
compensation plan is not funded and obligations thereunder represent general
unsecured claims against the general assets of the Fund.
Each fund in the Fund Complex has adopted a retirement plan. Under the
Fund's retirement plan, a Non-Affiliated Trustee who is receiving trustee's
compensation from the Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such trustee's retirement from the Fund. Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from the Fund. Each
trustee has served as a member of the Board of Trustees since he or she was
first appointed or elected in the year set forth below. The retirement plan
contains a Fund Complex retirement benefit cap of $60,000 per year. Asset
Management has reimbursed each AC Fund for the expenses related to the
retirement plan through December 31, 1996.
Additional information regarding compensation and benefits for trustees is
set forth below. As indicated in the notes accompanying the table, the amounts
relate to either the Fund's most recently completed fiscal year or the Fund
Complex' most recently completed calendar year ended December 31, 1996.
B-8
<PAGE> 16
1996 COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
YEAR FIRST PENSION OR ESTIMATED MAXIMUM BEFORE DEFERRAL
APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS FROM FUND
ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON COMPLEX PAID
NAME(1) BOARD FUND(2) EXPENSES RETIREMENT(4) TO TRUSTEE(5)
------- -------------- ------------------------ ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1996 -0- (3) $2,500 $104,875
Linda Hutton Heagy* 1996 -0- (3) 2,500 104,875
Dr. Roger Hilsman -0- (3) -0- 103,750
R. Craig Kennedy* 1996 -0- (3) 2,500 104,875
Donald C. Miller -0- (3) -0- 104,875
Jack E. Nelson* 1996 -0- (3) 2,500 97,875
Jerome L. Robinson* 1996 -0- (3) -0- 101,625
Dr. Fernando Sisto* 1996 -0- (3) 1,500 104,875
Wayne W. Whalen* 1996 -0- (3) 2,500 104,875
William S. Woodside -0- (3) -0- 104,875
</TABLE>
- ---------------
* Currently a member of the Board of Trustees. Mr. Phillip B. Rooney also is a
current member of the Board of Trustees but is not included in the
compensation table because he did not serve on the Board of Trustees or
receive any compensation from the Fund prior to April 14, 1997. Messrs.
McDonnell and Powell, also trustees of the Fund during all or a portion of
the Fund's last fiscal year, are not included in the compensation table
because they are affiliated persons of the Advisers and are not eligible for
compensation or retirement benefits from the Fund.
(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Messrs. Hilsman, Miller and Woodside
retired from the Board of Trustees on December 31, 1996.
(2) The Trustees have agreed to waive such compensation for the Fund's fiscal
year ended December 31, 1996.
(3) The aggregate expenses of the Fund for the retirement plan for all trustees
was approximately $1,000 in its fiscal year ended December 31, 1996. Due to
its de minimis amount, such amount is not broken down by trustee. The
Retirement Plan is described above the Compensation Table.
(4) This is the estimated maximum annual benefits payable by the Fund in each
year of the 10-year period commencing in the year of such trustee's
retirement from the Fund assuming: the trustee has 10 or more years of
service on the Board of Trustees (including years of service prior to the
adoption of the retirement plan) and retires at or after attaining the age
of 60. Trustees retiring prior to the age of 60 or with fewer than 10 years
of service for the Fund may receive reduced retirement benefits from the
Fund. The actual annual benefit may be less if the trustee is subject to the
Fund Complex retirement benefit cap or if the trustee is not fully vested at
the time of retirement. Each incumbent nominee to the Board of Trustees has
served as a member of the Board of Trustees since he or she was first
appointed or elected in the year set forth in the Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all 51 of the investment companies in the Fund Complex as of December 31,
1996 before deferral by the trustees under the deferred compensation plan.
Certain trustees deferred all or a portion of their aggregate compensation
from the Fund Complex during the calendar year ended December 31, 1996. The
deferred compensation earns a rate of return determined by reference to the
return on the shares of the funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
trustees' Fund Complex compensation cap covered the period July 22, 1995
through December 31, 1996. For the calendar year
B-9
<PAGE> 17
ended December 31, 1996, certain trustees received compensation over $84,000
in the aggregate due to compensation received but not subject to the cap,
including compensation from new funds added to the Fund Complex after July
22, 1995 and certain special meetings in 1996. The Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Messrs. McDonnell, Powell and Whalen, the
trustees were not trustees of such investment companies. Combining the Fund
Complex with other investment companies advised by the Advisers and their
affiliates, Mr. Whalen received Total Compensation of $243,375 during the
calendar year ended December 31, 1996.
As of April 4, 1997, the trustees and officers of the Fund as a group owned
less than 1% of the shares of the Fund. As of April 4, 1997, no trustee or
officer of the Fund owns or would be able to acquire 5% or more of the common
stock of VK/AC Holding, Inc.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The Adviser is responsible for
obtaining and evaluating economic, statistical, and financial data and for
formulating and implementing investment programs in furtherance of the Fund's
investment objectives. The Adviser also furnishes at no cost to the Fund (except
as noted herein) the services of sufficient executive and clerical personnel for
the Fund as are necessary to prepare registration statements, prospectuses,
shareholder reports, and notices and proxy solicitation materials. In addition,
the Adviser furnishes at no cost to the Fund the services of a President of the
Fund, one or more Vice Presidents as needed, and a Secretary.
Under the Advisory Agreement, the Fund bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of a Treasurer or other principal
financial officer and the personnel operating under his direction. Payments are
made to the Adviser or its parent in reimbursement of personnel, facilities,
office space, and equipment costs attributable to the provision of accounting
services to the Fund. The services are provided at cost which is allocated among
the investment companies advised by the Adviser in the manner approved by the
Board of Trustees from time to time. The Fund also pays shareholder service
agency fees, distribution fees, service fees, custodian fees, legal and auditing
fees, the costs of reports to shareholders and all other ordinary expenses not
specifically assumed by the Adviser.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
(a) See Item 6(b).
(b) See Item 6(b).
(c) None of the Fund's trustees or officers owns or is eligible to own
shares of beneficial interest of the Fund.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
(a) (i) The Adviser and ACCESS, the Fund's shareholder service agent, are
wholly-owned subsidiaries of Van Kampen American Capital, Inc.
("VKAC"), which is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM
Holdings II, Inc. which, in turn, is a wholly-owned subsidiary of
Morgan Stanley Group Inc. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
B-10
<PAGE> 18
Morgan Stanley Group Inc. and various of its directly or
indirectly owned subsidiaries, including Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser,
and Morgan Stanley International, are engaged in a wide range of
financial services. Their principal businesses include securities
underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities;
merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange,
commodities and swaps (involving foreign exchange, commodities,
indices and interest rates); real estate advice, financing and
investing; and global custody, securities clearance services and
securities lending.
