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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
FILE NO. 811-2611
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 19 [X]
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VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THE AGREEMENT OF LIMITED PARTNERSHIP)
2800 POST OAK BLVD.
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 993-0500
RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN AMERICAN CAPITAL, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
Items 1, 2, 3 and 5A of Part A are omitted pursuant to Item F.4. of the general
instructions to Form N-1A.
This Prospectus, which incorporates by reference the entire Statement of
Additional Information, concisely sets forth certain information about the
Registrant that a prospective investor should know before investing in shares of
the Registrant. Shareholders should read this Prospectus carefully and retain it
for future reference. A copy of the Statement of Additional Information may be
obtained without charge by calling (800) 421-5666 or for Telecommunications
Device for the Deaf at (800) 421-2833. The Statement of Additional Information
has been filed with the Securities and Exchange Commission ("SEC") and is
available along with other related materials at the SEC's internet web site
(http://www.sec.gov).
This Prospectus is dated April 27, 1998.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
(a) (i) Van Kampen American Capital Exchange Fund (a California
Limited Partnership), formerly known as American Capital
Exchange Fund ("Registrant"), is an open-end diversified
management investment company, registered under the
Investment Company Act of 1940 (the "1940 Act") and formed on
December 4, 1975 under the Uniform Limited Partnership Act of
California. Registrant commenced business as an investment
company on December 13, 1976 under the name American General
Exchange Fund.
(ii) The Registrant's principal investment objective is long-term
growth of capital, while the production of current income is
an important secondary objective. Registrant attempts to
achieve these objectives by investing in common stocks or
convertible securities. Registrant may, however, for defensive
purposes, temporarily own other types of securities, including
investment grade bonds, preferred stocks and money market
obligations such as government securities, certificates of
deposit and commercial paper. The foregoing policies may not
be changed without approval of a majority of the Registrant's
outstanding voting securities. Registrant's temporary
investments will consist of U.S. Treasury Bills and U.S.
Treasury Bonds, both issued by and supported by the full faith
and credit of the United States Government, and commercial
paper rated P-1, if by Moody's Investors Service, Inc., or A-1
if by Standard & Poor's Ratings Group and repurchase
agreements with domestic banks and broker-dealers.
(b) INAPPLICABLE.
(c) If Registrant were unable to pay its liabilities, partners
receiving distributions could be liable to creditors of Registrant
to the extent of such distributions, plus interest.
ITEM 5. MANAGEMENT OF THE FUND
(a) The business and affairs of the Registrant are managed under the
direction of the Board of Managing General Partners of the
Registrant. Subject to the Partners' authority, the Adviser
determines the investment of Registrant's assets, provides
administrative services and manages Registrant's business and
affairs.
(b) Van Kampen American Capital Asset Management, Inc. (the "Adviser"),
One Parkview Plaza, Oakbrook Terrace, Illinois 60181, serves as
investment adviser to Registrant.
The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("VKAC"). VKAC is a diversified asset management
company with more than two million retail investor accounts,
extensive capabilities for managing institutional portfolios, and
more than $60 billion under management or supervision. VKAC's more
than 50 open-end and 38 closed-end funds and more than 2,500 unit
investment trusts are professionally distributed
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by leading financial advisers nationwide. VKAC is an indirect
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
Morgan Stanley Dean Witter & Co. and various of its directly or
indirectly owned subsidiaries, including Morgan Stanley Asset
Management, Inc., an investment adviser, Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and
Morgan Stanley International, are engaged in a wide range of
financial services. Their principal businesses include securities
underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities;
merchant banking; stock brokerage and research services; credit
services; asset management; trading of futures, options, foreign
exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice,
financing and investing; and global custody, securities clearance
services and securities lending.
The Registrant 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 Registrant (the "Advisory Agreement"), the
Registrant pays the Adviser a fee monthly calculated at the annual
rate of 0.50% of average daily net assets of the Registrant. Under
the Advisory Agreement, Registrant also reimburses the Adviser for
the cost of the Registrant's accounting services, which include
maintaining its financial books and records and calculating its
daily net asset value.
(c) Evan Harrel has been primarily responsible for the day-to-day
management of the Fund's investment portfolio since January 1998.
Mr. Harrel has been Vice President of the Adviser and Van Kampen
American Capital Advisory Corp. since October 1996. Prior to that
time, Mr. Harrel was Associate Portfolio Manager of the Adviser.
Prior to May 1994, Mr. Harrel was a Vice President with Fayez
Sarofim and Co.
(d) INAPPLICABLE.
(e) ACCESS Investor Services, Inc. ("ACCESS"), P.O. Box 418256, Kansas
City, Missouri 64141-9256, a wholly-owned subsidiary of VKAC serves
as shareholder service agent for the Fund. The transfer agency fees
are determined through negotiations with the Fund's Board of
Trustees and are based on competitive market benchmarks.
(f) For the last fiscal year, advisory fees plus the cost of accounting
services paid by the Registrant equaled 0.50% of the Registrant's
average net assets. Operating expenses paid by the Registrant
include partner service agency fees, custodial fees, legal and
accounting fees, the costs of reports and proxies to partners,
managing general partners' fees, and all other business expenses
not specifically assumed by the Adviser. For the same period, the
Registrant's other operating expenses were 0.25% of average net
assets.
(g) The Adviser places portfolio transactions for other advisory
accounts, including other investment companies. Research services
furnished by firms through which the Registrant effects its
securities transactions may be used by the Adviser in servicing all
of its accounts; not all such services may be used by the Adviser
in connection with the Registrant. In the opinion of the Adviser,
the benefits from research services to each of the accounts
(including the Registrant) managed by the Adviser cannot be
measured separately. Because the volume and nature of the trading
activities of the accounts are not uniform, the amount of
commissions in excess of the lowest available rate paid by each
account for brokerage and research services will vary. In the
opinion of the Adviser, however, such costs to the Registrant will
not be disproportionate to the benefits received by the Registrant
on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell
securities by the Registrant and another advisory account. In some
cases, this procedure could have an adverse effect on the price or
the amount of securities available to the Registrant. In making such
allocations, the main factors considered
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by the Adviser are the funds' relative net assets, respective
investment objectives, the relative size of the portfolio holdings
of the same or comparable securities, the availability of cash for
investment, the size of the investment commitments generally held,
and the opinions of the persons responsible for recommending the
investment.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
INAPPLICABLE.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a) Registrant has outstanding units of partnership interest ("shares")
with equal rights to participate in distributions made by
Registrant and equal rights to Registrant's assets. Each share is
entitled to one vote and there is no cumulative voting. Shares may
be redeemed at any time at net asset value with no charge.
(b) INAPPLICABLE.
(c) INAPPLICABLE.
(d) INAPPLICABLE.
(e) Inquiries regarding Registrant or its shares should be made to the
Registrant's Secretary, Ronald A. Nyberg, at One Parkview Plaza,
Oakbrook Terrace, IL 60181.
(f) The Registrant makes quarterly distributions of net investment
income, exclusive of capital gains, to the partners. The Managing
General Partners determine each year whether and to what extent any
realized capital gains are to be distributed and such
distributions, if any, will be made annually. Distributions, when
made, are made equally among the outstanding shares held by
partners. Dividends and capital gains distributions are
automatically applied to purchase additional shares of the
Registrant at the next determined net asset value unless the
shareholder instructs otherwise.
(g) The Registrant is classified as a partnership for federal income
tax purposes. Each partner is required to report on his personal
federal income tax return his share of Registrant's income, gains,
losses, deductions and expenses for the taxable year of the
Registrant ending within or with his taxable year, regardless of
whether cash or other properties are distributed. For federal
income tax purposes, capital gain or loss is allocated equally
among shares outstanding on the day recognized, and all other items
of Registrant's income, gain, loss, deduction and expense during a
year are allocated to each partner in the proportion which the
total number of shares such partner held on each day during the
year bears to the total of the outstanding shares of the Registrant
on each day during the year.
The tax basis to each partner for his shares in Registrant is
determined by reference to the basis of the securities and any money
that he contributed to the Registrant in exchange for his shares
increased by his share of the Registrant's taxable income and
decreased (but not below zero) principally by the Registrant's
distributions and his share of the Registrant's net losses. If cash
distributed exceeds basis, the excess will be taxable as gain from
the sale of a capital asset. The Registrant's tax basis in the
securities contributed by the partners is the same as that of the
partners contributing such securities.
Redemptions for cash will generally be taxable as capital gains to
the extent that such cash exceeds a partner's adjusted basis in his
shares of the Registrant. The receipt of securities on redemption is
not a taxable event to the partner or to the Registrant. The
partner's basis in securities received on redemption will be the
same as the Registrant's. Net long-term capital gains realized by
the Registrant will be taxable to the partners at the current
capital gain rates.
(h) INAPPLICABLE.
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ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
INAPPLICABLE.
ITEM 8. REDEMPTION OR REPURCHASES
(a) Partners may redeem shares at any time without charge at the next
determined net asset value by submitting a written request in
proper form to ACCESS, P.O. Box 418256, Kansas City, Missouri
64141-9256, by placing the redemption request through an authorized
dealer or by calling the Registrant.
The net asset value of shares redeemed (other than redemptions under
a systematic withdrawal plan) may be paid in cash or securities, at
the option of Registrant, and will ordinarily be paid in whole or in
part in securities. Registrant's valuation will determine the
quantity of securities tendered. Registrant will select securities
for tender in redemptions based on tax or investment considerations.
Registrant will determine its per share net asset value as of the
close of each business day on the New York Stock Exchange.
Registrant's net assets equal the value of its portfolio securities,
plus all cash and other assets (including dividends and interest
accrued but not collected) less all liabilities (including accrued
expenses but excluding partner capital contributions). Registrant's
portfolio securities are valued at the last sales price on the
exchange where principally traded, or, if no sale occurred on that
day, at the mean between the closing bid and asked prices;
securities not so traded are valued in like manner, if market
quotations are available, or at the mean between the highest bid and
the lowest asked prices if there is no last sales price or closing
bid and asked prices. The value of any other securities and assets
is the fair value as determined in good faith by the Adviser based
on procedures approved by the Managing General Partners.
Payment for shares redeemed will be made within seven days after
acceptance by ACCESS of the request and any other necessary
documents in proper order. Redemptions are not made on days during
which the New York Stock Exchange is closed. The right of redemption
may be suspended and the payment therefore may be postponed for more
than seven days during any period when (a) the New York Stock
Exchange is closed for other than customary weekends or holidays;
(b) trading on the New York Stock Exchange is restricted; (c) an
emergency exists as a result of which disposal by the Registrant of
securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Registrant to fairly determine the
value of its net assets; or (d) the SEC, by order, so permits.
(b) While there is no charge when shares are redeemed or repurchased
through the Registrant or through Van Kampen American Capital
Distributors, Inc., an affiliate of the Adviser, dealers may make a
charge for effecting a repurchase.
(c) INAPPLICABLE.
(d) Payment for shares redeemed may be postponed or the right of
redemption suspended as provided by the rules of the SEC.
ITEM 9. PENDING LEGAL PROCEEDINGS
INAPPLICABLE.
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PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE
Van Kampen American Capital Exchange Fund (a California Limited
Partnership) (the "Registrant") is a diversified open-end management investment
company registered under the Investment Company Act of 1940 ("1940 Act") and
formed on December 4, 1975 under the Uniform Limited Partnership Act of
California. Registrant commenced business as an investment company on December
13, 1976 under the name American General Exchange Fund.
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Registrant's prospectus (the "Prospectus") dated as of the same date as this
Statement of Additional Information. This Statement of Additional Information
does not include all of the information a prospective investor should consider
before purchasing shares of the Registrant. Investors should obtain and read the
Prospectus prior to purchasing shares of the Registrant. A Prospectus may be
obtained without charge by writing or calling Van Kampen American Capital
Distributors, Inc. (the "Distributor") at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181 at (800) 421-5666.
This Statement of Additional Information is dated April 27, 1998.
