<PAGE> 1
VAN KAMPEN
HARBOR FUND
Van Kampen Harbor Fund is a mutual fund with
the investment objective to seek to provide
current income, capital appreciation and
conservation of capital. The Fund's investment
adviser seeks to achieve the Fund's investment
objective by investing principally in a
portfolio of debt securities, primarily
convertible bonds and convertible preferred
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 APRIL 28, 2000,
AS SUPPLEMENTED ON MAY 25, 2000.
[VAN KAMPEN FUNDS LOGO]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary............................... 3
Fees and Expenses of the Fund..................... 6
Investment Objective, Policies and Risks.......... 7
Investment Advisory Services...................... 13
Purchase of Shares................................ 14
Redemption of Shares.............................. 20
Distributions from the Fund....................... 22
Shareholder Services.............................. 22
Federal Income Taxation........................... 24
Financial Highlights.............................. 26
Appendix - Description of Securities Ratings...... A-1
</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> 3
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund is a mutual fund with the investment objective to seek to provide
current income, capital appreciation and conservation of capital.
INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing principally in a portfolio of debt securities, primarily
convertible bonds and convertible preferred stocks. Under normal market
conditions, the Fund invests at least 50% of its total assets (excluding cash,
cash equivalents and government securities) in convertible debt securities. The
Fund's investment adviser emphasizes income-producing securities of companies
whose common stocks are believed to have good prospects for capital
appreciation. The Fund's investment adviser seeks to identify companies with
improving fundamentals, strong earnings growth, increasing market share and
attractive valuations that are likely to provide investors with equity
participation through their issuance of convertible securities. Portfolio
securities are sold when the Fund's investment adviser's assessments of the
income or growth potential of such securities materially change. The Fund may
invest in securities without limitations as to credit ratings, and such
investments may include high-, medium-, or lower-rated securities or unrated
securities. Securities rated BB or lower by Standard & Poor's ("S&P") or rated
Ba or lower by Moody's Investors Service, Inc. ("Moody's") and unrated
securities of comparable quality are commonly referred to as "junk bonds" and
involve special risks as compared to investments in higher-grade securities (see
the appendix to this prospectus for an explanation of securities ratings). The
Fund may invest up to 45% of its total assets in common stocks and 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 investment 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
stock generally are affected by changes in the stock markets, which fluctuate
substantially over time, sometimes suddenly and sharply. During an overall stock
market decline, stock prices of small- or medium- sized companies (in which the
Fund may invest) often fluctuate more than prices of larger companies. The
prices of the Fund's investments in common stocks may or may not fluctuate in
tandem with overall changes in the stock market. The prices of debt securities
tend to fall as interest rates rise, and such declines tend to be greater among
debt securities with longer maturities. Lower-grade securities, especially those
with long maturities or that do not make regular interest payments, may be more
volatile and may decline more in price in response to negative issuer or general
economic news than higher-grade securities.
The prices of convertible securities are affected by changes similar to those of
debt and equity securities. The value of a convertible security tends to decline
as interest rates rise and, because of the conversion feature, tends to vary
with fluctuations in the market value of the underlying equity security.
CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Because the Fund may invest in securities with low
credit quality, it is subject to a higher level of credit risk than a fund that
buys only investment grade securities. The credit quality of "noninvestment
grade" securities is considered speculative by recognized rating agencies with
respect to the issuer's continuing ability to pay interest and principal. Lower-
grade securities may have less liquidity and a higher incidence of default than
investments in higher-grade securities. The Fund may incur higher expenditures
to protect the Fund's interest in such securities. The credit risks and market
prices of lower-grade securities generally are more sensitive to negative
corporate developments, such as a decline in profits, or adverse economic
conditions, such as a recession, than are higher-grade securities.
INCOME RISK. The interest income on debt securities, including convertible
bonds, generally is affected by prevailing interest rates, which can vary widely
over the short- and long-term. The ability of equity securities to generate
income generally depends on the earnings and continuing declaration of dividends
by the issuers of such securities. If interest rates drop or dividends are
reduced or discontinued, your income from the Fund may drop as well.
3
<PAGE> 4
CALL RISK. If interest rates fall, it is possible that issuers of callable
securities with high interest rates will buy back or call their securities
before their maturity dates. In this event, the proceeds from the called
securities would most likely be reinvested by the Fund in securities bearing the
new, lower interest rates, resulting in a possible decline in the Fund's income
and distributions to shareholders and termination of any conversion option on
convertible securities.
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 derivatives. 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 current income and capital appreciation over the long term
- Are willing to take on the substantially increased risks of investments in
medium- and lower-grade securities in exchange for potentially higher income
and capital appreciation
- Can withstand volatility in the value of their shares of the Fund
- Wish to add to their investment portfolio a fund that invests principally in
convertible securities
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.
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's Class A Shares over the ten calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
1990 -1.23
1991 23.08
1992 9.72
1993 13.56
1994 -6.43
1995 22.46
1996 12.08
1997 16.91
1998 7.52
1999 50.01
</TABLE>
The Fund's return for the three-month period ended March 31, 2000 was 13.15%.
4
<PAGE> 5
The annual return variability of the Fund's Class B Shares and Class C 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 B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.
During the ten-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 32.75% (for the quarter ended December 31, 1999) and the
lowest quarterly return was -13.64% (for the quarter ended September 30, 1998).
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Russell 2000 Stock Index*, a
broad-based market index that the Fund's investment adviser believes is an
appropriate benchmark for the Fund, and with the Lipper Convertible Securities
Fund Index, an index of funds with similar investment objectives. The Fund's
performance figures include the maximum sales charges paid by investors. The
indices' performance figures do not include any commissions or sales charges
that would be paid by investors purchasing the securities represented by those
indices. An investment can not 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 Past 10
for the Years
Periods Ended Past Past or Since
December 31, 1999 1 Year 5 Years Inception
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen Harbor
Fund--Class A
Shares 41.35% 19.52% 13.21%
Russell 2000 Stock
Index 21.26% 16.69% 13.40%
Lipper Convertible
Securities Fund
Index 28.30% 16.44% 12.39%
.........................................................