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter,
Discover & Co. announced that they had entered into an Agreement
and Plan of Merger to form a new company to be named Morgan
Stanley, Dean Witter, Discover & Co. Subject to certain conditions
being met, it is currently anticipated that the transaction will
close in mid-1997. Thereafter, Van Kampen American Capital Asset
Management, Inc. will be an indirect subsidiary of Morgan Stanley,
Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with
three major businesses: full service brokerage, credit services
and asset management of more than $100 billion in customer
accounts.
(ii) See Item 14.
(iii) The Fund and the Adviser are parties to an investment advisory
agreement (the "Agreement") which provides that the Adviser will
provide investment advisory services to the Fund at no fee. The
Fund is, however, required to reimburse the Adviser for certain
expenses as described in Item 16(b).
The Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii)
by vote of a majority of the Fund's outstanding voting securities
and (b) by the affirmative vote of a majority of the Trustees who
are not parties to the agreement or interested persons of any
such party by votes cast in person at a meeting called for that
purpose. The Agreement provides that it may be terminated without
penalty by either party on 30 days' written notice.
(b) The investment advisory agreement between the Adviser and the Fund
provides that the Adviser will supply investment research and portfolio
management, including the selection of securities for the Fund to
purchase. The Adviser also administers the business affairs of the
Fund, furnishes offices, necessary facilities and equipment, provides
administrative services, and permits its officers and employees to
serve without compensation as officers of the Fund and trustees of the
Trust if duly elected to such positions.
The agreement provides that the Adviser shall not be liable for any
error of judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which the agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Adviser in the performance of its obligations and
duties, or by reason of its reckless disregard of its obligations and
duties under the agreement.
(c) INAPPLICABLE
(d) INAPPLICABLE
(e) INAPPLICABLE
(f) INAPPLICABLE
(g) INAPPLICABLE
B-11
<PAGE> 19
(h) The custodian of all the Fund's assets is State Street Bank and Trust
Company located at 225 Franklin Street, Boston, Massachusetts 02110.
KPMG Peat Marwick LLP, Chicago, Illinois, are the independent
accountants for the Fund.
(i) During the fiscal period ended December 31, 1996, ACCESS, shareholder
service agent for the Fund, waived all fees.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
(a) The Adviser places orders for portfolio transactions for the Fund with
broker/dealer firms giving consideration to the quality, quantity and
nature of each firm's professional services. These services include
execution, clearance procedures, wire service quotations and statistical
and other research information provided to the Fund and the investment
adviser, including quotations necessary to determine the value of the
Fund's net assets. Any research benefits derived are available for all
clients of the investment adviser. Since statistical and other research
information is only supplementary to the research efforts of the Adviser
and still must be analyzed and reviewed by its staff, the receipt of
research information is not expected to materially reduce its expenses.
If it is believed to be in the best interests of the Fund, the Adviser
may place portfolio transactions with brokers who provide the types of
research service described above, even if it means the Fund will have to
pay a higher commission (or, if the broker's profit is part of the cost
of the security, will have to pay a higher price for the security) than
would be the case if no weight were given to the broker's furnishing of
those research services. This will be done, however, only if, in the
opinion of the Adviser, the amount of additional commission or increased
cost is reasonable in relation to the value of such services.
(b) Brokerage commissions paid by the Fund on portfolio transactions for
the fiscal period ended December 31, 1996 totalled $153,935 to brokers
selected primarily on the basis of research services provided.
The Fund placed brokerage transactions with brokers that were considered
affiliated persons of the Adviser such as Morgan Stanley Group Inc. The
negotiated commission paid to an affiliated broker on any transaction
would be comparable to that payable to a non-affiliated broker in a
similar transaction.
The Fund paid no commissions to Morgan Stanley Group Inc. during the
fiscal period ended 1996.
(c) In selecting among the firms believed to meet the criteria for handling
a particular transaction, the Adviser may take into consideration that
certain firms (i) provide market, statistical or other research
information such as that set forth above to the Fund and the Adviser,
(ii) have sold or are selling shares of the Fund and (iii) may be firms
that are affiliated with the Fund, its investment adviser or its
distributor and other principal underwriters. If purchases or sales of
securities of the Fund and of one or more other investment companies or
clients advised by the Adviser are considered at or about the same time,
transactions in such securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by
the Adviser, taking into account the respective sizes of the funds and
the amount of securities to be purchased or sold. Although it is
possible that in some cases this procedure could have a detrimental
effect on the price or volume of the security as far as the Fund is
concerned, it is also possible that the ability to participate in volume
transactions and to negotiate lower brokerage commissions will be
beneficial to the Fund.
While the Adviser will be primarily responsible for the placement of the
Fund's business, the policies and practices in this regard must be
consistent with the foregoing and will at all times be subject to review
by the Trustees of the Fund.
The Trustees have adopted certain policies incorporating the standards
of Rule 17e-1 issued by the SEC under the 1940 Act which requires that
the commission paid to the Distributor and other
B-12
<PAGE> 20
affiliates of the Fund must be reasonable and fair compared to the
commissions, fees or other remuneration received or to be received by
other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. The rule and
procedures also contain review requirements and require the Adviser to
furnish reports to the Trustees and to maintain records in connection
with such reviews. After consideration of all factors deemed relevant,
the Trustees will consider from time to time whether the advisory fee
will be reduced by all or a portion of the brokerage commission given to
brokers that are affiliated with the Fund.
(d) See Item 17(b).
(e) INAPPLICABLE
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
See Item 6.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
(a) See Item 7.
(b) See Item 8.
(c) INAPPLICABLE
ITEM 20. TAX STATUS.
See Item 6(g).
ITEM 21. UNDERWRITERS.
(a) INAPPLICABLE
(b) INAPPLICABLE
(c) INAPPLICABLE
ITEM 22. CALCULATION OF PERFORMANCE DATA.
