<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 2000
REGISTRATION NOS. 2-10559
811-630
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 41 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 35 [X]
</TABLE>
VAN KAMPEN ENTERPRISE FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
1 PARKVIEW PLAZA, PO BOX 5555, OAKBROOK TERRACE, ILLINOIS 60181-5555
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
A. THOMAS SMITH III
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN INVESTMENTS INC.
1 PARKVIEW PLAZA
PO BOX 5555
OAKBROOK TERRACE, ILLINOIS 60181-5555
(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
---------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
VAN KAMPEN
ENTERPRISE FUND
Van Kampen Enterprise Fund's investment objective is to seek capital
appreciation by investing in a portfolio of securities consisting principally of
common stocks.
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulator, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This prospectus is dated SEPTEMBER 25, 2000
CLASS D SHARES
PROSPECTUS
[VAN KAMPEN FUNDS LOGO]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 5
Investment Objective, Policies and Risks........... 5
Investment Advisory Services....................... 8
Purchase of Shares................................. 10
Redemption of Shares............................... 11
Distributions from the Fund........................ 13
Shareholder Services............................... 13
Federal Income Taxation............................ 14
</TABLE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
<PAGE> 4
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek capital appreciation by investing in
a portfolio of securities consisting principally of common stocks.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing principally in common stocks which
are believed by the Fund's investment adviser to have above-average potential
for capital appreciation. The Fund invests primarily in common stocks of
"growth" companies focusing on securities believed to offer a combination of
strong business fundamentals at an attractive valuation. Portfolio securities
are typically sold when the Fund's investment adviser's assessments of the
capital appreciation potential of such securities materially change. The Fund
may invest up to 15% of its total assets in securities of foreign issuers. The
Fund may purchase and sell certain derivative instruments, such as options,
futures and options on futures, for various portfolio management purposes.
INVESTMENT RISKS
An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in common
stocks generally are affected by changes in the stock markets, which fluctuate
substantially over time, sometimes suddenly and sharply. The Fund emphasizes a
"growth" style of investing. The market values of growth common stocks may be
more volatile than other types of investments. The returns on growth securities
may or may not move in tandem with the returns on other styles of investing or
the overall stock markets. During an overall stock market decline, stock prices
of small- or medium-sized companies (in which the Fund may invest) may be more
volatile and may fall more than stock prices of larger companies.
FOREIGN RISKS. Because the Fund may own securities of foreign issuers, it may be
subject to risks not usually associated with owning securities of U.S. issuers.
These risks can include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading, and foreign
taxation issues.
RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures and options on futures are
examples of derivative instruments. Derivative instruments involve risks
different from the direct investment in underlying securities. These risks
include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; and risks that the transactions may not be
liquid.
MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment techniques,
and the Fund's performance may lag behind that of similar funds.
INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:
- Seek capital appreciation over the long term
- Do not seek current income from their investment
- Can withstand substantial volatility in the value of their shares of the Fund
- Wish to add to their investment portfolio a fund that emphasizes a "growth"
style of investing in common stocks
An investment in the Fund is not a deposit of any bank or other insured
depository institution. An investment in the Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-term
investment, and the Fund should not be used as a trading vehicle.
3
<PAGE> 5
ANNUAL PERFORMANCE
One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund* over the ten calendar years prior to the date of this
prospectus. Remember that the past performance of the Fund is not indicative of
its future performance.
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
1990 -2.87
1991 39.23
1992 8.39
1993 10.95
1994 -0.19
1995 33.92
1996 23.49
1997 28.55
1998 23.56
1999 26.56
</TABLE>
* The Fund commenced offering Class D Shares on September 25, 2000. The
returns shown in the Annual Performance chart above (and in the Comparative
Performance chart below) are for the Class A Shares of the Fund (which are
offered in a separate prospectus). The annual return variability of the
Fund's Class D Shares would be substantially similar to that shown for the
Class A Shares because all of the Fund's shares are invested in the same
portfolio of securities; however, the actual annual returns of the Class D
Shares would be higher than the annual returns shown for the Fund's Class A
Shares because of differences in the expenses borne by each class of
shares.
The Fund's return for Class A Shares for the six month period ended June 30,
2000 was 6.58%.
During the ten-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 24.62% (for the quarter ended December 31, 1998) and the
lowest quarterly return for Class A Shares was -15.78% (for the quarter ended
September 30, 1990).
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with two broad-based market indices
that the Fund's investment adviser believes are appropriate benchmarks for the
Fund: the Standard & Poor's 500-Stock Index** and the Russell 1000 Growth
Index***; and with the Lipper Growth Fund Index****, an index of funds with
similar investment objectives. The Fund's performance figures are for the Fund's
Class A Shares and include the maximum sales charges paid by investors on such
Class A Shares*. The indices' performance figures do not include any commissions
or sales charges that would be paid by investors purchasing the securities
represented by the indices. An investment cannot be made directly in the
indices. Average annual total returns are shown for the periods ended December
31, 1999 (the most recently completed calendar year prior to the date of this
prospectus). Remember that the past performance of the Fund is not indicative of
its future performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns
for the
Periods Ended Past Past Past 10
December 31, 1999 1 Year 5 Years Years
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen
Enterprise Fund--
Class A Shares* 19.25% 25.64% 17.66%
Standard & Poor's
500-Stock Index** 21.04% 28.56% 18.21%
Russell 1000
Growth Index*** 33.16% 32.41% 20.32%
Lipper Growth
Fund Index**** 27.96% 26.27% 17.25%
.......................................................
</TABLE>
* The Fund commenced offering Class D Shares on September 25, 2000. The
returns shown in the Comparative Performance chart above are for the Class
A Shares of the Fund (which are offered in a separate prospectus). The
annual return variability of the Fund's Class D Shares would be
substantially similar to that shown for the Class A Shares because all of
the Fund's shares are invested in the same portfolio of securities; however
the actual annual returns of the Class D Shares would be higher than the
annual returns shown for the Class A Shares because of differences in the
expenses borne by each class of shares.
** The Standard and Poor's 500-Stock Index consists of 500 widely-held common
stock of companies with market capitalization of $1 billion or more that
are a representative sample of approximately 100 industries, chosen mainly
for market size, liquidity and industry group representation (assumes
dividends are reinvested).
*** The Russell 1000 Growth Index measures the performance of those Russell
1000 Index companies with higher price-to-book ratios and higher forecasted
growth values. The Russell 1000 Index is an index of the 1,000 largest U.S.
companies based on market capitalization.
**** Since Lipper Analytical Services has reclassified how it categorizes many
of its indices, the Fund's investment adviser believes the new system is
less applicable for this Fund. Based on the Fund's asset composition, the
Fund's investment adviser believes adding the
4
<PAGE> 6
Russell 1000 Growth Index provides a more appropriate benchmark for the
Fund, and the Lipper Growth Fund Index will not be shown in future
prospectuses of the Fund.
FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class D
(fees paid directly from your investment) Shares
------------------------------------------------------
<S> <C> <C>
Maximum sales charge (load) imposed on None
purchases
......................................................
Maximum deferred sales charge (load) None
......................................................
Maximum sales charge (load) imposed on
reinvested dividends None
......................................................
Redemption fee None
......................................................
Exchange fee None
......................................................
</TABLE>
------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES Class D
(expenses that are deducted from Fund assets) Shares
----------------------------------------------------------
<S> <C> <C>
Management fees 0.44%
..........................................................
Other expenses 0.24%
..........................................................
Total annual fund operating expenses 0.68%
..........................................................
</TABLE>
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class D Shares $69 $218 $ 379 $847
....................................................................
</TABLE>
INVESTMENT OBJECTIVE,
POLICIES AND RISKS
The Fund's investment objective is to seek capital appreciation by investing in
a portfolio of securities consisting principally of common stocks. Any income
received from the investment of portfolio securities is incidental to the Fund's
investment objective. The Fund's investment objective is a fundamental policy
and may not be changed without shareholder approval of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). There are risks inherent in all investments in
securities; accordingly there can be no assurance that the Fund will achieve its
investment objective.
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing principally in common stocks which
it believes have above-average potential for capital appreciation. The Fund's
primary approach is to seek what the Fund's investment adviser believes to be
unusually attractive growth investments on an individual company basis. The Fund
may invest in securities that have above average volatility of price movement.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary. In an effort to reduce the portfolio's
exposure to any individual security price decline, the Fund spreads its
investments over many different companies in a variety of industries.
5
<PAGE> 7
In selecting securities for investment, the Fund generally focuses on common
stocks of "growth" companies, including companies with new products, services or
processes. The investment adviser seeks such securities which it believes offer
a combination of strong business fundamentals at an attractive valuation. Growth
companies generally include those companies with established records of growth
in sales or earnings that the Fund's investment adviser believes are in or are
entering into a growth cycle in their respective businesses, with the
expectation that the stock of such companies will increase in value. Stocks of
different types, such as "growth" stocks or "value" stocks, tend to shift in and
out of favor depending on market and economic conditions. Thus, the value of the
Fund's investments in "growth" stocks will vary and at times may be lower or
higher than that of other types of funds. The market values of "growth" common
stocks may be more volatile than other types of investments. The Fund may invest
in companies generating or applying new technologies, new or improved
distribution techniques or new services, which companies may benefit from
changing consumer demands or lifestyles. The Fund may also invest in companies
that have projected earnings in excess of the average for their sector or
industry. In each case, the Fund's investment adviser believes companies have
prospects that are favorable for above-average capital appreciation. The Fund
may also focus its investments on stocks of companies in cyclical industries
during periods when their securities appear attractive for capital appreciation.
The companies in which the Fund invests may be in any market capitalization
range, provided the Fund's investment adviser believes the investment is
consistent with the Fund's objective. The securities of small- or medium-sized
companies may be subject to more abrupt or erratic market movements than
securities of larger companies or the market averages in general. In addition,
such companies typically are subject to a greater degree of change in earnings
and business prospects than are larger companies. Thus, to the extent the Fund
invests in small- and medium-sized companies, the Fund may be subject to greater
risk than that assumed through investment in the equity securities of
larger-capitalization companies.
The Fund may dispose of a security whenever, in the opinion of the Fund's
investment adviser, factors indicate it is desirable to do so. Such factors
include change in economic or market factors in general or with respect to a
particular industry, a change in the market trend or other factors affecting an
individual security, changes in the relative market performance or appreciation
possibilities offered by individual securities and other circumstances bearing
on the desirability of a given investment.
The Fund invests principally in common stocks. Common stocks are shares of a
corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other class of
securities, including such entity's debt securities, preferred stock and other
senior equity securities. Common stock usually carries with it the right to vote
and frequently an exclusive right to do so.
While the Fund invests principally in common stocks, the Fund may invest in
preferred stocks and warrants. Preferred stock generally has a preference as to
dividends and liquidation over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure. Unlike interest payments on debt
securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions. Generally, warrants are securities that may be
exchanged for a prescribed amount of common stock or other equity security of
the issuer within a particular period of time at a specified price or in
accordance with a specified formula.
RISKS OF INVESTING IN
SECURITIES OF FOREIGN ISSUERS
The Fund may invest up to 15% of its total assets in securities of foreign
issuers. Securities of foreign issuers may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), the
imposition of foreign exchange limitations (including currency blockage),
withholding taxes on income or capital transactions or other restrictions,
higher transaction costs (including higher brokerage, custodial and settlement
costs and currency conversion costs) and possible difficulty in enforcing
contractual obligations or taking judicial action. Foreign securities may not be
as liquid and may be more volatile than comparable domestic securities.
6
<PAGE> 8
In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive auditing, accounting and financial reporting disclosure
requirements than domestic issuers. There is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in the
United States, and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the United States, the Fund may experience
settlement difficulties or delays not usually encountered in the United States.
Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact returns and result in temporary periods when assets of the Fund are
not fully invested or attractive investment opportunities are foregone.
The Fund may invest in securities of issuers in developing or emerging market
countries. Investments in securities of issuers in developing or emerging market
countries are subject to greater risks than investments in securities of
developed countries since emerging market countries tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed countries.
In addition to the increased risks of investing in foreign securities, there are
often increased transaction costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.
USING OPTIONS, FUTURES CONTRACTS
AND RELATED OPTIONS
The Fund may, but is not required to, use various investment strategic
transactions including options, futures contracts and options on futures
contracts, in several different ways depending upon the status of the Fund's
portfolio and the expectations of the Fund's investment adviser concerning the
securities markets. Although the Fund's investment adviser seeks to use the
practices to further the Fund's investment objectives, no assurance can be given
that the use of these practices will achieve this result.
In times of stable or rising stock prices, the Fund generally seeks to be fully
invested in equity securities. Even when the Fund is fully invested, however,
prudent management requires that at least a small portion of assets be available
as cash to honor redemption requests and for other short-term needs. The Fund
may also have cash on hand that has not yet been invested. The portion of the
Fund's assets that is invested in cash or cash equivalents does not fluctuate
with stock market prices, so that, in times of rising market prices, the Fund
may underperform the market in proportion to the amount of cash or cash
equivalents in its portfolio. By purchasing stock index futures contracts,
however, the Fund can compensate for the cash portion of its assets and may
obtain performance equivalent to investing 100% of its assets in equity
securities.
If the Fund's investment adviser forecasts a market decline, the Fund may seek
to reduce its exposure to the securities markets by increasing its cash
position. By selling stock index futures contracts instead of portfolio
securities, a similar result can be achieved to the extent that the performance
of the futures contracts correlates to the performance of the Fund's portfolio
securities. Sales of futures contracts frequently may be accomplished more
rapidly and at less cost than the actual sale of securities. Once the desired
hedged position has been effected, the Fund could then liquidate securities in a
more deliberate manner.
The Fund can engage in options transactions on securities, indices or on futures
to attempt to manage the portfolio's risk in advancing or declining markets. For
example, the value of a put option generally increases as the value of the
underlying security declines below a specified level. Value is protected against
a market decline to the degree the performance of the put correlates with the
performance of the Fund's investment portfolio. If the market remains stable or
advances, the Fund can refrain from exercising the put and its portfolio will
participate in the advance, having incurred only the premium cost for the put.
Generally, the Fund expects that options will be purchased or sold on securities
exchanges. However, the Fund is authorized to purchase and sell listed and
over-the-counter options ("OTC Options"). OTC Options are subject to certain
additional risks including default by the other party to the transaction and the
liquidity of the transactions.
In certain cases, the options and futures markets provide investment or risk
management opportunities
7
<PAGE> 9
that are not available from the direct investment in underlying securities. In
addition, some strategies can be performed with greater ease and at lower cost
by utilizing the options and futures markets rather than purchasing or selling
portfolio securities. However, such transactions involve risks different from
the direct investment in underlying securities. For example, there may be
imperfect correlation between the value of the instruments and the underlying
assets. In addition, the use of such instruments includes the risks of default
by the other party to certain transactions. The Fund may incur losses that
partially or completely offset gains in portfolio positions. These transactions
may not be liquid and involve manager risk. In addition, such transactions may
involve commissions and other costs, which may increase the Fund's expenses and
reduce its return.
A more complete discussion of options, futures contracts and related options and
their risks is contained in the Fund's Statement of Additional Information which
may be obtained by investors free of charge as described on the back cover of
this prospectus.
OTHER INVESTMENTS AND RISK FACTORS
For cash management purposes, the Fund may engage in repurchase agreements with
broker-dealers, banks and other financial institutions to earn a return on
temporarily available cash. Such transactions are subject to the risk of default
by the other party.
The Fund may invest up to 10% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.
The Fund generally holds a portion of its assets in high-quality short-term debt
securities and in "investment grade" corporate debt securities in order to
provide for liquidity (collectively "temporary investments"). High-quality
short-term debt securities include securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, prime commercial paper,
certificates of deposit, bankers' acceptances and other obligations of domestic
banks having total assets of at least $500 million, and repurchase agreements.
Investment grade bonds include bonds rated Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's ("S&P"). The
market prices of such bonds can be expected to vary inversely with changes in
prevailing interest rates. Securities rated Baa by Moody's or BBB by S&P are
considered by such rating agencies to be medium-grade obligations which possess
speculative characteristics so that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher rated securities.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.
The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) and higher
portfolio turnover may result in the realization of more short-term capital
gains than if a fund had lower portfolio turnover. Increases in a fund's
transaction costs would adversely impact that fund's performance. The turnover
rate will not be a limiting factor, however, if the Fund's investment adviser
considers portfolio changes appropriate.
TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in temporary investments. Under normal market
conditions, the potential for capital appreciation on these securities will tend
to be lower than the potential for capital appreciation on other securities that
may be owned by the Fund. In taking such a defensive position, the Fund would
not be pursuing and may not achieve its investment objective.
INVESTMENT ADVISORY SERVICES
THE ADVISER. Van Kampen Asset Management Inc. is the Fund's investment adviser
(the "Adviser" or "Asset Management"). The Adviser is a wholly owned subsidiary
of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
8
<PAGE> 10
Investments is a diversified asset management company with more than three
million retail investor accounts, extensive capabilities for managing
institutional portfolios, and more than $100 billion under management or
supervision as of June 30, 2000. Van Kampen Investments' more than 50 open-end
and 39 closed-end funds and more than 2,700 unit investment trusts are
professionally distributed by leading authorized dealers nationwide. Van Kampen
Funds Inc., the distributor of the Fund (the "Distributor") and the sponsor of
the funds mentioned above, is also a wholly owned subsidiary of Van Kampen
Investments. Van Kampen Investments is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Adviser's principal office is located at 1
Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.
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. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to the average daily net assets of
the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
-----------------------------------------------------
<S> <C> <C> <C>
First $1 billion 0.50%
.....................................................