The Registrant's principal investment objective is long-term growth of
capital, while the production of current income is an important secondary
objective. Registrant attempts to achieve these objectives by investing in
common stocks or convertible securities. Registrant may, however, for defensive
purposes, temporarily own other types of securities, including investment grade
bonds, preferred stocks and money market obligations such as government
securities, certificates of deposit and commercial paper. The foregoing policies
may not be changed without approval of a majority of the Registrant's
outstanding voting securities. Registrant's temporary investments will consist
of U.S. Treasury Bills and U.S. Treasury Bonds, both issued by and supported by
full faith and credit of the United States Government, and commercial paper
rated P-1, if by Moody's Investors Service, Inc., or A-1 if by Standard & Poor's
Ratings Group and repurchase agreements with domestic banks and broker-dealers.
ITEM 11. TABLE OF CONTENTS
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General Information and History............................. B-1
Investment Objectives and Policies.......................... B-2
Management of the Fund...................................... B-3
Control Persons and Principal Holders of Securities......... B-13
Investment Advisory and Other Services...................... B-13
Brokerage Allocation and Other Practices.................... B-15
Capital Stock and Other Securities.......................... B-16
Purchase, Redemption and Pricing of Securities Being
Offered..................................................... B-16
Tax Status.................................................. B-16
Underwriters................................................ B-16
Calculation of Performance Data............................. B-16
Report of Independent Accountants........................... B-17
Financial Statements........................................ B-18
Notes to Financial Statements............................... B-24
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ITEM 12. GENERAL INFORMATION AND HISTORY
The name of the Registrant was changed from American Capital Exchange Fund
to Van Kampen American Capital Exchange Fund (a California Limited Partnership)
on April 26, 1996.
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The Registrant and Van Kampen American Capital Asset Management, Inc., (the
"Adviser") have adopted Codes of Ethics designed to recognize the fiduciary
relationship between the Registrant and the Adviser and its employees. The Codes
permit directors, trustees, officers and employees to buy and sell securities
for their personal accounts subject to certain restrictions. Persons with access
to certain sensitive information are subject to preclearance and other
procedures designed to prevent conflicts of interest.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
(a) In seeking to attain its investment objectives of long-term growth
of capital, and, secondarily, production of income, Registrant will
acquire securities for long-term appreciation and does not intend to
engage to any significant degree in short-term trading. Capital
gains taxes will be considered in determining the sale of portfolio
securities. However, sales will be effected whenever believed to be
in the best interests of the Partners, even though capital gains may
be recognized thereby.
Registrant has no present intention of investing in corporate bonds,
preferred stocks or certificates of deposit in an amount in excess
of 5% of the value of its net assets.
(b) Registrant has adopted certain investment restrictions which may be
altered or rescinded only with the approval by the vote of a
majority of its outstanding voting shares, which is defined by the
Investment Company Act of 1940, as amended (the "1940 Act"), as the
lesser of (i) 67% or more of the voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (ii) more than
50% of the outstanding voting securities. Registrant may not:
(1) Purchase securities on margin or make short sales.
(2) Purchase or write any options, puts, calls, straddles, spreads
or combinations thereof.
(3) Borrow money, except from banks for a purpose other than the
purchase of securities, such borrowing not to exceed 5% of the
Registrant's total assets at market value at the time of
borrowing. Any such borrowing may be secured provided that not
more than 10% of the total assets at market value at the time of
pledging may be used as security for such borrowings.
(4) Engage in the underwriting of securities or invest in securities
subject to restrictions on resale.
(5) Invest more than 25% of its assets at market value at the time
of purchase in securities of companies all of which conduct
their principal activities in the same industry.
(6) Invest in real estate (including interests in real estate
investment trusts) or invest in oil, gas or mineral exploration
or development programs, except in publicly traded securities of
issuers which engage in such business.
(7) Buy or sell commodities or commodity contracts.
(8) Make loans of money or securities to other persons provided that
this limitation shall not prevent the purchase of a portion of
an issue of bonds, notes, debentures or other debt securities
which are publicly distributed or of a type customarily
purchased by institutional investors.
(9) Invest more than 5% of its total assets at market value at the
time of purchase in the securities of any one issuer (other than
obligations of the United States Government or any
instrumentalities thereof).
(10) Purchase securities if such purchase would result in the
Registrant owning more than 10% of the outstanding voting
securities of any one issuer at the time of purchase.
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(11) Invest in securities of companies which have a record, together
with their predecessors, of less than three years of continuous
operation.
(12) Purchase securities issued by any other investment company or
investment trust.
(13) Purchase or hold securities of any company if any of its General
Partners, or officers or directors of Registrant's investment
adviser, who beneficially own more than 0.50% of the securities
of that company together own beneficially more than 5% of the
securities of such company.
(14) Invest in companies for the purpose of exercising control or
management. (Registrant's officers may be authorized to vote
proxies issued with respect to its portfolio securities
consistently with its investment objectives).
(15) Invest in or hold warrants unless received with respect to
securities held by Registrant.
(16) Invest in foreign securities unless listed at the time of
purchase on the New York Stock Exchange.
(17) Invest more than 5% of its total assets at market value at the
time of purchase in equity securities which are not readily
marketable.
Registrant does not issue senior securities.
(c) INAPPLICABLE.
(d) The Registrant's portfolio had no turnover during the fiscal year
ended December 31, 1997.
ITEM 14. MANAGEMENT OF THE FUND
(a) The Managing General Partners and executive officers and their
principal occupations for the past five years are listed below.
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NAME AND POSITION HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
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David C. Arch Managing General Chairman and Chief Executive Officer of
1800 Swift Drive Partner Blistex Inc., a consumer health care
Oak Brook, IL 60523 products manufacturer. Director of Elmhurst
Date of Birth: 07/17/45 College and the Illinois Manufacturers'
Assoc. Trustee of other investment companies
advised by the Adviser, Van Kampen American
Capital Investment Advisory Corp. (the "VK
Adviser") and Van Kampen American Capital
Management, Inc. ("Management Inc.").
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NAME AND POSITION HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
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Rod Dammeyer Managing General Managing General Partner of Equity Group
Two North Riverside Plaza Partner Investments, Inc. (EGI), a company that
Suite 1950 makes private equity investments in other
Chicago, IL 62606 companies, and Vice Chairman and Director of
Date of Birth: 11/05/40 Anixter International Inc., a value-added
provider of integrated networking and
cabling solutions that support business
information and network infrastructure
requirements (employed by Anixter since
1985). Prior to 1997, President, Chief
Executive Officer and a Director of Great
American Management & Investment, Inc., a
diversified manufacturing company. Member of
the Board of Directors of TeleTech Holdings
Inc., Lukens, Inc., Metal Management, Inc.,
Stericycle, Inc., Transmedia Networks, Inc.,
Jancor Communications, Inc., CAN Surety,
Corp., IMC Global Inc., Antec Corporation,
Groupo Azucarero Mexico (GAM) and Kent State
University Foundation. Previously a Director
of Santa Fe Pacific Corporation, Q-Tel, S.A.
de C.V. and Servicios Finacieros Quandrum,
S.A. Prior to 1998, a Director of Capsure
Holdings Corp., Revco D.S., Inc., the Chase
Manhattan Corporation National Advisory
Board and Sealy, Inc. Trustee of other
investment companies advised by the Adviser,
the VK Adviser and Management Inc.
Howard J Kerr Managing General President and Chief Executive Officer
736 North Western Ave. Partner Pocklington Corporation, Inc., an investment
P.O. Box 317 holding company. Director of Canbra Foods,
Lake Forest, IL 60045 Ltd., a Canadian oilseed crushing, refining,
Date of Birth: 11/17/35 processing and packaging operation. Prior to
1991, President, Chief Executive Officer and
Chairman of the Board of Directors of
Grabill Aerospace Industries, Ltd. Trustee
of other investment companies advised by the
Adviser, the VK Adviser and Management Inc.
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NAME AND POSITION HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
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Dennis J. McDonnell* Chief Executive President, Chief Operating Officer and a
One Parkview Plaza Officer, Chairman of Director of the Adviser, the VK Adviser, Van
Oakbrook Terrace, IL 60181 the Board and Managing Kampen American Capital Advisors, Inc., and
Date of Birth: 05/20/42 General Partner Management Inc. Executive Vice President and
Director of VK/AC Holding, Inc. and Van
Kampen American Capital, Inc. ("VKAC").
Prior to April of 1997, Director of Van
Kampen Merrit Equity Holdings Corp. Prior to
September of 1996, Chief Executive Officer
and Director of MCM Group, Inc., McCarthy,
Crisanti & Maffei, Inc. and Chairman and
Director of MCM Asia Pacific Company Limited
and MCM (Europe) Limited. Prior to July of
1996, President, Chief Operating Officer and
Trustee of VSM Inc. and VCJ Inc. Prior to
December of 1991, Senior Vice President of
Van Kampen Merritt Inc. President and a
Director of Van Kampen American Capital
Equity Advisors Corp. President and/or a
Trustee of other investment companies
advised by the Adviser, the VK Adviser and
Management Inc.
Steven Muller, Ph.D. Managing General President Emeritus of The Johns Hopkins
President Emeritus Partner University. Director of Beneficial
The Johns Hopkins University Corporation (bank holding company) and
Suite 711 Milpore Corporation (biotechnology). Prior
1619 Massachusetts Ave., N.W. to December of 1997, Trustee of the Common
Washington, D.C. 20036 Sense Trust and Chairman of the 21st Century
Date of Birth: 11/22/27 Foundation (public affairs). Prior to May of
1997, a Director of BT Alex Brown and Sons
(investment banking). Trustee of other
investment companies advised by the Adviser,
the VK Adviser and Management Inc.
Theodore A. Myers Managing General Senior Financial Adviser of Qualitech Steel
550 Washington Avenue Partner Corporation, a manufacturer of special
Glencoe, IL 60022 quality bar products, as well as iron
Date of Birth: 08/03/30 carbide (a steel scrap substitute). Director
of COVA Series Trust of COVA Financial Life
Insurance (formerly known as Xerox Life).
Member of the Arthur Anderson Chief
Financial Officer Advisory Committee. Prior
to 1997, Director of McClouth Steel, and
prior to July of 1996, Executive Vice
President and Chief Financial Officer of
Qualitech Steel Corporation. Prior to August
of 1993, Senior Vice President, Chief
Financial Officer and a Director of Foods
Brand America (formerly known as Doskocil
Companies, Inc.), a food processing and
distribution company. Prior to January of
1990, Vice President and Chief Financial
Officer of Inland Steel Industries. Trustee
of other investment companies advised by the
Adviser, the VK Adviser and Management Inc.
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NAME AND POSITION HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
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Hugo F. Sonnenschein Managing General President of the University of Chicago.
5801 South Ellis Avenue Partner Member of the Board of Trustees of the
Suite 502 University of Rochester and a member of its
Chicago, IL 60637 investment committee. Prior to July, 1993,
Date of Birth: 11/14/40 Provost of Princeton University, and, from
1988 to 1991, Dean of the School of Arts and
Sciences and a fellow of the American
Academy of Arts and Sciences. Trustee of
other investment companies advised by the
Adviser, the VK Adviser and Management Inc.
Wayne W. Whalen* Managing General Partner in the law firm of Skadden, Arps,
333 W. Wacker Dr. Partner Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the Registrant, and other
Date of Birth: 08/22/39 investment companies advised by the Adviser,
the VK Adviser or Management, Inc.
Trustee/Director of other investment
companies advised by the Adviser, the VK
Adviser and Management Inc.
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* Mr. McDonnell is an "interested person" (within the meaning of Section
2(a)(19) of 1940 Act) of the Adviser and the Registrant by reason of his
position with the Adviser. Mr. Whalen is an interested person of the
Registrant by reason of his firm acting as legal counsel to the Registrant.
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OFFICERS
Messrs. Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin, Wetherell and Hill
are located at One Parkview Plaza, Oakbrook Terrace, IL 60181. The Fund's other
officers are located at 2800 Post Oak Blvd., Houston, TX 77056.
