<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 26, 1996
REGISTRATION NOS. 2-33214
811-2424
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 55 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 25 [X]
</TABLE>
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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)
---------------------
COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 W. WACKER DRIVE
CHICAGO, ILLINOIS 60606
(313) 407-0700
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 29, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24F-2.
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES
ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 AND
INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A RULE 24F-2 NOTICE
FOR ITS FISCAL YEAR ENDING AUGUST 31, 1997 ON OR ABOUT NOVEMBER 29, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM
- -------------------------------------------------
PART A
- -------------------------------------------------
<C> <S> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... The Fund; Investment Objective and
Policies; Investment Practices; Description
of Shares of the Fund
5. Management of the Fund..................... The Fund; Investment Practices; Investment
Advisory Services; Inside Back Cover
6. Capital Stock and Other Securities......... The Fund; Alternative Sales Arrangements;
Shareholder Services; Distribution and
Service Plans; Redemption of Shares;
Distributions from the Fund; Tax Status;
Description of Shares of the Fund; Inside
Back Cover
7. Purchase of Securities Being Offered....... Alternative Sales Arrangements; Purchase of
Shares; Shareholder Services;
Distribution and Service Plans
8. Redemption or Repurchase................... Shareholder Services; Redemption of Shares
9. Pending Legal Proceedings.................. Inapplicable
</TABLE>
<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
-------------------------------------------
<C> <S> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Policies and Techniques;
Investment Restrictions
14. Management of the Fund..................... General Information; Trustees and Officers;
Investment Advisory Agreement
15. Control Persons and Principal Holders of
Securities............................... General Information; Trustees and Officers;
Investment Advisory Agreement
16. Investment Advisory and Other Services..... Investment Advisory Agreement; Distributor;
Distribution and Service Plans; Transfer
Agent; Portfolio Transactions and
Brokerage; Other Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; Exchange
Privilege
20. Tax Status................................. Tax Status of the Fund
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Fund Performance
23. Financial Statements....................... Independent Accountants' Report; Financial
Statements; Notes to Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item in Part C of this registration statement.
<PAGE> 3
- ------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
EMERGING GROWTH FUND
- ------------------------------------------------------------------------
Van Kampen American Capital Emerging Growth Fund (the "Fund") is a
professionally managed mutual fund. The Fund's investment objective is capital
appreciation. The Fund seeks to achieve its investment objective by investing in
a portfolio of securities consisting principally of common stocks of small and
medium sized companies considered by Van Kampen American Capital Asset
Management, Inc. to be emerging growth companies. There is no assurance that the
Fund will achieve its investment objective.
The Fund's investment adviser is Van Kampen American Capital Asset
Management, Inc. This Prospectus sets forth certain information that a
prospective investor should know before investing in the Fund. Please read it
carefully and retain it for future reference. The address of the Fund is One
Parkview Plaza, Oakbrook Terrace, Illinois 60181 and its telephone number is
(800) 421-5666.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR STATE REGULATORS NOR HAS THE COMMISSION OR ANY STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated December 29, 1996, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this Prospectus. 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) 772-8889. 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).
------------------
VAN KAMPEN AMERICAN CAPITAL (SM)
------------------
THIS PROSPECTUS IS DATED DECEMBER 29, 1996.
<PAGE> 4
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................... 3
Shareholder Transaction Expenses................................. 5
Annual Fund Operating Expenses and Example....................... 6
Financial Highlights............................................. 8
The Fund......................................................... 10
Investment Objectives and Policies............................... 10
Investment Practices............................................. 11
Investment Advisory Services..................................... 16
Alternative Sales Arrangements................................... 18
Purchase of Shares............................................... 20
Shareholder Services............................................. 31
Redemption of Shares............................................. 35
Distribution and Service Plans................................... 38
Distributions from the Fund...................................... 40
Tax Status....................................................... 41
Fund Performance................................................. 44
Description of Shares of the Fund................................ 46
Additional Information........................................... 46
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 5
- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital Emerging Growth Fund (the "Fund") is a
diversified, open-end management investment company organized as a Delaware
business trust.
MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum subsequent investment for each class of shares (or less as described
under "Purchase of Shares").
INVESTMENT OBJECTIVE. The investment objective of the Fund is capital
appreciation. There is, however, no assurance that the Fund will be successful
in achieving its objective. See "Investment Objective and Policies."
INVESTMENT POLICY AND RISKS. The Fund seeks to achieve its objective by
investing at least 65% of the Fund's total assets in common stocks of small and
medium sized companies (less than $2 billion of market capitalization or annual
sales), both domestic and foreign, considered by the Adviser to be emerging
growth companies. The companies in which the Fund invests may offer greater
opportunities for growth of capital than larger, more established companies, but
investments in such companies may involve special risks. See "Investment
Objective and Policies" and "Investment Practices -- Foreign Securities." The
use of options, futures contracts and related options may include additional
risks. See "Investment Practices -- Using Options, Futures Contracts and Related
Options."
INVESTMENT RESULTS. The investment results of the Fund are shown in the table of
"Financial Highlights."
ALTERNATE SALES ARRANGEMENTS. The Fund offers three classes of shares to the
public, each with its own sales charge structure: Class A shares, Class B shares
and Class C shares. Each class has distinct advantages and disadvantages for
different investors, and investors may choose the class of shares that best
suits their circumstances and objectives. Each class of shares represents an
interest in the same portfolio of investments of the Fund. See "Alternate Sales
Arrangements." For information on redeeming shares see "Redemption of Shares."
Class A Shares. Class A shares are offered at net asset value per share plus a
maximum initial sales charge of 5.75% of the offering price (6.10% of the net
amount invested), reduced on investments of $50,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a contingent deferred sales charge ("CDSC") of 1.00% may be imposed on
redemptions made within one year of the purchase. Class A shares are subject to
an annual service fee of up to 0.25% of its average daily net assets
attributable to such class of shares. See "Purchase of Shares -- Class A Shares"
and "Distribution and Service Plans."
3
<PAGE> 6
Class B Shares. Class B shares are offered at net asset value per share and
are subject to a maximum CDSC of 5.00% of redemption proceeds on redemptions
made within the first year after purchase and declining thereafter to 0.00%
after the fifth year. See "Redemption of Shares." Class B shares are subject to
a combined annual distribution fee and service fee of up to 1.00% of the Fund's
average daily net assets attributable to such class of shares. See "Purchase of
Shares -- Class B Shares" and "Distribution and Service Plans." Class B shares
convert automatically to Class A shares eight years after the end of the
calendar month in which the shareholder's order to purchase was accepted. See
"Alternative Sales Arrangements -- Conversion Feature."
Class C Shares. Class C shares are offered at net asset value per share and
are subject to a CDSC of 1.00% of redemption proceeds on redemptions made within
one year of purchase. See "Redemption of Shares." Class C shares are subject to
a combined annual distribution fee and service fee of up to 1.00% of the Fund's
average daily net assets attributable to such class of shares. See "Purchase of
Shares -- Class C Shares" and "Distribution and Service Plans."
INVESTMENT ADVISER. Van Kampen American Capital Asset Management, Inc. (the
"Adviser") is the Fund's investment adviser.
DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.
DISTRIBUTIONS FROM THE FUND. Dividends from net investment income and capital
gains, if any, are distributed at least annually. All dividends and
distributions are automatically reinvested in shares of the Fund at net asset
value per share (without sales charge), unless payment in cash is requested. See
"Distributions from the Fund."
The foregoing is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus.
4
<PAGE> 7
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
--------- ----------------- -------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price).............. 5.75%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of offering
price)....................... None None None
Deferred sales charge (as a
percentage of the lesser of
original purchase price or
redemption proceeds)......... None (2) Year 1--5.00% Year 1--1.00%
Year 2--4.00% After--None
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a
percentage of amount
redeemed).................... None None None
Exchange fee................... None None None
</TABLE>
- ------------------------------------------------------------------------------
(1) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on redemptions made
within one year of the purchase. See "Purchase of Shares -- Class A Shares."