INAPPLICABLE
B-13
<PAGE> 21
Item 23. Financial Statements.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Foreign Securities Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Foreign Securities Fund (the "Fund"), including the
portfolio of investments, as of December 31, 1996, and the related statement of
operations, the statement of changes in net assets, and the financial
highlights for the period from July 1, 1996 (commencement of investment
operations) to December 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Van Kampen American Capital Fund Foreign Securities as of December, 31, 1996,
the results of its operations, the changes in its net assets and financial
highlights for the period from July 1, 1996 (commencement of investment
operations) to December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 12, 1997
B - 14
<PAGE> 22
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS AND EQUIVALENTS 77.1%
AUSTRALIA 1.3%
CSR Limited 86,000 $ 300,771
Stockland Trust Group 100,000 258,326
----------
559,097
----------
AUSTRIA 1.9%
Bbag Oest Brau Bet 6,300 427,622
Creditanstalt Bank 6,500 439,996
----------
867,618
----------
BELGIUM 1.4%
Electrabel NV 1,000 236,703
Generale De Banque 1,100 394,431
----------
631,134
----------
DENMARK 0.6%
Tele Danmark, Series B 5,000 275,854
----------
FINLAND 0.8%
Nokia AB, Series A - Preferred Stock 6,000 348,000
----------
FRANCE 8.2%
Alcatel ALST CGE 3,000 240,995
Carrefour 1,050 683,203
Cie Fin Paribas, Class A 5,000 338,152
Danone 3,800 529,517
Elf Aquitaine 5,500 500,655
LaFarge 5,000 299,990
LVMH Moet Hennessy 1,100 307,199
Michelin CGDE 5,000 269,924
Total, Class B 6,000 488,002
----------
3,657,637
----------
GERMANY 14.8%
Adidas 2,800 242,007
BASF AG 14,000 539,329
Bayer 17,500 714,193
Bayer Hypo/Wech 15,000 453,763
Bayer Vereinsbk 10,000 410,710
Deutsche Bank AG 10,500 490,609
Dresdner Bank AG 14,000 419,418
Heidelberg Zement 6,000 485,443
Lufthansa AG 34,000 463,998
Man AG 1,300 315,116
Munchener Ruckvers 300 749,610
</TABLE>
See Notes to Financial Statements
B - 15
<PAGE> 23
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY (CONTINUED)
Siemens 4,500 $ 212,016
Thyssen AG 2,150 381,433
VEBA AG 12,000 694,047
----------
6,571,692
----------
HONG KONG 0.9%
Hong Kong Telecomm 250,000 402,418
----------
IRELAND 0.3%
Allied Irish Banks 20,336 136,469
----------
ITALY 6.8%
BCO Ambros Veneto Di Risp 200,000 374,423
Edison 44,000 278,444
Eni S.p.A. 155,000 795,435
Fiat S.p.A. 95,000 287,443
Parmalat Finanz 259,600 397,015
Pirelli S.p.A. 210,000 389,684
Telecom Italia 200,000 519,446
----------
3,041,890
----------
JAPAN 22.8%
Bank of Tokyo-Mitsubishi 47,000 872,550
Bridgestone Corp. 12,000 227,959
Canon, Inc. 16,000 353,683
Citizen Watch Co. 55,000 394,180
Dai Nippon Printing 13,000 227,873
Dainippon Screen Manufacturing Co., Ltd. 50,000 369,139
Fanuc 9,000 288,317
Fuji Photo Film Co. 10,000 329,851
Furukawa Electric 60,000 284,431
Honda Motor Co. 10,000 285,813
Jusco Co. 12,000 407,219
Kansai Electric Power 26,000 538,813
Kansai Paint Co. 65,000 291,857
Kinki Nippon Railway 25,000 156,075
Mitsubishi Corp. 15,000 155,427
Mitsubishi Gas CHM 110,000 396,080
Mitsui & Co. 22,000 178,568
Nippon Express Co., Ltd. 12,000 82,273
Nomura Securities Co., Ltd. 13,000 195,320
Sakura Bank 65,000 464,727
Shin Etsu Chemical Corp. 26,000 473,707
Shiseido Co. 33,000 381,832
Sony Corp. 8,500 557,076
Sumitomo Bank 27,000 389,345
</TABLE>
See Notes to Financial Statements
B - 16
<PAGE> 24
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Sumitomo Heavy Industries 115,000 $ 349,538
Takeda Chemical Industries 21,000 440,635
Toa Corp. 35,000 183,145
Toyota Motor Corp. 30,000 862,620
-----------
10,138,053
-----------
MALAYSIA 0.3%
Telekom Malaysia 15,000 133,637
-----------
NETHERLANDS 0.7%
ABN AMRO Holdings NV 5,000 325,514
-----------
NEW ZEALAND 0.3%
Telecom Corp. of NZ 25,000 127,607
-----------
NORWAY 0.8%
Norsk Hydro AS 6,500 348,047
-----------
SINGAPORE 0.6%
Singapore Airlines 31,000 281,355
-----------
SPAIN 3.8%
EMP Nac Electricid 4,700 334,512
Iberdrola SA 30,000 425,188
Telefonica De Espana 27,000 627,036
Union Electric Fenosa 30,000 322,357
-----------
1,709,093
-----------
SWEDEN 1.5%
Esselte AB, Series B 13,000 287,834
Trellberg AB, Series B 29,800 395,446
-----------
683,280
-----------
SWITZERLAND 1.1%
SCHW Bankgesellsch 550 481,995
-----------
</TABLE>
See Notes to Financial Statements
B - 17
<PAGE> 25
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM 8.2%
Associated British Foods 50,000 $ 413,740
British Airways 47,000 488,359
British Petroleum 35,315 423,514
Cadbury Schweppes 51,026 430,972
Carlton Communications 50,000 438,239
GKN 12,203 209,272
HSBC Holdings 20,196 451,529
MEPC 50,000 371,766
United Utilities 40,000 424,190
-----------
3,651,581
-----------
TOTAL LONG-TERM INVESTMENTS 77.1%
(Cost $31,885,942) (a) 34,371,971
REPURCHASE AGREEMENT 14.7%
BA Securities ($6,565,000 par collateralized by U.S. Government Obligations
in a pooled cash account, dated 12/31/96, to be sold on 01/02/97 at
$6,567,097) (a) 6,565,000
FOREIGN CURRENCY 0.1% (VARIOUS DENOMINATIONS)
(Cost $57,567) (a) 57,957
OTHER ASSETS IN EXCESS OF LIABILITIES 8.1% 3,569,444
-----------
NET ASSETS 100.0% $44,564,342
===========
</TABLE>
(a) At December 31, 1996, for federal tax purposes cost is $38,916,439; the
aggregate gross unrealized appreciation is $3,486,086 and the aggregate gross
unrealized depreciation is $1,406,237, resulting in net unrealized appreciation
on investments, foreign currency and translation of other assets and liabilities
denominated in foreign currencies of $2,079,849.