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POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
------------ --------------------------- ---------------------
<S> <C> <C>
Peter W. Hegel.............. Vice President Executive Vice President of the Adviser,
Date of Birth: 06/25/56 the VK Adviser, Management Inc. and Van
Kampen American Capital Advisors, Inc.
Prior to July of 1996, Mr. Hegel was a
Director of VSM Inc. Prior to September of
1996, he was a Director of McCarthy,
Crisanti & Maffei, Inc. Vice President of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Adviser, the VK Adviser or their
affiliates.
Curtis W. Morell............ Vice President and Chief Senior Vice President of the Adviser and
Date of Birth: 08/04/46 Accounting Officer the VK Adviser. Vice President and Chief
Accounting Officer of each of the funds in
the Fund Complex and certain other
investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
</TABLE>
B-7
<PAGE> 13
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
------------ --------------------------- ---------------------
<S> <C> <C>
Ronald A. Nyberg............ Vice President, Principal Executive Vice President, General Counsel,
Date of Birth: 07/29/53 Legal Officer and Secretary Secretary and Director of VKAC and VK/AC
Holding, Inc. Mr. Nyberg is also Executive
Vice President, General Counsel and a
Director of Van Kampen Merritt Equity
Holdings Corp. Executive Vice President,
General Counsel, Assistant Secretary and a
Director of the Adviser, the VK Adviser and
the Distributor, Van Kampen American
Capital Advisors, Inc., Management Inc.,
Van Kampen American Capital Exchange
Corporation, American Capital Contractual
Services, Inc. and Van Kampen American
Capital Trust Company. Executive Vice
President, General Counsel and Assistant
Secretary of ACCESS. Director or officer of
certain other subsidiaries of VKAC. Prior
to June of 1997, Director of ICI Mutual
Insurance Co., a provider of insurance to
members of the Investment Company
Institute. Prior to April of 1997, he was
Executive Vice President, General Counsel
and Director of Van Kampen Merritt Equity
Advisors Corp. Prior to July of 1996, Mr.
Nyberg was Executive Vice President and
General Counsel of VSM Inc. and Executive
Vice President and General Counsel of VCJ
Inc. Prior to September of 1996, he was
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Vice President and Secretary
of each of the funds in the Fund Complex
and certain other investment companies
advised by the Adviser, the VK Adviser or
their affiliates.
Alan T. Sachtleben.......... Chief Investment Officer Executive Vice President of the Adviser,
Date of Birth: 04/20/42 the VK Adviser, Management Inc. and Van
Kampen American Capital Advisors, Inc. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Adviser, the VK
Adviser or their affiliates.
Paul R. Wolkenberg.......... Vice President Executive Vice President and Director of
Date of Birth: 11/10/44 VKAC, and VK/AC Holding Inc. Executive Vice
President of the Adviser and the
Distributor. President and a Director of
ACCESS. President and Chief Operating
Officer of Van Kampen American Capital
Record Keeping Services, Inc. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Adviser, the VK
Adviser or their affiliates.
</TABLE>
B-8
<PAGE> 14
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
------------ --------------------------- ---------------------
<S> <C> <C>
Edward C. Wood III.......... Vice President and Chief Senior Vice President of the Adviser, the
Date of Birth: 01/11/56 Financial Officer VK Adviser and Management Inc. Vice
President and Chief Financial Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Adviser, the VK Adviser or their
affiliates.
John L. Sullivan............ Treasurer First Vice President of the Adviser and the
Date of Birth: 08/20/55 VK Adviser. Treasurer of each of the funds
in the Fund Complex and certain other
investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
Tanya M. Loden.............. Financial Officer Vice President of the Adviser and the VK
Date of Birth: 11/19/59 Adviser. Controller of each of the funds in
the Fund Complex and other investment
companies advised by the Adviser, the VK
Adviser or their affiliates.
Nicholas Dalmaso............ Legal Officer and Assistant Vice President, Associate General Counsel
Date of Birth: 03/01/65 Secretary and Assistant Secretary of VKAC. Vice
President, Associate General Counsel and
Assistant Secretary of the Adviser, the VK
Adviser, the Distributor, Van Kampen
American Capital Advisors, Inc. and
Management Inc. Assistant Secretary of each
of the funds in the Fund Complex and other
investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
Huey P. Falgout, Jr......... Legal Officer and Assistant Vice President and a Senior Attorney of
Date of Birth: 11/15/63 Secretary VKAC. Vice President and Assistant
Secretary of the Adviser, the VK Adviser,
the Distributor, ACCESS, Management Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and Van Kampen American Capital
Advisors, Inc. Assistant Secretary of each
of the funds in the Fund Complex and other
investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
</TABLE>
B-9
<PAGE> 15
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
------------ --------------------------- ---------------------
<S> <C> <C>
Scott E. Martin............. Legal Officer and Assistant Senior Vice President, Deputy General
Date of Birth: 08/20/56 Secretary Counsel and Assistant Secretary of VKAC and
VKAC Holding, Inc. Senior Vice President,
Deputy General Counsel and Secretary of the
Adviser, the VK Adviser, the Distributor,
ACCESS, American Capital Contractual
Services, Inc., Management Inc., Van Kampen
American Capital Exchange Corporation, Van
Kampen American Capital Advisors, Inc., Van
Kampen American Capital Insurance Agency of
Illinois, Inc., VKAC System, Inc., Van
Kampen American Capital Record Keeping
Services, Inc. and Van Kampen Merritt
Equity Advisors Corp. Prior to April of
1997, Senior Vice President, Deputy General
Counsel and Secretary of Van Kampen
American Capital Services, Inc. and Van
Kampen Merritt Holdings Corp. Prior to
September of 1996, Mr. Martin was Deputy
General Counsel and Secretary of McCarthy,
Crisanti & Maffei, Inc., and prior to July
of 1996, he was Senior Vice President,
Deputy General Counsel and Secretary of VSM
Inc. and VCJ Inc. Assistant Secretary of
each of the funds in the Fund Complex and
other investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
Weston B. Wetherell......... Legal Officer and Assistant Vice President, Associate General Counsel
Date of Birth: 06/15/56 Secretary and Assistant Secretary of VKAC, the
Adviser, the VK Adviser, the Distributor,
Management Inc. and Van Kampen American
Capital Advisors, Inc. Prior to September
of 1996, Mr. Wetherell was Assistant
Secretary of McCarthy, Crisanti & Maffei,
Inc. Assistant Secretary of each of the
funds in the Fund Complex and other
investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
Steven M. Hill.............. Assistant Treasurer Vice President of the Adviser and the VK
Date of Birth: 10/16/64 Adviser. Assistant Treasurer of each of the
funds in the Fund Complex and other
investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
Michael Robert Sullivan..... Assistant Controller Assistant Vice President of the Adviser and
Date of Birth: 03/30/33 the VK Adviser. Assistant Controller of
each of the funds in the Fund Complex and
other investment companies advised by the
Adviser, the VK Adviser or their
affiliates.
</TABLE>
B-10
<PAGE> 16
(b) See Item 14(a).
(c) Prior to the election of the current Managing General Partners
effective on January 2, 1998, Messrs. Donald M. Carlton, Stephen R.
Gross, Don G. Powell, F. Robert Paulsen and Alan B. Shepard, Jr.,
served as managing general partners to the Registrant during all or
part of the Registrant's year ended December 31, 1997 (the "Prior
Managing General Partners"). Until January 2, 1998, the Registrant
was part of a complex consisting of Common Sense Trust, Van Kampen
American Capital Bond Fund, Van Kampen American Capital Convertible
Securities Fund and Van Kampen American Capital Income Trust (the
"Prior Complex").
The following table shows aggregate compensation paid to each of the Prior
Managing General Partners from the Registrant and other funds in the Prior
Complex for the year ended December 31, 1997. Mr. Powell was not compensated for
his service as a Prior Managing General Partner because of his affiliation with
the Adviser.
COMPENSATION TABLE
PRIOR MANAGING GENERAL PARTNERS
<TABLE>
<CAPTION>
AGGREGATE ESTIMATED TOTAL
COMPENSATION AGGREGATE ESTIMATED COMPENSATION
YEAR OF BEFORE DEFERRAL PENSION OR RETIREMENT AGGREGATE BEFORE DEFERRAL
ELECTION/ FROM THE BENEFITS ACCRUED ANNUAL BENEFITS FROM THE
NAME APPOINTMENT REGISTRANT AS PART OF EXPENSES(1) UPON RETIREMENT PRIOR COMPLEX(2)
---- ----------- --------------- ---------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Dr. Donald M. Carlton(3)..... 1996 $8,500 -- $ (4) $51,250
Stephen R. Gross(3).......... 1996 9,000 -- (4) 53,750
Dr. F. Robert Paulsen(3)..... 1979 7,000 -- 9,000(4) 46,909
Alan B. Shepard, Jr.(3) ..... 1992 8,250 -- (4) 53,000
</TABLE>
- ---------------
(1) The Prior Managing General Partners of the Registrant instituted a
Retirement Plan effective April 26, 1996. For the Prior Managing General
Partners not affiliated with the Adviser, the annual retirement benefit
payable per year for the ten-year period after such Prior Managing General
Partner's retirement is based upon the highest total annual compensation
received in any of the three calendar years preceding retirement. Prior
Managing General Partners with at least five but less than ten years of
service (including years of service prior to the plan's adoption) at
retirement will receive a prorated reduced benefit. Retirement benefits
accrued as part of Registrant expenses are $42,293 for Registrant's year
ended December 31, 1997.
(2) Reflects eleven investment companies in the Prior Complex.
(3) Mr. Paulsen retired as a Managing General Partner on April 10, 1997.
Messrs. Carlton, Gross and Shepard retired as Managing General Partners
as of January 2, 1998.
(4) For Mr. Paulsen, this amount represents the retirement benefit payable for
each of the 10-year period since his retirement. Under the terms of the
retirement plan, Mr. Shephard has elected and received in 1998 $38,602;
which represents a discounted lump sum payment of his vested retirement
benefits paid in lieu of receiving benefits over 10 years. In connection
with their years of service and retirement benefits forgone, Messrs.
Carlton, Gross and Shepard received in 1998 $45,000, $45,000 and $36,000,
respectively, paid by the Adviser or its affiliates.
The following table shows aggregate compensation paid to each of the
Registrant's current Managing General Partners by the Registrant for the
Registrant's last fiscal year and from the Fund Complex (defined below) for the
calendar year ended December 31, 1997. The current officers and Managing General
Partners act as officers and trustees of other funds in the Fund Complex
(defined below). The compensation of officers and Managing General
Partners/Trustees who are affiliated persons (as defined in the 1940 Act) of the
Adviser is paid by the Adviser. Funds in the Fund Complex, including the
Registrant, pay compensation to Managing General Partners/Trustees who are not
affiliated with the Adviser ("Non-Affiliated Trustees"). The funds in the Fund
Complex pay an annual Fund Complex retainer (generally equal to the product of
B-11
<PAGE> 17
$2,500 times the number of funds in the Fund Complex), which retainer is then
allocated among the funds in the Fund Complex based on the funds' relative net
assets, and $250 per fund per meeting as well as reimbursement of expenses
incurred in connection with such meetings. Each of the funds in the Fund Complex
other than the Registrant has adopted a uniform retirement plan for
Non-Affiliated Trustees which provides retirement benefits to Non-Affiliated
Trustees that have at least ten years of service for a fund (including years of
service prior to adoption of the retirement plan) and retire at or after
attaining the age of 60 equal to $2,500 per fund for each of the ten years
following such trustee's retirement.