Next $1 billion 0.45%
.....................................................
Next $1 billion 0.40%
.....................................................
Over $3 billion 0.35%
.....................................................
</TABLE>
Applying this fee schedule, the effective advisory fee rate was 0.44% of the
Fund's average daily net assets for the Fund's fiscal year ended December 31,
1999. The Fund's average daily net assets are determined by taking the average
of all of the determinations of the net assets during a given calendar month.
Such fee is payable for each calendar month as soon as practicable after the end
of that month.
Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment, and provides administrative services to the Fund. The
Fund pays all charges and expenses of its day-to-day operations, including
service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of reports and proxies to shareholders, compensation
of trustees of the Trust (other than those who are affiliated persons of the
Adviser, Distributor or Van Kampen Investments) and all other ordinary business
expenses not specifically assumed by the Adviser.
From time to time, the Adviser or the Distributor may voluntarily undertake to
reduce the Fund's expenses by reducing the fees payable to them or by reducing
other expenses of the Fund in accordance with such limitations as the Adviser or
Distributor may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.").
PERSONAL INVESTMENT POLICIES. The Fund, the Adviser and the Distributor have
adopted Codes of Ethics designed to recognize the fiduciary relationships among
the Fund, the Adviser, the Distributor and their respective employees. The Codes
of Ethics 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 pre-clearance and
other procedures designed to prevent conflicts of interest.
PORTFOLIO MANAGEMENT. The Fund's management team is headed by Jeff D. New,
Senior Portfolio Manager. Mr. New has been affiliated with the Fund since 1991,
has assisted in co-managing the Fund's investment portfolio since July 1994 and
has been the Senior Portfolio Manager of the Fund's investment portfolio since
December 1994. Mr. New has been Senior Vice President and Senior Portfolio
Manager of the Adviser since December 1997. Prior to December 1997, Mr. New was
a Vice President and Portfolio Manager of the Adviser. Prior to December 1994,
Mr. New was an Associate Portfolio Manager of the Adviser. He joined the Adviser
in 1990.
Senior Portfolio Managers Michael Davis and Mary Jayne Maly are responsible as
co-managers for the day-to-day management of the Fund's investment portfolio.
Mr. Davis has been a Senior Portfolio Manager of the Adviser since April 2000,
and a Vice President and Portfolio Manager of the Adviser since March 1998.
Prior to March 1998, Mr. Davis was the owner of Davis Equity Research, a stock
research company. Mr. Davis has been an investment professional since 1983. Mr.
Davis has been a co-manager of the Fund since March 1998.
9
<PAGE> 11
Ms. Maly has been a Senior Portfolio Manager since April 2000, and a Vice
President and Portfolio Manager of the Adviser since July 1998. From July 1997
to June 1998, she was a Vice President at Morgan Stanley Asset Management Inc.
and assisted in the management of the Morgan Stanley Institutional Real Estate
Funds and the Van Kampen American Capital Real Estate Securities Fund. Prior to
July 1997, she was a Vice President and Portfolio Manager of the Adviser. Prior
to November 1992, Ms. Maly was a Vice President and Senior Equity Analyst for 8
years at Texas Commerce Investment Management Company. Ms. Maly has been a
co-manager of the Fund since July 1998.
PURCHASE OF SHARES
GENERAL
This prospectus offers Class D Shares of the Fund. Class D Shares are offered
without any sales charges on purchases or sales and without any distribution fee
(12b-1). Class D Shares are available for purchase exclusively by investors
meeting an initial minimum investment of $5 million and to investors of
tax-exempt retirement plans (Profit Sharing, 401(k), Money Purchase Pension and
Defined Benefit Plans) of Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean
Witter") or any of its subsidiaries for the benefit of certain employees of
Morgan Stanley Dean Witter and its subsidiaries.
Initial investments must be at least $5,000,000 for Class D Shares, and
subsequent investments must be at least $25 for Class D Shares. Minimum
investment amounts may be waived by the Distributor for plans involving periodic
investments and for certain retirement accounts.
Other classes of shares of the Fund may be offered through one or more separate
prospectuses of the Fund. Each class of shares of the Fund represents an
interest in the same portfolio of investments of the Fund and generally has the
same rights, except for the differing sales loads, distribution fees, services
fees and any related expenses associated with each class of shares, the
exclusive voting rights by each class with respect to any distribution plan or
service plan for such class or shares, and some classes may have different
conversion rights or shareholder servicing options.
The offering price of the Fund's Class D Shares is the Fund's net asset value
per share. The net asset value per share is determined once daily as of the
close of trading on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m., New York time) each day the Exchange is open for trading except on any day
on which no purchase or redemption orders are received or there is not a
sufficient degree of trading in the Fund's portfolio securities such that the
Fund's net asset value per share might be materially affected. The Fund's Board
of Trustees reserves the right to calculate the net asset value per share and
adjust the offering price more frequently than once daily if deemed desirable.
Net asset value per share for each class is determined by dividing the value of
the Fund's portfolio securities, cash and other assets (including accrued
interest) attributable to such class, less all liabilities (including accrued
expenses) attributable to such class, by the total number of shares of the class
outstanding. Such computation is made by using prices as of the close of trading
on the Exchange and (i) valuing securities listed or traded on a national
securities exchange at the last reported sale price, or if there has been no
sale that day, at the mean between the last reported bid and asked prices, (ii)
valuing unlisted securities at the mean between the last reported bid and asked
prices available from the National Association of Securities Dealers Automated
Quotations ("NASDAQ") or brokers-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 Adviser based on procedures approved by
the Board of Trustees of the Fund. Short-term securities are valued in the
manner described in the notes to the financial statements included in the Fund's
Statement of Additional Information.
The shares are offered to investors on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555. Shares also are offered through members
of the NASD who are acting as securities dealers ("dealers") and NASD members or
eligible non-NASD members who are acting as brokers or agents for investors
("brokers").
10
<PAGE> 12
"Dealers" and "brokers" are sometimes referred to herein as "authorized
dealers."
Shares may be purchased on any business day by completing the account
application form and forwarding the account application, directly or through an
authorized dealer, to the Fund's shareholder service agent, Van Kampen Investor
Services Inc. ("Investor Services"), a wholly owned subsidiary of Van Kampen
Investments. When purchasing shares of the Fund through this prospectus,
investors must specify that the purchase is for Class D Shares.
The offering price for Class D Shares is the next calculation of net asset value
per share after an order is received by Investor Services. Orders received by
authorized dealers prior to the close of the Exchange are priced based on the
date of receipt provided such order is transmitted to Investor Services prior to
Investor Services' close of business on such date. Orders received by authorized
dealers after the close of the Exchange or transmitted to Investor Services
after its close of business are priced based on the date of the next determined
net asset value per share provided they are received by Investor Services prior
to Investor Services' close of business on such date. It is the responsibility
of authorized dealers to transmit orders received by them to Investor Services
so they will be received in a timely manner.
The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund by telephone at (800)
341-2911 or by writing to the Fund, c/o Van Kampen Investor Services Inc., PO
Box 218256, Kansas City, MO 64121-8256.
REDEMPTION OF
SHARES
Generally, shareholders of Class D Shares of the Fund may redeem for cash some
or all of their shares without charge by the Fund at any time. The redemption
price will be the net asset value per share next determined after the receipt of
a request in proper form (see below). Redemptions completed through an
authorized dealer or a custodian/trustee of a retirement plan account may
involve additional fees charged by the dealer or custodian/trustee.
Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind will result
in recognition by the shareholder of a gain or loss for federal income tax
purposes when such securities are distributed, and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms the purchase check has cleared, which may
take up to 15 days from the date of purchase. A taxable gain or loss may be
recognized by the shareholder upon redemption of shares. Certificated shares
must be properly endorsed for transfer and must accompany a written redemption
request.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and class designation of such shares and the shareholder's account number.
The redemption request must be signed by all persons in whose names the shares
are registered. Signatures must conform exactly to the account registration. If
the proceeds of the redemption
11
<PAGE> 13
exceed $50,000, or if the proceeds are not to be paid to the record owner at the
record address, or if the record address has changed within the previous 30
days, signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some cases, however, additional documents may be necessary. Certificated
shares may be redeemed only by written request. The certificates for the shares
being redeemed must be properly endorsed for transfer and must accompany the
redemption request.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. The redemption price for such shares is
the net asset value per share next calculated after an order in proper form is
received by an authorized dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of business on such day. It is the
responsibility of authorized dealers to transmit redemption requests received by
them to the Distributor so they will be received prior to such time. Redemptions
completed through an authorized dealer may involve additional fees charged by
the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Van Kampen Investments and its subsidiaries, including Investor
Services, and the Fund employ procedures considered by them to be reasonable to
confirm that instructions communicated by telephone are genuine. Such procedures
include requiring certain personal identification information prior to acting
upon telephone instructions, tape-recording telephone communications and
providing written confirmation of instructions communicated by telephone. If
reasonable procedures are employed, none of Van Kampen Investments, Investor
Services or the Fund will be liable for following telephone instructions which
it reasonably believes to be genuine. Telephone redemptions may not be available
if the shareholder cannot reach Investor Services by telephone, whether because
all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Fund's other redemption procedure previously
described. Requests received by Investor Services prior to 4:00 p.m., New York
time, will be processed at the next determined net asset value per share. These
privileges are available for most accounts other than retirement accounts or
accounts with shares represented by certificates. If an account has multiple
owners, Investor Services may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account that
has a value on the date of the notice of redemption less than the minimum
initial investment as specified in this prospectus. At least 60 days' advance
written notice of any such involuntary redemption will be provided to the
shareholder and such shareholder will be given an opportunity to purchase the
required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.
12
<PAGE> 14
DISTRIBUTIONS FROM THE FUND
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.
DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Trustees, is to
distribute all or substantially all of its net investment income quarterly as
dividends to shareholders. Dividends are automatically applied to purchase
additional shares of the Fund at the next determined net asset value unless the
shareholder instructs otherwise.
CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. The Fund distributes any capital gains to
shareholders at least annually. As in the case of dividends, capital gain
dividends are automatically reinvested in additional shares of the Fund at the
next determined net asset value unless the shareholder instructs otherwise.
SHAREHOLDER SERVICES
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Fund's Statement of Additional Information or contact your
authorized dealer.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share on the applicable
payable date of the dividend or capital gain dividend. Unless the shareholder
instructs otherwise, the reinvestment plan is automatic. This instruction may be
made by telephone by calling (800) 341-2911 ((800) 421-2833 for the hearing
impaired) or by writing to Investor Services. The investor may, on the account
application form or prior to any declaration, instruct that dividends and/or
capital gain dividends be paid in cash, be reinvested in the Fund at the next
determined net asset value, or be invested in another participating Van Kampen
fund at the next determined net asset value.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit the shareholder's bank
account on a regular basis to invest predetermined amounts in the Fund.
Additional information is available from the Distributor or your authorized
dealer.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any participating Van Kampen fund based on the next determined net
asset value per share of each fund after requesting the exchange without any
sales charge, subject to certain limitations. Shares of the Fund may be
exchanged for shares of any participating Van Kampen fund only if shares of that
participating Van Kampen fund are available for sale; however, during periods of
suspension of sales, shares of a participating Van Kampen fund may be available
for sale only to existing shareholders of a participating Van Kampen fund.
Shareholders seeking an exchange into a participating Van Kampen fund should
obtain and read the current prospectus for such fund prior to implementing an
exchange. A prospectus of any of the participating Van Kampen funds may be
obtained from an authorized dealer or the Distributor.
Exchanges of shares are sales of shares of one participating Van Kampen fund and
purchases of shares of another participating Van Kampen fund. The sale may
result in a gain or loss for federal income tax purposes.
If the exchanging shareholder does not have an account in the fund whose shares
are being acquired, a new account will be established with the same
registration, dividend and capital gain dividend options (except dividend
diversification) and authorized dealer of record as the account from which
shares are exchanged, unless otherwise specified by the shareholder. In order to
establish a systematic withdrawal plan for the new account or reinvest dividends
from the new account into another fund, however, an exchanging shareholder must
submit a specific request. The Fund reserves the right to reject any order to
acquire its shares through exchange. In addition, the Fund and other
participating Van Kampen funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disal-
13
<PAGE> 15
lowing the exchange privilege to such shareholders. For further information on
these restrictions, see the Fund's Statement of Additional Information. The Fund
may modify, restrict or terminate the exchange privilege at any time on 60 days'
notice to its shareholders of any termination or material amendment.
Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares of the fund which the
shareholder is redeeming will be redeemed at the net asset value per share next
determined on the date of receipt. Shares of the fund that the shareholder is
purchasing will also normally be purchased at the net asset value per share next
determined on the date of receipt. Exchange requests received on a business day
after the time that shares of the funds involved in the request are priced will
be processed on the next business day in the manner described herein.
FEDERAL INCOME TAXATION
Distributions of the Fund's investment company taxable income (generally
ordinary income and net short-term capital gain) are taxable to shareholders as
ordinary income, to the extent of the Fund's earnings and profits, whether paid
in cash or reinvested in additional shares. Distributions of the Fund's net
capital gain (which is the excess of net long-term capital gain over net
short-term capital loss) as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains, whether paid in cash or reinvested in
additional shares, and regardless of how long the shares of the Fund have been
held by such shareholders. The Fund expects that its distributions will consist
primarily of ordinary income and capital gain dividends. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). Although distributions generally are treated as taxable in the
year they are paid, distributions declared in October, November or December,
payable to shareholders of record on a specified date in such month and paid
during January of the following year will be treated as having been distributed
by the Fund and received by the shareholders on the December 31st prior to the
date of payment. The Fund will inform shareholders of the source and tax status
of all distributions promptly after the close of each calendar year.
The sale or exchange of shares may be a taxable transaction for federal income
tax purposes. Shareholders who sell their shares will generally recognize gain
or loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held by the
shareholder as a capital asset, the gain or loss will be a capital gain or loss.
Any recognized capital gains may be taxed at different rates depending on how
long the shareholder held such shares.
The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are nonresident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their tax
advisers concerning the tax consequences to them of an investment in shares.
The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.
The federal income tax discussion above is for general information only.
Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding and disposing of shares
of the Fund, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
14
<PAGE> 16
BOARD OF TRUSTEES
AND OFFICERS
BOARD OF TRUSTEES
<TABLE>
<S> <C>
J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson
</TABLE>
OFFICERS
Richard F. Powers, III*
President
Stephen L. Boyd*
Executive Vice President and Chief Investment Officer
A. Thomas Smith III*
Vice President and Secretary
John H. Zimmermann, III*
Vice President
Michael H. Santo*
Vice President
Richard A. Ciccarone*
Vice President
John R. Reynoldson*
Vice President
John L. Sullivan*
Vice President, Chief Financial Officer and Treasurer
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
FOR MORE INFORMATION
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
WEB SITE
www.vankampen.com
VAN KAMPEN ENTERPRISE FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Enterprise Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Enterprise Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Auditors
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
<PAGE> 17
VAN KAMPEN
ENTERPRISE FUND
CLASS D SHARES
PROSPECTUS
SEPTEMBER 25, 2000
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.
You will find additional information about the
Fund in its annual and semiannual reports to
shareholders. The annual report explains the
market conditions and investment strategies
affecting the Fund's performance during its
last fiscal year.
You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.
Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC's Public
Reference Room in Washington, DC or on the
EDGAR database on the SEC's internet site
(http://www.sec.gov). Information on the
operation of the SEC's Public Reference Room
may be obtained by calling the SEC at
1-202-942-8090. You can also request copies of
these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail
address ([email protected]), or by writing
the Public Reference Section of the SEC,
Washington, DC 20549-0102.
[VAN KAMPEN FUNDS LOGO]
The Fund's Investment Company Act File No. is 811-630. ENT PRO 9/00
<PAGE> 18
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN
ENTERPRISE FUND
Van Kampen Enterprise Fund (the "Fund") is a mutual fund with the
investment objective to seek capital appreciation by investing in a portfolio of
securities consisting principally of common stocks.
The Fund is organized as a diversified series of Van Kampen Enterprise
Fund, an open-end, management investment company (the "Trust").
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's Class A Share, Class B Share and Class C Share prospectus dated April 28,
2000, as supplemented, and the Fund's Class D Share prospectus dated September
25, 2000 (collectively the "Prospectus"). This Statement of Additional
Information does not include all the information that 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 Funds Inc. at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555 (or (800)
341-2911 or (800) 421-2833 for the hearing impaired).
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective, Policies and Risks.................... B-4
Options, Futures Contracts and Related Options.............. B-6
Investment Restrictions..................................... B-13
Trustees and Officers....................................... B-16
Investment Advisory Agreement............................... B-25
Other Agreements............................................ B-26
Distribution and Service.................................... B-26
Transfer Agent.............................................. B-31
Portfolio Transactions and Brokerage Allocation............. B-31
Shareholder Services........................................ B-33
Redemption of Shares........................................ B-35
Contingent Deferred Sales Charge-Class A.................... B-36
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-36
Taxation.................................................... B-38
Fund Performance............................................ B-42
Other Information........................................... B-46
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-13
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 25, 2000.
ENT SAI 9/00
<PAGE> 19
GENERAL INFORMATION
The Fund was originally incorporated in Delaware on September 18, 1953,
under the name American Capital Enterprise Fund, Inc. The Fund was
reincorporated by merger as a Maryland corporation on January 12, 1979, under
the same name. As of August 5, 1995, the Fund was reorganized under the name Van
Kampen American Capital Enterprise Fund as a series of the Trust. The Trust is
organized as an unincorporated business trust under the laws of the State of
Delaware. On July 14, 1998, the Fund and the Trust adopted their present names.