See Notes to Financial Statements
B - 18
<PAGE> 26
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $31,885,942) (Note 1) $34,371,971
Repurchase Agreement (Note 1) 6,565,000
Foreign Currency, at Market Value (Cost $57,567) 57,957
Cash 5,111
Receivables:
Securities Sold 9,626,071
Dividends 77,729
Interest 1,048
Unamortized Organizational Expenses (Note 1) 58,663
-----------
Total Assets 50,763,550
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased 6,000,000
Organizational Expenses 65,000
Distributor and Affiliates (Note 2) 1,983
Income Distributions 650
Accrued Expenses 120,381
Deferred Compensation and Retirement Plans (Note 2) 11,194
-----------
Total Liabilities 6,199,208
-----------
NET ASSETS $44,564,342
===========
NET ASSETS CONSIST OF:
Capital (Note 3) $39,913,364
Net Unrealized Appreciation on Securities 2,487,779
Accumulated Net Realized Gain on Securities 2,218,138
Accumulated Distributions in Excess of Net Investment Income (Note 1) (54,939)
-----------
NET ASSETS $44,564,342
===========
Net Asset Value, Offering Price and Redemption Price Per Share (Based on net assets of $44,564,342
and 4,284,714 shares of beneficial interest issued and outstanding) $ 10.40
===========
</TABLE>
See Notes to Financial Statements
B-19
<PAGE> 27
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
STATEMENT OF OPERATIONS
For the Period July 1, 1996 (Commencement of
Investment Operations) to December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $39,076) $ 311,342
Interest 105,322
----------
Total Income 416,664
----------
EXPENSES:
Custody 106,613
Audit 20,850
Trustees Fees and Expenses (Note 2) 18,564
Amortization of Organizational Expenses (Note 1) 6,337
Legal (Note 2) 4,720
Other 6,964
----------
Total Expenses 164,048
----------
NET INVESTMENT INCOME $ 252,616
==========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments $2,271,305
Foreign Currency Transactions (46,708)
----------
Net Realized Gain on Securities 2,224,597
----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period 0
----------
End of the Period:
Investments 2,486,029
Foreign Currency Translation 1,750
----------
Net Unrealized Appreciation on Securities During the Period 2,487,779
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES $4,712,376
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,964,992
==========
</TABLE>
See Notes to Financial Statements
B - 20
<PAGE> 28
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period July 1, 1996 (Commencement of
Investment Operations) to December 31, 1996
<TABLE>
<S> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 252,616
Net Realized Gain on Securities 2,224,597
Net Unrealized Appreciation on Securities During the Period 2,487,779
------------
Change in Net Assets from Operations 4,964,992
------------
Distributions from Net Investment Income (252,616)
Distributions in Excess of Net Investment Income (Note 1) (61,398)
------------
Distributions from and in Excess of Net Investment Income (314,014)
------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 4,650,978
------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold 80,500,000
Net Asset Value of Shares Issued Through Dividend Reinvestment 313,364
Cost of Shares Repurchased (41,000,000)
------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 39,813,364
------------
TOTAL INCREASE IN NET ASSETS 44,464,342
NET ASSETS:
Beginning of the Period 100,000
------------
End of the Period (Including accumulated distributions in excess of net
investment income of $54,939) $ 44,564,342
============
</TABLE>
See Notes to Financial Statements
B - 21
<PAGE> 29
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the period indicated.
<TABLE>
<CAPTION>
JULY 1, 1996
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
DECEMBER 31, 1996
====================================================================================
<S> <C>
Net Asset Value, Beginning of the Period $10.000
-------
Net Investment Income .052
Net Realized and Unrealized Gain on Securities .413
-------
Total from Investment Operations .465
Less Distributions from and in Excess of Net Investment Income (Note 1) .065
-------
Net Asset Value, End of the Period $10.400
=======
Total Return 4.65%*
Net Assets at End of the Period (In millions) $ 44.6
Ratio of Expenses to Average Net Assets 0.45%
Ratio of Net Investment Income to Average Net Assets 0.70%
Portfolio Turnover 76%*
Average Commission Paid Per Equity Share Traded (a) $ .0149
* Non-Annualized
</TABLE>
(a) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
B - 22
<PAGE> 30
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Foreign Securities Fund (the "Fund") is organized
as a Delaware business trust, and is registered as a diversified open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to provide long-term growth of
capital through investments in an internationally diversified portfolio of
equity securities of companies of any country. The Fund commenced investment
operations on July 1, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sales price as of the close of such securities
exchange. Unlisted securities and listed securities for which the last sales
price is not available are valued at the last bid price. For those securities
where quotations or prices are not available, valuations are determined in
accordance with the procedures established in good faith by the Board of
Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specific price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due to the Fund.
C. INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis.
D. CURRENCY TRANSLATION - Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on quoted exchange rates as
of noon Eastern Time. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were
acquired or sold. Income and expenses are translated at rates prevailing when
accrued.
E. ORGANIZATIONAL EXPENSES - The Fund will reimburse Van Kampen American
Capital Distributors, Inc. or its affiliates (collectively "VKAC") for costs
incurred in connection with the Fund's organization in the amount of $65,000.
These costs are being amortized on a straight line basis over the 60 month
period ending June 30, 2001. The Adviser has agreed that in the event any of
the initial shares of the Fund originally purchased by VKAC are redeemed during
the amortization period, the Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
F. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains
to its shareholders. Therefore, no provision for federal income taxes is
required.
Net realized gains or losses may differ for financial reporting and tax
purposes as a result of the deferral of losses for tax purposes resulting from
wash sales.
G. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any.
Due to inherent differences in the recognition of income, expense and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, the amount of distributed net investment income
may differ for a particular period. These differences are temporary in nature,
but may result in book basis distribution in excess of net investment income
for certain periods.
Permanent differences between book and tax basis reporting for the 1996
fiscal year have been identified and appropriately reclassified. Net permanent
differences relating to net currency losses and the character of shareholder
distributions totaling $6,459 were reclassified from accumulated undistributed
net investment income to accumulated realized gain/loss on securities.
B-23
<PAGE> 31
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as the investment manager of the Fund, but receives no
compensation for its investment management services.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an
affiliated person.
For the period ended December 31, 1996, the Fund recognized expenses of
approximately $2,100, representing VKAC's cost of providing accounting
services to the Fund.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the period ended
December 31, 1996, ACCESS has waived all fees for transfer agency and
shareholder services provided.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are
officers of VKAC.
The Fund has implemented deferred compensation and retirement plans for
its trustees. Under the deferred compensation plan, trustees may elect to
defer all or a portion of their compensation to a later date. The retirement
plan covers those trustees who are not officers of VKAC.
At December 31, 1996, the Fund was owned by VKAC (10,000 shares
representing 0.2% of outstanding shares) and three investment companies advised
by VKAC; Common Sense Trust Growth Fund (52.2% of outstanding shares), Common
Sense Trust Growth and Income Fund (2.0% of outstanding shares) and Van Kampen
American Capital Pace Fund (45.6% of outstanding shares).
3. CAPITAL TRANSACTIONS
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $.01 per share. Fund shares are only available
for purchase by Funds for which VKAC serves as investment adviser.
At December 31, 1996, capital aggregated $39,913,364. Transactions in
common shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1996
--------------
<S> <C>
Beginning Shares 10,000
--------------
Shares Sold 8,206,435
Shares Issued Through
Dividend Reinvestment 30,102
Shares Redeemed (3,961,823)
--------------
Net Increase in Shares
Outstanding 4,274,714
--------------
Ending Shares 4,284,714
==============
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments, were $80,500,166 and
$50,885,448, respectively.
B-24
<PAGE> 32
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Included in the Prospectus:
None
Included in the Statement of Additional Information:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<S> <C>
(1) Agreement and Declaration of Trust(2)
(2) Bylaws(2)
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Agreement+
(6) Inapplicable
(7) Inapplicable
(8)(a) Custodian Agreement(1)
(b) Transfer Agency and Service Agreement(2)
(9)(a) Fund Accounting Agreement+
(b) Amended and Restated Legal Services Agreement+
(10) Inapplicable
(11) Consent of Independent Accountants+
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Inapplicable
(27) Financial Data Schedule+
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 13 to Van
Kampen American Capital Equity Trust, File Nos. 33-8122 and 811-4805 filed
on June 8, 1993.