Van Kampen Harbor
Fund--Class B
Shares 44.02% 19.87% 14.60%(1)**
Russell 2000 Stock
Index 21.26% 16.69% 14.67%(2)
Lipper Convertible
Securities Fund
Index 28.30% 16.44% 13.27%(2)
.........................................................
Van Kampen Harbor
Fund--Class C
Shares 47.95% 20.01% 14.67%(3)
Russell 2000 Stock
Index 21.26% 16.69% 12.99%(4)
Lipper Convertible
Securities Fund
Index 28.30% 16.44% 12.52%(5)
.........................................................
</TABLE>
Inception dates: (1) 12/20/91, (2) 12/31/91, (3) 10/26/93, (4) 10/31/93, (5)
10/28/93.
* The Russell 2000 Stock Index is a small-cap stock benchmark composed of the
smallest 2,000 companies of the Russell 3000 Stock Index (an index of the
3,000 largest U.S. companies based on market capitalization).
** The "Since Inception" performance for Class B Shares reflects the conversion
of such shares into Class A Shares six years after the end of the calendar
month in which shares were purchased. Class B Shares purchased on or after
June 1, 1996 will convert to Class A Shares eight years after purchase. See
"Purchase of Shares".
5
<PAGE> 6
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>
Class A Class B Class C
Shares Shares Shares
------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of 5.75%(1) None None
offering price)
............................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
............................................................
Maximum sales charge
(load) imposed on
reinvested dividends
None None None
............................................................
Redemption fees None None None
............................................................
Exchange fee None None None
............................................................
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
------------------------------------------------------------
Management fees 0.53% 0.53% 0.53%
............................................................
Distribution and/or
service (12b-1)
fees(5) 0.24% 1.00%(6) 1.00%(6)
............................................................
Other expenses 0.23% 0.24% 0.23%
............................................................
Total annual fund
operating expenses
1.00% 1.77% 1.76%
............................................................
</TABLE>
(1) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 1.00% may be imposed on
certain redemptions made within one year of the purchase. See "Purchase of
Shares -- Class A Shares."
(3) The maximum deferred sales charge is 5.00% in the first year after purchase,
declining thereafter as follows:
Year 1-5.00%
Year 2-4.00%
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
See "Purchase of Shares -- Class B Shares."
(4) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
(5) Class A Shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
Shares and Class C Shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Purchase of Shares."
(6) Because distribution and/or service (12b-1) fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.
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 (except for the ten-year
amounts for Class B Shares which reflect the conversion of Class B Shares to
Class A Shares after eight years). 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 A Shares $671 $875 $1,096 $1,729
......................................................................
Class B Shares $680 $857 $1,109 $1,881*
......................................................................
Class C Shares $279 $554 $954 $2,073
......................................................................
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $671 $875 $1,096 $1,729
......................................................................
Class B Shares $180 $557 $959 $1,881*
......................................................................
Class C Shares $179 $554 $954 $2,073
......................................................................
</TABLE>
* Based on conversion to Class A Shares after eight years.
6
<PAGE> 7
INVESTMENT OBJECTIVE,
POLICIES AND RISKS
The Fund's investment objective is to seek to provide current income, capital
appreciation and conservation of capital. 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.
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing principally in a portfolio of debt securities, primarily
convertible bonds and convertible preferred stocks. As a fundamental investment
policy, the Fund invests, under normal market conditions, at least 50% of the
Fund's total assets (excluding cash, cash equivalents and government securities)
in convertible debt securities.
Through careful selection of individual securities, diversification of
investments and by continuing supervision of the investment portfolio, the
Fund's investment adviser seeks to provide income and capital appreciation while
striving to reduce risk and conserve shareholder capital. The Fund's investment
adviser emphasizes income-producing securities of companies whose common stocks
are believed to have good prospects for capital appreciation. The Fund's
investment adviser seeks to identify companies with improving fundamentals,
strong earnings growth, increasing market share and attractive valuations that
are likely to provide investors with equity participation through the issuance
of convertible securities. The Fund may invest in issuers of small-, medium- or
large-capitalization companies. 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, the Fund may be subject
to greater investment risk than that assumed through investment solely in the
securities of larger-capitalization companies. While attractive convertible
securities of desired quality may not be available in all industries at all
times, their general availability is considered by the Fund's investment adviser
to be more than adequate in light of the Fund's investment objectives.
A convertible security is a bond, debenture, note, preferred stock, warrant or
other security that may be converted into or exchanged for a prescribed amount
of common stock or other security of the same or a different issuer or into cash
within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt securities or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The value of convertible securities tends to
decline as interest rates rise and, because of the conversion feature, tends to
vary with fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally do not directly participate in any dividend
increases or decreases of the underlying equity securities although the market
prices of convertible securities may be affected by any such dividend changes or
other changes in the underlying equity securities. Convertible securities
generally rank senior to common stocks in a corporation's capital structure and
generally entail less risk than common stock, although the extent to which such
risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed-income security.
The Fund's investment in convertible securities may include securities with
enhanced convertible features or "equity-linked" features. Equity-linked
securities come in many forms and may include features, among others, such as
the following: (i) may be issued by the issuer of the underlying equity security
or by a company other than the one to which the instrument is linked (usually an
investment bank), (ii) may convert into equity securities, such as common stock,
within a stated period from the issue date or may be redeemed for cash or some
combination of cash and the linked security at a value based upon the value of
the underlying equity security within a stated period from the issue date, (iii)
may have various conversion features prior to maturity at the option of the
holder or the issuer or both, (iv) may limit the appreciation value with caps or
collars of the value of the
7
<PAGE> 8
underlying equity security and (v) may have fixed, variable or no interest
payments during the life of the security which reflect the actual or a
structured return relative to the underlying dividends of the linked equity
security. Investments in equity-linked securities may subject the Fund to
additional risks not ordinarily associated with investments in other equity
securities. Because equity-linked securities are sometimes issued by a third
party other than the issuer of the linked security, the Fund is subject to risks
if the underlying stock underperforms and if the issuer defaults on the payment
of the dividend or the common stock at maturity. In addition, the trading market
for particular equity-linked securities may be less liquid, making it difficult
for the Fund to dispose of a particular security when necessary and reduced
liquidity in the secondary market for any such securities may make it more
difficult to obtain market quotations for valuing the Fund's portfolio.