Van Kampen Asset Management Inc. (the "Adviser" or "Asset Management"), Van
Kampen Funds Inc. (the "Distributor"), and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean Witter"). The principal
office of the Trust, the Fund, the Adviser, the Distributor and Van Kampen
Investments is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555. The principal office of Investor Services is located at 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153.
Morgan Stanley Dean Witter is a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
The Fund currently offers four classes of shares, designated Class A
Shares, Class B Shares, Class C Shares and Class D Shares. Other classes may be
established from time to time in accordance with provisions of the Declaration
of Trust. Each class of shares of the Fund generally is identical in all
respects except that each class bears certain distribution expenses and has
exclusive voting rights with respect to its distribution fee. Shares of the
Trust entitle their holders to one vote per share; however, separate votes are
taken by each series on matters affecting an individual series and separate
votes are taken by each class of a series on matters affecting an individual
class of such series. For example, a change in investment policy for a series
would be voted upon by shareholders of only the series involved and a change in
the distribution fee for a class of a series would be voted upon by shareholders
of only the class of such series involved. Except as otherwise described in the
Prospectus or herein, shares do not have cumulative voting rights, preemptive
rights or any conversion, subscription or exchange rights.
The Trust does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of a majority of the shares then outstanding cast
in person or by proxy at such meeting. The
B-2
<PAGE> 20
Fund will assist such holders in communicating with other shareholders of the
Fund to the extent required by the Investment Company Act of 1940, as amended
(the "1940 Act"), or rules or regulations promulgated by the Securities and
Exchange Commission ("SEC").
In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be less than to holders of
Class A Shares and Class D Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
outstanding and entitled to vote present at a meeting of shareholders (or such
higher vote as may be required by the 1940 Act or other applicable law) and
except that the Trustees cannot amend the Declaration of Trust to impose any
liability on shareholders, make any assessment on shares or impose liabilities
on the Trustees without approval from each affected shareholder or Trustee, as
the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
As of September 5, 2000, no person was known by the Fund to own
beneficially or to hold of record 5% or more of the outstanding Class A Shares,
Class B Shares, Class C Shares or Class D Shares of the Fund, except as follows:
<TABLE>
<CAPTION>
Amount of
Ownership at Class Percentage
Name and Address of Holder September 5, 2000 of Shares Ownership
-------------------------- ------------------ --------- ----------
<S> <C> <C> <C>
Edward D. Jones & Co 12,448,695 A 10.37%
Attn: Mutual Fund
Shareholder Accounting
201 Progress Parkway
Maryland Heights, MO 63043-3009..........
Edward D. Jones & Co 2,789,209 B 5.38%
Attn: Mutual Fund
Shareholder Accounting
201 Progress Parkway
Maryland Heights, MO 63043-3009..........
Edward D. Jones & Co 562,036 C 8.43%
Attn: Mutual Fund
Shareholder Accounting
201 Progress Parkway
Maryland Heights, MO 63043-3009..........
</TABLE>
------------------------------------
Van Kampen Trust Company acts as custodian for certain employee benefit
plans
and individual retirement accounts.
B-3
<PAGE> 21
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The following disclosure supplements the disclosure set forth under the
same caption in the Prospectus and does not, standing alone, present a complete
or accurate explanation of the matters disclosed. Readers must refer also to
this caption in the Prospectus for a complete presentation of the matters
disclosed below.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements with broker-dealers, banks and
other financial institutions in order to earn a return on temporarily available
cash. It is currently the policy of the Fund not to invest more than 25% of its
total assets at the time of purchase in securities subject to repurchase
agreements. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. Repurchase agreements involve
certain risks in the event of default by the other party. The Fund may enter
into repurchase agreements with broker-dealers, banks and other financial
institutions deemed to be creditworthy by the Adviser under guidelines approved
by the Fund's Board of Trustees. 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, would exceed the Fund's
limitation on illiquid securities described herein. The Fund does not bear the
risk of a decline in the value of the underlying security unless the seller
defaults under its repurchase obligation. In the event of the bankruptcy or
other default of a seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying securities and losses including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible lack of access to
income on the underlying security during this period; and (c) expenses of
enforcing its rights.
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 in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC permitting this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
Repurchase agreements are fully collateralized by the underlying securities
and are considered to be loans under the 1940 Act. The Fund pays for such
securities only upon physical delivery or evidence of book entry transfer to the
account of a custodian or bank acting as agent. The seller under a repurchase
agreement will be required to maintain the value of the underlying securities
marked-to-market daily at not less than the repurchase price. The underlying
securities (normally securities of the U.S. government, its agencies or
instrumentalities) may have maturity dates exceeding one year.
B-4
<PAGE> 22
WARRANTS
Warrants are in effect longer-term call options. They give the holder the
right to purchase a given number of shares of a particular company at specified
prices within certain periods of time. The purchaser of a warrant expects that
the market price of the security will exceed the purchase price of the warrant
plus the exercise price of the warrant, thus giving him a profit. Of course,
since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young, unseasoned companies. The purchase price of a
warrant varies with the exercise price of the warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
SECURITIES OF FOREIGN ISSUERS
The Fund may purchase foreign securities in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
representing underlying shares of foreign companies. These securities are not
necessarily denominated in the same currency as the underlying securities but
generally are denominated in the currency of the market in which they are
traded. ADRs are receipts typically issued by an American bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. ADRs are publicly traded on exchanges or over-the-counter in the
United States and are issued through "sponsored" or "unsponsored" arrangements.
In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay
some or all of the depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depositary's
transaction fees are paid by the ADR holders. In addition, generally less
information is available about an unsponsored ADR than about a sponsored ADR and
financial information about a company may not be as reliable for an unsponsored
ADR as for a sponsored ADR. The Fund may invest in ADRs through both sponsored
and unsponsored arrangements. EDRs are receipts issued in Europe by banks or
depositaries which evidence a similar ownership arrangement.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year. The
turnover rate may vary greatly from year to year as well as within a year.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities,
which includes securities that are not readily marketable, repurchase agreements
which have a maturity of longer than seven days, and generally includes
securities that are restricted from sale to the public without registration
under the Securities Act of 1933, as amended (the "1933 Act"). The sale of such
securities often requires more time and results in higher brokerage
B-5
<PAGE> 23
charges or dealer discounts and other selling expenses than does the sale of
liquid securities trading on national securities exchanges or in the
over-the-counter markets. Restricted securities are often purchased at a
discount from the market price of unrestricted securities of the same issuer
reflecting the fact that such securities may not be readily marketable without
some time delay. Investments in securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Adviser in accordance with procedures approved by the Fund's Board of Trustees.
Ordinarily, the Fund would invest in restricted securities only when it receives
the issuer's commitment to register the securities without expense to the Fund.
However, registration and underwriting expenses (which typically range from 7%
to 15% of the gross proceeds of the securities sold) may be paid by the Fund.
Restricted securities which can be offered and sold to qualified institutional
buyers under Rule 144A under the 1933 Act ("144A Securities") and are determined
to be liquid under guidelines adopted by and subject to the supervision of the
Fund's Board of Trustees are not subject to the limitation on illiquid
securities. Such 144A Securities are subject to monitoring and may become
illiquid to the extent qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Factors used to determine whether
144A Securities are liquid include, among other things, a security's trading
history, the availability of reliable pricing information, the number of dealers
making quotes or making a market in such security and the number of potential
purchasers in the market for such security. For purposes hereof, investments by
the Fund in securities of other investment companies will not be considered
investments in restricted securities to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief (such as "no action" letters issued by the staff of the SEC
interpreting or providing guidance on the 1940 Act or regulations thereunder)
from the provisions of the 1940 Act, as amended from time to time.
OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS
The Fund may, but is not required to, use various investment strategies as
described below to earn income, facilitate portfolio management and mitigate
risks. Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. Although the Fund's
Adviser seeks to use such transactions to further the Fund's investment
objective, no assurance can be given that the use of these transactions will
achieve this result.
SELLING CALL AND PUT OPTIONS
Purpose. The principal reason for selling options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. Such current return could be expected to fluctuate
because premiums earned from an option selling program and dividend or interest
income yields on portfolio securities vary as economic and market conditions
change. Selling options on portfolio securities is likely to result in a higher
portfolio turnover rate.
Selling Options. The purchaser of a call option pays a premium to the
seller (i.e., the writer) for the right to buy the underlying security from the
seller at a specified price during a certain period. The Fund would write call
options only on a covered basis or for cross-hedging purposes. A call option is
covered if, at all times during the option period,
B-6
<PAGE> 24
the Fund would own or have the right to acquire securities of the type that it
would be obligated to deliver if any outstanding option were exercised. An
option is for cross-hedging purposes if it is not covered by the security
subject to the option, but is designed to provide a hedge against another
security which the Fund owns or has the right to acquire. In such circumstances,
the Fund collateralizes the option by maintaining in a segregated account with
the Fund's custodian cash or liquid securities in an amount not less than the
market value of the underlying security, marked to market daily, while the
option is outstanding.
The purchaser of a put option pays a premium to the seller (i.e., the
writer) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would sell put options only on
a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its custodian cash or liquid
securities in an amount of not less than the exercise price of the option, or
would hold a put on the same underlying security at an equal or greater exercise
price.
Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a writer of a call or put option, the Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously sold by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is lesser (greater) than the premium it received on the sale of the
option. The Fund would also realize a gain if an option it has written lapses
unexercised.
The Fund could sell options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. The
Fund could close out its position as a seller of an option only if a liquid
secondary market exists for options of that series, but there is no assurance
that such a market will exist, particularly in the case of over-the-counter
options, since they can be closed out only with the other party to the
transaction. Alternatively, the Fund could purchase an offsetting option, which
would not close out its position as a seller, but would provide an asset of
equal value to its obligation under the option sold. If the Fund is not able to
enter into a closing purchase transaction or to purchase an offsetting option
with respect to an option it has sold, it will be required to maintain the
securities subject to the call or the collateral securing the option until a
closing purchase transaction can be entered into (or the option is exercised or
expires) even though it might not be advantageous to do so. The staff of the SEC
currently takes the position that, in general, over-the-counter options on
securities purchased by the Fund, and portfolio securities "covering" the amount
of the Fund's obligation pursuant to an over-the-counter option sold by it (the
cost of the sell-back plus the in-the-money amount, if any) are illiquid, and
are subject to the Fund's limitation on illiquid securities described herein.
Risks of Writing Options. By selling a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by selling a put option the Fund might become obligated
to purchase the underlying security at an exercise price that exceeds the then
current market price.
B-7
<PAGE> 25
PURCHASING CALL AND PUT OPTIONS
The Fund could purchase call options to protect against anticipated
increases in the prices of securities it wishes to acquire. Alternatively, call
options could be purchased for capital appreciation. Since the premium paid for
a call option is typically a small fraction of the price of the underlying
security, a given amount of funds will purchase call options covering a much
larger quantity of such security than could be purchased directly. By purchasing
call options, the Fund could benefit from any significant increase in the price
of the underlying security to a greater extent than had it invested the same
amount in the security directly. However, because of the very high volatility of
option premiums, the Fund would bear a significant risk of losing the entire
premium if the price of the underlying security did not rise sufficiently, or if
it did not do so before the option expired.
Put options may be purchased to protect against anticipated declines in the
market value of either specific portfolio securities or of the Fund's assets
generally. Alternatively, put options may be purchased for capital appreciation
in anticipation of a price decline in the underlying security and a
corresponding increase in the value of the put option. The purchase of put
options for capital appreciation involves the same significant risk of loss as
described above for call options.
In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.
OPTIONS ON STOCK INDICES
Options on stock indices are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash which amount will depend upon the closing
level of the stock index upon which the option is based being greater than (in
the case of a call) or less than (in the case of a put) the exercise price of
the option. The amount of cash received will be the difference between the
closing price of the index and the exercise price of the option, multiplied by a
specified dollar multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount.
Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indices are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on several exchanges.
Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.
B-8
<PAGE> 26
FUTURES CONTRACTS
The Fund may engage in transactions involving futures contracts and related
options in accordance with the rules and interpretations of the Commodity
Futures Trading Commission ("CFTC") under which the Fund would be exempt from
registration as a "commodity pool."
A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of an amount of cash equal to a specified dollar
amount multiplied by the difference between the stock index value at a specified
time and the price at which the futures contract originally was struck. No
physical delivery of the underlying stocks in the index is made.
Currently, stock index futures contracts can be purchased with respect to
several indices on various exchanges. Differences in the stocks included in the
indices may result in differences in correlation of the futures contracts with
movements in the value of the securities being hedged.
The Fund also may invest in foreign stock index futures traded outside the
United States which involve additional risks including fluctuations in foreign
exchange rates, foreign currency exchange controls, political and economic
instability, differences in financial reporting and securities regulation and
trading, and foreign taxation issues.
An interest rate futures contract is an agreement pursuant to which a party
agrees to take or make delivery of a specified debt security (such as U.S.
Treasury bonds or notes) at a specified future time and at a specified price.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its custodian in an
account in the broker's name an amount of cash or liquid securities equal to a
percentage (which will normally range between 2% and 10%) of the contract
amount. This amount is known as initial margin. The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transaction. Rather, the initial margin is in the nature
of a performance bond or good faith deposit on the contract, which is returned
to the Fund upon termination of the futures contract and satisfaction of its
contractual obligations. Subsequent payments to and from the broker, called
variation margin, are made on a daily basis as the price of the underlying
securities or index fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as marking to market.
For example, when the Fund purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund receives from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund purchases a futures contract and
the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
B-9
<PAGE> 27
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract would
serve as a temporary substitute for the purchase of individual securities, which
may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
would substantially reduce the risk to the Fund of a market decline and, by so
doing, provides an alternative to the liquidation of securities positions in the
Fund. Ordinarily transaction costs associated with futures transactions are
lower than transaction costs that would be incurred in the purchase and sale of
securities.
Special Risks Associated with Futures Transactions. There are several risks
connected with the use of futures contracts. These include the risk of imperfect
correlation between movements in the price of the futures contracts and of the
underlying securities or index; the risk of market distortion; the risk of
illiquidity; and the risk of error in anticipating price movement.
There may be an imperfect correlation (or no correlation) between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for the imperfect correlation, the Fund could buy or sell futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the securities being hedged is greater than the
historical volatility of the securities underlying the futures contract.
Conversely, the Fund could buy or sell futures contracts in a lesser dollar
amount than the dollar amount of securities being hedged if the historical
volatility of the securities being hedged is less than the historical volatility
of the securities underlying the futures contracts. It is also possible that the
value of futures contracts held by the Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.
There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities or index underlying the
futures contract due to certain market distortions. First, all participants in
the futures market are subject to margin depository and maintenance
requirements. Rather than meet additional margin depository requirements,
investors may close futures contracts through offsetting transactions, which
could distort the normal relationship between the futures market and the
securities or index underlying the futures contract. Second, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions. Due to the possibility of price distortion in the futures markets
and because of the imperfect correlation between movements in futures contracts
and movements in the securities underlying them, a correct forecast
B-10
<PAGE> 28
of general market trends by the Adviser may still not result in a successful
hedging transaction.
There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in a futures contract and thus provide an offset to
losses on the futures contract.
The Fund will not enter into futures contracts or options transactions
(except for closing transactions) other than for bona fide hedging purposes if,
immediately thereafter, the sum of its initial margin and premiums on open
futures contracts and options exceed 5% of the fair market value of the Fund's
assets; however, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In order to prevent leverage in connection with the purchase of
futures contracts by the Fund, an amount of cash or liquid securities equal to
the market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the custodian.
B-11
<PAGE> 29
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purposes as, the sale of a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts is intended to serve the same purpose as the actual purchase
of the futures contracts.
Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Adviser will not purchase
options on futures on any exchange unless in the Adviser's opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances, such as when
there is no movement in the price of the underlying security or index, when the
use of an option on a future would result in a loss to the Fund when the use of
a future would not.
ADDITIONAL RISKS OF OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written on
one or more accounts or through one or more brokers). Option positions of all
investment companies advised by the Adviser are combined for purposes of these
limits. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
B-12
<PAGE> 30
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many derivative transactions, in addition to other requirements, require
that the Fund segregate cash and liquid securities with its custodian to the
extent the Fund's obligations are not otherwise "covered" as described above. In
general, either the full amount of any obligation by the Fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered (or securities convertible into the needed
securities without additional consideration), or, subject to applicable
regulatory restrictions, an amount of cash or liquid securities at least equal
to the current amount of the obligation must be segregated with the custodian.
The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. In
the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
cash and liquid securities sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the expiration of
an index-based futures contract. Derivative transactions may be covered by other
means when consistent with applicable regulatory policies. The Fund may also
enter into offsetting transactions so that its combined position, coupled with
any segregated cash and liquid securities, equals its net outstanding
obligation.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which may not be changed without shareholder approval by the vote of a majority
of its outstanding voting securities which is defined by the 1940 Act as the
lesser of (i) 67% or more of the Fund's voting securities present at a meeting,
if the holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy; or (ii) more than 50% of the Fund's
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities. With respect to the limitations on illiquid securities and
borrowings, the percentage limitations apply at the time of purchase and on an
ongoing basis. The Fund shall not:
1. Make loans except that the Fund may invest up to 25% of the Fund's
total assets in repurchase agreements.
2. Sell short or buy on margin, but the Fund may engage in transaction in
options, futures contracts and related options and make margin deposits
and payments in connection therewith.