COMPENSATION TABLE
CURRENT MANAGING GENERAL PARTNERS
<TABLE>
<CAPTION>
FUND COMPLEX
-------------------------------------------------------------
AGGREGATE TOTAL
COMPENSATION ESTIMATED AGGREGATE ESTIMATED COMPENSATION
YEAR OF BEFORE DEFERRAL PENSION OR RETIREMENT AGGREGATE BEFORE DEFERRAL
ELECTION/ FROM THE BENEFITS ACCRUED ANNUAL BENEFITS FROM THE
NAME(1) APPOINTMENT REGISTRANT(2) AS PART OF EXPENSES(3) UPON RETIREMENT(4) FUND COMPLEX(5)
------- ----------- --------------- ---------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
David C. Arch............ 1998 0 $ 7,912 $85,000 $157,750
Rod Dammeyer............. 1998 0 14,303 85,000 157,750
Howard J Kerr............ 1998 0 27,338 85,000 157,750
Steven Muller............ 1998 0 0 0 0
Theodore A. Myers........ 1998 0 57,361 85,000 157,750
Hugo F. Sonnenschein..... 1998 0 13,493 85,000 157,750
Wayne W. Whalen.......... 1998 0 16,155 85,000 157,250
</TABLE>
- ---------------
(1) Mr. McDonnell is an affiliated person of the Adviser and does not receive
compensation or retirement benefits from the Registrant.
(2) The current Managing General Partners did not receive any compensation from
the Registrant during the Registrant's last fiscal year. It is anticipated
that each Managing General Partner will receive approximately $1,500 for
the Registrants' current fiscal year.
(3) The amounts shown in this column represent the sum of the estimated Pension
or Retirement Benefit Accruals expected to be accrued by the 34 operating
investment companies in the Fund Complex as of December 31, 1997 for their
respective fiscal year ends in 1997.
(4) The amounts shown in this column represent the sum of the estimated annual
benefits payable per year by the 34 operating investment companies in the
Fund Complex as of December 31, 1997 for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement.
(5) The "Fund Complex" currently consists of 41 investment companies (including
the Registrant) advised by the Adviser or its affiliates that have the same
members on each investment company's Board of Trustees. The amounts shown
in this column are accumulated from the Aggregate Compensation of the 34
investment companies in the Fund Complex for the year ended December 31,
1997 before deferral by the trustees under the deferred compensation plan.
The Adviser also serves as investment adviser for other investment
companies; however, with the exception of Mr. Whalen, the Non-Affiliated
Trustees are not trustees of other investment companies. Combining the Fund
Complex with other investment companies advised by the Adviser or its
affiliates, Mr. Whalen received Total Compensation of $268,447 for the year
ended December 31, 1997.
Skadden, Arps, Slate, Meagher & Flom (Illinois) serves as legal counsel to the
Registrant.
B-12
<PAGE> 18
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) INAPPLICABLE.
(b) As of April 1, 1998, no person was known by the Registrant to own
beneficially or to hold of record 5% or more of the outstanding
shares of the Registrant, except as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
NAME AND ADDRESS OF HOLDER OF OWNERSHIP OWNERSHIP
-------------------------- ----------------- ----------
<S> <C> <C>
Comerica Bank of Detroit and Edward Mardigian, 45,045 15.62%
Trustees for Helen Mardigian
P.O. Box 75000
Detroit, MI 48257-0001
Richard F. McCarthy and Walter R. McCarthy, 15,000 5.20%
Trustees for the Richard F. McCarthy Trust
540 Indian Mound St., E 1-D
Wayzata, MN 55391-1745
George O. and Sidney M. Thorson, a partnership 14,775 5.12%
P.O. Box 1847
Friday Harbor, WA 98250-1847
</TABLE>
(c) At April 1, 1998, all Managing General Partners and officers as a
group owned less than 1% of Registrant's outstanding voting
securities.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
(a) (i) The Adviser and ACCESS, the Registrant's shareholder service
agent, are wholly-owned subsidiaries of VKAC, which is an
indirect wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. The Adviser's principal office is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly
or indirectly owned subsidiaries, including Morgan Stanley
Asset Management Inc., an investment adviser, Morgan Stanley
& Co. Incorporated, a registered broker and investment
adviser, and Morgan Stanley International, are engaged in a
wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate
finance advisory activities; merchant banking; stock
brokerage and research services; credit services; asset
management; trading of futures, options, foreign exchange,
commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice,
financing and investing; and global custody, securities
clearance services and securities lending.
(ii) See Item 14(a).
(iii) Registrant and the Adviser are parties to an investment
advisory agreement (the "Agreement"). Under the Advisory
Agreement, Registrant pays to the Adviser as compensation for
the services rendered, facilities furnished, and expenses paid
by it a fee payable monthly computed on average daily net
assets of Registrant at annual rate of 0.50%. The Adviser
received $221,917, $264,323 and $351,434, in advisory fees
from the Registrant during the fiscal years ended December 31,
1995, 1996 and 1997, respectively.
The average net asset value is determined by taking the
average of all of the determinations of net asset value for
each business day during a given calendar month. Such fee is
payable for each calendar month as soon as practicable after
the end of that month. The fee payable to the Adviser is
reduced by any commissions, tender
B-13
<PAGE> 19
solicitation and other fees, brokerage or similar payments
received by the Adviser or any other direct or indirect
majority owned subsidiary of VKAC, in connection with the
purchase and sale of portfolio investments of the Registrant,
less any direct expenses incurred by such subsidiary of VKAC in
connection with obtaining such payments. The Adviser agrees to
use its best efforts to recapture tender solicitation fees and
exchange offer fees for the Registrant's benefit, and to advise
the Managing General Partners of Registrant of any other
commissions, fees, brokerage or similar payments which may be
possible under applicable laws for the Adviser or any other
direct or indirect majority owned subsidiary of VKAC to receive
in connection with Registrant's portfolio transactions or other
arrangements which may benefit Registrant.
The agreement also provides that, in the event the ordinary
business expenses of Registrant for any fiscal year exceed
1 1/2% of the first $30 million of the Registrant's average net
assets, plus one percent of any excess over $30 million, the
compensation due the Adviser will be reduced by the amount of
such excess and that, if a reduction in and refund of the
advisory fee is insufficient, the Adviser will pay the
Registrant monthly an amount sufficient to make up the
deficiency, subject to readjustment during the year. Ordinary
business expenses do not include (1) interest and taxes, (2)
brokerage commissions and (3) certain litigation and
indemnification expenses as described in the Advisory
Agreement.
The Advisory Agreement may be continued from year to year if
specifically approved at least annually (a)(i) by the
Registrant's Managing General Partners or (ii) by vote of a
majority of the Registrant's outstanding voting securities and
(b) by the affirmative vote of a majority of the Managing
General Partners who are not parties to the agreement or
interested persons of any such party by votes cast in person at
a meeting called for such purpose. The Advisory Agreement
provides that it shall terminate automatically if assigned and
that it may be terminated without penalty by either party on 30
days written notice.
(b) Under the Agreement, Registrant retains the Adviser to manage the
investment of its assets and to place orders for the purchase and
sale of its portfolio securities. The Adviser is responsible for
obtaining and evaluating economic, statistical, and financial data
and for formulating and implementing investment programs in
furtherance of Registrant's investment objectives. The Adviser also
furnishes at no cost to Registrant (except as noted herein) the
services of sufficient executive and clerical personnel for
Registrant as are necessary to prepare registration statements,
partner reports, and notices and proxy solicitation materials. In
addition, the Adviser furnishes at no cost to Registrant the
services of a Chief Executive Officer and other executive and
clerical personnel, as needed.
Under the Agreement, Registrant bears the cost of its accounting
services, which includes maintaining its financial books and records
and calculating its daily net asset value. The costs of such
accounting services include the salaries and overhead expenses of
the Registrant's Principal Financial and Accounting Officer and the
personnel operating under his direction. For the fiscal years ended
December 31, 1995, 1996 and 1997, the Registrant paid $52,584,
$50,358 and $15,313, respectively, for such services. A portion of
these amounts were paid to the Adviser in reimbursement of
personnel, facilities and equipment costs attributable to the
provision of accounting services to Registrant. The services
provided by the Adviser are at cost which is allocated among the
investment companies advised or sub-advised by the Adviser.
Registrant also pays transfer agency fees, custodian fees, legal and
auditing fees, the costs of reports to partners and all other
ordinary expenses not specifically assumed by the Adviser.
(c) INAPPLICABLE.
(d) INAPPLICABLE.
B-14
<PAGE> 20
(e) INAPPLICABLE.
(f) INAPPLICABLE.
(g) INAPPLICABLE.
(h) The custodian of all the assets of Registrant is State Street Bank
and Trust Company located at 225 Franklin Street, Boston,
Massachusetts 02110.
KPMG Peat Marwick LLP, Chicago Illinois, the independent
accountants for the Registrant performs an annual audit of the
Registrant's financial statements.
(i) During the fiscal years ended December 31, 1995, 1996 and 1997,
ACCESS, shareholder service agent for the Registrant, received
fees aggregating $15,514, $15,000 and $15,000, respectively. See
also Item 5(e).
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
(a) The Adviser is responsible for decisions to buy and sell securities
for the Registrant and for the placement of its portfolio business
and the negotiation of the commissions paid on such transactions.
It is the policy of the Adviser to seek the best security price
available with respect to each transaction. In over-the-counter
transactions, orders are placed directly with a principal market
maker unless it is believed that a better price and execution can
be obtained by using a broker. Except to the extent that the
Registrant may pay higher brokerage commissions for brokerage and
research services (as described below) on a portion of its
transactions executed on securities exchanges, the Adviser seeks
the best security price at the most favorable commission rate. The
Registrant paid no brokerage commissions during the fiscal years
ended December 31, 1995, 1996 and 1997, respectively.
(b) INAPPLICABLE.
(c) In selecting dealers and in negotiating commissions, the Adviser
considers the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition. When
more than one firm is believed to meet these criteria, preference
may be given to firms which also provide research services to
Registrant or the Adviser.
Section 28(e) of the Securities Exchange Act of 1934 ("Section
28(e)") permits an investment adviser, under certain
circumstances, to cause an account to pay a broker or dealer
who supplies brokerage and research services, a commission for
effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for
effecting the transaction. Brokerage and research services include
(a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of
securities, (b) furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (c)
effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).
Pursuant to provisions of the Agreement, the Registrant's Managing
General Partners have authorized the Adviser to cause the
Registrant to incur brokerage commissions in an amount higher than
the lowest available rate in return for research services provided
to the Adviser. The Adviser is of the opinion that the continued
receipt of supplemental investment research services from dealers
is essential to its provision of high quality portfolio management
services to Registrant. The Adviser undertakes that such
higher commissions will not be paid by Registrant unless (a) the
Adviser determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction or
in terms of the Adviser's overall responsibilities with respect to
the accounts as to which it exercises investment discretion, (b)
such payment is made in compliance with the provisions of Section
28(e) and other applicable state and federal laws, and (c) in the
opinion of the Adviser, the total B-15
<PAGE> 21
commissions paid by Registrant are reasonable in relation to the
expected benefits to Registrant over the long term. The investment
advisory fee paid by Registrant under the investment advisory
agreement is not reduced as a result of the Adviser's receipt of
research services.
The Adviser places portfolio transactions for other advisory
accounts including other investment companies. Research services
furnished by firms through which Registrant effects its securities
transactions may be used by the Adviser in servicing all of its
accounts; not all of such services may be used by the Adviser in
connection with Registrant. In the opinion of the Adviser, the
benefits from research services to each of the accounts (including
Registrant) managed by the Adviser cannot be measured separately.
Because the volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in excess of the
lowest available rate paid by each account for brokerage and
research services will vary. However, in the opinion of the Adviser,
such costs to Registrant will not be disproportionate to the
benefits received by Registrant on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell
securities by Registrant and another advisory account. In some
cases, this procedure could have an adverse effect on the price or
the amount of securities available to Registrant. In making such
allocations among Registrant and other advisory accounts, the main
factors considered by the Adviser are the relative net assets,
respective investment objectives, the relative size of portfolio
holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally
held, and opinions of the persons responsible for recommending the
investment.
(d) During the fiscal year ended December 31, 1997, the Registrant paid
no brokerage commissions.
(e) INAPPLICABLE.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
See Item 6.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
(a) INAPPLICABLE.
(b) No shares are being offered to the public. The redemption price per
share is equivalent to the net asset value per share as more fully
described in Item 8.
(c) INAPPLICABLE.
ITEM 20. TAX STATUS
See Item 6(g).
ITEM 21. UNDERWRITERS
INAPPLICABLE.