5
<PAGE> 8
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
--------- --------- ---------
<S> <C> <C> <C>
Management Fees (as a percentage of
average daily net assets)............. 0.48% 0.48% 0.48%
12b-1 Fees(1) (as a percentage of
average daily net assets)............. 0.21% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage of
average daily net assets)............. 0.41% 0.42% 0.41%
Total Fund Operating Expenses (as a
percentage of average daily net
assets)............................... 1.10% 1.90% 1.89%
</TABLE>
- ------------------------------------------------------------------------------
(1) Class A shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
shares and Class C shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Distribution and Service Plans."
(2) Individual long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales charges permitted as a Fund-level expense by
NASD Rules.
6
<PAGE> 9
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLE: YEAR YEARS YEARS YEARS
------ ------ ------ ------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an
operating expense ratio of 1.10% for
Class A shares, 1.90% for Class B shares
and 1.89% for Class C shares, (ii) a 5%
annual return and (iii) redemption at the
end of each time period:
Class A shares........................ $ 68 $ 90 $115 $184
Class B shares........................ $ 69 $ 90 $118 $201*
Class C shares........................ $ 29 $ 59 $102 $221
You would pay the following expenses on
the same $1,000 investment assuming no
redemption at the end of each time
period:
Class A shares........................ $ 68 $ 90 $115 $184
Class B shares........................ $ 19 $ 60 $103 $201*
Class C shares........................ $ 19 $ 59 $102 $221
</TABLE>
- ------------------------------------------------------------------------------
* Based on conversion to Class A shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. Class B shares acquired through the exchange privilege are
subject to the deferred sales charge schedule relating to the Class B shares of
the fund from which the purchase of Class B shares was originally made.
Accordingly, future expenses as projected could be higher than those determined
in the above table if the investor's Class B shares were exchanged from a fund
with a higher CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of such
costs and expenses, see "Purchase of Shares," "Investment Advisory Services,"
"Redemption of Shares" and "Distribution and Service Plans."
7
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS(Selected data for a share of beneficial interest
outstanding throughout each of the periods indicated)
- --------------------------------------------------------------------------------
The following financial highlights have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. The most recent
annual report (which contains the financial highlights for the last five years)
is included in the Statement of Additional Information and may be obtained by
shareholders without charge by calling the telephone number on the cover of this
Prospectus. This information should be read in conjunction with the financial
statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------
YEAR ENDED AUGUST 31
----------------------------------------------------------------------
1996(A) 1995(A) 1994 1993 1992(A) 1991
---------- --------- --------- ---------- ---------- ----------
Net Asset Value, Beginning of the Period........... $31.59 $24.37 $26.46 $19.03 $20.06 $14.44
-------- ------ ------- ------ ------ -------
Net Investment Income (Loss)...................... (.096) .05 (.11) (.05) (.015) .035
Net Realized and Unrealized Gain/Loss on
Securities...................................... 6.043 7.79 (.32) 8.6375 .9275 6.035
-------- ------ ------ ------ ------- -------
Total from Investment Operations................... 5.947 7.84 (.43) 8.5875 .9125 6.07
-------- ------ ------ ------ ------- -------
Less Distributions from
Net Investment Income............................. -- -- -- -- .0325 .0775
Net Realized Gain on Securities................... 3.190 .62 1.66 1.1575 1.91 .3725
-------- ------ ------ ------ ------- -------
Total Distributions................................ 3.190 .62 1.66 1.1575 1.9425 .45
-------- ------ ------ ------ ------- -------
Net Asset Value, End of the Period................. $34.347 $31.59 $24.37 $26.46 $19.03 $20.06