3. Primarily engage in the underwriting or distribution of securities.
4. Make any investment in real estate, commodities or commodities
contracts; however, the Fund is not prohibited from investing in
securities issued by a real estate investment trust, provided that such
trust is not permitted to invest in real estate or interests in real
estate other than mortgages or other security interests, and the Fund
is not prohibited from entering into transactions in futures contracts
and related options.
5. Make any investment in any security about which information is not
available with respect to history, management, assets, earnings, and
income of the issuer, except that the Fund may purchase securities of
other investment companies to
B-13
<PAGE> 31
the extent permitted (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940
Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act, as amended from time to
time.
6. Make any investment which involves promotion or business management by
the Fund or which would subject the Fund to unlimited liability.
7. Invest more than 5% of the value of its assets in the securities of any
one issuer (with the exception of U.S. government securities) or
purchase more than 10% of the outstanding voting securities of any one
issuer, except that the Fund may purchase securities of other
investment companies to the extent permitted by (i) the 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated
by the SEC under the 1940 Act, as amended from time to time, or (iii)
an exemption or other relief from the provisions of the 1940 Act, as
amended from time to time.
8. Invest more than 25% of the value of its assets in securities issued by
companies in any one industry, except that the Fund may purchase
securities of other investment companies to the extent permitted by (i)
the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions
of the 1940 Act, as amended from time to time.
9. Borrow more than 10% of the value of its net assets valued at the lower
of cost or market at the time of borrowing; and then only from banks
and undertaken as a temporary measure for extraordinary or emergency
purposes; or pledge, transfer, assign or otherwise encumber its assets
except to secure such borrowing and in an amount not exceeding the
amount of the borrowing. Notwithstanding the foregoing, the Fund may
engage in transactions in options, futures contracts and related
options, segregate or deposit assets to cover or secure options
written, and make margin deposits or payments for futures contracts and
related options.
10. Invest in companies for the purpose of exercising control, except that
the Fund may purchase securities of other investment companies to the
extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940
Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act, as amended from time to
time.
11. Invest in securities issued by other investment companies except as
part of a merger, reorganization or other acquisition and except that
the Fund may purchase securities of other investment companies to the
extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940
Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act, as amended from time to
time.
12. 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 and other investment strategies and instruments that
B-14
<PAGE> 32
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".
In addition to the foregoing, the Fund has adopted additional investment
restrictions which may be changed by the Fund's Board of Trustees without a vote
of shareholders. These restrictions provide that the Fund may not:
1. Invest more than 5% of the value of its total assets in securities of
companies which (including predecessor companies or operations) have
been in business less than three years, except that the Fund may
purchase securities of other investment companies to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act, as amended from time to time.
2. Pledge, mortgage or hypothecate its portfolio securities to the extent
that at any time the percentage of pledged securities plus the sales
load will exceed 10% of the offering price of the Fund's shares.
Notwithstanding the foregoing, the Fund may engage in transactions in
options, futures contracts and related options, segregate or deposit
assets to cover or secure options written, and make margin deposits or
payments for futures contracts and related options.
3. 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 as that term is defined under the 1933 Act.
4. Acquire any private placement if it would cause more than 2% of the net
assets of the Fund, as determined at the time the Fund agrees to any
such acquisition, to be invested in private placements and other assets
not having readily available market quotations, except that the Fund
may purchase securities of other investment companies to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act, as amended from time to time.
5. Purchase or retain securities of a company which has an officer or
director who is an officer or director of the Fund or its Adviser if,
to the knowledge of the Fund, one or more such persons own beneficially
more than 1/2 of 1% of the shares of the company, and all such persons
own more than 5% thereof.
6. Invest more than 5% of its net assets in warrants or rights valued at
the lower of cost or market, nor more than 2% of its net assets in
warrants or rights (valued on such basis) which are not listed on the
New York Stock Exchange or American Stock Exchange. Warrants or rights
acquired in units or attached to other securities are not subject to
the foregoing limitations.
7. Invest more than 10% of its net assets (determined at the time of
investment) in illiquid securities and repurchase agreements that have
a maturity of longer than seven days.
8. Invest in interests in oil, gas, or other mineral exploration or
developmental programs.
B-15
<PAGE> 33
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc. ("Investor Services"). 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
Advisers (excluding Van Kampen Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder, and
Raleigh, NC 27614 prior to August 1996, Chairman, Chief Executive
Date of Birth: 07/14/32 Officer and President, MDT Corporation (now
Age: 68 known as Getinge/Castle, Inc., a subsidiary of
Getinge Industrier AB), a company which
develops, manufactures, markets and services
medical and scientific equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
53 Monarch Bay Drive company. Trustee/Director of each of the funds
Dana Point, CA 92629 in the Fund Complex. Prior to January 1999,
Date of Birth: 09/16/38 Chairman and Chief Executive Officer of The
Age: 62 Allstate Corporation ("Allstate") and Allstate
Insurance Company. Prior to January 1995,
President and Chief Executive Officer of
Allstate. Prior to August 1994, various
management positions at Allstate.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of each
233 South Wacker Drive of the funds in the Fund Complex. Prior to
Suite 7000 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management consulting
Date of Birth: 06/03/48 firm. Formerly, Executive Vice President of ABN
Age: 52 AMRO, N.A., a Dutch bank holding company. Prior
to 1992, Executive Vice President of La Salle
National Bank. Trustee on the University of
Chicago Hospitals Board, Vice Chair of the
Board of The YMCA of Metropolitan Chicago and a
member of the Women's Board of the University
of Chicago. Prior to 1996, Trustee of The
International House Board, a fellowship and
housing organization for international graduate
students.
</TABLE>
B-16
<PAGE> 34
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
R. Craig Kennedy.......................... President and Director, German Marshall Fund of
11 DuPont Circle, N.W. the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
Age: 48 of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor to
the Dennis Trading Group Inc., a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Mitchell M. Merin*........................ President and Chief Operating Officer of Asset
Two World Trade Center Management of Morgan Stanley Dean Witter since
66th Floor December 1998. President and Director since
New York, NY 10048 April 1997 and Chief Executive Officer since
Date of Birth: 08/13/53 June 1998 of Morgan Stanley Dean Witter
Age: 47 Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc. Chairman, Chief Executive
Officer and Director of Morgan Stanley Dean
Witter Distributors Inc. since June 1998.
Chairman and Chief Executive Officer since June
1998, and Director since January 1998, of
Morgan Stanley Dean Witter Trust FSB. Director
of various Morgan Stanley Dean Witter
subsidiaries. President of the Morgan Stanley
Dean Witter Funds since May 1999.
Trustee/Director of each of the funds in the
Fund Complex. Previously Chief Strategic
Officer of Morgan Stanley Dean Witter Advisors
Inc. and Morgan Stanley Dean Witter Services
Company Inc. and Executive Vice President of
Morgan Stanley Dean Witter Distributors Inc.
April 1997-June 1998, Vice President of the
Morgan Stanley Dean Witter Funds May 1997-April
1999, and Executive Vice President of Dean
Witter, Discover & Co.
Jack E. Nelson............................ President and owner, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser in the State
Date of Birth: 02/13/36 of Florida. President and owner, Nelson Ivest
Age: 64 Brokerage Services Inc., a member of the
National Association of Securities Dealers,
Inc. and Securities Investors Protection Corp.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>
B-17
<PAGE> 35
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Richard F. Powers, III*................... Chairman, President and Chief Executive Officer
1 Parkview Plaza of Van Kampen Investments. Chairman, Director
P.O. Box 5555 and Chief Executive Officer of the Advisers,
Oakbrook Terrace, IL 60181-5555 the Distributor, Van Kampen Advisors Inc. and
Date of Birth: 02/02/46 Van Kampen Management Inc. Director and officer
Age: 54 of certain other subsidiaries of Van Kampen
Investments. Trustee/Director and President of
each of the funds in the Fund Complex. Trustee,
President and Chairman of the Board of other
investment companies advised by the Advisers
and their affiliates, and Chief Executive
Officer of Van Kampen Exchange Fund. Prior to
May 1998, Executive Vice President and Director
of Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and Dean
Witter Realty. Prior to 1996, Director of Dean
Witter Reynolds Inc.
Phillip B. Rooney......................... Vice Chairman (since April 1997) and Director
One ServiceMaster Way (since 1994) of The ServiceMaster Company, a
Downers Grove, IL 60515 business and consumer services company.
Date of Birth: 07/08/44 Director of Illinois Tool Works, Inc., a
Age: 56 manufacturing company and the Urban Shopping
Centers Inc., a retail mall management company.
Trustee, University of Notre Dame. Trustee/
Director of each of the funds in the Fund
Complex. Prior to 1998, Director of Stone
Smurfit Container Corp., a paper manufacturing
company. From May 1996 through February 1997 he
was President, Chief Executive Officer and
Chief Operating Officer of Waste Management,
Inc., an environmental services company, and
from November 1984 through May 1996 he was
President and Chief Operating Officer of Waste
Management, Inc.
Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a
155 Hickory Lane George M. Bond Chaired Professor with Stevens
Closter, NJ 07624 Institute of Technology, and prior to 1995,
Date of Birth: 08/02/24 Dean of the Graduate School, Stevens Institute
Age: 76 of Technology. Director, Dynalysis of
Princeton, a firm engaged in engineering
research. Trustee/Director of each of the funds
in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal counsel
Chicago, IL 60606 to the funds in the Fund Complex, and other
Date of Birth: 08/22/39 investment companies advised by the Advisers.
Age: 61 Trustee/Director of each of the funds in the
Fund Complex, and Trustee/ Managing General
Partner of other investment companies advised
by the Advisers.
</TABLE>
B-18
<PAGE> 36
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Suzanne H. Woolsey........................ Chief Operating Officer of the National Academy
2101 Constitution Ave., N.W. of Sciences/National Research Council, an
Room 206 independent, federally chartered policy
Washington, D.C. 20418 institution, since 1993. Director of Neurogen
Date of Birth: 12/27/41 Corporation, a pharmaceutical company, since
Age: 58 January 1998. Director of the German Marshall
Fund of the United States, Trustee of Colorado
College, and Vice Chair of the Board of the
Council for Excellence in Government.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1993, Executive Director
of the Commission on Behavioral and Social
Sciences and Education at the National Academy
of Sciences/National Research Council. From
1980 through 1989, Partner of Coopers &
Lybrand.
</TABLE>
------------------------------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. Merin and
Powers are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter or its affiliates.
B-19
<PAGE> 37
OFFICERS
Messrs. Smith, Santo, Ciccarone, Reynoldson, Sullivan and Zimmermann are
located at 1 Parkview Plaza, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is
located at 2800 Post Oak Blvd., Houston, TX 77056.
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Age: 43 the Advisers, Van Kampen Advisors Inc., Van Kampen
Vice President and Secretary Management Inc., the Distributor, American Capital
Contractual Services, Inc., Van Kampen Exchange
Corp., Van Kampen Recordkeeping Services Inc.,
Investor Services, Van Kampen Insurance Agency of
Illinois Inc. and Van Kampen System Inc. Vice
President and Secretary of each of the funds in the
Fund Complex and Vice President and Secretary/Vice
President, Principal Legal Officer and Secretary of
other investment companies advised by the Advisers
or their affiliates. Prior to January 1999, Vice
President and Associate General Counsel to New York
Life Insurance Company ("New York Life"), and prior
to March 1997, Associate General Counsel of New
York Life. Prior to December 1993, Assistant
General Counsel of The Dreyfus Corporation. Prior
to August 1991, Senior Associate, Willkie Farr &
Gallagher. Prior to January 1989, Staff Attorney at
the Securities and Exchange Commission, Division of
Investment Management, Office of Chief Counsel.
Michael H. Santo..................... Executive Vice President, Chief Administrative
Date of Birth: 10/22/55 Officer and Director of Van Kampen Investments, the
Age: 44 Advisers, the Distributor, Van Kampen Advisors
Vice President Inc., Van Kampen Management Inc. and Van Kampen
Investor Services Inc., and serves as a Director or
Officer of certain other subsidiaries of Van Kampen
Investments. Vice President of each of the funds in
the Fund Complex and certain other investment
companies advised by the Advisers and their
affiliates. Prior to 1998, Senior Vice President
and Senior Planning Officer for Individual Asset
Management of Morgan Stanley Dean Witter and its
predecessor since 1994. From 1990-1994, First Vice
President and Assistant Controller in Dean Witter's
Controller's Department.
</TABLE>
B-20
<PAGE> 38
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Stephen L. Boyd...................... Executive Vice President and Chief Investment
Date of Birth: 11/16/40 Officer of Van Kampen Investments, and President
Age: 59 and Chief Operating Officer of the Advisers.
Executive Vice President and Executive Vice President and Chief Investment
Chief Investment Officer Officer of each of the funds in the Fund Complex
and certain other investment companies advised by
the Advisers or their affiliates. Prior to April
2000, Executive Vice President and Chief Investment
Officer for Equity Investments of the Advisers.
Prior to October 1998, Vice President and Senior
Portfolio Manager with AIM Capital Management, Inc.
Prior to February 1998, Senior Vice President and
Portfolio Manager of Van Kampen American Capital
Asset Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American
Capital Management, Inc.
Richard A. Ciccarone................. Senior Vice President and Co-head of the Fixed
Date of Birth: 06/15/52 Income Department of the Advisers, Van Kampen
Age: 48 Management Inc. and Van Kampen Advisors Inc. Prior
Vice President to May 2000, he served as Co-head of Municipal
Investments and Director of Research of the
Advisers, Van Kampen Management Inc. and Van Kampen
Advisors Inc. Mr. Ciccarone first joined the
Adviser in June 1983, and worked for the Adviser
until May 1989, with his last position being a Vice
President. From June 1989 to April 1996, he worked
at EVEREN Securities (formerly known as Kemper
Securities), with his last position at EVEREN being
an Executive Vice President. Since April 1996, Mr.
Ciccarone has been a Senior Vice President of the
Advisers, Van Kampen Management Inc. and Van Kampen
Advisors Inc.
John R. Reynoldson................... Senior Vice President and Co-head of the Fixed
Date of Birth: 05/15/53 Income Department of the Advisers, Van Kampen
Age: 47 Management Inc. and Van Kampen Advisors Inc. Prior
Vice President to May 2000, he managed the investment grade
taxable group for the Adviser since July 1999. From
July 1988 to June 1999, he managed the government
securities bond group for Asset Management. Mr.
Reynoldson has been with Asset Management since
April 1987, and has been a Senior Vice President of
Asset Management since July 1988. He has been a
Senior Vice President of the Adviser and Van Kampen
Management Inc. since June 1995 and Senior Vice
President of Van Kampen Advisors Inc. since June
2000.
John L. Sullivan..................... Senior Vice President of Van Kampen Investments and
Date of Birth: 08/20/55 the Advisers. Vice President, Chief Financial
Age: 45 Officer and Treasurer of each of the funds in the
Vice President, Chief Financial Fund Complex and certain other investment companies
Officer and Treasurer advised by the Advisers or their affiliates.
</TABLE>
B-21
<PAGE> 39
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
John. H. Zimmermann, III............. Senior Vice President and Director of Van Kampen
Date of Birth: 11/25/57 Investments, President and Director of the
Age: 42 Distributor and President of Van Kampen Insurance
Vice President Agency of Illinois Inc. Vice President of each of
the funds in the Fund Complex. From November 1992
to December 1997, Mr. Zimmermann was Senior Vice
President of the Distributor.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 61 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(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/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex 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 includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the
date of the 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.
Under the deferred compensation plan, 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.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such 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
B-22
<PAGE> 40
per year for each of the ten years following such retirement from such Fund.
Non-Affiliated 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 such Fund. Each trustee/director has served as a member of the Board of
Trustees of the Fund 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.
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Year First Compensation Benefits Benefits from before
Appointed or before Accrued as the Fund Deferral from
Elected to Deferral from Part of Upon Fund
Name(1) the Board the Fund(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1991 $ 5,373 $40,303 $60,000 $126,000
Jerry D. Choate(1) 1999 3,902 0 60,000 88,700
Linda Hutton Heagy 1995 5,373 5,045 60,000 126,000
R. Craig Kennedy 1995 5,373 3,571 60,000 125,600
Jack E. Nelson 1995 5,373 21,664 60,000 126,000
Phillip B. Rooney 1997 5,173 7,787 60,000 113,400
Fernando Sisto 1980 5,373 72,060 60,000 126,000
Wayne W. Whalen 1995 5,373 15,189 60,000 126,000
Suzanne H. Woolsey(1) 1999 3,902 0 60,000 88,700
</TABLE>
------------------------------------
(1) Trustees not eligible for compensation are not included in the Compensation
Table. Mr. Choate and Ms. Woolsey became members of the Board of Trustees
for the Fund and other funds in the Fund Complex on May 26, 1999 and
therefore do not have a full year of information to report. Paul G. Yovovich
resigned as a member of the Board of Trustees for the Fund and other funds
in the Fund Complex on April 14, 2000.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1999. The
following trustees deferred compensation from the Fund during the fiscal
year ended December 31, 1999: Mr. Branagan, $5,373; Mr. Choate, $2,652; Ms.
Heagy, $5,373; Mr. Kennedy, $2,687; Mr. Nelson, $5,373; Mr. Rooney, $5,173;
Mr. Sisto, $2,687; and Mr. Whalen, $5,373. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to either the
return on the common shares of the 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, each fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation. The cumulative
B-23
<PAGE> 41
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from the Fund as of December 31, 1999 is
as follows: Mr. Branagan, $20,339; Mr. Caruso, $7,499; Mr. Choate, $3,611;
Mr. Gaughan, $589; Ms. Heagy, $20,392; Mr. Kennedy, $16,012; Mr. Miller,
$5,361; Mr. Nelson, $37,429; Mr. Rees, $3,222; Mr. Robinson, $12,649; Mr.