ITEM 22. CALCULATION OF PERFORMANCE DATA
INAPPLICABLE.
B-16
<PAGE> 22
ITEM 23. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS OF VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
We have audited the accompanying statement of assets and liabilities
including the portfolio of investments of Van Kampen American Capital Exchange
Fund (a California Limited Partnership), as of December 31, 1997, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the years in the two-year period then ended,
and financial highlights for each of the years in the five-year period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and by application of
alternate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Exchange Fund as of December 31, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
February 4, 1998
B-17
<PAGE> 23
PORTFOLIO OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
Security Number
Description of Shares Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.0%
CONSUMER DISTRIBUTION 4.4%
Ikon Office Solutions, Inc............................................. 86,993 $ 2,446,678
Unisource Worldwide, Inc............................................... 43,496 619,818
-----------
3,066,496
-----------
CONSUMER DURABLES 0.9%
Dana Corp.............................................................. 13,677 649,658
-----------
CONSUMER NON-DURABLES 5.6%
International Flavours & Fragrances, Inc............................... 49,712 2,560,168
McCormick & Co., Inc................................................... 48,259 1,351,252
-----------
3,911,420
-----------
CONSUMER SERVICES 0.3%
Luby's Cafeterias, Inc................................................. 13,367 234,758
-----------
ENERGY 14.1%
Amerada Hess Corp...................................................... 21,200 1,163,350
Amoco Corp............................................................. 12,800 1,089,600
Apache Corp............................................................ 11,406 399,923
Baker Hughes, Inc...................................................... 25,634 1,118,283
Dresser Industries, Inc................................................ 30,320 1,271,545
Kerr McGee Corp........................................................ 10,900 690,106
Mobil Corp............................................................. 40,262 2,906,413
Schlumberger, Ltd...................................................... 16,080 1,294,440
-----------
9,933,660
-----------
FINANCE 3.6%
American International Group, Inc...................................... 14,823 1,612,002
Household International, Inc........................................... 7,124 908,755
-----------
2,520,757
-----------
HEALTHCARE 28.9%
Allegiance Corp........................................................ 1,000 35,438
American Home Products Corp............................................ 28,000 2,142,000
Baxter International, Inc.............................................. 5,000 252,187
Johnson & Johnson, Inc................................................. 54,432 3,585,708
Merck & Co., Inc....................................................... 25,188 2,676,225
</TABLE>
B-18 See Notes to Financial Statements
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
Security Number
Description of Shares Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Schering-Plough Corp................................................... 102,608 $ 6,374,522
Warner-Lambert Co...................................................... 42,430 5,261,320
-----------
20,327,400
-----------
PRODUCER MANUFACTURING 1.4%
AlliedSignal, Inc...................................................... 12,528 487,809
Fluor Corp............................................................. 12,831 479,559
-----------
967,368
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 11.7%
Air Products & Chemicals, Inc.......................................... 54,545 4,486,326
Alcan Aluminum, Ltd.................................................... 10,774 297,632
Georgia Pacific Corp................................................... 18,688 1,135,296
Georgia Pacific - Timber Group (a)..................................... 18,688 423,984
Louisiana-Pacific Corp................................................. 25,970 493,430
Lubrizol Corp.......................................................... 37,620 1,387,237
-----------
8,223,905
-----------
TECHNOLOGY 24.1%
General Signal Corp.................................................... 20,000 843,750
Intel Corp............................................................. 218,097 15,321,314
International Business Machines Corp................................... 7,508 785,055
-----------
16,950,119
-----------
TOTAL LONG-TERM INVESTMENTS 95.0%
(Cost $7,426,632)................................................................. 66,785,541
-----------
SHORT-TERM INVESTMENTS 5.0%
Federal National Mortgage Assn. ($1,000,000 par, yielding 5.68%,
01/16/98 maturity)................................................................ 997,489
General Electric Capital Corp. ($2,515,000 par, yielding 6.70%,
01/02/98 maturity)................................................................ 2,514,064
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,511,553)................................................................. 3,511,553
-----------
TOTAL INVESTMENTS 100.0%
(Cost $10,938,185)................................................................ 70,297,094
LIABILITIES IN EXCESS OF OTHER ASSETS 0.0%.......................................... (23,101)
-----------
NET ASSETS 100.0%................................................................... $70,273,993
===========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
B-19 See Notes to Financial Statements
<PAGE> 25
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $10,938,185).......................................... $70,297,094
Cash.......................................................................... 5,523
Receivables:
Dividends................................................................... 75,498
Investments Sold............................................................ 19,459
Other......................................................................... 120,406
-----------
Total Assets............................................................. 70,517,980
-----------
LIABILITIES:
Payables:
Investment Advisory Fee..................................................... 29,697
Fund Units Repurchased...................................................... 19,483
Affiliates.................................................................. 3,100
Income Distributions........................................................ 2,805
Managing General Partners' Retirement Plan.................................... 165,614
Accrued Expenses.............................................................. 23,288
-----------
Total Liabilities........................................................ 243,987
-----------
NET ASSETS.................................................................... $70,273,993
===========
NET ASSETS WERE COMPRISED OF:
284,518 units of limited partnership interest................................. $69,290,862
3,541 units of non-managing general partnership interest...................... 862,452
496 units of managing general partnership interest............................ 120,679
-----------
NET ASSETS.................................................................... $70,273,993
===========
NET ASSET VALUE PER UNIT
($70,273,993 divided by 288,555 units of partnership interest outstanding).... $ 243.54
===========
</TABLE>
B-20 See Notes to Financial Statements
<PAGE> 26
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................. $ 904,653
Interest.................................................. 186,389
-----------
Total Income......................................... 1,091,042
-----------
EXPENSES:
Investment Advisory Fee................................... 351,434
Managing General Partners' Fees and Expenses.............. 72,143
Custody................................................... 16,558
Shareholder Services...................................... 15,711
Legal..................................................... 10,524
Other..................................................... 60,354
-----------
Total Expenses....................................... 526,724
-----------
NET INVESTMENT INCOME..................................... $ 564,318
===========
REALIZED AND UNREALIZED GAIN/LOSS
Net Realized Gain......................................... $ 5,272,722
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................. 53,335,307
End of the Period....................................... 59,358,909
-----------
Net Unrealized Appreciation During the Period............. 6,023,602
-----------
NET REALIZED AND UNREALIZED GAIN.......................... $11,296,324
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS................ $11,860,642
===========
</TABLE>
B-21 See Notes to Financial Statements
<PAGE> 27
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 564,318 $ 457,374
Net Realized Gain........................................... 5,272,722 1,864,174
Net Unrealized Appreciation During the Period............... 6,023,602 14,427,053
----------- -----------
Change in Net Assets from Operations........................ 11,860,642 16,748,601
Distributions from Net Investment Income.................... (379,623) (393,524)
----------- -----------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES....................................... 11,481,019 16,355,077
----------- -----------
FROM PARTNERSHIP UNIT TRANSACTIONS:
Proceeds from Units Issued Through
Dividend Reinvestment..................................... 50,220 52,164
Cost of Units Repurchased................................... (3,024,080) (2,395,079)
----------- -----------
NET CHANGE IN NET ASSETS FROM
PARTNERSHIP UNIT TRANSACTIONS............................. (2,973,860) (2,342,915)
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 8,507,159 14,012,162
NET ASSETS:
Beginning of the Period..................................... 61,766,834 47,754,672
----------- -----------
End of the Period
(Including accumulated undistributed net investment
income of $2,618,113 and $2,433,418, respectively)........ $70,273,993 $61,766,834
=========== ===========
CHANGE IN PARTNERSHIP UNITS OUTSTANDING:
Units Issued Through Dividend Reinvestment.................. 210 313
Units Repurchased........................................... (12,445) (13,938)
----------- -----------
Decrease in Partnership Units Outstanding................. (12,235) (13,625)
=========== ===========
</TABLE>
B-22 See Notes to Financial Statements
<PAGE> 28
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one unit of
partnership interest outstanding throughout the periods indicated
<TABLE>
<CAPTION>
Year Ended December 31 (a)
----------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....................... $205.349 $ 151.88 $115.36 $111.32 $104.40
-------- -------- ------- ------- -------
Net Investment Income........................................ 1.908 1.488 1.62 1.62 1.49
Net Realized and Unrealized Gain............................. 37.561 53.261 36.18 3.70 6.71
-------- -------- ------- ------- -------
Total from Investment Operations............................... 39.469 54.749 37.80 5.32 8.20
Less Distributions from Net Investment Income.................. 1.280 1.280 1.28 1.28 1.28
-------- -------- ------- ------- -------
Net Asset Value, End of the Period............................. $243.538 $205.349 $151.88 $115.36 $111.32
======== ======== ======= ======= =======
Total Return................................................... 19.23% 36.21% 32.89% 4.82% 7.91%
Net Assets at End of the Period (In millions).................. $ 70.3 $ 61.8 $ 47.8 $ 37.7 $ 38.5
Ratio of Expenses to Average Net Assets........................ .75% .93% .88% .89% .93%
Ratio of Net Investment Income to..............................
Average Net Assets........................................... .80% .87% 1.16% 1.45% 1.38%
Portfolio Turnover............................................. 0% 0% 0% 0% 0%
</TABLE>
(a) Based on average units outstanding.
During the years ended December 31, 1997 and 1996, the Fund incurred no
brokerage commissions on equity share trades. This disclosure was not required
in fiscal years prior to 1996.
B-23 See Notes to Financial Statements
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Significant Accounting Policies
Van Kampen American Capital Exchange Fund (the "Fund"), a California limited
partnership is a partnership registered under the Investment Company Act of
1940, as amended, as a diversified open-end investment management company. The
Fund seeks capital appreciation in a portfolio of common stock. The Fund
commenced investment operations on December 16, 1976.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION-Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Fixed income investments are stated at value using market quotations. Unlisted
securities and listed securities for which the last sales price is not available
are valued at the mean between the last reported bid and ask price. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term investments
whereby the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies
advised by Van Kampen American Capital Asset Management, Inc. (the "Adviser")
or its affiliates, the daily aggregate of which is invested in repurchase
agreements. Repurchase agreements are fully collateralized by the underlying
debt security. The Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the custodian
bank. The seller is required to maintain the value of the underlying security at
not less than the repurchase proceeds due the Fund.
C. INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount is
amortized over the life of each applicable security. Premiums on debt securities
are not amortized.
B-24
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
D. FEDERAL INCOME TAXES-The Fund has met the qualifications to be classified as
a partnership for federal income tax purposes and intends to maintain this
qualification in the future. A partnership is not subject to federal income tax.
At December 31, 1997, for federal income tax purposes the cost of long- and
short-term investments is $6,587,400; the aggregate gross unrealized
appreciation is $63,709,694 and the aggregate gross unrealized depreciation is
$0, resulting in net unrealized appreciation of $63,709,694.
E. DISTRIBUTION OF INCOME AND GAINS-Quarterly distributions to partners are
recorded on the record date. Net investment income is allocated daily to each
partner, relative to the total number of units held. Capital gains or losses
will be allocated equally among units outstanding on the day recognized.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide facilities and investment advice to the Fund for an annual fee payable
monthly of .50% based on the average daily net assets of the Fund.
For the year ended December 31, 1997, the Fund recognized expenses of
approximately $15,300 representing Van Kampen American Capital, Inc.'s or its
affiliates' (collectively "VKAC") cost of providing accounting services to the
Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
December 31, 1997, the Fund recognized expenses of approximately $15,000,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Managing general partners of the Fund who are not affiliated with the Adviser
are compensated by the Fund at the annual rate of $5,000 plus a fee of $750 per
Board meeting attended.
The Partners of the Fund instituted a Retirement Plan effective April 1, 1996.
The Plan is not funded, and obligations under the Plan will be paid solely out
of the Fund's general accounts. The Fund will not reserve or set aside funds for
the payment of its obligations under the Plan by any form of trust or escrow.