There can be no assurance of current income on convertible securities because of
the issuers thereof may default on their obligations. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying equity security. There can
be no assurance of capital appreciation, however, because securities prices
fluctuate. Convertible securities, however, generally offer lower interest or
dividend yields than non-convertible securities of similar quality because of
the potential for capital appreciation. The Fund's Statement of Additional
Information contains a further discussion of convertible securities.
Securities acquired by the Fund are not governed by specific ratings categories,
and the Fund may purchase high-, medium-, lower-rated or unrated securities. To
the extent that the Fund invests a large portion of its total assets in
lower-grade securities, the Fund's ability to conserve shareholder capital may
be diminished. Securities rated BB or lower by S&P or rated Ba or lower by
Moody's and unrated securities determined by the Fund's investment adviser to be
of comparable quality are commonly referred to as "junk bonds." Lower-rated
securities are considered speculative by the rating agencies with respect to the
issuer's continuing ability to make timely payments of interest and principal.
Securities below investment grade involve special risks compared to higher-grade
securities. See "Risks of Investing in Lower-Grade Securities" below. A detailed
explanation of the various S&P and Moody's rating categories is included in the
appendix to this prospectus.
UNDERSTANDING
QUALITY RATINGS
Security ratings are based on the issuer's ability to pay interest and repay the
principal. Securities with ratings above the line are considered "investment
grade," while those with ratings below the line are regarded as "noninvestment
grade," or "junk bonds." A detailed explanation of these and other security
ratings can be found in the appendix to this prospectus.
<TABLE>
<CAPTION>
S&P Moody's Meaning
------------------------------------------------------
<C> <S> <C>
AAA Aaa Highest quality
......................................................
AA Aa High quality
......................................................
A A Above-average quality
......................................................
BBB Baa Average quality
------------------------------------------------------
BB Ba Below-average quality
......................................................
B B Marginal quality
......................................................
CCC Caa Poor quality
......................................................
CC Ca Highly speculative
......................................................
C C Lowest quality
......................................................
D -- In default
......................................................
</TABLE>
While the Fund invests primarily in convertible securities, the Fund may invest
in the common stocks of companies. 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. The Fund has a fundamental policy of
investing not more than 45% of its total assets in common stocks.
RISKS OF INVESTING IN LOWER-GRADE SECURITIES
Securities which are in the lower-grade categories generally offer a higher
current yield than is offered by higher-grade securities of similar maturities,
but they also generally involve greater risks, such as greater credit risk,
greater market risk and volatility, greater liquidity concerns and potentially
greater manager risk. Investors should carefully consider the risks of owning
shares of a fund which invests in lower-grade securities before investing in the
Fund.
8
<PAGE> 9
Credit risk relates to the issuer's ability to make timely payment of interest
and principal when due. Lower-grade securities are considered more susceptible
to nonpayment of interest and principal or default than higher grade securities.
Increases in interest rates or changes in the economy may significantly affect
the ability of issuers of lower-grade securities to pay interest and to repay
principal, to meet projected financial goals or to obtain additional financing.
In the event that an issuer of securities held by the Fund experiences
difficulties in the timely payment of principal and interest and such issuer
seeks to restructure the terms of its borrowings, the Fund may incur additional
expenses and may determine to invest additional assets with respect to such
issuer or the project or projects to which the Fund's portfolio securities
relate. Further, the Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default in the payment of interest or the
repayment of principal on its portfolio holdings, and the Fund may be unable to
obtain full recovery on such amounts.
Market risk relates to changes in market value of a security that occur as a
result of variation in the level of prevailing interest rates and yield
relationships in the debt securities market and as a result of real or perceived
changes in credit risk. The value of the Fund's portfolio securities can be
expected to fluctuate over time. When interest rates decline, the value of a
portfolio invested in fixed income securities generally can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in fixed
income securities generally can be expected to decline. However, the secondary
market prices of lower grade securities generally are less sensitive to changes
in interest rates and are more sensitive to general adverse economic changes or
specific developments with respect to the particular issues than are the
secondary market prices of higher-grade securities. A significant increase in
interest rates or a general economic downturn could severely disrupt the market
for lower-grade securities and adversely affect the market value of such
securities. Such events also could lead to a higher incidence of default by
issuers of lower-grade securities as compared with higher-grade securities. In
addition, changes in credit risks, interest rates, the credit markets or periods
of general economic uncertainty can be expected to result in increased
volatility in the market price of the securities in the Fund's portfolio and
thus in the net asset value of the Fund. Adverse publicity and investor
perceptions, whether or not based on rational analysis, may affect the value and
liquidity of lower-grade securities.
The markets for lower-grade securities may be less liquid than the markets for
higher-grade securities. Liquidity relates to the ability of a fund to sell a
security in a timely manner at a price which reflects the value of that
security. To the extent that there is no established retail market for some of
the lower-grade securities in which the Fund may invest, trading in such
securities may be relatively inactive. Prices of lower-grade securities may
decline rapidly in the event a significant number of holders decide to sell.
Changes in expectations regarding an individual issuer or lower-grade securities
generally could reduce market liquidity for such securities and make their sale
by the Fund more difficult, at least in the absence of price concessions. The
effects of adverse publicity and investor perceptions may be more pronounced for
securities for which no established retail market exists as compared with the
effects on securities for which such a market does exist. An economic downturn
or an increase in interest rates could severely disrupt the market for such
securities and adversely affect the value of outstanding securities or the
ability of the issuers to repay principal and interest. Further, the Fund may
have more difficulty selling such securities in a timely manner and at their
stated value than would be the case for securities for which an established
retail market does exist.