(2) Incorporated herein by reference to initial Registrant's Registration
Statement on Form N-1A, filed March 26, 1996.
+ Filed Herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
AS OF APRIL 4, 1997:
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
Shares of Beneficial Interest, $0.01 par
value 10
</TABLE>
C-1
<PAGE> 33
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
thereof to which such person would otherwise be subject by reason of (i) not
acting in good faith in the reasonable belief that such person's actions were
not in the best interest of the Trust, (ii) willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office, (iii) for a criminal proceeding, not having a reasonable
cause to believe that such conduct was unlawful (collectively "Disabling
Conduct"). Absent a court determination that an officer or trustee seeking
indemnification was not liable on the merits or guilty of Disabling Conduct in
the conduct of his or her office, the decision by the Registrant to indemnify
such person must be based upon the reasonable determination of independent
counsel or non-party independent trustees, after review of the facts, that such
officer or trustee is not guilty of Disabling Conduct in the conduct of his or
her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Management of the Fund" in Part A and "Management of the Fund" in the
Statement of Additional Information for information regarding the business of
the Adviser. For information as to the business, profession, vocation and
employment of a substantial nature of directors and officers of the Adviser,
reference is made to the Adviser's current Form ADV (File No. 801-18161) filed
under the Investment Advisers Act of 1940, as amended, incorporated herein by
reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
C-2
<PAGE> 34
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; and (ii) by the Adviser,
will be maintained at its offices, located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, Van Kampen American Capital Foreign Securities Fund, has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Oakbrook Terrace, State of Illinois, on
the 25th day of April, 1997.
VAN KAMPEN AMERICAN CAPITAL
FOREIGN SECURITIES FUND
By /s/ RONALD A. NYBERG
Ronald A. Nyberg, Vice President and
Secretary
<PAGE> 36
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
INDEX TO EXHIBITS TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON APRIL 25, 1997
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
(5) Investment Advisory Agreement
(9)(a) Fund Accounting Agreement
(b) Amended and Restated Legal Services Agreement
(11) Consent of Independent Accountants
(27) Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit(5)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of October 31, 1996, by
and between VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND (the "Fund")
and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. (the "Adviser"), a
Delaware corporation.
1. (a) Retention of Adviser by Fund. The Fund hereby employs the Adviser
to act as the investment adviser for and to manage the investment and
reinvestment of the assets of the Fund in accordance with the Fund's investment
objective and policies and limitations, and to administer its affairs to the
extent requested by, and subject to the review and supervision of, the Board of
Trustees of the Fund for the period and upon the terms herein set forth. The
investment of funds shall be subject to all applicable restrictions of
applicable law and of the Declaration of Trust and By-Laws of the Trust, and
resolutions of the Board of Trustees of the Fund as may from time to time be in
force and delivered or made available to the Adviser.
(b) Adviser's Acceptance of Employment. The Adviser accepts such
employment and agrees during such period to render such services, to supply
investment research and portfolio management (including without limitation the
selection of securities for the Fund to purchase, hold or sell and the
selection of brokers through whom the Fund's portfolio transactions are
executed, in accordance with the policies adopted by the Fund and its Board of
Trustees), to administer the business affairs of the Fund, to furnish offices
and necessary facilities and equipment to the Fund, to provide administrative
services for the Fund, to render periodic reports to the Board of Trustees of
the Fund, and to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions.
(c) Independent Contractor. The Adviser shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed as agent of the Fund.
(d) Non-Exclusive Agreement. The services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the Adviser shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
2. (a) Fee. The Adviser shall provide to the Fund the services described
herein without charge.
(b) Determination of Net Asset Value. The net asset value of the
Fund shall be calculated as of 2:00 P.M. Eastern time on each day the New York
Stock Exchange is open for trading or such other time or times as the trustees
may determine in accordance with the provisions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as from time to time in force. For the purpose of the
foregoing computations, on each such day when net asset value is not
calculated, the net asset value of a share of beneficial interest of the Fund
shall be deemed to be the net asset value of such share as of the close of
business of the last day on which such calculation was made.
<PAGE> 2
3. Expenses. The Fund shall assume and pay any expenses for services
rendered by a custodian for the safekeeping of the Fund's securities or other
property, for keeping its books of account, for any other charges of the
custodian and for calculating the net asset value of the Fund as provided
above. The Adviser shall not be required to pay, and the Fund shall assume and
pay, the charges and expenses of its operations, including compensation of the
trustees (other than those who are interested persons of the Adviser and other
than those who are interested persons of the distributor of the Van Kampen
American Capital family of funds but not of the Adviser, if the distributor has
agreed to pay such compensation), charges and expenses of independent
accountants, of legal counsel and of any transfer or dividend disbursing agent,
costs of acquiring and disposing of portfolio securities, cost of listing
shares on the New York Stock Exchange or other exchange interest (if any) on
obligations incurred by the Fund, costs of share certificates, membership dues
in the Investment Company Institute or any similar organization, costs of
reports and notices to shareholders, costs of registering shares of the Fund
under the federal securities laws, miscellaneous expenses and all taxes and
fees to federal, state or other governmental agencies on account of the
registration of securities issued by the Fund, filing of corporate documents or
otherwise. The Fund shall not pay or incur any obligation for any management
or administrative expenses for which the Fund intends to seek reimbursement
from the Adviser without first obtaining the written approval of the Adviser.
The Adviser shall arrange, if desired by the Fund, for officers or employees of
the Adviser to serve, without compensation from the Fund, as trustees, officers
or agents of the Fund if duly elected or appointed to such positions and
subject to their individual consent and to any limitations imposed by law.
4. Interested Persons. Subject to applicable statutes and regulations,
it is understood that trustees, officers, shareholders and agents of the Fund
are or may be interested in the Adviser as directors, officers, shareholders,
agents or otherwise and that the directors, officers, shareholders and agents
of the Adviser may be interested in the Fund as trustees, officers,
shareholders, agents or otherwise.
5. Liability. The Adviser shall not be liable for any error of judgment
or of law, or for any loss suffered by the Fund in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6. (a) Term. This Agreement shall become effective on the date hereof
and shall remain in full force until May 30, 1997 unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only as long as such continuance is specifically approved as
least annually in the manner required by the Investment Company Act of 1940,
as amended.
(b) Termination. This Agreement shall automatically terminate in the
event of its assignment. This Agreement may be terminated at any time without
the payment of any penalty by the Fund or by the Adviser on sixty (60) days
written notice to the other party. The Fund may effect termination by action
of the Board of Trustees or by vote of a majority of the outstanding shares of
stock of the Fund, accompanied by appropriate notice. This Agreement may be
terminated at any time without the payment of any penalty and without advance
notice by the Board of Trustees or by vote of a majority of the outstanding
shares of the Fund in the event that it shall have been established by a court
of competent jurisdiction that the Adviser or any officer or director of the
Adviser has taken any action which results in a breach of the covenants of the
Adviser set forth herein.