For the current Managing General Partners not affiliated with the Adviser, the
annual retirement benefit payable per year for a ten year period is based upon
the highest total annual compensation received in any of the three calendar
years preceding retirement. Managing General Partners with more than five but
less than ten years service at retirement will receive a prorated reduced
benefit. Under the Plan, for the Managing General Partners retiring with the
effectiveness of the Plan, the annual retirement benefit payable per year for a
ten year period is equal to 75% of the total compensation received from the Fund
during the 1995 calendar year.
B-25
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
At the Annual Meeting of Partners held on December 18, 1997, eight new
Managing General Partners were elected to replace the four Managing General
Partners that resigned, with the effective date of their resignation being
December 31, 1997. In connection with their resignation from services as
Managing General Partners of the Fund, each resigning Managing General Partner
will receive the vested portion of their retirement benefits under the Fund's
retirement plan. In addition, in recognition of their years of service, VKAC
will pay each resigning Managing General Partner an amount equal to the
non-vested portion of their retirement benefits. These retirement benefits are
being period and will not be paid to a resigning Managing General Partner who
is and the Adviser.
At December 31, 1997, the Adviser and Van Kampen American Capital Exchange
Corp., as non-managing general partners of the Fund, owned 354 and 3,180 units
of partnership interest, respectively.
3. PARTNERSHIP UNIT TRANSACTIONS
Partners of the Fund may redeem units at any time. The net asset value of
units redeemed, other than redemptions under a systematic withdrawal plan, may
be paid in cash or securities, at the option of the Fund, and will ordinarily
be paid in whole or in part in securities. The Fund's valuation will determine
the quantity of securities tendered. The Fund will select securities for
tender in redemptions based on tax or investment considerations.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of
B-26
<PAGE> 32
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Included in the Statement of Additional Information:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<S> <C>
(1)(a) Restated and Amended Certificate and Agreement of Limited
Partnership(2)
(b) Amendment to Certificate of Limited Partnership, on Form
LP-1(4)
(c) Amendment to Certificate of Limited Partnership, on Form
LP-2(5)
(d) Amendment to Certificate of Limited Partnership, on Form
LP-2+
(2) Bylaws(1)
(3) Inapplicable
(4) Copy of Specimen Certificate(3)
(5) Investment Advisory Agreement+
(6) Inapplicable
(7) Inapplicable
(8)(a) Custodian Contract(6)
(b) Transfer Agency and Service Agreement+
(9) Inapplicable
(10) Inapplicable
(11) Consent of Independent Auditors+
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(27) Financial Data Schedule+
</TABLE>
- ---------------
(1) Incorporated herein by reference to Amendment No. 1 to Registrant's
Registration Statement on Form N-1, File Number 2-55128.
(2) Incorporated herein by reference to Amendment No. 2 to Registrant's
Registration Statement on Form S-5, File Number 2-55128.
(3) Incorporated herein by reference to Amendment No. 5 to Registrant's
Registration Statement on Form N-1, File Number 811-2611.
(4) Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A, File Number 811-2611,
filed April 26, 1995.
(5) Incorporated herein by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A, File Number 811-2611,
filed April 29, 1996.
(6) Incorporated herein by reference to Post-Effective Amendment No. 75 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File Number 2-21657, filed March 27, 1998.
+ Filed Herewith.
C-1
<PAGE> 33
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
AS OF APRIL 1, 1998:
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- ----------------------------- -------
<S> <C>
Units of Partnership Interest 127
</TABLE>
ITEM 27. INDEMNIFICATION
Article XIII, Section 13.4 of Registrant's Restated and Amended Certificate
and Agreement of Limited Partnership provides as follows:
"The Partnership shall indemnify each General Partner (including officers
and or directors of a corporate General Partner and including former General
Partners who have not ceased to be liable as General Partners under the
Partnership Act) against judgments, fines, amounts paid in settlement, and
expenses (including attorneys' fees) reasonably incurred by him in any civil,
criminal or investigative proceeding in which he is involved or threatened to be
involved by reason of his being a General Partner of the Partnership, provided
that he acted in good faith, within what he reasonably believed to be the scope
of his authority, and for a purpose which he reasonably believed to be within
the scope of his authority, and for a purpose which he reasonably believed to be
in the best interests of the Partnership or the Limited Partners. To the extent
that a General Partner has been successful on the merits or otherwise in defense
of any such proceeding or in defense of any claim or matter therein, he shall be
deemed to have acted in good faith and in a manner he believed to be in the best
interests of the Partnership or the Limited Partners. The determination under
any other circumstances as to whether a General Partner acted in good faith,
within what he reasonably believed to be the scope of his authority, and for a
purpose which he reasonably believed to be in the best interests of the
Partnership or the Limited Partners, shall be made by action of the General
Partners who were not parties to such proceedings, or by independent legal
counsel selected by the General Partners (who may be the regular counsel for the
Partnership) in a written opinion. No General Partner shall be indemnified under
this provision against any liability to the Partnership or its Partners to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. The indemnification provided hereunder shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any applicable
statute, agreement, vote of the General Partners or Limited Partners, or
otherwise."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Fund" in Part A and "Management of the Fund" in the
Statement of Additional Information for information regarding the business of
the Adviser. For information as to the business, profession, vocation and
employment of a substantial nature of directors and officers of the Adviser,
reference is made to the Adviser's current Form ADV (File No. 801-1669) filed
under the Investment Advisers Act of 1940, as amended, incorporated herein by
reference.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at 2800 Post Oak Blvd.,
Houston, Texas 77056, Van Kampen American Capital, Inc., One Parkview Plaza,
C-2
<PAGE> 34
Oakbrook Terrace, Illinois 60181, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the Adviser, will
be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181; and (iii) by the Distributor, the principal underwriter, will be
maintained at its offices located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
Managing General Partner or Managing General Partners and to assist in
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
Registrant hereby undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-3
<PAGE> 35
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, Van Kampen American Capital Exchange Fund, has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Oakbrook Terrace, and the
State of Illinois, on the 24th day of April, 1998.
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
By /s/ RONALD A. NYBERG
------------------------------------------
Ronald A. Nyberg,
Principal Legal Officer and
Secretary
<PAGE> 36
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
INDEX TO EXHIBITS TO AMENDMENT NO. 19, FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF
NO. EXHIBIT
------- --------------
<S> <C>
(1)(d) Amendment to Certificate of Limited Partnership, on Form LP-2
(5) Investment Advisory Agreement
(8)(b) Transfer Agency and Service Agreement
(11) Consent of Independent Auditors
(27) Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT (1)(d)
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
STATE OF CALIFORNIA
BILL JONES [OFFICE OF THE
SECRETARY OF STATE]
SECRETARY OF STATE
SACRAMENTO
I, BILL JONES, Secretary of State of California, hereby certify:
That the annexed transcript of 5 page(s) was prepared by and in this
office from the record on file, of which it purports to be a copy, and that it
is full, true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California
[THE GREAT SEAL OF THE STATE OF
CALIFORNIA]
April 16, 1998
------------------------------------
/s/ Bill Jones
Secretary of State
- --------------------------------------------------------------------------------
<PAGE> 2
State of California
Secretary of State
AMENDMENT TO CERTIFICATE OF LIMITED PARTNERSHIP
IMPORTANT -- Read instructions on back before completing this form
This Certificate is presented for filing pursuant to Section 15622, California
Corporations Code.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1. SECRETARY OF STATE FILE NO. 2. NAME OF LIMITED PARTNERSHIP
(ORIGINAL CERTIFICATE-FORM LP-1)
9502500015 Van Kampen American Capital Exchange Fund, a California Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
3. THIS CERTIFICATE OF LIMITED PARTNERSHIP IS AMENDED AS FOLLOWS: COMPLETE APPROPRIATE SUB-SECTION(S) CONTINUE ON SECOND PAGE, IF
NECESSARY).
A. THE LIMITED PARTNERSHIP NAME IS CHANGED TO:
- ------------------------------------------------------------------------------------------------------------------------------------
B. PRINCIPAL EXECUTIVE OFFICE ADDRESS CHANGE: E. GENERAL PARTNERS NAME CHANGE:
ADDRESS: OLD NAME:
CITY: STATE: ZIP CODE: NEW NAME:
- ------------------------------------------------------------------------------------------------------------------------------------
C. CALIFORNIA OFFICE ADDRESS CHANGE: F. GENERAL PARTNER(S) WITHDRAWN:
ADDRESS: NAME:
See Attached Page
CITY: STATE: CA ZIP CODE: NAME:
- ------------------------------------------------------------------------------------------------------------------------------------
D. GENERAL PARTNER ADDRESS CHANGE: G. GENERAL PARTNER ADDED:
NAME: NAME:
See Attached Page
ADDRESS: ADDRESS:
CITY: STATE: ZIP CODE: CITY: STATE: ZIP CODE:
- ------------------------------------------------------------------------------------------------------------------------------------
H. PERSON(S) WINDING UP AFFAIRS OF LIMITED PARTNERSHIP: I. INFORMATION CONCERNING THE AGENT FOR SERVICE OF
PROCESS HAS BEEN CHANGED TO:
NAME: NAME:
ADDRESS: ADDRESS:
CITY: STATE: ZIP CODE: CITY: STATE: ZIP CODE:
- ------------------------------------------------------------------------------------------------------------------------------------
J. THE NUMBER OF GENERAL PARTNERS REQUIRED TO ACKNOWLEDGE AND K. OTHER MATTERS TO BE INCLUDED IN THE CERTIFICATE OF
FILE CERTIFICATES OF AMENDMENT, RESTATEMENT, DISSOLUTION, LIMITED PARTNERSHIP ARE AMENDED AS INDICATED ON
CONTINUATION, CANCELLATION AND MERGER IS CHANGED TO: THE ATTACHED PAGE(S).
[ ] NUMBER OF PAGES ATTACHED: [ 4 ]
(PLEASE INDICATE NUMBER ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
4. IT IS HEREBY DECLARED THAT I AM (WE ARE) THE PERSON(S) WHO EXECUTED THIS AMENDMENT TO THE
INDENTIFIED CERTIFICATE OF LIMITED PARTNERSHIP, WHICH EXECUTION IS MY (OUR) ACT AND DEED.
(SEE INSTRUCTIONS)
======================================
/s/ Don G. Powell /s/ Dennis J. McDonnell | THIS SPACE FOR FILING OFFICER USE
- --------------------------------------------- -------------------------------------------- | 9502500015
SIGNATURE Don G. Powell SIGNATURE Dennis J. McDonnell |
|
Managing General Partner 3-31-98 Managing General Partner 3-31-98 |
- --------------------------------------------- -------------------------------------------- |
POSITION OR TITLE DATE POSITION OR TITLE DATE |
|
/s/ Steven Muller /s/ Howard J Kerr | FILED
- --------------------------------------------- -------------------------------------------- | In the office of the Secretary of
SIGNATURE Dr. Steven Muller SIGNATURE Howard J Kerr | State of the State of California
|
Managing General Partner 3-31-98 Managing General Partner 3-31-98 |
- --------------------------------------------- -------------------------------------------- | APR 06 1998
POSITION OR TITLE DATE POSITION OR TITLE DATE |
|
============================================================================================ |
5. RETURN ACKNOWLEDGEMENT TO: | /s/ Bill Jones
|
NAME Van Kampen American Capital |
ADDRESS Shannon Brown |
CITY One Parkview Plaza, 9th Floor | BILL JONES, Secretary of State
STATE Oakbrook Terrace, IL 60181 |
ZIP CODE |
|
============================================================================================ |
SEC/STATE REV. 1/96 FORM LP-2 - FILING FEE: $30.00 |
Approved by Secretary of State |
====================================================================================================================================
</TABLE>
<PAGE> 3
AMENDMENT TO CERTIFICATE OF
LIMITED PARTNERSHIP OF
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
ITEM 3F. GENERAL PARTNERS WITHDRAWN:
NAME: Donald M. Carlton
NAME: Stephen Randolph Gross
NAME: Alan B. Shepard
NAME: F. Robert Paulsen
ITEM 3G. GENERAL PARTNERS ADDED:
NAME: David C. Arch
ADDRESS: Blistex Inc.