Rooney, $21,158; Mr. Sisto, $59,370; Mr. Whalen, $25,603; and Mr. Yovovich,
$6,392. The deferred compensation plan is described above the Compensation
Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the funds' respective fiscal years ended in
1999. The retirement plan is described above the Compensation Table.
(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
retirement plan is described above the Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1999 before
deferral by the trustees under the deferred compensation plan. Because the
funds in the Fund Complex have different fiscal year ends, the amounts shown
in this column are presented on a calendar year basis. Certain trustees
deferred all or a portion of their aggregate compensation from the Fund
Complex during the calendar year ended December 31, 1999. 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 Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Mr. Whalen, the Non-Affiliated 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 $279,250 during the calendar year
ended December 31, 1999.
The Fund, the Adviser and the Distributor have adopted Codes of Ethics
(collectively, the "Code of Ethics") that set forth general and specific
standards relating to the securities trading activities of their employees. The
Code of Ethics does not prohibit employees from acquiring securities that may be
purchased or held by the Fund, but is intended to ensure that all employees
conduct their personal transactions in a manner that does not interfere with the
portfolio transactions of the Fund or other Van Kampen funds, or that such
employees take unfair advantage of their relationship with the Fund. Among other
things, the Code of Ethics prohibits certain types of transactions absent prior
approval, imposes various trading restrictions (such as time periods during
which personal transactions may or may not be made) and requires quarterly
reporting of securities transactions and other matters. All reportable
securities transactions and other required reports are to be reviewed by
appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
B-24
<PAGE> 42
Fund or other Van Kampen funds or who otherwise are involved in the investment
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.
As of September 5, 2000, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
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 the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate
strategy and implement the Fund's investment objective. The Adviser also
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, renders periodic reports to the Fund's Board of Trustees
and permits its officers and employees to serve without compensation as trustees
of the Trust or officers of the Fund if elected to such positions. The Fund,
however, bears the cost of its day-to-day operations, including service fees,
distribution fees, custodian fees, legal and independent accountant fees, the
costs of reports and proxies to shareholders, compensation of trustees of the
Trust (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments), and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to the Fund for any actions or omissions in the
absence of willful misfeasance, bad faith, negligence or reckless disregard of
its obligations and duties under the Advisory Agreement.
The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any other direct or indirect majority owned subsidiary of Van Kampen
Investments in connection with the purchase and sale of portfolio investments
less any direct expenses incurred by such subsidiary of Van Kampen Investments,
in connection with obtaining such commissions, fees, brokerage or similar
payments. The Adviser agrees to use its best efforts to recapture tender
solicitation fees and exchange offer fees for the Fund's benefit and to advise
the Trustees of the Fund of any other commissions, fees, brokerage or similar
payments which may be possible for the Adviser or any other direct or indirect
majority owned subsidiary of Van Kampen Investments to receive in connection
with the Fund's portfolio transactions or other arrangements which may benefit
the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed 1.5% of the first $30
million of the Fund's average daily net assets plus 1% of any excess over $30
million, the compensation due the Adviser will be reduced by the amount of such
excess and that, if a reduction in and refund of the advisory fee is
insufficient, the Adviser will pay the Fund monthly an amount sufficient to make
up the deficiency, subject to readjustment during the year. Ordinary business
expenses include the investment advisory fee and other operating costs paid by
the Fund except (1) interest and taxes, (2) brokerage commissions, (3) certain
litigation and indemnification expenses as described in the Advisory Agreement
and (4) payments made by the Fund pursuant to the distribution plans.
B-25
<PAGE> 43
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Board of Trustees or (ii) by a
vote of a majority of the Fund's outstanding voting securities and (b) by a 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 such
purpose. The Advisory Agreement provides that it shall terminate automatically
if assigned and that it may be terminated without penalty by either party on 60
days' written notice.
During the fiscal years ended December 31, 1999, 1998 and 1997, the Adviser
received approximately $14,030,000, $11,985,200 and $9,423,400, respectively, in
advisory fees from the Fund.
OTHER AGREEMENTS
Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
to the Fund supplementary to those provided by the custodian. Such services are
expected to enable the Fund to more closely monitor and maintain its accounts
and records. The Fund pays all costs and expenses related to such services,
including all salary and related benefits of accounting personnel, as well as
the overhead and expenses of office space and the equipment necessary to render
such services. The Fund shares together with the other Van Kampen funds in the
cost of providing such services with 25% of such costs shared proportionately
based on the respective number of classes of securities issued per fund and the
remaining 75% of such costs based proportionately on the respective net assets
per fund.
During the fiscal years ended December 31, 1999, 1998 and 1997, Advisory
Corp. received approximately $640,300, $594,200 and $269,000, respectively, in
accounting services fees from the Fund.
DISTRIBUTION AND SERVICE
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's
Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) a vote of a majority of Trustees who are not parties to the
Distribution and Service Agreement or interested persons of any party, by votes
cast in person at a meeting called for such purpose. The Distribution and
Service Agreement provides that it will terminate if assigned, and that it may
be terminated without penalty
B-26
<PAGE> 44
by either party on 90 days' written notice. Total underwriting commissions on
the sale of shares of the Fund for the last three fiscal periods are shown in
the chart below.
<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal year ended December 31, 1999..................... $7,195,313 $914,283
Fiscal year ended December 31, 1998..................... $6,296,136 $859,326
Fiscal year ended December 31, 1997..................... $4,997,467 $678,682
</TABLE>
With respect to sales of Class A Shares of the Fund, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:
CLASS A SHARES SALES CHARGE TABLE
<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 or more.......................... * * *
------------------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although the Fund may impose a contingent deferred sales
charge of 1.00% on certain redemptions made within one year of the purchase. A
commission or transaction fee will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for purchases
of $1 million or more computed on a percentage of the dollar value of such
shares sold as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million. For single purchases of
$20 million or more by an individual retail investor the Distributor will pay,
at the time of purchase and directly out of the Distributor's assets (and not
out of the Fund's assets), a commission or transaction fee of 1.00% to
authorized dealers who initiate and are responsible for such purchases. The
commission or transaction fee of 1.00% will be computed on a percentage of the
dollar value of such shares sold.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.
Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of
B-27
<PAGE> 45
the Fund's shares, such as the payment to authorized dealers for selling such
shares. With respect to Class C Shares, the authorized dealers generally are
paid the ongoing commission and transaction fees of up to 0.75% of the average
daily net assets of the Fund's Class C Shares annually commencing in the second
year after purchase.
With respect to Class D Shares, there are no sales charges paid by
investors and no commissions or transaction fees to authorized dealers.
In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Also, the Distributor in its discretion may from time to time, pursuant to
objective criteria established by the Distributor, pay fees to, and sponsor
business seminars for, qualifying authorized dealers for certain services or
activities which are primarily intended to result in sales of shares of the Fund
or other Van Kampen funds. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its quarterly sales of shares of the Fund and other Van
Kampen funds and increases in net assets of the Fund and other Van Kampen funds
over specified thresholds. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total daily net assets of the Fund on an annual basis. These
programs will not change the price an investor will pay for shares or the amount
that a Fund will receive from such sale.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to Class A Shares, Class B Shares and Class C Shares pursuant to Rule
12b-1 under the 1940 Act. The Fund also has adopted a service plan (the "Service
Plan") with respect to Class A Shares, Class B Shares and Class C Shares. There
is no distribution plan or service plan in effect for Class D Shares. The
Distribution Plan and the Service Plan sometimes are referred to herein as the
"Plans." The Plans provide that the Fund may spend a portion of the Fund's
average daily net assets attributable to each such class of shares in connection
with distribution of the respective class of shares and in connection with the
provision of ongoing services to shareholders of such class, respectively. The
Distribution Plan and the Service Plan are being implemented through the
Distribution and Service Agreement with the Distributor of each such class of
the Fund's shares, sub-agreements between the Distributor and members of the
NASD who are acting as securities dealers and NASD members or eligible
non-members who are acting as brokers or agents and similar agreements between
the Fund and financial intermediaries who are acting as brokers (collectively,
"Selling Agreements") that may provide for their customers or clients certain
services or assistance, which may include, but not be limited to, processing
purchase and
B-28
<PAGE> 46
redemption transactions, establishing and maintaining shareholder accounts
regarding the Fund, and such other services as may be agreed to from time to
time and as may be permitted by applicable statute, rule or regulation. Brokers,
dealers and financial intermediaries that have entered into sub-agreements with
the Distributor and sell shares of the Fund are referred to herein as "financial
intermediaries."
Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary were
prohibited from acting in any capacity or providing any of the described
services, the Distributor would consider what action, if any, would be
appropriate. The Distributor does not believe that termination of a relationship
with a financial intermediary would result in any material adverse consequences
to the Fund.
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
For Class A Shares in any given year in which the Plans are in effect, the
Plans generally provide for the Fund to pay the Distributor the lesser of (i)
the amount of the Distributor's actual expenses incurred during such year less
any deferred sales charges (if any) it received during such year (the "actual
net expenses") or (ii) the distribution and service fees at the rates specified
in the Prospectus (the "plan fees"). Therefore, to the extent the Distributor's
actual net expenses in a given year are less than the plan fees for such year,
the Fund only pays the actual net expenses. Alternatively, to the extent the
Distributor's actual net expenses in a given year exceed the plan fees for such
year, the Fund only pays the plan fees for such year. For Class A Shares, there
is no carryover of any unreimbursed actual net expenses to succeeding years.
The Plans for Class B Shares and Class C Shares are similar to the Plans
for Class A Shares, except that any actual net expenses which exceed plan fees
for a given year are carried forward and are eligible for payment in future
years by the Fund so long as the Plans remain in effect. Thus, for each of the
Class B Shares and Class C Shares, in any given year in which the Plans are in
effect, the Plans generally provide for the Fund to pay the Distributor the
lesser of (i) the applicable amount of the Distributor's actual net expenses
incurred during such year for such class of shares plus any actual net expenses
from prior years that are still unpaid by the Fund for such class of shares or
(ii) the applicable plan fees for such class of shares. Except as may be
mandated by applicable law, the Fund does not impose any limit with respect to
the number of years into the future that such unreimbursed actual net expenses
may be carried forward (on a Fund
B-29
<PAGE> 47
level basis). These unreimbursed actual net expenses may or may not be recovered
through plan fees or contingent deferred sales charges in future years.
Because of fluctuation in net asset value, the plan fees with respect to a
particular Class B Share or Class C Share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
December 31, 1999, there were $25,938,033 and $1,180,451 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 2.54% and 1.00% of the Fund's net assets attributable
to Class B Shares and Class C Shares, respectively. If the Plans are terminated
or not continued, the Fund would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the Fund or recovered
through contingent deferred sales charges.
For the fiscal year ended December 31, 1999, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $4,797,288 or 0.23% of the Class A
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for payments made to financial intermediaries for servicing Class A
shareholders and for administering the Class A Share Plans. For the fiscal year
ended December 31, 1999, the Fund's aggregate expenses paid under the Plans for
Class B Shares were $8,578,348 or 1.00% of the Class B Shares' average daily net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $6,428,570 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B Shares of the Fund and $2,149,778
for fees paid to financial intermediaries for servicing Class B shareholders and
administering the Class B Share Plans. For the fiscal year ended December 31,
1999, the Fund's aggregate expenses paid under the Plans for Class C Shares were
$940,577 or 1.00% of the Class C Shares' average daily net assets. Such expenses
were paid to reimburse the Distributor for the following payments; $385,536 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class C Shares of the Fund and $555,041 for fees paid to financial
intermediaries for servicing Class C shareholders and administering the Class C
Share Plans.
The Distributor has entered into agreements with the following firms: (i)
Fidelity Brokerage Services, Inc. & National Financial Services Corporation,
(ii) GreatWest Life & Annuity Insurance Company/BenefitsCorp Equities, Inc.,
(iii) Hewitt Associates, LLC, (iv) Huntington Bank, (v) Invesco Retirement and
Benefit Services, Inc., (vi) Lincoln National Life Insurance Company, (vii)
Merrill Lynch Pierce, Fenner & Smith, Incorporated, (viii) Dean Witter Reynolds,
Inc., (ix) National Deferred Compensation, Inc., (x) Nationwide Investment
Services Corporation, (xi) Norwest Bank Minnesota, N.A./Wells Fargo Bank, N.A.,
(xii) The Prudential Insurance Company of America, (xiii) Charles Schwab & Co.,
Inc., (xiv) Smith Barney, Inc., (xv) Union Bank of California, N.A., (xvi) Buck
Consultants, Inc. and (xvii) The Vanguard Group, Inc. Shares of the Fund shall
be offered pursuant to such firm's retirement plan alliance program(s). Trustees
and other fiduciaries of retirement plans seeking to invest in multiple fund
families through a broker-dealer retirement plan alliance program should contact
the firms mentioned above for further information concerning the program(s)
including, but not limited to, minimum size and operational requirements.
B-30
<PAGE> 48
TRANSFER AGENT
The Fund's transfer agent, shareholder service agent and dividend
disbursing agent is Van Kampen Investor Services Inc. The transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Board of Trustees of the Fund.
The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker-dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Fund.
The Adviser also may place portfolio transactions, to the extent permitted
by law, with brokerage firms affiliated with the Fund, the Adviser or the
Distributor and with brokerage firms participating in the distribution of the
Fund's shares if it reasonably believes that the quality of execution and the
commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
B-31
<PAGE> 49
discounts to a firm supplying research or other services or to a firm
participating in the distribution of the Fund's shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.
Effective October 31, 1996, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") became an affiliate of the Adviser. Effective May 31, 1997, Dean
Witter Reynolds, Inc. ("Dean Witter") became an affiliate of the Adviser. The
Fund's Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the SEC under the 1940 Act which require that
the commissions paid to 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 for the Fund will be reduced by all or a
portion of the brokerage commission given to affiliated brokers.
The Fund paid the following commissions to all brokers and affiliated
brokers during the years shown:
Commissions Paid:
<TABLE>
<CAPTION>
Affiliated Brokers
------------------
All Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Fiscal year ended December 31, 1999.................. $7,090,125 $108,880 $ --
Fiscal year ended December 31, 1998.................. $4,420,585 $ -- $ --
Fiscal year ended December 31, 1997.................. $2,707,388 $ -- $ --
Fiscal year 1999 Percentages:
Commissions with affiliate to total commissions.... 1.54% --
Value of brokerage transactions with affiliate to
total transactions.............................. 0.00% --
</TABLE>
During the fiscal year ended December 31, 1999, the Fund paid $4,674,777 in
brokerage commissions on transactions totalling $3,989,160,241 to brokers
selected primarily on the basis of research services provided to the Adviser.
B-32
<PAGE> 50
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
INVESTMENT ACCOUNT
Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the Van
Kampen funds will receive statements quarterly from Investor Services showing
any reinvestments of dividends and capital gain dividends and any other activity
in the account since the preceding statement. Such shareholders also will
receive separate confirmations for each purchase or sale transaction other than
reinvestment of dividends and capital gain dividends and systematic purchases or
redemptions. Additional shares may be purchased at any time through authorized
dealers or by mailing a check directly to Investor Services.
SHARE CERTIFICATES
Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 1.50% of the
net asset value of the issued shares, and bill the party to whom the replacement
certificate was mailed.
RETIREMENT PLANS
Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and Money Purchase and Profit Sharing
Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.
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AUTOMATED CLEARING HOUSE("ACH") DEPOSITS
Shareholders can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemption proceeds transferred to a
bank account via the ACH plan are available to be credited to the account on the
second business day following normal payment. In order to utilize this option,
the shareholder's bank must be a member of ACH. In addition, the shareholder
must fill out the appropriate section of the account application. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemption proceeds are to be deposited together with the
completed application. Once Investor Services has received the application and
the voided check or deposit slip, such shareholder's designated bank account,
following any redemption, will be credited with the proceeds of such redemption.
Once enrolled in the ACH plan, a shareholder may terminate participation at any
time by writing Investor Services or by calling (800) 341-2911 ((800) 421-2833
for the hearing impaired).
DIVIDEND DIVERSIFICATION
A shareholder may, upon written request by completing the appropriate
section of the account application form or by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired), elect to have all dividends and capital gain
dividends paid on a class of shares of the Fund invested into shares of the same
class of any Van Kampen fund that participates in the exchange privilege program
so long as the investor has a pre-existing account for such class of shares of
the other fund. Both accounts must be of the same type, either non-retirement or
retirement. If the accounts are retirement accounts, they must both be for the
same class and of the same type of retirement plan (e.g. IRA, 403(b)(7), 401(k),
Money Purchase and Profit Sharing Keogh plans) and for the benefit of the same
individual. If a qualified, pre-existing account does not exist, the shareholder
must establish a new account subject to minimum investment and other
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value per
share as of the payable date of the distribution from the Fund.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for periodic checks in any
amount, not less than $25. Such a systematic withdrawal plan may also be
maintained by an investor purchasing shares for a retirement plan established on
a form made available by the Fund. See "Shareholder Services--Retirement Plans."
Class B Shareholders and Class C Shareholders who establish a systematic
withdrawal plan may redeem up to 12% annually of the shareholder's initial
account balance without incurring a contingent deferred sales charge. Initial
account balance means the amount of the shareholder's investment at the time the
election to participate in the plan is made.
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Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gain dividends
on shares held in accounts with systematic withdrawal plans are reinvested in
additional shares at the next determined net asset value per share. If periodic
withdrawals continuously exceed reinvested dividends and capital gain dividends,
the shareholder's original investment will be correspondingly reduced and
ultimately exhausted. Redemptions made concurrently with the purchase of
additional shares ordinarily will be disadvantageous to the shareholder because
of the duplication of sales charges. Any gain or loss realized by the
shareholder upon redemption of shares is a taxable event. The Fund reserves the
right to amend or terminate the systematic withdrawal program upon 30 days'
notice to its shareholders.