<PAGE> 3
(c) Payment upon Termination. Termination of this Agreement shall not
affect the right of the Adviser to receive reimbursement of any expenses as
described in Section 3 for which reimbursement is due prior to such
termination.
7. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
shall not thereby be affected.
8. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
9. Disclaimer. The Adviser acknowledges and agrees that, as provided by
Section 8.1 of the Declaration of Trust of the Trust, (i) this Agreement has
been executed by officers of the Trust in their capacity as officers, and not
individually, and (ii) the shareholders, trustees, officers, employees and
other agents of the Trust and the Fund shall not personally be bound by or
liable hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder and that any such resort may
only be had upon the assets and property of the Fund.
10. Governing Law. All questions concerning the validity, meaning and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year first above written.
VAN KAMPEN AMERICAN CAPITAL
FOREIGN SECURITIES FUND
By: /s/ DENNIS J. MCDONNELL
-----------------------------
Name: Dennis J. McDonnell
----------------------------
Its: President
----------------------------
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
By:/s/ PETER W. HEGEL
------------------------------
Name: Peter W. Hegel
----------------------------
Its: Executive Vice President
----------------------------
<PAGE> 1
EXHIBIT (9)(a)
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, dated October 31, 1996, by and between the parties set
forth in Schedule A hereto (designated collectively hereafter as the "Funds")
and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware
corporation ("Advisory Corp.").
W I T N E S S E T H:
WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, Advisory Corp. has the capability of providing certain accounting
services to the Funds; and
WHEREAS, each desires to utilized Advisory Corp. in the provision of such
accounting services; and
WHEREAS, Advisory Corp. intends to maintain its staff in order to
accommodate the provision of all such services.
NOW THEREFORE, in consideration of the premises and the mutual covenants
spelled out herein, it is agreed between the parties hereto as follows:
1. Appointment of Advisory Corp.. As agent, Advisory Corp. shall provide each
of the Funds the accounting services ("Accounting Services") as set forth in
Paragraph 2 of this Agreement. Advisory Corp. accepts such appointment and
agrees to furnish the Accounting Services in return for the compensation
provided in Paragraph 3 of this Agreement.
2. Accounting Services to be Provided. Advisory Corp. will provide to each
respective Fund accounting related services in connection with the maintenance
of the financial records of such Fund, including without limitation: (i)
maintenance of the general ledger and other financial books and records; (ii)
processing of portfolio transactions; (iii) coordination of the valuation of
portfolio securities; (iv) calculation of the Fund's net asset value; (v)
coordination of financial and regulatory reporting; (vi) preparation of
financial reports for each Fund's Board of Trustees; (vii) coordination of tax
and financial compliance issues; (viii) the establishment and maintenance of
accounting policies; (ix) recommendations with respect to dividend policies;
(x) preparation of each Fund's financial reports and other accounting and tax
related notice information to shareholders; and (xi) the assimilation and
interpretation of accounting data for meaningful management review. Advisory
Corp. shall provide accurate maintenance of each Fund's financial books and
records as required by the applicable securities statutes and regulations, and
shall hire persons (collectively the "Accounting Service Group") as needed to
provide such Accounting Services.
<PAGE> 2
3. Expenses and Reimbursements. Advisory Corp. shall be reimbursed by the
Funds for all costs and services incurred in connection with the provision of
the aforementioned Accounting Services ("Accounting Service Expenses"),
including but not limited to all salary and related benefits paid to the
personnel of the Accounting Service Group, overhead and expenses related to
office space and related equipment and out-of-pocket expenses.
The Accounting Services Expenses will be paid by Advisory Corp. and
reimbursed by the Funds. Advisory Corp. will tender to each Fund a monthly
invoice as of the last business day of each month which shall certify the total
support service expenses expended. Except as provided herein, Advisory Corp.
will receive no other compensation in connection with Accounting Services
rendered in accordance with this Agreement.
4. Payment for Accounting Service Expenses Among the Funds. As to one quarter
(25%) of the Accounting Service Expenses incurred under the Agreement, the
expense shall be allocated between all Funds based on the number of classes of
shares of beneficial interest that each respective Fund has issued. As to the
remaining three quarters (75%) of the Accounting Service Expenses incurred
under the Agreement, the expense shall be allocated between all Funds based on
their relative net assets. For purposes of determining the percentage of
expenses to be allocated to any Fund, the liquidation preference of any
preferred shares issued by any such Fund shall not be considered a liability of
such Fund for the purposes of calculating relative net assets of such Fund.
5. Maintenance of Records. All records maintained by Advisory Corp. in
connection with the performance of its duties under this Agreement will remain
the property of each respective Fund and will be preserved by Advisory Corp.
for the periods prescribed in Section 31 of the 1940 Act and the rules
thereunder or such other applicable rules that may be adopted from time to time
under the act. In the event of termination of the Agreement, such records will
be promptly delivered to the respective Funds. Such records may be inspected
by the respective Funds at reasonable times.
6. Liability of Advisory Corp. Advisory Corp. shall not be liable to any Fund
for any action taken or thing done by it or its agents or contractors on behalf
of the fund in carrying out the terms and provisions of the Agreement if done
in good faith and without gross negligence or misconduct on the part of
Advisory Corp., its agents or contractors.
7. Indemnification By Funds. Each Fund will indemnify and hold Advisory Corp.
harmless from all lost, cost, damage and expense, including reasonable expenses
for legal counsel, incurred by Advisory Corp. resulting from: (a) any claim,
demand, action or suit in connection with Advisory Corp.'s acceptance of this
Agreement; (b) any action or omission by Advisory Corp. in the performance of
its duties hereunder; (c) Advisory Corp.'s acting upon instructions believed by
it to have been executed by a duly authorized officer of the Fund; or (d)
Advisory Corp.'s acting upon information provided by the Fund in form and under
policies agreed to by Advisory Corp. and the Fund. Advisory Corp. shall not be
entitled to such indemnification in respect of actions or omissions
constituting gross negligence or willful misconduct of Advisory Corp. or its
agents or contractors. Prior to confessing any claim against it which may be
subject to this indemnification, Advisory Corp. shall give the Fund reasonable
opportunity to defend against said claim in its own name or in the name of
Advisory Corp.
8. Indemnification By Advisory Corp. Advisory Corp. will indemnify and hold
harmless each Fund from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Fund resulting from any
claim, demand, action or suit arising out of Advisory Corp.'s failure to comply
with the terms of this Agreement or which arises out of the gross negligence or
willful misconduct of Advisory Corp. or its agents or contractors; provided
that such negligence or misconduct is not attributable to the Funds, their
agents or contractors. Prior to confessing any claim against it which may be
subject to this indemnification, the Fund shall give Advisory Corp. reasonable
opportunity to defend against said claim in its own name or in the name of such
Fund.