1800 Swift Drive
CITY: Oak Brook STATE: IL ZIP CODE: 60523
NAME: Wayne W. Whalen
ADDRESS: Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Dr.
CITY: Chicago STATE: IL ZIP CODE: 60606
Name: Hugo Sonnenschein
Address: University of Chicago
5801 S. Ellis Ave., Suite 502
CITY: Chicago STATE: IL ZIP CODE: 60637
Name: Theodore A. Myers
Address: 550 Washington Ave.
CITY: Glencoe STATE: IL ZIP CODE: 60022
Name: Dr. Steven Muller
Address: The Johns Hopkins University
1619 Massachusetts Ave., N.W., Suite 711
CITY: Washington STATE: D.C. ZIP CODE: 20036
2
<PAGE> 4
AMENDMENT TO CERTIFICATE OF
LIMITED PARTNERSHIP OF
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
ITEM 3G. GENERAL PARTNERS ADDED (CONT.):
NAME: Dennis J. McDonnell
ADDRESS: Van Kampen American Capital
One Parkview Plaza
CITY: Oakbrook Terrace STATE: IL ZIP CODE: 60181
NAME: Howard J Kerr
ADDRESS: Pocklington Corporation, Inc.
736 N. Western Ave., Box 317
CITY: Lake Forest STATE: IL ZIP CODE: 60045
NAME: Rod Dammeyer
ADDRESS: Anixer International, Inc.
Two N. Riverside Plaza, Suite 600
CITY: Chicago STATE: IL ZIP CODE: 60606
3
<PAGE> 5
AMENDMENT TO CERTIFICATE OF
LIMITED PARTNERSHIP OF
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
ITEM 4 (CONTINUED):
/s/ David C. Arch
- --------------------------------------------------
SIGNATURE David C. Arch
Managing General Partner 3-31-98
- --------------------------------------------------
POSITION OR TITLE DATE
/s/ Wayne W. Whalen
- --------------------------------------------------
SIGNATURE Wayne W. Whalen
Managing General Partner 3-31-98
- --------------------------------------------------
POSITION OR TITLE DATE
/s/ Theodore A. Myers
- --------------------------------------------------
SIGNATURE Theodore A. Myers
Managing General Partner 3-31-98
- --------------------------------------------------
POSITION OR TITLE DATE
/s/ Rod Dammeyer
- --------------------------------------------------
SIGNATURE Rod Dammeyer
Managing General Partner 3-31-98
- --------------------------------------------------
POSITION OR TITLE DATE
4
<PAGE> 6
AMENDMENT TO CERTIFICATE OF
LIMITED PARTNERSHIP OF
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND,
A CALIFORNIA LIMITED PARTNERSHIP
ITEM 4 (CONTINUED):
/s/ Hugo Sonnenschein
- --------------------------------------------------
SIGNATURE Hugo Sonnenschein
Managing General Partner 3-29-98
- --------------------------------------------------
POSITION OR TITLE DATE
5
<PAGE> 1
EXHIBIT (5)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 31st day of October, 1996, by and between VAN KAMPEN
AMERICAN CAPITAL EXCHANGE FUND, a California Limited Partnership hereinafter
referred to as the "FUND," and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation, hereinafter referred to as the "ADVISER".
The FUND and the ADVISER agree as follows:
(1) Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of the Managing
General Partners of the FUND and in conformity with applicable laws, the FUND's
Certificate and Agreement of Limited Partnership, Bylaws, registration
statements, prospectus and stated investment objectives, policies and
restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing of
legal services except for services provided by outside counsel to the FUND
selected by the Managing General Partners, and the supervision of the FUND's
Principal Financial and Accounting Officer and the personnel working under his
direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND Managing General Partner and FUND officer
who is an affiliated person of the ADVISER, except the compensation of the
FUND's Principal Financial and Accounting Officer and related expenses as
provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Managing General Partners of
<PAGE> 2
appropriate policies and procedures, the ADVISER may, to the extent authorized
by law, cause the FUND to pay a broker or dealer that provides brokerage and
research services to the ADVISER an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. In the
event of such authorization and to the extent authorized by law the ADVISER
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its Managing General Partners and officers other than those who
are affiliated persons of the ADVISER; (iv) compensation of its Principal
Financial and Accounting Officer, compensation of personnel working under the
Principal Financial and Accounting Officer's direction, and expenses of office
space, facilities, and equipment used by the Principal Financial and Accounting
Officer and such personnel in the performance of their normal duties for the
FUND which consist of maintenance of the accounts, books and other documents
which constitute the record forming the basis for the FUND's financial
statements, preparation of such financial statements and other FUND documents
and reports of a financial nature required by federal and state laws, and
participation in the production of the FUND's registration statement,
prospectuses, proxy solicitation materials and reports to Partners; (v) fees of
outside counsel to and of independent accountants of the FUND selected by the
Managing General Partners; (vi) custodian, registrar and transfer agent fees
and expenses; (vii) expenses related to the repurchase or redemption of its
shares including expenses related to a program of periodic repurchases or
redemptions; (viii) expenses related to the issuance of its shares against
payment therefor by or on behalf of the subscribers thereto; (ix) fees and
related expenses of registering and qualifying the FUND and its shares for
distribution under state and federal securities laws; (x) expenses of printing
and mailing of registration statements, prospectuses, reports, notices and
proxy solicitation materials of the FUND; (xi) all other expenses incidental to
holding meetings of the FUND's Limited Partners including proxy solicitations
therefor; (xii) expenses for servicing the Limited Partners' accounts; (xiii)
insurance premiums for fidelity coverage and errors and omissions insurance;
(xiv) dues for the FUND's membership in trade associations approved by the
Managing General Partners; and (xv) such nonrecurring expenses as may arise,
including those associated with actions, suits, or proceedings to which the
FUND is a party and the legal obligation which the FUND may have to indemnify
its officers and partners with
2
<PAGE> 3
respect thereto. To the extent that any of the foregoing expenses are allocated
between the FUND and any other party, such allocations shall be pursuant to
methods approved by the Managing General Partners.
(2) Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 any of the
Partners, officers and employees of the FUND may be a shareholder, director,
officer or employee of, or be otherwise interested in, the ADVISER, and in any
person controlled by or under common control with the ADVISER, and the ADVISER,
and any person controlled by or under common control with the ADVISER, may have
an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the
part of the ADVISER, the ADVISER shall not be subject to liability to the FUND,
or to any Partner of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
(3) Compensation Payable to ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed
at the annual rate of one half of one percent (1/2%) of the FUND's average net
assets. The ADVISER hereby agrees that it shall look for payment of such
compensation solely to the FUND's assets and not to any personal assets of any
partner of the FUND.
Such average net assets shall be determined by taking the average of all of the
determinations of net asset value, made in the manner provided in the FUND's
Certificate and Agreement of Limited Partnership, for each business day during
a given calendar month. Such fee shall be payable for each calendar month as
soon as practicable after the end of that month.
The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall be
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of American Capital Management & Research, Inc., or
its successor, in connection with the purchase and sale of portfolio
investments of the FUND, less any direct expenses incurred by such person, in
3
<PAGE> 4
connection with obtaining such commissions, fees, brokerage or similar
payments. The ADVISER shall use its best efforts to recapture all available
tender offer solicitation fees and exchange offer fees in connection with the
FUND's portfolio transactions and shall advise the Managing General Partners of
any other commissions, fees, brokerage or similar payments which may be
possible for the ADVISER, or any other direct or indirect majority owned
subsidiary of American Capital Management & Research, Inc., or its successor,
to receive in connection with the FUND's portfolio transactions or other
arrangements which may benefit the FUND.
In the event that the ordinary business expenses of the FUND for any fiscal
year should exceed 1 1/2% of the first $30 million of the FUND's average daily
net assets determined in the manner described in Section 3, plus 1% of any
excess over $30 million of such average daily net assets so taken, the
compensation due the ADVISER for such fiscal year shall be reduced by the
amount of such excess. The ADVISER's compensation shall be so reduced by a
reduction or a refund thereof, at the time such compensation is payable after
the end of each calendar month during such fiscal year of the FUND, and if such
amount should exceed such monthly compensation, the ADVISER shall pay the FUND
an amount sufficient to make up the deficiency, subject to readjustment during
the FUND's fiscal year. For purposes of this paragraph, all ordinary business
expenses of the FUND shall exclude expenses incurred by the FUND (i) for
interest and taxes; (ii) brokerage commissions; (iii) as a result of litigation
in connection with a suit involving a claim for recovery by the FUND; (iv) as a
result of litigation involving a defense against a liability asserted against
the FUND, provided that, if the ADVISER made the decision or took the actions
which resulted in such claim, it acted in good faith without negligence or
misconduct; and (v) any indemnification paid by the FUND to its officers and
Managing General Partners and the ADVISER in accordance with applicable state
and federal laws as a result of such litigation.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4) Duration of Agreement.
This Agreement shall have an initial term of two years from the date hereof and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved at least annually by the vote of a majority of the
FUND's Managing General Partners who are not parties to this Agreement or
interested persons of any such parties, cast in person at a meeting called for
the purpose of voting on such approval, and by a vote of a majority of the
FUND's Managing General Partners or a majority of the FUND's outstanding voting
securities.
4
<PAGE> 5
This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the FUND's Managing General
Partners, by vote of a majority of the FUND's outstanding voting securities, or
by the ADVISER, on not more than 60 days', nor less than 30 days' written
notice, or upon such shorter notice as may be mutually agreed upon. Such
termination shall be without payment of any penalty.
Notwithstanding the foregoing, the ADVISER hereby agrees that should any
Limited Partner be sued for any obligation of the FUND as a general partner,
which obligation or alleged obligation was incurred by the FUND while the
ADVISER acted as such pursuant to this or any successor agreement, the ADVISER
will indemnify such Limited Partner against any liability as general partner
provided that such Limited Partner promptly notifies ADVISER in writing of the
pendency of the action (unless the ADVISER is otherwise on notice) and provided
the ADVISER has the opportunity to participate in the defense of the case.
The ADVISER hereby acknowledges that it is familiar with the provisions of the
FUND's Partnership Agreement, and specifically Article 8.4 under which action
may be taken only by majority vote of the Managing General Partners and no
individual Managing General Partner is authorized to act on behalf of the FUND
or to bind it except on such majority vote.
As further consideration for its being chosen as investment adviser for the
FUND, ADVISER will cause VAN KAMPEN AMERICAN CAPITAL EXCHANGE CORPORATION, its
wholly owned subsidiary, to own not less than 1% of the FUND's outstanding
Shares, acquired for cash at net asset value, so long as such subsidiary shall
remain a Non-Managing General Partner of the FUND, except that if the ADVISER
ceases to continue as investment adviser to the FUND, it shall be permitted to
withdraw its subsidiary's capital contribution on the earlier of two years
following the termination of such status or two business days following the due
approval at a meeting of Partners of a qualified successor as investment
adviser.
(5) Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject, however,
to such exemptions as may be granted to either the ADVISER or the FUND by the
Securities and Exchange Commission, or such interpretive positions as may be
taken by the Commission or its staff, under said Act, and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
5
<PAGE> 6
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
By: /s/ DENNIS J. MCDONNELL
Name: Dennis J. McDonnell
Its: Executive Vice President
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ PETER W. HEGEL
Name: Peter W. Hegel
Its: Executive Vice President
6
<PAGE> 1
EXHIBIT 8(b)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of January, 1998 by and between VAN
KAMPEN AMERICAN CAPITAL EXCHANGE FUND, a California Limited Partnership having
its principal office and place of business at Oakbrook Terrace, Illinois (the
"Fund"), and ACCESS INVESTOR SERVICES, INC., a Delaware corporation, having its
principal office at Houston, Texas, and its principal place of business at
Kansas City, Missouri ("ACCESS").
R E C I T A L:
WHEREAS, the Fund desires to appoint ACCESS as its transfer agent,
dividend disbursing agent and shareholder service agent and ACCESS desires to
accept such appointments;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF ACCESS.
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints ACCESS as its transfer agent,
dividend disbursing agent and shareholder service agent.