EXCHANGE PRIVILEGE
All shareholders are limited to eight exchanges per fund during a rolling
365-day period.
Exchange privileges will be suspended on a particular fund if more than
eight exchanges out of that fund are made by a shareholder during a rolling
365-day period. If exchange privileges are suspended, subsequent exchange
requests during the stated period will not be processed. Exchange privileges
will be restored when the account history shows fewer than eight exchanges in
the rolling 365-day period.
This policy does not apply to money market funds, systematic exchange plans
or employer-sponsored retirement plans.
REINSTATEMENT PRIVILEGE
A Class A Shareholder or Class B Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of the Fund. A Class C Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C Shares of the Fund with credit given for any contingent deferred sales
charge paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge) next determined after the order is
received, which must be made within 180 days after the date of the redemption.
Reinstatement at net asset value per share is also offered to participants in
those eligible retirement plans held or administered by Van Kampen Trust Company
for repayment of principal (and interest) on their borrowings on such plans.
There is no reinstatement privilege for Class D Shares.
REDEMPTION OF SHARES
Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
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In addition, if the Fund's Board of Trustees determines that payment wholly
or partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. A
distribution-in-kind will result in recognition by the shareholder of a gain or
loss for federal income tax purposes when such securities are distributed, and
the shareholder may have brokerage charges and a gain or loss for federal income
tax purposes upon the shareholder's subsequent disposition of such securities.
CONTINGENT DEFERRED SALES CHARGE-CLASS A
As described in the Class A, B and C Shares Prospectus under "Purchase of
Shares--Class A Shares," there is no sales charge payable on Class A Shares at
the time of purchase on investments of $1 million or more, but a contingent
deferred sales charge ("CDSC--Class A") may be imposed on certain redemptions
made within one year of purchase. For purposes of the CDSC-Class A, when shares
of one fund are exchanged for shares of another fund, the purchase date for the
shares of the fund exchanged into will be assumed to be the date on which shares
were purchased in the fund from which the exchange was made. If the exchanged
shares themselves are acquired through an exchange, the purchase date is assumed
to carry over from the date of the original election to purchase shares subject
to a CDSC-Class A rather than a front-end load sales charge. In determining
whether a CDSC-Class A is payable, it is assumed that shares being redeemed
first are any shares in the shareholder's account not subject to a contingent
deferred sales charge followed by shares held the longest in the shareholder's
account. The contingent deferred sales charge is assessed on an amount equal to
the lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED
SALES CHARGES
As described in the Class A, B and C Shares Prospectus under "Redemption of
Shares," redemptions of Class B Shares and Class C Shares will be subject to a
contingent deferred sales charge ("CDSC-Class B and C"). The CDSC-Class B and C
is waived on redemptions of Class B Shares and Class C Shares in the
circumstances described below:
REDEMPTION UPON DEATH OR DISABILITY
The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), which in pertinent part defines a person as disabled if
such person "is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration."
While the Fund does not specifically adopt the balance of the Code's definition
which pertains to furnishing the Secretary of Treasury with such proof as he or
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<PAGE> 54
she may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC-Class B and C.
In cases of death or disability, the CDSC-Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC-Class B and C applies to a total or partial redemption,
but only to redemptions of shares held at the time of the death or initial
determination of disability.
REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS
The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The CDSC-Class B and C will be waived upon the tax-free rollover or
transfer of assets to another retirement plan invested in one or more Van Kampen
funds that participate in the exchange privilege program; in such event, as
described below, the Fund will "tack" the period for which the original shares
were held on to the holding period of the shares acquired in the transfer or
rollover for purposes of determining what, if any, CDSC-Class B and C is
applicable in the event that such acquired shares are redeemed following the
transfer or rollover. The charge also will be waived on any redemption which
results from the return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code, the return of excess deferral amounts pursuant to Code
Section 401(k)(8) or 402(g)(2), the financial hardship of the employee pursuant
to U.S. Treasury Regulations Section 1.401(k)-1(d)(2), or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.
REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in the Fund. Under the systematic
withdrawal plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic basis, and
the proceeds sent to the designated payee of record. The amount to be redeemed
and frequency of the systematic withdrawals will be specified by the shareholder
upon his or her election to participate in the systematic withdrawal plan. The
CDSC-Class B and C will be waived on redemptions made under the systematic
withdrawal plan.
The amount of the shareholder's investment in the Fund at the time the
election to participate in the systematic withdrawal plan is made with respect
to the Fund is hereinafter referred to as the "initial account balance." The
amount to be systematically redeemed from the Fund without the imposition of a
CDSC-Class B and C may not exceed a maximum of 12% annually of the shareholder's
initial account balance. The Fund reserves the right to change the terms and
conditions of the systematic withdrawal plan and the ability to offer the
systematic withdrawal plan.
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<PAGE> 55
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" in the Class A, B and C Shares Prospectus.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the value of the
account up to the required minimum balance. The Fund will waive the CDSC-Class B
and C upon such involuntary redemption.
REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder who has redeemed Class C Shares of the Fund may reinvest at
net asset value, with credit for any CDSC-Class C paid on the redeemed shares,
any portion or all of his or her redemption proceeds (plus that amount necessary
to acquire a fractional share to round off his or her purchase to the nearest
full share) in Class C Shares of the Fund, provided that the reinvestment is
effected within 180 days after such redemption and the shareholder has not
previously exercised this reinvestment privilege with respect to Class C Shares
of the Fund. Shares acquired in this manner will be deemed to have the original
cost and purchase date of the redeemed shares for purposes of applying the
CDSC-Class C to subsequent redemptions.
REDEMPTION BY ADVISER
The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
TAXATION
FEDERAL INCOME TAXATION OF THE FUND
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the source of
its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its investment company taxable income (generally including ordinary
income and net short-term capital gain, but not net capital gain, which is the
excess of net long-term capital gain over net short-term capital loss) and meets
certain other requirements, it will not be required to pay federal income taxes
on any income it distributes to shareholders. The Fund intends to distribute at
least the minimum amount of investment company taxable income necessary to
satisfy the 90% distribution requirement. The Fund will not be subject to
federal income tax on any net capital gain distributed to shareholders.
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<PAGE> 56
To avoid a 4% excise tax, the Fund will be required to distribute, by
December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. In addition, the Fund
could be required to recognize unrealized gains, pay taxes and interest charges
and make distributions before requalifying for taxation as a regulated
investment company.
Some of the Fund's investment practices are subject to special provisions
of the Code that may, among other things, (i) disallow, suspend or otherwise
limit the allowance of certain losses or deductions, (ii) convert lower taxed
long-term capital gain into higher taxed short-term capital gain or ordinary
income, (iii) convert an ordinary loss or a deduction into a capital loss (the
deductibility of which is more limited) and/or (iv) cause the Fund to recognize
income or gain without a corresponding receipt for cash with which to make
distributions in amounts necessary to satisfy the 90% distribution requirement
and the distribution requirements for avoiding income and excise taxes. The Fund
will monitor its transactions and may make certain tax elections to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company.
PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in non-U.S.
corporations that could be classified as "passive foreign investment companies"
as defined for federal income tax purposes. For federal income tax purposes,
such an investment may, among other things, cause the Fund to recognize income
or gain without a corresponding receipt of cash, to incur an interest charge on
taxable income that is deemed to have been deferred and/or to recognize ordinary
income that would otherwise have been treated as capital gain.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions of the Fund's investment company taxable income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gain regardless of the length of time shares
of the Fund have been held by such shareholders. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the maximum tax rates applicable to capital
gains (including capital gain dividends), see "Capital Gains Rates" below.
Tax-exempt shareholders not subject to federal income tax on their income
generally will not be taxed on distributions from the Fund.
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Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the distribution date. The basis of such shares will
equal the fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations during the year if the Fund receives qualifying
dividends during the year and if certain requirements of the Code are satisfied.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
Certain foreign currency gains or losses attributable to currency exchange
rate fluctuations are treated as ordinary income or loss. Such income or loss
may increase or decrease (or possibly eliminate) the Fund's income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gains. Generally, a shareholder's tax basis in
Fund shares will be reduced to the extent that an amount distributed to such
shareholder is treated as a return of capital.
SALE OF SHARES
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) may be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
sold and the amount received. If the shares sold are held as a capital asset,
the gain or loss will be a capital gain or loss. For a summary of the maximum
tax rates applicable to capital gains (including capital gain dividends), see
"Capital Gains Rates" below. Any loss recognized upon a taxable disposition of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends received with respect to such
shares. For purposes of determining whether shares have been held for six months
or less, the holding period is suspended for any periods during which the
shareholder's risk of loss is
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diminished as a result of holding one or more other positions in substantially
similar or related property or through certain options or short sales.
CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers investing in the Fund is (i) the
same as the maximum ordinary income tax rate for capital assets held for one
year or less or (ii) 20% for capital assets held for more than one year. The
maximum long-term capital gains rate for corporations is 35%.
NON-U.S. SHAREHOLDERS
A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder.
Accordingly, investment in the Fund is likely to be appropriate for a Non-U.S.
Shareholder only if such person can utilize a foreign tax credit or
corresponding tax benefit in respect of such U.S. withholding tax.
Non-effectively connected capital gain dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) an
individual Non-U.S. Shareholder who is not present in the United States for more
than 182 days during the taxable year (assuming that certain other conditions
are met). However, certain Non-U.S. Shareholders may nonetheless be subject to
backup withholding on capital gain dividends and gross proceeds paid to them
upon the sale of their shares. See "Backup Withholding" below.
If income from the Fund or gains realized from the sale of shares are
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.
United States Treasury Regulations, generally effective for payments made
after December 31, 2000, modify the withholding, backup withholding and
information reporting rules including the procedures to be followed by foreign
investors in establishing foreign status. Prospective foreign investors should
consult their tax advisors concerning the applicability and effect of such
Treasury Regulations on an investment in shares of the Fund.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S.
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Shareholders may be required to provide appropriate documentation to establish
their entitlement to the benefits of such a treaty. Foreign investors are
advised to consult their tax advisers with respect to the tax implications of
purchasing, holding and disposing of shares of the Fund.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to properly furnish the Fund with its correct taxpayer
identification number, (ii) the IRS notifies the Fund that the shareholder has
failed to properly report certain interest and dividend income to the IRS and to
respond to notices to that effect or (iii) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's U.S. federal income tax liability, if any,
provided that the required information is furnished to the IRS.
INFORMATION REPORTING
The Fund must report annually to the IRS and to each shareholder (other
than a Non-U.S. Shareholder) the amount of dividends paid to such shareholder
and the amount, if any, of tax withheld pursuant to backup withholding rules
with respect to such dividends. In the case of a Non-U.S. Shareholder, the Fund
must report to the IRS and such shareholder the aggregate amount of dividends
paid that are subject to backup withholding (if any) and the amount of tax
withheld with respect to such dividends pursuant to the backup withholding
rules. This information may also be made available to the tax authorities in the
Non-U.S. Shareholder's country of residence. Generally, dividends paid to
Non-U.S. Shareholders that are subject to the 30% federal income tax withholding
described above under "Non-U.S. Shareholders" are not subject to backup
withholding.
GENERAL
The federal income tax discussion set forth above is for general
information only. Prospective investors and shareholders should consult their
tax advisers regarding the specific federal tax consequences of purchasing,
holding and disposing of shares, as well as the effects of state, local and
foreign tax law and any proposed tax law changes.
FUND PERFORMANCE
From time to time the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one-year, five-year and ten-year periods. Other total
return quotations, aggregate or average, over other time periods may also be
included.
The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the
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end of the period. Total return is calculated by subtracting the value of the
initial investment from the ending value and showing the difference as a
percentage of the initial investment; the calculation assumes the initial
investment is made at the current maximum public offering price (which includes
the maximum sales charge for Class A Shares); that all income dividends or
capital gain dividends during the period are reinvested in Fund shares at net
asset value; and that any applicable contingent deferred sales charge has been
paid. The Fund's total return will vary depending on market conditions, the
securities comprising the Fund's portfolio, the Fund's operating expenses and
unrealized net capital gains or losses during the period. Since Class A Shares
of the Fund were offered at a maximum sales charge of 8.50% prior to June 12,
1989, actual Fund total return would have been somewhat less than that computed
on the basis of the current maximum sales charge. Total return is based on
historical earnings and asset value fluctuations and is not intended to indicate
future performance. No adjustments are made to reflect any income taxes payable
by shareholders on dividends, and capital gain dividends paid by the Fund, or to
reflect the fact that 12b-1 fees may have previously been less than the current
12b-1 fees for certain classes of shares as specified in the Prospectus.
Average annual total return quotations are computed by finding the average
annual compounded rate of return over the period that would equate the initial
amount invested to the ending redeemable value.
The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative non-standardized total return is calculated by measuring the value of
an initial investment in a given class of shares of the Fund at a given time,
deducting the maximum initial sales charge, if any, determining the value of all
subsequent reinvested distributions, and dividing the net change in the value of
the investment as of the end of the period by the amount of the initial
investment and expressing the result as a percentage. Non-standardized total
return will be calculated separately for each class of shares.
Non-standardized total return calculations do not reflect the imposition of
a contingent deferred sales charge, and if any such contingent deferred sales
charge imposed at the time of redemption were reflected, it would reduce the
performance quoted.
Total return is calculated separately for Class A Shares, Class B Shares,
Class C Shares and Class D Shares of the Fund. Total return figures for Class A
Shares include the maximum sales charge; total return figures for Class B Shares
and Class C Shares include any applicable contingent deferred sales charge.
Because of the differences in sales charges and distribution fees, the total
returns for each class of shares will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield
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since, for instance, it may not include the effect of amortization of bond
premiums, and may include non-recurring short-term capital gains and premiums
from futures transactions engaged in by the Fund. Distribution rates will be
computed separately for each class of the Fund's shares.
From time to time marketing materials may provide a portfolio manager
update, an Adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top sector holdings and largest holdings. Materials may also
mention how the Distributor believes the Fund compares relative to other Van
Kampen funds. Materials may also discuss the Dalbar Financial Services study
from 1984 to 1994 which studied investor cash flow into and out of all types of
mutual funds. The ten-year study found that investors who bought mutual fund
shares and held such shares outperformed investors who bought and sold. The
Dalbar study conclusions were consistent regardless of whether shareholders
purchased their fund shares in direct or sales force distribution channels. The
study showed that investors working with a professional representative have
tended over time to earn higher returns than those who invested directly. The
performance of the funds purchased by the investors in the Dalbar study and the
conclusions based thereon are not necessarily indicative of future performance
of such funds or conclusions that may result from similar studies in the future.
The Fund may also be marketed on the internet.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking or rating services and by
nationally recognized financial publications. Such comparative performance
information will be stated in the same terms in which the comparative data or
indices are stated. Such advertisements and sales material may also include a
yield quotation as of a current period. In each case, such total return and
yield information, if any, will be calculated pursuant to rules established by
the SEC and will be computed separately for each class of the Fund's shares. For
these purposes, the performance of the Fund, as well as the performance of other
mutual funds or indices, do not reflect sales charges, the inclusion of which
would reduce the Fund's performance. The Fund will include performance data for
each class of shares of the Fund in any advertisement or information including
performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return.
B-44
<PAGE> 62
The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without charge by calling or writing the Fund at the telephone number
and address printed on the cover of this Statement of Additional Information.
CLASS A SHARES
The Fund's average annual total return, assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one-year period ended
December 31, 1999 was 19.25%, (ii) the five-year period ended December 31, 1999
was 25.64% and (iii) the ten-year period ended December 31, 1999 was 17.66%.
The Fund's cumulative non-standardized total return, including payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 38832.01%.
The Fund's cumulative non-standardized total return, excluding payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 41163.26%.
CLASS B SHARES
The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class B Shares of the Fund for (i) the one-year
period ended December 31, 1999 was 20.53%, (ii) the five-year period ended
December 31, 1999 was 26.01%, and (iii) the approximately eight-year period
since December 20, 1991, the commencement of distribution for Class B Shares of
the Fund, through December 31, 1999 was 19.49%.
The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class B Shares from
December 20, 1991 (commencement of distribution of Class B Shares) to December
31, 1999 was 318.22%.
The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class B Shares from
December 20, 1991 (commencement of distribution of Class B Shares) to December
31, 1999 was 318.22%.
CLASS C SHARES
The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class C Shares of the Fund for (i) the one-year
period ended December 31, 1999 was 24.59%, (ii) the five-year period ended
December 31, 1999 was 26.17%, and (iii) the approximately six-year, six-month
period since July 20, 1993, the commencement of distribution for Class C Shares
of the Fund, through December 31, 1999 was 20.66%.
The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class C Shares from
July 20, 1993 (commencement of distribution of Class C Shares) to December 31,
1999 was 235.79%.
B-45
<PAGE> 63
The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class C Shares from
December 31, 1993 (commencement of distribution of Class C Shares) to December
31, 1999 was 235.79%.
These results are based on historical earnings and asset value fluctuations
and are not intended to indicate future performance. Such information should be
considered in light of the Fund's investment objective and policies as well as
the risks incurred in the Fund's investment practices.
CLASS D SHARES
Class D Shares have not been offered prior to the date of this Statement of
Additional Information and have no historical performance information to report.
OTHER INFORMATION
CUSTODY OF ASSETS
All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as custodian. The custodian also provides accounting
services to the Fund.
SHAREHOLDER REPORTS
Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent auditors.