The Fund's investment adviser is responsible for determining the net asset value
of the Fund, subject to the supervision of the Fund's Board of Trustees. During
periods of reduced market liquidity and in the absence of readily available
market quotations for lower-grade securities held in the Fund's portfolio, the
ability of the Fund's investment adviser to value the Fund's securities becomes
more difficult and the investment adviser's use of judgment may play a greater
role in the valuation of the Fund's securities due to the reduced availability
of reliable objective data.
The Fund may invest in securities not producing immediate cash income, including
zero-coupon securities or pay-in-kind securities, when their effective yield
over comparable instruments producing cash income make these investments
attractive. Prices on non-cash-paying instruments may be more sensitive to
changes in the issuer's financial condition, fluctuation in interest rates and
market demand/supply imbalances than cash-paying securities with similar credit
ratings, and thus may be more
9
<PAGE> 10
speculative. In addition, the accrued interest income earned on such instruments
is included in investment company taxable income, and thereby is included in the
required minimum distributions to shareholders without providing the
corresponding cash flow with which to pay such distributions. The Fund must
distribute substantially all of its investment company taxable income to its
shareholders to qualify for pass-through treatment under federal income tax law
and may, therefore, have to dispose of portfolio securities to satisfy
distribution requirements. The Fund's investment adviser will weigh these
concerns against the expected total returns from such instruments.
Many lower-grade income securities are not listed for trading on any national
securities exchange, and many issuers of lower-grade income securities choose
not to have a rating assigned to their obligations by any nationally recognized
statistical rating organization. As a result, the Fund's portfolio may consist
of a higher portion of unlisted or unrated securities as compared with an
investment company that invests solely in higher-grade securities. Unrated
securities are usually not as attractive to as many buyers as are rated
securities, a factor which may make unrated securities less marketable. These
factors may have the effect of limiting the availability of the securities for
purchase by the Fund and may also limit the ability of the Fund to sell such
securities at their fair market value either to meet redemption requests or in
response to changes in the economy or the financial markets. Further, to the
extent the Fund owns or may acquire illiquid or restricted lower-grade
securities, these securities may involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
The Fund will rely on its investment adviser's judgment, analysis and experience
in evaluating the creditworthiness of an issue. The amount of available
information about the financial condition of certain lower-grade issuers may be
less extensive than other issuers. In its analysis, the Fund's investment
adviser may consider the credit ratings of Moody's and S&P in evaluating
securities although the investment adviser does not rely primarily on these
ratings. Credit ratings of securities rating organizations evaluate only the
safety of principal and interest payments. In addition, ratings are general and
not absolute standards of quality, and credit ratings are subject to the risk
that the creditworthiness of an issuer may change and the rating agencies may
fail to change such ratings in a timely fashion. A rating downgrade does not
require the Fund to dispose of a security. The Fund's investment adviser
continuously monitors the issuers of securities held in the Fund's portfolio.
Because of the number of investment considerations involved in investing in
lower-grade securities, achievement of the Fund's investment objective may be
more dependent upon the investment adviser's credit analysis than is the case
with investing in higher-grade securities.
New or proposed laws may have an impact on the market for lower-grade
securities. The Fund's investment adviser is unable at this time to predict what
effect, if any, legislation may have on the market for lower-grade securities.
The table below sets forth the percentages of the Fund's assets invested during
the fiscal year ended December 31, 1999 in the various S&P's and Moody's rating
categories and in unrated securities determined by the Fund's investment adviser
to be of comparable quality. The percentages are based on the dollar-weighted
average of credit ratings of all securities held by the Fund during the 1999
fiscal year computed on a monthly basis.
<TABLE>
<CAPTION>
Period Ended December 31, 1999
Unrated Securities of
Rated Securities Comparable Quality
(As a Percentage of (As a Percentage of
Rating Category Portfolio Value) Portfolio Value)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA/Aaa 1.88% 0.00%
........................................................................
AA/Aa 1.31% 1.69%
........................................................................
A/A 6.05% 0.00%
........................................................................
BBB/Baa 11.35% 0.56%
........................................................................
BB/Ba 10.06% 0.00%
........................................................................
B/B 29.49% 10.10%
........................................................................
CCC/Ccc 8.26% 5.72%
........................................................................
CC/Ca 0.00% 0.00%
........................................................................
C/C 0.00% 0.00%
........................................................................
D 0.00% 0.00%
........................................................................
N/A(*) 13.53% 0.00%
........................................................................
Percentage of Rated
and Unrated
Securities 81.93% 18.07%
........................................................................
</TABLE>
* The 13.53% designated "N/A" are equity securities held by the Fund. Unlike
debt securities, equity securities are not subject to ratings categorization
and the ratings are therefore not applicable to these securities.
10
<PAGE> 11
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 dividend or interest payments 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. Also,
foreign securities may not be as liquid and may be more volatile than comparable
domestic securities.
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 U.S., 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 U.S., the Fund may experience
settlement difficulties or delays not usually encountered in the U.S.
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 transactions 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 Fund's investment adviser's expectations concerning the
securities markets. Although the Fund's investment adviser seeks to use the
practices to further the Fund's investment objective, no assurance can be given
that the use of these practices will achieve this result.
In times of stable or rising prices, the Fund generally seeks to be fully
invested in convertible and other 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 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 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
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 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
11
<PAGE> 12
liquidate securities in a more deliberate manner, reducing its futures position
simultaneously to maintain the desired balance, or it could maintain the hedged
position.
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 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 that are not available from direct investments in
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 in using these instruments 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 25% of its total assets at the
time of purchase in securities subject to repurchase agreements.
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.