2
<PAGE> 3
9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers or shareholders of both the Funds and Advisory
Corp. (including Advisory Corp.'s affiliates), and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided by a specific provision of applicable
law.
11. Execution, Amendment and Termination. The term of this Agreement shall
begin as of the date first above written, and unless sooner terminated as
herein provided, this Agreement shall remain in effect through May, 1998, and
thereafter from year to year, if such continuation is specifically approved at
least annually by the Board of Trustees of each Fund, including a majority of
the independent Trustees of each Fund. This Agreement may be modified or
amended from time to time by mutual agreement between the parties hereto and
may be terminated after May, 1998, by at least sixty (60) days' written notice
given by one party to the others. Upon termination hereof, each Fund shall pay
to Advisory Corp. such compensation as may be due as of the date of such
termination and shall likewise reimburse Advisory Corp. for its costs, expenses
and disbursements payable under this Agreement to such date. This Agreement
may be amended in the future to include as additional parties to the Agreement
other investment companies for with Advisory Corp., any subsidiary or affiliate
serves as investment advisor or distributor if such amendment is approved by
the President of each Fund.
12. Assignment. Any interest of Advisory Corp. under this Agreement shall not
be assigned or transferred, either voluntarily or involuntarily, by operation
of law or otherwise, without the prior written consent of the Funds. This
Agreement shall automatically and immediately terminate in the event of its
assignment without the prior written consent of the Funds.
13. Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt
of such notices. Until further notice to the other parties, it is agreed that
for this purpose the address of each Fund is One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, Attention: President and that of Advisory Corp. for
this purpose is One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
Attention: President.
14. Personal Liability. As provided for in the Agreement and Declaration of
Trust of the various Funds, under which the Funds are organized as
unincorporated trusts, the shareholders, trustees, officers, employees and
other agents of the Fund shall not personally be found by or liable for the
matters set forth hereto, nor shall resort be had to their private property for
the satisfaction of any obligation or claim hereunder.
15. Interpretative Provisions. In connection with the operation of this
Agreement, Advisory Corp. and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement.
16. State Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Illinois.
17. Captions. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this amended and restated
Agreement to be executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ RONALD A. NYBERG
-----------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ DENNIS J. McDONNELL
------------------------------------
Dennis J. McDonnell, President
4
<PAGE> 5
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital Intermediate Term High Income Trust
Van Kampen American Capital Limited Term High Income Trust
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
("MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
5
<PAGE> 6
OPEN END FUNDS
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL
FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Government Target Fund ("Government Target
Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT")
on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities
Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust")
on behalf of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
6
<PAGE> 7
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY
CORP. ("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government
Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax
Free Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income
Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate Term Municipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund
("Florida Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust")
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income
Fund")
Van Kampen American Capital Equity Trust ("Equity Trust")
on behalf of its series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Balanced Fund ("Balanced Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great
American Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities
Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund
("Pennsylvania Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund");
and
7
<PAGE> 1
EXHIBIT (9)(b)
AMENDED AND RESTATED
LEGAL SERVICES AGREEMENT
THIS AGREEMENT, dated as of October 31, 1996, by and between the parties
as set forth in Schedule 1, attached hereto and incorporated by reference
(designated collectively hereafter as the "Funds"), and VAN KAMPEN AMERICAN
CAPITAL, INC., a Delaware corporation ("Van Kampen").
W I T N E S S E T H:
WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, Van Kampen has the capability of providing certain legal services
to the Funds; and
WHEREAS, each Fund desires to utilize Van Kampen in the provision of such
legal services; and
WHEREAS, Van Kampen intends to increase its staff in order to accommodate
the provision of all such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
spelled out herein, it is agreed between the parties hereto as follows:
1. Appointment of Van Kampen. As agent, Van Kampen shall provide each of the
Funds the legal services (the "Legal Services") as set forth in Paragraph 2 of
this Agreement. Van Kampen accepts such appointments and agrees to furnish the
Legal Services in return for the compensation provided in Paragraph 3 of this
Agreement.
2. Legal Services to be Provided. Van Kampen will provide to the Funds the
following legal services, including without limitation: accurate maintenance of
the Funds' Corporate Minute books and records, preparation and oversight of
each Fund's regulatory reports and other information provided to shareholders
as well as responding to day-to-day legal issues on behalf of the Funds. Van
Kampen shall hire persons (collectively the "Legal Services Group") as needed
to provide such Legal Services and in such numbers as may be agreed from time
to time.
3. Expenses and Reimbursement. The Legal Services expenses (the "Legal
Services Expenses") for which Van Kampen may be reimbursed are salary and
salary related benefits, including but not limited to bonuses, group insurance
and other regular wages paid to the personnel of the Legal Services Group, as
well as overhead
1
<PAGE> 2
and expenses related to office space and necessary equipment. The Legal
Services Expenses will be paid by Van Kampen and reimbursed by the Funds. Van
Kampen will tender to each Fund a monthly invoice as of the last business day
of each month which shall certify the total Legal Service Expenses expended.
Except as provided herein, Van Kampen will receive no other compensation in
connection with Legal Services rendered in accordance with this Agreement, and
Van Kampen will be responsible for all other expenses relating to the providing
of Legal Services.
4. Payment for Legal Services Expense Among the Funds. One half (50%) of the
Legal Services Expenses incurred under the Agreement shall be attributable
equally to each respective Fund and all other funds to whom Van Kampen provides
Legal Services, including all other Funds for which Van Kampen serves as
investment adviser and distributor and the Govett Funds (the Non-Participating
Funds"). Van Kampen shall assume the costs of Legal Services for the
Non-Participating Funds for which reimbursement is not received. The remaining
one half (50%) of the Legal Services Expenses shall be in allocated (a) in the
event services are attributable to specific funds (including the
Non-Participating Funds) based on such specific time allocations; and (b) in
the event services are attributable only to types of funds (i.e. closed-end and
open-end funds), the relative amount of time spent on each type of fund and
then further allocated between funds of that type on the basis of relative net
assets at the end of the period.
5. Maintenance of Records. All records maintained by Van Kampen in connection
with the performance of its duties under this Agreement will remain the
property of each respective Fund and will be preserved by Van Kampen for the
periods prescribed in Section 31 of the 1940 Act and the rules thereunder or
such other applicable rules that may be adopted from time to time under the
Act. In the event of termination of the Agreement, such records will be
promptly delivered to the respective Funds. Such records may be inspected by
the respective Funds at reasonable times.
6. Liability of Van Kampen. Van Kampen shall not be liable to any Fund for any
action taken or thing done by it or its agents or contractors on behalf of the
Fund in carrying out the terms and provisions of the Agreement if done in good
faith and without negligence or misconduct on the part of Van Kampen, its
agents or contractors.