INDEPENDENT AUDITORS
Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Fund's Board of Trustees has engaged Ernst & Young
LLP, located at 233 South Wacker Drive, Chicago, Illinois 60606, to be the
Fund's independent auditors. The change in independent auditors was approved by
the Fund's audit committee and the Fund's Board of Trustees, including Trustees
who are not "interested persons" of the Fund (as defined in the 1940 Act).
PricewaterhouseCoopers LLP, located at 200 East Randolph Drive, Chicago,
Illinois 60601 ("PWC"), ceased being the Fund's independent auditors effective
May 25, 2000. The cessation of the client-auditor relationship between the Fund
and PWC was based solely on a possible future business relationship by PWC with
an affiliate of the Fund's investment adviser. The change in independent
auditors was approved by the Fund's audit committee and the Fund's Board of
Trustees, including Trustees who are not "interested persons" of the Fund (as
defined in the 1940 Act).
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
B-46
<PAGE> 64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen Enterprise Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Enterprise Fund (the
"Fund") at December 31, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods presented,
in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 11, 2000
F-1
<PAGE> 65
PORTFOLIO OF INVESTMENTS
December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
-----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS* 90.9%
CONSUMER DISTRIBUTION 5.9%
Costco Wholesale Corp. (a)........................ 162,000 $ 14,782,500
Dayton Hudson Corp. .............................. 444,000 32,606,250
Home Depot, Inc. ................................. 1,101,000 75,487,312
Tandy Corp. ...................................... 404,000 19,871,750
Wal-Mart Stores, Inc. ............................ 1,130,000 78,111,250
--------------
220,859,062
--------------
CONSUMER DURABLES 0.4%
Harley-Davidson, Inc. ............................ 230,000 14,734,375
--------------
CONSUMER NON-DURABLES 4.0%
Anheuser-Busch Cos., Inc. ........................ 191,000 13,537,125
Colgate-Palmolive Co. ............................ 154,000 10,010,000
Jones Apparel Group, Inc. (a)..................... 742,000 20,126,750
Kimberly-Clark Corp. ............................. 208,000 13,572,000
Pepsi Bottling Group, Inc. ....................... 730,000 12,090,625
Procter & Gamble Co. ............................. 314,000 34,402,625
Quaker Oats Co. .................................. 466,000 30,581,250
Seagram Co. Ltd. ................................. 312,600 14,047,463
--------------
148,367,838
--------------
CONSUMER SERVICES 6.7%
CBS Corp. (a)..................................... 722,000 46,162,875
Clear Channel Communications, Inc. (a)............ 427,049 38,114,123
Hispanic Broadcasting Corp. (a)................... 218,000 20,103,688
Metro-Goldwyn-Mayer, Inc. (a)..................... 795,778 18,750,519
MGM Grand, Inc. .................................. 188,000 9,458,750
Omnicom Group, Inc. .............................. 429,000 42,900,000
Park Place Entertainment Corp. (a)................ 764,000 9,550,000
Time Warner, Inc. ................................ 266,000 19,268,375
Univision Communications, Inc. (a)................ 449,000 45,882,187
--------------
250,190,517
--------------
ENERGY 0.4%
Noble Drilling Corp. (a).......................... 453,000 14,835,750
--------------
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 66
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
-----------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 8.1%
American Express Co. ............................. 177,000 $ 29,426,250
American International Group, Inc. ............... 244,000 26,382,500
Bank of America Corp. ............................ 35,000 1,756,563
Capital One Financial Corp. ...................... 288,000 13,878,000
Chase Manhattan Corp. ............................ 153,000 11,886,188
Citigroup, Inc. .................................. 423,000 23,502,937
Federal Home Loan Mortgage Corp. ................. 287,000 13,506,937
Federal National Mortgage Association............. 134,000 8,366,625
Fifth Third Bancorp............................... 273,000 20,031,375
Firstar Corp. .................................... 839,000 17,723,875
FleetBoston Financial Corp. ...................... 481,000 16,744,812
Franklin Resources, Inc. ......................... 265,000 8,496,563
Lehman Brothers Holdings, Inc. ................... 221,000 18,715,937
MBNA Corp. ....................................... 433,000 11,799,250
MGIC Investment Corp. ............................ 233,000 14,023,687
T. Rowe Price Associates, Inc. ................... 226,000 8,347,875
Providian Financial Corp. ........................ 85,000 7,740,313
Charles Schwab Corp. ............................. 396,000 15,196,500
SLM Holding Corp. ................................ 358,000 15,125,500
UnumProvident Corp. .............................. 245,000 7,855,313
Wells Fargo Co. .................................. 308,000 12,454,750
--------------
302,961,750
--------------
HEALTHCARE 8.9%
American Home Products Corp. ..................... 698,100 27,531,319
Amgen, Inc. (a)................................... 400,000 24,025,000
Baxter International, Inc. ....................... 258,000 16,205,625
Biogen, Inc. (a).................................. 211,000 17,829,500
Bristol-Myers Squibb Co. ......................... 651,000 41,786,062
Guidant Corp. .................................... 285,900 13,437,300
Johnson & Johnson, Inc. .......................... 472,000 43,955,000
Lincare Holdings, Inc. (a) ....................... 709,000 24,593,438
Merck & Co., Inc. ................................ 444,000 29,775,750
PE Corp.-PE Biosystems Group...................... 138,000 16,603,125
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 67
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
-----------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Pfizer, Inc. ..................................... 369,000 $ 11,969,438
Schering-Plough Corp. ............................ 617,000 26,029,687
Warner-Lambert Co. ............................... 325,000 26,629,687
Wellpoint Health Networks, Inc. (a)............... 168,000 11,077,500
--------------
331,448,431
--------------
PRODUCER MANUFACTURING 1.8%
Corning, Inc. .................................... 525,000 67,692,188
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.5%
USX--U.S. Steel Group............................. 563,000 18,579,000
--------------
TECHNOLOGY 47.2%
Adobe Systems, Inc. .............................. 148,000 9,953,000
Altera Corp. (a).................................. 362,000 17,941,625
America Online, Inc. (a).......................... 1,304,000 98,370,500
Analog Devices, Inc. (a) ......................... 225,000 20,925,000
Apple Computer, Inc. (a) ......................... 157,000 16,141,563
Applied Materials, Inc. (a)....................... 273,000 34,585,687
BMC Software, Inc. (a)............................ 343,000 27,418,562
Cisco Systems, Inc. (a)........................... 1,491,000 159,723,375
Citrix Systems, Inc. (a).......................... 440,000 54,120,000
Computer Associates International, Inc. .......... 141,000 9,861,188
Comverse Technology, Inc. (a)..................... 330,000 47,767,500
Echostar Communications Corp. (a)................. 150,800 14,703,000
Electronic Arts, Inc. (a)......................... 81,000 6,804,000
EMC Corp. (a)..................................... 819,000 89,475,750
First Data Corp. ................................. 468,000 23,078,250
Gateway, Inc. (a)................................. 290,000 20,898,125
General Instrument Corp. (a)...................... 325,000 27,625,000
Honeywell International, Inc. .................... 446,500 25,757,469
Intel Corp. ...................................... 1,211,000 99,680,437
International Business Machines Corp. ............ 161,000 17,388,000
JDS Uniphase Corp. (a) ........................... 347,600 56,072,225
Linear Technology Corp. .......................... 147,000 10,519,688
LSI Logic Corp. (a)............................... 324,000 21,870,000
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 68
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
-----------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Lucent Technologies, Inc. ........................ 903,650 $ 67,604,316
Micron Technology, Inc. .......................... 339,000 26,357,250
Microsoft Corp. (a)............................... 1,397,000 163,099,750
Motorola, Inc. ................................... 304,000 44,764,000
Nokia Corp.--ADR (Finland)........................ 440,000 83,600,000
Nortel Networks Corp. ............................ 442,000 44,642,000
Oracle Corp. (a).................................. 906,000 101,528,625
QUALCOMM, Inc. (a)................................ 236,000 41,565,500
Sanmina Corp. (a)................................. 312,000 31,161,000
Solectron Corp. (a) .............................. 128,000 12,176,000
STMicroelectronics NV--ADR (Netherlands).......... 200,000 30,287,500
Sun Microsystems, Inc. (a)........................ 810,000 62,724,375
Texas Instruments, Inc. .......................... 478,000 46,306,250
VERITAS Software Corp. (a)........................ 100,500 14,384,063
Waters Corp. (a).................................. 212,000 11,236,000
Xilinx, Inc. (a).................................. 612,000 27,826,875
Yahoo!, Inc. (a).................................. 93,000 40,239,937
--------------
1,760,183,385
--------------
TRANSPORTATION 0.2%
Kansas City Southern Industries, Inc. ............ 109,000 8,134,125
--------------
UTILITIES 6.8%
AES Corp. ........................................ 275,700 20,608,575
ALLTEL Corp. ..................................... 613,000 50,687,437
General Electric Co. ............................. 756,000 116,991,000
MCI Worldcom, Inc. (a)............................ 463,500 24,594,469
Nextel Communications, Inc. (a)................... 153,000 15,778,125
VoiceStream Wireless Corp. (a).................... 181,000 25,758,562
--------------
254,418,168
--------------
TOTAL LONG-TERM INVESTMENTS 90.9%
(Cost $2,039,753,879).......................................... 3,392,404,589
--------------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 69
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS 8.1%
REPURCHASE AGREEMENTS 3.0%
DLJ Mortgage Acceptance Corp. ($94,648,000 par,
collateralized by U.S. Government obligations in a pooled
cash account, dated 12/31/99, to be sold on 01/03/00 at
$94,663,775).............................................. $ 94,648,000
SBC Warburg Dillon Read ($17,912,000 par, collateralized by
U.S. Government obligations in a pooled cash account,
dated 12/31/99, to be sold on 01/03/00 at $17,915,881).... 17,912,000
--------------
112,560,000
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 5.1%
Federal Home Loan Bank Consolidated Discount Notes
($15,000,000 par, yielding 5.58%, 03/10/00
maturity) (b)............................................. 14,841,300
Federal Home Loan Mortgage Discount Notes ($25,000,000 par,
yielding 5.64%, 01/27/00 maturity) (b).................... 24,898,889
Federal National Mortgage Association Discount Notes
($25,000,000 par, yielding 5.63%, 01/18/00
maturity) (b)............................................. 24,934,007
Federal National Mortgage Association Discount Notes
($25,000,000 par, yielding 5.67%, 02/24/00
maturity) (b)............................................. 24,790,375
Federal National Mortgage Association Discount Notes
($50,000,000 par, yielding 5.65%, 01/06/00
maturity) (b)............................................. 49,960,833
Federal National Mortgage Association Discount Notes
($50,000,000 par, yielding 5.65%, 01/07/00
maturity) (b)............................................. 49,953,000
--------------
189,378,404
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $301,938,404)....................................... 301,938,404
--------------
TOTAL INVESTMENTS 99.0%
(Cost $2,341,692,283)..................................... 3,694,342,993
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0%................. 35,474,517
--------------
NET ASSETS 100.0%.......................................... $3,729,817,510
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated for open futures transactions.
ADR--American Depositary Receipt
* The common stocks are classified by sectors which represent broad groupings of
related industries.
F-6
<PAGE> 70
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,341,692,283)..................... $3,694,342,993
Cash........................................................ 37,342,543
Receivables:
Investments Sold.......................................... 40,101,317
Fund Shares Sold.......................................... 9,112,602
Dividends................................................. 1,597,531
Variation Margin on Futures............................... 645,998
Other....................................................... 172,136
--------------
Total Assets.......................................... 3,783,315,120
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 34,231,020
Investments Purchased..................................... 9,733,399
Income and Capital Gain Distributions..................... 5,552,275
Distributor and Affiliates................................ 2,136,367
Investment Advisory Fee................................... 1,164,705
Trustees' Deferred Compensation and Retirement Plans........ 288,172
Accrued Expenses............................................ 391,672
--------------
Total Liabilities..................................... 53,497,610
--------------
NET ASSETS.................................................. $3,729,817,510
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $2,294,861,784
Net Unrealized Appreciation................................. 1,364,234,284
Accumulated Net Realized Gain............................... 70,964,751
Accumulated Net Investment Loss............................. (243,309)
--------------
NET ASSETS.................................................. $3,729,817,510
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $2,591,140,580 and 113,772,002 shares of
beneficial interest issued and outstanding)........... $ 22.77
Maximum sales charge (5.75%* of offering price)......... 1.39
--------------
Maximum offering price to public........................ $ 24.16
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,020,771,324 and 46,643,784 shares of
beneficial interest issued and outstanding)........... $ 21.88
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $117,905,606 and 5,336,741 shares of
beneficial interest issued and outstanding)........... $ 22.09
==============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
F-7
<PAGE> 71
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 17,222,388
Interest.................................................... 7,361,253
--------------
Total Income............................................ 24,583,641
--------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $5,103,323, $8,749,163 and $962,535
respectively)............................................. 14,815,021
Investment Advisory Fee..................................... 14,030,139
Shareholder Services........................................ 5,876,205
Custody..................................................... 216,323
Legal....................................................... 173,775
Trustees' Fees and Related Expenses......................... 91,054
Other....................................................... 1,205,409
--------------
Total Expenses.......................................... 36,407,926
Less Credits Earned on Cash Balances.................... 46,198
--------------
Net Expenses............................................ 36,361,728
--------------
NET INVESTMENT LOSS......................................... $ (11,778,087)
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 480,881,210
Futures................................................... 1,555,800
--------------
Net Realized Gain........................................... 482,437,010
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,058,881,928
--------------
End of the Period:
Investments............................................. 1,352,650,710
Futures................................................. 11,583,574
--------------
1,364,234,284
--------------
Net Unrealized Appreciation During the Period............... 305,352,356
--------------
NET REALIZED AND UNREALIZED GAIN............................ $ 787,789,366
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 776,011,279
==============
</TABLE>
See Notes to Financial Statements
F-8
<PAGE> 72
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
-------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss..................... $ (11,778,087) $ 2,399,932
Net Realized Gain.............................. 482,437,010 134,279,558
Net Unrealized Appreciation During the
Period....................................... 305,352,356 443,358,417
-------------- ---------------
Change in Net Assets from Operations........... 776,011,279 580,037,907
-------------- ---------------
Distributions from Net Investment Income....... (39,771) (4,405,387)
Distributions in Excess of Net Investment
Income....................................... (332,342) -0-
-------------- ---------------
Distributions from and in Excess of Net
Investment Income*........................... (372,113) (4,405,387)
Distributions from Net Realized Gain*.......... (443,264,269) (108,647,338)
-------------- ---------------
Total Distributions............................ (443,636,382) (113,052,725)
-------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... 332,374,897 466,985,182
-------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold...................... 5,415,754,623 5,283,612,665
Net Asset Value of Shares Issued Through
Dividend Reinvestment........................ 404,284,548 102,204,579
Cost of Shares Repurchased..................... (5,462,366,950) (5,118,178,150)
-------------- ---------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................. 357,672,221 267,639,094
-------------- ---------------
TOTAL INCREASE IN NET ASSETS................... 690,047,118 734,624,276
NET ASSETS:
Beginning of the Period........................ 3,039,770,392 2,305,146,116
-------------- ---------------
End of the Period (Including accumulated
undistributed net investment income of
$(243,309) and $39,771, respectively)........ $3,729,817,510 $ 3,039,770,392
============== ===============
</TABLE>
<TABLE>
<CAPTION>
*Distributions by Class
------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of
Net Investment Income:
Class A Shares.................... $ (372,113) $ (4,405,387)
Class B Shares.................... -0- -0-
Class C Shares.................... -0- -0-
-------------- --------------
$ (372,113) $ (4,405,387)
============== ==============
Distributions from Net Realized
Gain:
Class A Shares.................... $ (304,078,413) $ (75,906,906)
Class B Shares.................... (125,087,732) (29,616,587)
Class C Shares.................... (14,098,124) (3,123,845)
-------------- --------------
$ (443,264,269) $ (108,647,338)
============== ==============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE> 73
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
Class A Shares 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $20.631 $ 17.414 $ 15.120 $ 13.07 $ 11.43
------- -------- -------- -------- --------
Net Investment Income/Loss.... (.030) .058 .087 .086 .08
Net Realized and Unrealized
Gain........................ 5.207 3.980 4.113 2.942 3.7325
------- -------- -------- -------- --------
Total from Investment
Operations.................. 5.177 4.038 4.200 3.028 3.8125
------- -------- -------- -------- --------
Less:
Distributions from and in
Excess of Net Investment
Income.................... .004 .045 .060 .077 .0725
Distributions from Net
Realized Gain............. 3.030 .776 1.846 .901 2.10
------- -------- -------- -------- --------
Total Distribution............ 3.034 .821 1.906 .978 2.1725
------- -------- -------- -------- --------
Net Assets Value, End of the
Period...................... $22.774 $ 20.631 $ 17.414 $ 15.120 $ 13.07
======= ======== ======== ======== ========
Total Return (a).............. 26.56% 23.56% 28.55% 23.48% 33.92%
Net Assets at End of the
Period (in millions)........ $2,591.1 $2,137.4 $1,706.1 $1,276.9 $1,035.7
Ratio of Expenses to Average
Net Assets (b).............. .91% .94% .93% 1.01% .98%
Ratio of Net Investment
Income/Loss to Average Net
Assets (b).................. (.13%) .32% .54% .60% .59%
Portfolio Turnover............ 111% 72% 73% 110% 152%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(b) For the year ended December 31, 1996, the impact on the Ratios of Expenses
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
F-10
<PAGE> 74
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
Class B Shares 1999 1998(c) 1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................. $20.075 $17.059 $14.909 $ 12.94 $ 11.37
------- ------- ------- ------- -------
Net Investment Loss.......... (.154) (.089) (.021) (.012) (.03)
Net Realized and Unrealized
Gain....................... 4.993 3.881 4.017 2.882 3.70
------- ------- ------- ------- -------
Total from Investment
Operations................. 4.839 3.792 3.996 2.870 3.67
Less Distributions from Net
Realized Gain.............. 3.030 .776 1.846 .901 2.10
------- ------- ------- ------- -------
Net Asset Value, End of the
Period..................... $21.884 20.075 $17.059 $14.909 $ 12.94
======= ======= ======= ======= =======
Total Return (a)............. 25.54% 22.65% 27.50% 22.48% 32.82%
Net Assets at End of the
Period (In millions)....... $1,020.8 $ 816.3 $ 542.2 $ 305.6 $ 184.1
Ratio of Expenses to Average
Net Assets (b)............. 1.67% 1.74% 1.75% 1.82% 1.81%
Ratio of Net Investment Loss
to Average Net
Assets (b)................. (.91%) (.49%) (.29%) (.21%) (.24%)
Portfolio Turnover........... 111% 72% 73% 110% 152%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
maximum sales charge of contingent deferred sales charge.