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 current income or capital
appreciation has lessened, or for other reasons. The Fund's portfolio turnover
is shown under the Prospectus heading "Financial Highlights." The portfolio
turnover rate may vary from year to year. A high portfolio turnover rate (100%
or more) increases a fund's transactions costs (including brokerage commissions
or dealer costs) and a higher portfolio turnover rate may result in the
realization of more short-term capital gains than if a fund had a lower
portfolio turnover rate. Increases in a fund's transaction costs would adversely
impact the 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 securities issued or guaranteed by the U.S.
government, its agencies or its instrumentalities, prime commercial paper,
certificates of deposit, bankers' acceptances and repurchase agreements. Under
normal market conditions, the potential for current income or capital
appreciation on these investments will tend to be
12
<PAGE> 13
lower than the potential for current income or 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 objectives of
current income and capital appreciation.
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
Investments is a diversified asset management company with more than two million
retail investor accounts, extensive capabilities for managing institutional
portfolios, and more than $100 billion under management or supervision as of
March 31, 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 $350 million 0.55 of 1.00%
......................................................
Next $350 million 0.50 of 1.00%
......................................................
Next $350 million 0.45 of 1.00%
......................................................
Over $1.05 billion 0.40 of 1.00%
......................................................
</TABLE>
Applying this fee schedule, the effective advisory fee rate was 0.53% 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 is managed by the team of Christine Drusch,
Senior Portfolio Manager of the Fund since January 1998, and Portfolio Manager
of the Fund since July 1991, and David McLaughlin, Portfolio Manager of the Fund
since October 1998.
Ms. Drusch has been a Senior Vice President of the Adviser and Advisory Corp.
since December 1999, and prior to December 1999 she was a Vice President
13
<PAGE> 14
of the Adviser and Advisory Corp. Prior to December 1998, Ms. Drusch was an
Assistant Vice President of the Adviser and Advisory Corp. since September 1995.
Prior to September 1995, Ms. Drusch was an Associate Portfolio Manager of the
Adviser and has worked for the Adviser since July 1991.
Mr. McLaughlin has been a Vice President of the Adviser and Advisory Corp. since
June 1995, and he was an Assistant Vice President of the Adviser since March
1994. Prior to June 1995, Mr. McLaughlin was a Senior Equity Trader for the
Adviser. Mr. McLaughlin has worked for the Adviser since 1986.
PURCHASE OF SHARES
GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.
Initial investments must be at least $1,000 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Minimum
investment amounts may be waived by the Distributor for plans involving periodic
investments.
Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which its distribution fee and/or service fee is paid, (iii) each class of
shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature and (v) certain classes of shares have different
shareholder service options available.
The offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.
The net asset value per share for each class of shares of the Fund 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 based thereon 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 and (iii) valuing
securities for which market quotations are not readily available and any other
assets at fair value as determined in good faith by the Adviser in accordance
with procedures established by the Fund's Board of Trustees. 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 Fund has adopted a distribution plan (the "Distribution Plan") with respect
to each class of its shares pursuant to Rule 12b-1 under the 1940 Act. The Fund
also has adopted a service plan (the "Service Plan") with respect to each class
of its shares. Under the Distribution Plan and the Service
14
<PAGE> 15
Plan, the Fund pays distribution fees in connection with the sale and
distribution of its shares and service fees in connection with the provision of
ongoing services to shareholders and the maintenance of the shareholders'
accounts.
The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.
The shares are offered to the public 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"). "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, investors must specify whether
the purchase is for Class A Shares, Class B Shares or Class C Shares by
selecting the correct Fund number on the account application. Sales personnel of
authorized dealers distributing the Fund's shares are entitled to receive
compensation for selling such shares and may receive differing compensation for
selling Class A Shares, Class B Shares or Class C Shares.
The offering price for shares is based upon the next calculation of net asset
value per share (plus sales charges, where applicable) 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 computed 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 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.
15
<PAGE> 16
CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 5.75% of the offering price (or 6.10% of the net amount
invested), reduced on investments of $50,000 or more as follows:
CLASS A SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
As % of As % of
Size of Offering Net Amount
Investment Price Invested
----------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10%
..........................................................
$50,000 but less than
$100,000 4.75% 4.99%
..........................................................
$100,000 but less than
$250,000 3.75% 3.90%
..........................................................
$250,000 but less than
$500,000 2.75% 2.83%
..........................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
..........................................................
$1,000,000 or more * *
..........................................................
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund may impose a
contingent deferred sales charge of 1.00% on certain redemptions made within
one year of the purchase. 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.
No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.
Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.25% per year of the Fund's average daily net assets with respect to
the Class A Shares of the Fund. From such amount, under the Service Plan, the
Fund may spend up to 0.25% per year of the Fund's average daily net assets with
respect to the Class A Shares of the Fund. The rates in this paragraph are 0.15%
per year of the Fund's average daily net assets attributable to Class A Shares
with respect to accounts existing before October 1, 1989.
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:
CLASS B SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
as a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
------------------------------------------------
<S> <C> <C> <C>
First 5.00%
................................................
Second 4.00%
................................................
Third 3.00%
................................................
Fourth 2.50%
................................................
Fifth 1.50%
................................................
Sixth and After None
................................................
</TABLE>
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. It
is presently the policy of the Distributor not to accept any order for Class B
Shares in an amount of $500,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for each purchase of Class B Shares
until the time of redemption of such shares.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge followed by shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class B Shares of the Fund.
In addition, under the Service Plan, the Fund may spend up to 0.25% per year of
the Fund's average daily net assets with respect to the Class B Shares of the
Fund.
16
<PAGE> 17
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge of 1.00% of the dollar amount subject to charge
if redeemed within one year of purchase.
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. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge followed by shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class C Shares of the Fund.
In addition, under the Service Plan, the Fund may spend up to 0.25% per year of
the Fund's average daily net assets with respect to the Class C Shares of the
Fund. The aggregate distribution and service fees are currently 1.00% per year
of the average daily net assets attributable to Class C Shares of the Fund. The
aggregate distribution and service fees are 0.90% per year of the average daily
net assets attributable to Class C Shares of the Fund with respect to accounts
existing before April 1, 1995.