7. Indemnification By Funds. Each Fund will indemnify and hold Van Kampen
harmless from all loss, cost, damage and expense, including reasonable expenses
for legal counsel, incurred by Van Kampen resulting from (a) any claim, demand,
action or suit in connection with Van Kampen's acceptance of this Agreement;
(b) an action or omission by Van Kampen in the performance of its duties
hereunder; (c) Van Kampen's acting upon instructions believed by it to have
been executed by a duly authorized office of the Fund; or (d) Van Kampen's
acting upon information provided by the Fund in form and under policies agreed
to by Van Kampen and the Fund. Van Kampen shall not be entitled to such
indemnification in respect of action or omissions constituting negligence or
willful misconduct of Van Kampen or its agents or contractors. Prior to
2
<PAGE> 3
confessing any claim against it which may be subject to this indemnification,
Van Kampen shall give the Fund reasonable opportunity to defend against said
claim on its own name or in the name of Van Kampen.
8. Indemnification By Van Kampen. Van Kampen will indemnify and hold harmless
each Fund from all loss, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by the Fund resulting from any claim,
demand, action or suit arising out of Van Kampen's failure to comply with the
terms of this Agreement or which arises out of the negligence or willful
misconduct of Van Kampen or its agents or contractors; provided, that such
negligence or misconduct is not attributable to the Funds, their agents or
contractors. Prior to confessing any claim against it which may be subject to
this indemnification, the Fund shall give Van Kampen reasonable opportunity to
defend against said claim in its own name or in the name of such Fund.
9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as necessary to effectuate the purposes hereof.
10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers, or shareholders of both the Funds and Van Kampen
(including Van Kampen's affiliates), and that the existence of any such dual
interest shall not affect the validity hereof or of any transactions hereunder
except as otherwise provided by a specific provision of applicable law.
11. Execution, Amendment and Termination. The term of this Agreement shall
begin as of the date first above written, and unless sooner terminated as
herein provided, this Agreement shall remain in effect through May 31, 1997,
and thereafter from year to year if such continuation is specifically approved
at least annually by the Board of Trustees of each Fund, including a majority
of the independent Trustees of each Fund. The Agreement may be modified or
amended from time to time by mutual agreement between the and shall likewise
reimburse Van Kampen for its costs, expenses and disbursements payable under
this Agreement to such date. This Agreement may be amended in the future to
include as additional parties to the Agreement other investment companies for
which Van Kampen, any subsidiary or affiliate serves as investment advisor or
distributor.
12. Assignment. Any interest of Van Kampen under this Agreement shall not be
assigned or transferred, either voluntarily or involuntarily, by operation of
law or otherwise, without the prior written consent of the Fund. This Agreement
shall automatically and immediately terminate in the event of its assignment
without the prior written consent of the Fund.
13. Notice. Any notice under this agreement shall be in writing, addressed and
delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt
of such notices. Until further notice to the other parties, it is agreed that
for this purpose the address of each
3
<PAGE> 4
Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention:
President and the address of Van Kampen. for this purpose is One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: General Counsel.
14. Personal Liability. As provided for in the Declaration of Trust of the
various Funds, under which the Funds are organized as unincorporated trust
under the laws of the State of Delaware and Pennsylvania, as the case may be,
the shareholders, trustees, officers, employees and other agents of the Fund
shall not personally be found by or liable for the matters set forth hereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.
15. Interpretative Provisions. In connection with the operation of this
agreement, Van Kampen and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their opinion be consistent with the general tenor of this Agreement.
16. State Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Illinois.
17. Captions. The captions in the Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction effect.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ RONALD A. NYBERG
---------------------------------
Ronald A. Nyberg
Executive Vice President
VAN KAMPEN AMERICAN CAPITAL, INC.
By: /s/ DENNIS J. McDONNELL
---------------------------------
Dennis J. McDonnell
Executive Vice President
5
<PAGE> 6
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its
series, Van Kampen American Capital U.S. Government Fund
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series, Van
Kampen American Capital Insured Tax Free Income Fund, Van Kampen American
Capital Tax Free High Income Fund, Van Kampen American Capital California
Insured Tax Free Fund, Van Kampen American Capital Municipal Income Fund,
Van Kampen American Capital Intermediate Term Municipal Income Fund, Van
Kampen American Capital New York Tax Free Income Fund, Van Kampen American
Capital New Jersey Tax Free Income Fund, Van Kampen American Capital
Florida Insured Tax Free Income Fund, Van Kampen American Capital
California Tax Free Income Fund, Van Kampen American Capital Michigan Tax
Free Income Fund, Van Kampen American Capital Missouri Tax Free Income
Fund and Van Kampen American Capital Ohio Tax Free Income Fund
3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series, Van Kampen
American Capital High Yield Fund, Van Kampen American Capital Short-Term
Global Income Fund and Van Kampen American Capital Strategic Income Fund
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series, Van
Kampen American Capital Utility Fund, Van Kampen American Capital Balanced
Fund, Van Kampen American Capital Value Fund, Van Kampen American Capital
Growth Fund, Van Kampen American Capital Great American Companies Fund,
Van Kampen American Capital Prospector Fund and Van Kampen American
Capital Aggressive Growth Fund
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
13. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
14. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
15. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
16. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
18. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
19. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
6
<PAGE> 7
20. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS
23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS
25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK
MUNICIPALS
26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA
MUNICIPALS
27. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
28. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
30. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
31. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
32. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
39. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
40. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
41. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its sub-trusts, Explorer
Institutional Active Core Fund and Explorer Institutional Limited Duration
Fund
7
<PAGE> 1
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders
Van Kampen American Capital Foreign Securities Fund:
We consent to the use of our report included in the Statement of Additional
Information and to the reference to our Firm under the heading "Investment
Advisory and Other Services" in the Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
Chicago, Illinois
April 22, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 38450942
<INVESTMENTS-AT-VALUE> 40936971
<RECEIVABLES> 9704848
<ASSETS-OTHER> 58663
<OTHER-ITEMS-ASSETS> 63068
<TOTAL-ASSETS> 50763550
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6199208
<TOTAL-LIABILITIES> 6199208
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39900428
<SHARES-COMMON-STOCK> 4284714
<SHARES-COMMON-PRIOR> 10000
<ACCUMULATED-NII-CURRENT> (54939)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2231074
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2487779
<NET-ASSETS> 44564342
<DIVIDEND-INCOME> 311342
<INTEREST-INCOME> 105322
<OTHER-INCOME> 0
<EXPENSES-NET> (164048)
<NET-INVESTMENT-INCOME> 252616
<REALIZED-GAINS-CURRENT> 2224597
<APPREC-INCREASE-CURRENT> 2487779
<NET-CHANGE-FROM-OPS> 4964992
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (314014)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8206435
<NUMBER-OF-SHARES-REDEEMED> (3648744)
<SHARES-REINVESTED> 30102
<NET-CHANGE-IN-ASSETS> 44564342
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 164048
<AVERAGE-NET-ASSETS> 71997705
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.052
<PER-SHARE-GAIN-APPREC> 0.413
<PER-SHARE-DIVIDEND> (0.065)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.400
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