1.02 ACCESS hereby accepts such employment and appointments and
agrees that on and after the effective date of this Agreement it will act as
the transfer agent, dividend disbursing agent and shareholder service agent for
the Fund on the terms and conditions set forth herein.
1.03 ACCESS agrees that its duties and obligations hereunder
will be performed in a competent, efficient and workmanlike manner with due
diligence in accordance with reasonable industry practice, and that the
necessary facilities, equipment and personnel for such performance will be
provided.
1.04 In order to assure compliance with section 1.03 and to
implement a cooperative effort to improve the quality of transfer agency and
shareholder services received by the Fund and its shareholders, ACCESS agrees
to provide and maintain quantitative performance objectives, including maximum
target
1
<PAGE> 2
turn-around times and maximum target error rates, for the various services
provided hereunder. ACCESS also agrees to provide a reporting system designed
to provide the Managing General Partners of the Fund on a quarterly basis with
quantitative data comparing actual performance for the period with the
performance objectives. The foregoing procedures are designed to provide a
basis for continuing monitoring by the Board of the quality of services
rendered hereunder.
ARTICLE 2. FEES AND EXPENSES.
2.01 For the services to be performed by ACCESS pursuant to this
Agreement, the Fund agrees to pay ACCESS the fees provided in the fee schedules
agreed upon from time to time by the Fund and ACCESS.
2.02 In addition to the amounts paid under section 2.01 above,
the Fund agrees to reimburse ACCESS promptly for reasonable out-of-pocket
expenses or advances paid on its behalf by ACCESS in connection with its
performance under this Agreement for postage, freight, envelopes, checks,
drafts, continuous forms, reports and statements, telephone, telegraph, costs
of outside mailing firms, necessary outside record storage costs, media for
storage of records (e.g., microfilm, microfiche and computer tapes) and
printing costs incurred due to special requirements of the Fund. In addition,
any other special out-of-pocket expenses paid by ACCESS at the specific request
of the Fund will be promptly reimbursed by the Fund. Postage for mailings of
dividends, proxies, Fund reports and other mailings to all shareholder accounts
shall be advanced to ACCESS by the Fund three business days prior to the
mailing date of such materials.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ACCESS.
ACCESS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
2
<PAGE> 3
3.02 It is duly qualified to carry on its business in the states
of Texas and Missouri.
3.03 It is empowered under applicable laws and by its charter
and bylaws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have during the term of this
Agreement access to the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder.
3.06 It will maintain a system regarding "as of" transactions as
follows:
(a) Each "as of" transaction effected at a price other
than that in effect on the day of processing for which an estimate has
not been given to the Fund and which is necessitated by ACCESS' error,
or delay for which ACCESS is responsible or which could have been
avoided through the exercise of reasonable care, will be identified,
and the net effect of such transactions determined, on a daily basis.
(b) The cumulative net effect of the transactions
included in paragraph (a) above will be determined each day throughout
each month. If, on any day during the month, the cumulative net
effect upon the Fund is negative and exceeds an amount equivalent to
1/2 of 1 cent per share of the Fund, ACCESS shall promptly make a
payment to the Fund (in cash or through use of a credit as described
in paragraph (c) below) in such amount as necessary to reduce the
negative cumulative net effect to less than 1/2 of 1 cent per share
of the Fund. If on the last business day of the month the cumulative
net effect (adjusted by the amount of any payments pursuant to the
preceding sentence) upon the Fund is negative, the Fund shall be
entitled to a reduction in the monthly transfer agency fee next
payable by an equivalent amount, except as provided in paragraph (c)
below. If on the last business day of the month the cumulative net
effect (similarly adjusted) upon the Fund is
3
<PAGE> 4
positive, ACCESS shall be entitled to recover certain past payments
and reductions in fees, and to a credit against all future payments
and fee reductions made under this paragraph to the Fund, as described
in paragraph (c) below.
(c) At the end of each month, any positive cumulative
net effect upon the Fund shall be deemed to be a credit to ACCESS
which shall first be applied to recover any payments and fee
reductions made by ACCESS to the Fund under paragraph (b) above during
the calendar year by increasing the amount of the monthly transfer
agency fee next payable in an amount equal to prior payments and fee
reductions made during such year, but not exceeding the sum of that
month's credit and credits arising in prior months during such year to
the extent such prior credits have not previously been utilized as
contemplated by this paragraph (c). Any portion of a credit to ACCESS
not so used shall remain as a credit to be used as payment against the
amount of any future negative cumulative net effects that would
otherwise require a payment or fee reduction to the Fund pursuant to
paragraph (b) above.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE FUND.
The Fund hereby represents and warrants to ACCESS that:
4.01 It is duly organized and existing and in good standing under
the laws of California.
4.02 It is empowered under applicable laws and regulations and by
its Restated Certificate and Agreement of Limited Partnership and by-laws to
enter into and perform this Agreement.
4.03 All requisite proceedings have been taken by its Managing
General Partners to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, management investment company registered
under the Investment Company Act of 1940, as amended.
4.05 Any shares issued by the Fund shall be properly registered
for sale under applicable federal and state law.
4
<PAGE> 5
ARTICLE 5. INDEMNIFICATION.
5.01 ACCESS shall not be responsible for and the Fund shall
indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) All actions of ACCESS required to be taken by
ACCESS for the benefit of the Fund pursuant to this Agreement,
provided ACCESS has acted in good faith with due diligence and without
negligence or willful misconduct.
(b) The reasonable reliance by ACCESS on, or
reasonable use by ACCESS of, information, records and documents which
have been prepared or maintained by or on behalf of the Fund or have
been furnished to ACCESS by or on behalf of the Fund.
(c) The reasonable reliance by ACCESS on, or the
carrying out by ACCESS of, any instructions or requests of the Fund.
(d) The offer or sale of the Fund's shares in
violation of any requirement under the federal securities laws or
regulations or the securities laws or regulations of any state or in
violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer or sale of such
shares in such state unless such violation results from any failure by
ACCESS to comply with written instructions of the Fund that no offers
or sales of the Fund's shares be made in general or to the residents
of a particular state.
(e) The Fund's refusal or failure to comply with the
terms of this Agreement, or the Fund's lack of good faith, negligence
or willful misconduct or the breach of any representation or warranty
of the Fund hereunder.
5
<PAGE> 6
5.02 ACCESS shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to ACCESS'
refusal or failure to comply with the terms of this Agreement, or ACCESS' lack
of good faith, negligence or willful misconduct, or the breach of any
representation or warranty of ACCESS hereunder.
5.03 At any time ACCESS may apply to any authorized officer of
the Fund for instructions, and may consult with the Fund's legal counsel, at
the expense of the Fund, with respect to any matter arising in connection with
the services to be performed by ACCESS under this Agreement, and ACCESS shall
not be liable and shall be indemnified by the Fund for any action taken or
omitted by it in good faith in reasonable reliance upon such instructions or
upon the opinion of such counsel. ACCESS shall be protected and indemnified in
acting upon any paper or document reasonably believed by ACCESS to be genuine
and to have been signed by the proper person or persons and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. ACCESS shall also be protected and
indemnified in recognizing stock certificates which ACCESS reasonably believes
to bear the proper manual or facsimile signatures of the officers of the Fund,
and the proper countersignature of any former transfer agent or registrar, or
of a co-transfer agent or co-registrar.
5.04 In the event any party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
5.05 In no event and under no circumstances shall any party to
this Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.
6
<PAGE> 7
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which one party
may be required to indemnify another, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
ARTICLE 6. COVENANTS OF THE FUND AND ACCESS.
6.01 The Fund shall promptly furnish to ACCESS the following:
(a) Certified copies of the resolution of its Managing
General Partners authorizing the appointment of ACCESS and the
execution and delivery of this Agreement.
(b) Certified copies of its Agreement of Limited
Partnership and by-laws and all amendments thereto.
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of share certificates, check
forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.
6.03 ACCESS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of the Fund (hereinafter
referred to as "Fund Records") prepared or maintained by ACCESS hereunder shall
be maintained and kept current in compliance with Section 31 of the Investment
Company Act of 1940 and the Rules thereunder (such Section and Rules being
hereinafter referred to as the "1940 Act Requirements").
7
<PAGE> 8
To the extent required by the 1940 Act Requirements, ACCESS agrees that all
Fund Records prepared or maintained by ACCESS hereunder are the property of the
Fund and shall be preserved and made available in accordance with the 1940 Act
Requirements, and shall be surrendered promptly to the Fund on its request.
ACCESS agrees at such reasonable times as may be requested by the Managing
General Partners and at least quarterly to provide (i) written confirmation to
the Managing General Partners that all Fund Records are maintained and kept
current in accordance with the 1940 Act Requirements, and (ii) such other
reports regarding its performance hereunder as may be reasonably requested by
the Managing General Partners.
6.04 ACCESS and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of
any of the Fund Records, ACCESS will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection.
ACCESS reserves the right, however, to exhibit such Fund Records to any person
whenever it is advised by its counsel that it may be held liable for the
failure to exhibit such Fund Records to such person.
ARTICLE 7. TERM AND TERMINATION OF AGREEMENT.
7.01 The initial term of this Agreement shall expire June 30,
1999, and thereafter this Agreement shall automatically be renewed for
successive one year periods to begin on July 1 of each year unless any party
provides notice to the other party at least 30 days in advance of that date
that this Agreement is not to be renewed.
7.02 Notwithstanding the foregoing, any party may terminate this
Agreement for good and reasonable cause at any time by giving written notice to
the other party at least 120 days prior to the date on which such termination
is to be effective.
8
<PAGE> 9
7.03 Any unpaid fees or reimbursable expenses payable to ACCESS
at the termination date of this Agreement shall be due on that termination
date. ACCESS agrees to use its best efforts to cooperate with the Funds and the
successor transfer agent or agents in accomplishing an orderly transition.
ARTICLE 8. MISCELLANEOUS.
8.01 Except as provided in section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the written consent of ACCESS or the Fund, as the case may be;
provided, however, that no consent shall be required for any merger of the
Fund with, or any sale of all or substantially all the assets of the Fund to,
another investment company.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.03 ACCESS may, without further consent on the part of the
Fund, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to the Fund for
the acts and omissions of DST, Inc., or other qualified servicer as it is for
its own acts and omissions.
8.04 ACCESS may, without further consent on the part of the
Fund, provide services to its affiliated companies. Such services may be
provided at cost.
8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any
prior agreement with respect thereto, whether oral or written, and this
Agreement may not be modified except by written instrument executed by the
affected parties.
8.06 The Restated Certificate and Agreement of Limited
Partnership of Van Kampen American Capital Exchange Fund (the "Certificate") is
on file in the office of the Secretary of the State of California, provides
that the name "Van Kampen American Capital Exchange Fund" refers to the
Managing General Partners under the Certificate collectively as Managing
General Partners, but not as individuals or personally;
9
<PAGE> 10
and no Managing General Partner, shareholder, officer, employee, or agent of
said Limited Partnership shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim otherwise in connection with the affairs of said Limited Partnership
Estate only shall be liable.
8.07 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties hereto
agree to renegotiate such affected portions in good faith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf and through their duly
authorized officers, as of the date first above written.
VAN KAMPEN AMERICAN CAPITAL EXCHANGE
FUND, A CALIFORNIA LIMITED PARTNERSHIP
BY: /s/ [ILLEGIBLE]
------------------------------------
Vice President
ATTEST:
/s/ [ILLEGIBLE]
- ---------------------------
Assistant Secretary
ACCESS INVESTOR SERVICES, INC.
BY: /s/ [ILLEGIBLE]
------------------------------------
President
ATTEST:
/s/ [ILLEGIBLE]
- ---------------------------
Assistant Secretary
10
<PAGE> 1
EXHIBIT (11)
CONSENT OF INDEPENDENT AUDITORS
The Managing General Partners
Van Kampen American Capital Exchange Fund (A California Limited Partnership)
We consent to the use of our report included in the Statement of Additional
Information which is incorporated by reference into the Prospectus and to the
reference to our Firm under the heading "Investment Advisory and Other Services"
in the Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
Chicago, Illinois
April 24, 1998
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