CONVERSION FEATURE
Class B Shares purchased on or after June 1, 1996, including Class B Shares
received from reinvestment of distributions through the dividend reinvestment
plan, 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, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, automatically convert to
Class A Shares six years after the end of the calendar month in which the shares
were purchased. Class C Shares purchased before January 1, 1997, including Class
C Shares received from reinvestment of distributions through the dividend
reinvestment plan, automatically convert to Class A Shares ten years after the
end of the calendar month in which such shares were purchased. Such conversion
will be on the basis of the relative net asset values per share, without the
imposition of any sales load, fee or other charge. The conversion schedule
applicable to a share of the Fund acquired through the exchange privilege from
another Van Kampen fund participating in the exchange program is determined by
reference to the Van Kampen fund from which such share was originally purchased.
The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or capital gain dividends
constituting "preferential dividends" under the federal income tax law and (ii)
the conversion of shares does not constitute a taxable event under federal
income tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by the
Fund's involuntary liquidation of a shareholder's account as described under the
Prospectus heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the reinvestment is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.
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QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced or no sales charges. Investors, or their
authorized dealers, must notify the Fund at the time of the purchase order
whenever a quantity discount is applicable to purchases. Upon such notification,
an investor will pay the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or her
spouse and children under 21 years of age and any corporation, partnership or
sole proprietorship which is 100% owned, either alone or in combination, by any
of the foregoing; a trustee or other fiduciary purchasing for a single trust or
for a single fiduciary account, or a "company" as defined in Section 2(a)(8) of
the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
VOLUME DISCOUNTS. The size of investment shown in the Class A Shares sales
charge table applies to the total dollar amount being invested by any person in
shares of the Fund, or in any combination of shares of the Fund and shares of
other Participating Funds, although other Participating Funds may have different
sales charges.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds currently owned.
LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
The initial purchase must be for an amount equal to at least 5% of the minimum
total purchase amount of the level selected. If trades not initially made under
a Letter of Intent subsequently qualify for a lower sales charge through the
90-day backdating provisions, an adjustment will be made at the time of
expiration of the Letter of Intent to give effect to the lower sales charge.
Such adjustment in sales charge will be used to purchase additional shares. The
Fund initially will escrow shares totaling 5% of the dollar amount of the Letter
of Intent to be held by Investor Services in the name of the shareholder. In the
event the Letter of Intent goal is not achieved within the specified period, the
investor must pay the difference between the sales charge applicable to the
purchases made and the reduced sales charges previously paid. Such payments may
be made directly to the Distributor or, if not paid, the Distributor will
liquidate sufficient escrowed shares to obtain the difference.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced or no initial sales
charges in connection with the unit investment trust reinvestment program and
purchases by registered representatives of selling firms or purchases by persons
affiliated with the Fund or the Distributor. The Fund reserves the right to
modify or terminate these arrangements at any time.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value per share and with no minimum initial or
subsequent investment requirement, if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The total sales charge for all other
investments made from unit investment trust distributions will be 1.00% of the
offering price (1.01% of net asset value). Of this amount, the Distributor will
pay to the authorized dealer, if any, through which such participation in the
qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the terms and conditions that apply to the
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<PAGE> 19
program, should contact their authorized dealer or the Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each investor participating in the program in a computerized
format fully compatible with Investor Services' processing system.
In order to obtain these special benefits, all dividends and other distributions
from the Fund must be reinvested in additional shares and there can not be any
systematic withdrawal program. There will be no minimum for reinvestments from
unit investment trusts. The Fund will send account activity statements to such
participants on a quarterly basis only, even if their investments are made more
frequently. The Fund reserves the right to modify or terminate this program at
any time.
NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, upon written assurance that the purchase is made for investment
purposes and that the shares will not be resold except through redemption by the
Fund, by:
(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families and
their beneficial accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives, of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21 years
of age when purchasing for any accounts they beneficially own, or, in the
case of any such financial institution, when purchasing for retirement plans
for such institution's employees; provided that such purchases are otherwise
permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which purchases are made an amount up to 0.50% of the amount invested, over
a 12-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund families through broker-dealer retirement plan
alliance programs that have entered into agreements with the Distributor and
which are subject to certain minimum size and operational requirements.
Trustees and other fiduciaries should refer to the Statement of Additional
Information for further details with respect to such alliance programs.
(6) Beneficial owners of shares of Participating Funds held by a retirement plan
or held in a tax-advantaged retirement account who purchase shares of the
Fund with proceeds from distributions from such a plan or retirement account
other than distributions taken to correct an excess contribution.
(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code and assets held by an employer
or trustee in connection with an eligible deferred compensation plan under
Section 457 of the Code. Such plans will qualify for purchases at net asset
value provided, for plans initially establishing accounts with the
Distributor in the Participating Funds after January 1, 2000, that (1) the
total plan assets are at least $1 million or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating
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<PAGE> 20
Fund or have received proposals from the Distributor prior to January 1,
2000 based on net asset value purchase privileges previously in effect will
be qualified to purchase shares of the Participating Funds at net asset
value. Section 403(b) and similar accounts for which Van Kampen Trust
Company serves as custodian will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number
of eligible employees, except under certain uniform criteria established by
the Distributor from time to time. For purchases on February 1, 1997 and
thereafter, a commission will be paid on purchases as follows: 1.00% on
sales to $2 million, plus 0.80% on the next $1 million, plus 0.50% on the
next $47 million, plus 0.25% on the excess over $50 million.
(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the Fund
and Participating Funds, (iv) has a membership that the authorized dealer
can certify as to the group's members and (v) satisfies other uniform
criteria established by the Distributor for the purpose of realizing
economies of scale in distributing such shares. A qualified group does not
include one whose sole organizational nexus, for example, is that its
participants are credit card holders of the same institution, policy holders
of an insurance company, customers of a bank or broker-dealer, clients of an
investment adviser or other similar groups. Shares purchased in each group's
participants account in connection with this privilege will be subject to a
contingent deferred sales charge of 1.00% in the event of redemption within
one year of purchase, and a commission will be paid to authorized dealers
who initiate and are responsible for such sales to each individual 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.