(b) For the year ended December 31, 1996, the impact on the Ratios of Expenses
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
(c) Based on average shares outstanding.
See Notes to Financial Statements
F-11
<PAGE> 75
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class C Shares 1999 1998(c) 1997 1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $20.239 $17.191 $15.008 $ 13.01 $ 11.42
------- ------- ------- ------- -------
Net Investment Loss.................. (.136) (.090) (.023) (.013) (.03)
Net Realized and Unrealized Gain..... 5.020 3.914 4.052 2.912 3.72
------- ------- ------- ------- -------
Total from Investment Operations..... 4.884 3.824 4.029 2.899 3.69
Less Distributions from Net Realized
Gain............................... 3.030 .776 1.846 .901 2.10
------- ------- ------- ------- -------
Net Asset Value, End of the Period... $22.093 $20.239 $17.191 $15.008 $ 13.01
======= ======= ======= ======= =======
Total Return (a)..................... 25.59% 22.65% 27.51% 22.60% 32.85%
Net Assets at End of the Period (In
millions).......................... $ 117.9 $ 86.0 $ 56.9 $ 30.4 $ 15.7
Ratio of Expenses to Average Net
Assets (b)......................... 1.68% 1.74% 1.75% 1.82% 1.80%
Ratio of Net Investment Loss to
Average Net Assets (b)............. (.90%) (.48%) (.29%) (.22%) (.23%)
Portfolio Turnover................... 111% 72% 73% 110% 152%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
maximum sales charge of contingent deferred sales charge.
(b) For the year ended December 31, 1996, the impact on the Ratios of Expenses
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
(c) Based on average shares outstanding.
See Notes to Financial Statements
F-12
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Enterprise 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 seek capital appreciation by investing in a portfolio of
securities consisting principally of common stocks. The Fund commenced
investment operations on January 7, 1954. The distribution of the Fund's Class B
and Class C shares commenced on December 20, 1991 and July 20, 1993,
respectively.
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 sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sale price is not
available are valued at the mean of the bid and asked prices or, if not
available, their fair value as determined in accordance with 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 which is
considered to approximate market value.
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 specified 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 Asset Management Inc. (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
F-13
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
the value of the underlying security at not less than the repurchase proceeds
due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts on debt securities
purchased are amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. 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 to its shareholders.
Therefore, no provision for federal income taxes is required.
At December 31, 1999, for federal income tax purposes, cost of long- and
short-term investments is $2,348,151,732; the aggregate gross unrealized
appreciation is $1,398,587,691 and the aggregate gross unrealized depreciation
is $52,396,430, resulting in net unrealized appreciation on long- and short-term
investments of $1,346,191,261.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions and as a result of gains/losses recognized for tax purposes on open
futures at December 31, 1999.
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may include
short-term capital gains and gains on option and futures transactions. All
short-term capital gains and a portion of option and futures gains are included
in ordinary income for tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 1999 fiscal year have been identified and appropriately reclassified.
For the year ended December 31, 1999, a permanent book and tax difference
relating to a net operating loss, in the amount of $11,723,600, was reclassified
from accumulated net realized gain to accumulated net investment loss.
Additionally, a permanent book and tax difference relating to a
F-14
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
non-deductible expense, in the amount of $153,766, was reclassified from capital
to accumulated net investment loss. Finally, a permanent book and tax difference
relating to capital gain distributions, in the amount of $10,246, was
reclassified from accumulated net investment loss to accumulated net realized
gain.
F. EXPENSE REDUCTIONS--During the year ended December 31, 1999, the Fund's
custody fee was reduced by $46,198 a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
---------------------------------------------------------------------
<S> <C>
First $1 billion......................................... .50 of 1%
Next $1 billion.......................................... .45 of 1%
Next $1 billion.......................................... .40 of 1%
Over $3 billion.......................................... .35 of 1%
</TABLE>
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $173,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $640,300 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended December 31,
1999, the Fund recognized expenses of approximately $4,710,500. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the
F-15
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
retirement plan are payable for a ten-year period and are based upon each
trustee's years of service to the Fund. The maximum annual benefit per trustee
under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At December 31, 1999, capital aggregated $1,458,109,182, $747,435,502 and
$89,317,100 for Classes A, B, and C, respectively. For the year ended December
31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 204,104,518 $ 4,361,367,361
Class B.................................. 45,071,295 932,198,067
Class C.................................. 5,836,735 122,189,195
------------ ---------------
Total Sales................................ 255,012,548 $ 5,415,754,623
============ ===============
Dividend Reinvestment:
Class A.................................. 12,823,258 $ 272,202,449
Class B.................................. 5,831,316 119,129,590
Class C.................................. 628,245 12,952,509
------------ ---------------
Total Dividend Reinvestment................ 19,282,819 $ 404,284,548
============ ===============
Repurchases:
Class A.................................. (206,756,637) $(4,423,347,663)
Class B.................................. (44,921,263) (926,532,977)
Class C.................................. (5,378,863) (112,486,310)
------------ ---------------
Total Repurchases.......................... (257,056,763) $(5,462,366,950)
============ ===============
</TABLE>
F-16
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
At December 31, 1998, capital aggregated $1,247,993,551, $622,683,389 and
$66,666,389 for Classes A, B, and C, respectively. For the year ended December
31, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 232,030,934 $ 4,349,545,687
Class B.................................. 46,624,437 851,354,417
Class C.................................. 4,456,779 82,712,561
------------ ---------------
Total Sales................................ 283,112,150 $ 5,283,612,665
============ ===============
Dividend Reinvestment:
Class A.................................. 3,731,141 $ 71,215,610
Class B.................................. 1,514,082 28,118,929
Class C.................................. 153,307 2,870,040
------------ ---------------
Total Dividend Reinvestment................ 5,398,530 $ 102,204,579
============ ===============
Repurchases:
Class A.................................. (230,130,328) $(4,324,087,590)
Class B.................................. (39,259,659) (725,635,528)
Class C.................................. (3,669,727) (68,455,032)
------------ ---------------
Total Repurchases.......................... (273,059,714) $(5,118,178,150)
============ ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996, and any dividend reinvestment Class B shares received
on such shares, automatically convert to class A shares eight years after the
end of the calendar month in which the shares were purchased. Class B shares
purchased before June 1, 1996, and any dividend reinvestment plan Class B shares
received on such shares, automatically convert to class A shares six years after
the end of the calendar month in which the shares were purchased. For the year
ended December 31, 1999, 3,108,556 Class B shares automatically converted to
Class A shares and are shown in the above table as sales of Class A shares and
repurchases of Class B shares. Class C shares purchased before January 1, 1997,
and any dividend reinvestment plan C shares received on such shares,
automatically convert to Class A shares ten years after the end of the calendar
month in which the shares were purchased. Class C shares purchased on or after
January 1, 1997 do not possess a conversion feature. For the year ended December
31, 1999, no Class C shares converted to Class A shares. The CDSC for Class B
and C
F-17
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
shares will be imposed on most redemptions made within five years of the
purchase for Class B and one year of the purchase for Class C as detailed in the
following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Sixth and Thereafter......................... None None
</TABLE>
For the year ended December 31, 1999, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $914,300 and CDSC on redeemed shares of approximately $1,916,200.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $3,381,401,092 and $3,776,560,487,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures.
F-18
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
These contracts are generally used to provide the return of an index without
purchasing all of the securities underlying the index or to manage the Fund's
overall exposure to the equity markets.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
Transactions in futures contracts for the year ended December 31, 1999, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
-----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998.......................... -0-
Futures Opened............................................ 1,060
Futures Closed............................................ (300)
-----
Outstanding at December 31, 1999.......................... 760
=====
</TABLE>
The futures contracts outstanding as of December 31, 1999, and the
descriptions and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF APPRECIATION/
CONTRACTS DEPRECIATION
------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS:
S&P 500 Future-March 2000
(Current Notional Value of $371,050 per
contract)................................. 760 $11,583,574
=== ===========
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended December 31, 1999, are payments retained by Van Kampen of
approximately $7,362,500.
F-19
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
--------------------------------------------------------------------------------
7. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each Fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the credit facility meets or exceeds $650 million on a
complex-wide basis, each Fund will be limited to its pro-rata percentage based
on the net assets of each participating Fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each Fund incurs based on its pro-rata percentage of
quarterly net assets. The Fund has not borrowed against the credit facility
during the period.
F-20
<PAGE> 84
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<S> <C> <C>
(a) (1) First Amended and Restated Agreement and Declaration of
Trust(1)
(2) Certificate of Amendment(1)
(3) Second Certificate of Amendment(6)
(4) Amended and Restated Certificate of Designation(5)
(5) Second Amended and Restated Certificate of Designation(6)
(6) Third Amended and Restated Certificate of Designation+
(b) Amended and Restated Bylaws(1)
(c) (1) Specimen Class A Share Certificate(2)
(2) Specimen Class B Share Certificate(2)
(3) Specimen Class C Share Certificate(2)
(4) Specimen Class D Share Certificate+
(d) Investment Advisory Agreement(5)
(e) (1) Distribution and Service Agreement(5)
(2) Form of Dealer Agreement(2)
(3) Form of Broker Fully Disclosed Selling Agreement(2)
(4) Form of Bank Fully Disclosed Selling Agreement(2)
(f) (1) Form of Trustee Deferred Compensation Plan(7)
(2) Form of Trustee Retirement Plan(7)
(g) (1) Custodian Agreement(3)
(2) Transfer Agency and Service Agreement(5)
(h) (1) Data Services Agreement(2)
(2) Fund Accounting Agreement(4)
(i) Opinion and Consent of Counsel of Skadden, Arps, Slate,
Meagher & Flom (Illinois)+
(j) (1) Consent of Ernst & Young LLP+
(2) Consent of PricewaterhouseCoopers LLP+
(k) Not applicable
(l) Not applicable
(m) (1) Plan of Distribution Pursuant to Rule 12b-1(2)
(2) Form of Shareholder Assistance Agreement(2)
(3) Form of Administrative Services Agreement(2)
(4) Service Plan(2)
(n) Amended Multiple Class Plan+
(p) Code of Ethics+
(q) Power of Attorney(8)
(z) (1) List of Certain Investment Companies in Response to Item
27(a)(+)
(2) List of Officers and Directors of Van Kampen Funds Inc. in
Response to Item 27(b)(+)
</TABLE>
---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A, File Number 2-10559,
filed April 24, 1996.
(2) Incorporated herein by reference to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A, File Number 2-10559,
filed April 28, 1997.
(3) Incorporated herein by reference to Post-Effective Amendment No. 75 to Van
Kampen American Capital Growth and Income Fund Registration Statement on
Form N-1A, File Number 2-21657, filed March 27, 1998.
(4) Incorporated herein by reference to Post-Effective Amendment No. 50 to Van
Kampen American Capital Comstock Fund Registration Statement on Form N-1A,
File Number 2-27778, filed April 27, 1998.
(5) Incorporated herein by reference to Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A, File Number 2-10559,
filed April 28, 1998.
(6) Incorporated herein by reference to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A, File Number 2-10559,
filed February 25, 1999.
C-1
<PAGE> 85
(7) Incorporated herein by reference to Van Kampen Harbor Fund's Post-Effective
Amendment No. 81 to Registrant's Registration Statement on Form N-1A, File
Number 2-12685 and 811-734, filed on April 29, 1999.
(8) Incorporated herein by reference to Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A, File Number 2-10559,
filed July 27, 2000.
+ Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION.
Pursuant to Del. Code Ann. Title 12, Section 3817, a Delaware business
trust may provide in its governing instrument for the indemnification of its
officers and trustees from and against any and all claims and demands
whatsoever.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust as amended. 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, or (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 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 "1933 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
1933 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
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<PAGE> 86
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 1933 Act and will be governed by the
final adjudication of such issue.
Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading under the 1933 Act, or
any other statute or the common law. The Registrant does not agree to indemnify
the Distributor or hold it harmless to the extent that the statement or omission
was made in reliance upon, and in conformity with information furnished to the
Registrant by or on behalf of the Distributor. In no case is the indemnity of
the Registrant in favor of the Distributor or any person indemnified to be
deemed to protect the Distributor or any person against any liability to the
Fund or its security holders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the agreement.
Pursuant to the agreement by which Van Kampen Investor Services Inc.
("Investor Services") is appointed transfer agent of the Fund, the Registrant
agrees to indemnify and hold Investor Services harmless against any losses,
damages, costs, charges, payments, liabilities and expenses (including
reasonable counsel fees) arising out of or attributable to:
(1) the performance of Investor Services under the agreement provided that
Investor Services acted in good faith with due diligence and without negligence
or willful misconduct.
(2) reliance by Investor Services on, or reasonable use by, Investor
Services of information, records and documents which have been prepared on
behalf of, or have been furnished by, the Fund, or the carrying out by Investor
Services of any instructions or requests of the Fund.
(3) the offer or sale of the Fund's shares in violation of any federal or
state law or regulation or ruling by any federal agency unless such violation
results from any failure by Investor Services to comply with written
instructions from the Fund that such offers or sales were not permitted under
such law, rule or regulation.
(4) the refusal of the Fund to comply with terms of the agreement or the
Fund's lack of good faith, negligence or willful misconduct or breach of any
representation or warranty made by the Fund under the agreement provided that if
the reason for such failure is attributable to any action of the Fund's
investment adviser or distributor or any person providing accounting or legal
services to the Fund, Investor Services only will be entitled to indemnification
if such entity is otherwise entitled to the indemnification from the Fund.
See also "Investment Advisory Agreement" in the Statement of Additional
Information.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" and "Investment Advisory Agreement" in the Statement of Additional
Information for information regarding the business of Van Kampen Asset
Management Inc. (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. 801-1669)
filed under the Investment Advisers Act of 1940, as amended, incorporated herein
by reference.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen Funds Inc. which acts as
principal underwriter for certain investment companies and unit investment
trusts. See Exhibit (z)(1).
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<PAGE> 87
(b) Van Kampen Funds Inc. is an affiliated person of an affiliated person
of the Registrant and is the only principal underwriter for the Registrant. The
name, principal business address and positions and offices with Van Kampen Funds
Inc. of each of its directors and officers are disclosed in Exhibit (z)(2).
Except as disclosed under the heading, "Trustees and Officers" in Part B of this
Registration Statement, none of such persons has any position or office with
Registrant.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder to be maintained (i) by Registrant will be maintained at its offices,
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, or at Van
Kampen 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 02171; (ii) by the Adviser, will be maintained at its
offices, located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555; and
(iii) by Van Kampen Funds Inc., the principal underwriter, will be maintained at
its offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
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<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN ENTERPRISE FUND, certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the 1933 Act and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Oakbrook Terrace and State of Illinois, on the 25th
day of September, 2000.
VAN KAMPEN ENTERPRISE FUND
By: /s/ A. THOMAS SMITH III
---------------------------------------
A. Thomas Smith III, Secretary
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on September 25, 2000 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
Principal Executive Officer:
/s/ RICHARD F. POWERS, III* Trustee and President
-----------------------------------------------------
Richard F. Powers, III*
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and
----------------------------------------------------- Treasurer
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
-----------------------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Trustee
-----------------------------------------------------
Jerry D. Choate
/s/ LINDA HUTTON HEAGY* Trustee
-----------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
-----------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
-----------------------------------------------------
Jack E. Nelson
/s/ MITCHELL M. MERIN* Trustee
-----------------------------------------------------
Mitchell M. Merin
/s/ PHILLIP B. ROONEY* Trustee
-----------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
-----------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
-----------------------------------------------------
Wayne W. Whalen
/s/ SUZANNE H. WOOLSEY* Trustee
-----------------------------------------------------
Suzanne H. Woolsey
* Signed by A. Thomas Smith III pursuant to a power of attorney previously filed.
/s/ A. THOMAS SMITH III September 25, 2000
-----------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>
<PAGE> 89
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 41
TO FORM N-1A
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION
-------- -----------
<S> <C>
(a)(6) Third Amended and Restated Certificate of Designation
(c)(4) Specimen Class D Share Certificate
(i) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)
(j)(1) Consent of Ernst & Young LLP
(j)(2) Consent of PricewaterhouseCoopers LLP
(n) Amended Multiple Class Plan
(p) Code of Ethics
(z)(1) List of investment companies in response to Item 27(a)
(z)(2) List of Officers and Directors of Van Kampen Funds Inc. in
response to Item 27(b)
</TABLE>