The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as described above
on purchases made under options (3) through (9) above. The Fund may terminate,
or amend the terms of, offering shares of the Fund at net asset value to such
groups at any time.
REDEMPTION OF
SHARES
Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the Prospectus heading "Purchase of Shares," redemptions of
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge. In addition, certain redemptions of Class A Shares for shareholder
accounts of $1 million or more may be subject to a contingent deferred sales
charge. 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 a
shareholder's subsequent
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<PAGE> 21
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. A taxable gain or loss may be recognized by the shareholder upon
redemption of shares.
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 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. In the case of
shareholders holding certificates, the certificates for the shares being
redeemed must be properly endorsed for transfer and must accompany the
redemption request. In the event a redemption is requested by and registered to
a corporation, partnership, trust, fiduciary, estate or other legal entity
owning shares of the Fund, generally a copy of the corporate resolution or other
legal documentation appointing the authorized signer and certified within the
prior 120 days must accompany the redemption request. Retirement plan
distribution requests should be sent to the custodian/ trustee to be forwarded
to Investor Services. Contact the custodian/trustee for further information.
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. Shares may also be redeemed by phone through FundInfo(R)
(automated phone system), which is accessible 24 hours a day, seven days a week
at (800) 847-2424. 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
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<PAGE> 22
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.
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 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.
The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
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 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 (without sales
charge) 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 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 Fund at the next determined net asset value.
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<PAGE> 23
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 Fund based on the next computed 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 Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund prior to
implementing an exchange. A prospectus of any of the Participating Funds may be
obtained from any authorized dealer or the Distributor.
When shares that are subject to a contingent deferred sales charge are exchanged
among Participating Funds, the holding period for purposes of computing the
contingent deferred sales charge is based upon the date of the initial purchase
of such shares from a Participating Fund. When such shares are redeemed and not
exchanged for shares of another Participating Fund, the shares are subject to
the contingent deferred sales charge schedule imposed by the Participating Fund
from which such shares were originally purchased.
Exchanges of shares are sales of shares of one Participating Fund and purchases
of shares of another Participating Fund. The sale may result in a gain or loss
for federal income tax purposes. If the shares sold have been held for less than
91 days, the sales charge paid on such shares is carried over and included in
the tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at (800)
421-5684, through FundInfo(R) (automated phone system) at (800) 847-2424 or
through the internet at www.vankampen.com. A shareholder automatically has these
exchange privileges unless the shareholder indicates otherwise by checking the
applicable box on the account application form. 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. 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 Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privileges 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.
For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of such shareholder's securities, the
security upon which the highest sales charge rate was previously paid is deemed
exchanged first.
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<PAGE> 24
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,
plus any applicable sales charge, next determined on the date of receipt.
Exchange requests received on a business day after the time shares of the funds
involved in the request are priced will be processed on the next business day in
the manner described herein.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.vankampen.com for further instruction. 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
through the internet are genuine. Such procedures include requiring use of a
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed, none of Van Kampen Investments,
Investor Services or the Fund will be liable for following instructions received
through the internet which it reasonably believes to be genuine. If an account
has multiple owners, Investor Services may rely on the instructions of any one
owner.
FEDERAL INCOME TAXATION
Distributions of the Fund's investment company taxable income (consisting
generally of taxable 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 a 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 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. Accordingly, investment in the Fund is likely to be
appropriate for such shareholders only if they can utilize a foreign tax credit
on corresponding tax benefit in respect of such federal withholding taxes.
Prospective foreign investors should consult their tax advisers concerning the
tax consequences to them of an investment in shares.
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<PAGE> 25
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 set forth 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, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the Statement of Additional Information and may be obtained by
shareholders without charge by calling the telephone number on the back cover of
this prospectus. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Class A Shares
Year Ended December 31,
1999 1998 1997 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $14.835 $15.059 $15.054 $15.05 $13.24
------- ------- ------- ------ -------
Net Investment Income......... .447 .520 .600 .566 .68
Net Realized and Unrealized
Gain/Loss................... 6.687 .546 1.854 1.173 2.25
------- ------- ------- ------ -------
Total from Investment
Operations.................... 7.134 1.066 2.454 1.739 2.93
------- ------- ------- ------ -------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .520 .537 .730 .555 .7025
Distributions from and in
Excess of Net Realized
Gain........................ 1.102 .753 1.719 1.180 .4175
------- ------- ------- ------ -------
Total Distributions............. 1.622 1.290 2.449 1.735 1.12
------- ------- ------- ------ -------
Net Asset Value, End of the
Period........................ $20.347 $14.835 $15.059 $15.054 $15.05
======= ======= ======= ====== =======
Total Return(a)................. 50.01% 7.52% 16.91% 12.08% 22.46%
Net Assets at End of the Period
(In millions)................. $516.1 $375.4 $376.4 $373.1 $394.5
Ratio of Expenses to Average Net
Assets........................ 1.00% 1.02% 1.04% 1.09% 1.00%
Ratio of Net Investment Income
to Average Net Assets......... 2.69% 3.48% 3.58% 3.60% 4.62%
Portfolio Turnover.............. 103% 156% 170% 129% 130%
<CAPTION>
Class B Shares
Year Ended December 31,
1999(b) 1998(b) 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $14.755 $14.981 $14.992 $14.99 $13.20
------- ------- ------- ------ -------
Net Investment Income......... .320 .397 .470 .437 .56
Net Realized and Unrealized
Gain/Loss................... 6.667 .547 1.848 1.180 2.23
------- ------- ------- ------ -------
Total from Investment
Operations.................... 6.987 .944 2.318 1.617 2.79
------- ------- ------- ------ -------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .400 .417 .610 .435 .5825
Distributions from and in
Excess of Net Realized
Gain........................ 1.102 .753 1.719 1.180 .4175
------- ------- ------- ------ -------
Total Distributions............. 1.502 1.170 2.329 1.615 1.00
------- ------- ------- ------ -------
Net Asset Value, End of the
Period........................ $20.240 $14.755 $14.981 $14.992 $14.99
======= ======= ======= ====== =======
Total Return(a)................. 49.02% 6.70% 15.98% 11.19% 21.46%
Net Assets at End of the Period
(In millions)................. $62.5 $66.7 $81.3 $78.9 $78.1
Ratio of Expenses to Average Net
Assets........................ 1.77% 1.81% 1.82% 1.88% 1.81%
Ratio of Net Investment Income
to Average Net Assets......... 1.97% 2.66% 2.80% 2.81% 3.81%
Portfolio Turnover.............. 103% 156% 170% 129% 130%
<CAPTION>
Class C Shares
Year Ended December 31,
1999(b) 1998(b) 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $14.855 $15.080 $15.079 $15.07 $13.25
------- ------- ------- ------ -------
Net Investment Income......... .316 .405 .448 .439 .56
Net Realized and Unrealized
Gain/Loss................... 6.707 .540 1.882 1.185 2.26
------- ------- ------- ------ -------
Total from Investment
Operations.................... 7.023 .945 2.330 1.624 2.82
------- ------- ------- ------ -------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .400 .417 .610 .435 .5825
Distributions from and in
Excess of Net Realized
Gain........................ 1.102 .753 1.719 1.180 .4175
------- ------- ------- ------ -------
Total Distributions............. 1.502 1.170 2.329 1.615 1.00
------- ------- ------- ------ -------
Net Asset Value, End of the
Period........................ $20.376 $14.855 $15.080 $15.079 $15.07
======= ======= ======= ====== =======
Total Return(a)................. 48.95% 6.65% 15.96% 11.20% 21.52%
Net Assets at End of the Period
(In millions)................. $9.0 $5.9 $4.6 $3.6 $3.6
Ratio of Expenses to Average Net
Assets........................ 1.76% 1.81% 1.82% 1.88% 1.80%
Ratio of Net Investment Income
to Average Net Assets......... 1.91% 2.71% 2.79% 2.81% 3.80%
Portfolio Turnover.............. 103% 156% 170% 129% 130%
</TABLE>
(a) Total Return is based upon Net Asset Value which does not include payments
of maximum sales change or contingent deferred sales change.
(b) Based on average shares outstanding.
26
<PAGE> 27
APPENDIX -- DESCRIPTION
OF SECURITIES RATINGS
STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follows:
A S&P corporate or municipal debt rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the obligor or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment--capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation:
2. Nature of and provisions of the obligation; and
3. Protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.
1. LONG-TERM DEBT
Investment Grade
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to meet
its financial commitment on the obligation is extremely strong.
AA: Debt rated "AA" differs from the highest rated issues only in small degree.
Capacity to meet its financial commitment on the obligation is very strong.
A: Debt rated "A" is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rated
categories. Capacity to meet its financial commitment on the obligation is still
strong.
BBB: Debt rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
Speculative Grade
BB, B, CCC, CC, C: Debts rated "BB", "B", "CCC", "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB: Debt rated "BB" is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
B: Debt rated "B" is more vulnerable to nonpayment than obligations rated "BB",
but the obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.
CCC: Debt rated "CCC" is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: Debt rated "CC" is currently highly vulnerable to nonpayment.
A- 1
<PAGE> 28
C: Debt rated "C" is currently highly vulnerable to nonpayment. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are being
continued.
D: Debt rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The "D" rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
r: This symbol highlights derivative, hybrid and certain other obligations that
S&P believes may experience high volatility or high variability in expected
returns as a result of non credit risks. Examples include: obligations linked or
indexed to equities, currencies, or commodities; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
2. COMMERCIAL PAPER
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1: This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the due date, even if
the applicable grace period has not expired, unless S&P believes such payments
will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances.
MOODY'S INVESTORS SERVICE, INC. -- A brief description of the applicable
Moody's Investors Service, Inc. (Moody's) rating symbols and their meanings (as
published by Moody's) follows:
1. LONG-TERM DEBT
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa securities.
A- 2
<PAGE> 29
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payment
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other market shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date date to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
2. SHORT-TERM DEBT
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
A- 3
<PAGE> 30
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
3. PREFERRED STOCK
Preferred stock rating symbols and their definitions are as follows:
aaa: An issue which is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
aa: An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
a: An issue which is rated "a" is considered to be an upper-medium-grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protections are, nevertheless,
expected to be maintained at adequate levels.
baa: An issue which is rated "baa" is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba: An issue which is rated "ba" is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
b: An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa: An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
ca: An issue which is rated "ca" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.
c: This is the lowest rated class of preferred or preference stock. Issues so
rated can thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating classification.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
4. COMMERCIAL PAPER
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's makes no representation that such obligations are exempt
from registration under the Securities Act of 1933, nor does it represent that
any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law.
A- 4
<PAGE> 31
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-1 (on supporting institutions) have a superior ability for
repayment of short-term debt obligations. Prime-1 repayment ability will often
be evidenced by many of the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a ranges of financial markets and assured sources
of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of short-term debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supported institutions) have an acceptable ability for
repayment of short-term debt obligations. The effect of industry characteristics
and market compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt protection measurements
and may require relatively high financial leverage. Adequate alternate liquidity
is maintained.
Issuers rated Not Prime do not fall within any of the prime rating categories.
A- 5
<PAGE> 32
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*, Chairman
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson
</TABLE>
OFFICERS
Richard F. Powers, III*
President
Stephen L. Boyd*
Executive Vice President & Chief Investment Officer
A. Thomas Smith III*
Vice President and Secretary
John H. Zimmermann, III*
Vice President
Michael H. Santo*
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
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
FUNDINFO(R)
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com
VAN KAMPEN HARBOR 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 Harbor Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Harbor Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
<PAGE> 33
VAN KAMPEN
HARBOR FUND
PROSPECTUS
APRIL 28, 2000,
AS SUPPLEMENTED ON MAY 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 web 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 811-734.
HAR PRO 4/00