======== ====== ====== ====== ======= =======
Total Return(b).................................... 20.54% 33.11% (1.67%) 46.73% 4.28% 43.30%
Net Assets at End of the Period (in millions)...... $1,438.5 $1,029.2 $677.1 $517.8 $312.3 $283.6
Ratio of Expenses to Average Net Assets(c)........ 1.10% 1.14% 1.18% 1.10% 1.04% 1.14%
Ratio of Net Investment Income (Loss) to Average
Net Assets(c)................................... (.29%) .19% (.30%) (.27%) (.08%) .21%
Portfolio Turnover Rate............................ 91% 101% 64% 47% 61% 69%
Average Commission Paid Per Equity Share
Traded(d)......................................... $.0587 -- -- -- -- --
<CAPTION>
1990 1989 1988 1987
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........... $15.19 $11.46 $19.45 $16.61
-------- -------- ------- --------
Net Investment Income (Loss)...................... .105 .29 .27 .33
Net Realized and Unrealized Gain/Loss on
Securities...................................... (.60) 3.77 (4.7375) 3.03
-------- -------- ------- ------
Total from Investment Operations................... (.495) 4.06 (4.4675) 3.36
-------- -------- ------- ------
Less Distributions from
Net Investment Income............................. .255 .3175 .38 .225
Net Realized Gain on Securities................... -- .0125 3.1425 .295
-------- -------- ------- ------
Total Distributions................................ .255 .33 3.5225 .52
-------- -------- ------- ------
Net Asset Value, End of the Period................. $14.44 $15.19 $11.46 $19.45
======== ======= ======= ======
Total Return(b).................................... (3.27%) 36.39% (23.20%) 21.23%
Net Assets at End of the Period (in millions)...... $206.6 $209.4 $206.8 $346.6
Ratio of Expenses to Average Net Assets(c)........ 1.15% .97% .90% .77%
Ratio of Net Investment Income (Loss) to Average
Net Assets(c)................................... .65% 2.03% 1.78% 1.72%
Portfolio Turnover Rate............................ 47% 72% 122% 132%
Average Commission Paid Per Equity Share
Traded(d)......................................... -- -- -- --
</TABLE>
(Table continued on following page)
8
<PAGE> 11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES
---------------------------------------------------------
APRIL 20,
1992(E)
YEAR ENDED AUGUST 31 THROUGH
-------------------------------------------- AUGUST 31,
1996(A) 1995(A) 1994 1993(A) 1992(A)
--------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................... $30.65 $23.86 $26.14 $18.98 $19.66
--------- -------- --------- --------- ----------
Net Investment Income (Loss).............................. (.349) (.16) (.27) (.245) (.065)
Net Realized and Unrealized Gain/Loss on Securities....... 5.827 7.57 (.35) 8.5625 (.615)
--------- -------- --------- --------- ----------
Total from Investment Operations........................... 5.478 7.41 (.62) 8.3175 (.68)
Less Distributions from Net Realized Gain on Securities.... 3.190 .62 1.66 1.1575 .--
--------- -------- --------- --------- ----------
Net Asset Value, End of the Period......................... $32.938 $30.65 $23.86 $26.14 $18.98
========== ========= ========= ========= ==========
Total Return(b)............................................ 19.61% 32.01% (2.46%) 45.41% (3.51%)*
Net Assets at End of the Period (in millions).............. $757.3 $450.5 $252.9 $74.5 $5.2
Ratio of Expenses to Average Net Assets(c)................. 1.90% 1.97% 2.01% 1.89% 1.86%
Ratio of Net Investment Income (Loss) to Average Net
Assets(c)................................................. (1.10%) (.64%) (1.07%) (1.07%) (.80%)
Portfolio Turnover......................................... .91% 101% .64% .47% .61%
Average Commission Paid Per Equity Share Traded(d)......... $.0587 -- -- -- --
<CAPTION>
CLASS C SHARES
------------------------------------------
JULY 6,
1993
YEAR ENDED AUGUST 31 THROUGH
------------------------------ AUGUST 31,
1996(A) 1995(A) 1994(A) 1993(A)
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................... $31.02 $24.14 $26.42 $25.07
--------- -------- -------- ----------
Net Investment Income (Loss).............................. (.354) (.16) (.25) (.045)
Net Realized and Unrealized Gain/Loss on Securities....... 5.908 7.66 (.37) 1.395
--------- -------- -------- ----------
Total from Investment Operations........................... 5.554 7.50 (.62) 1.35
Less Distributions from Net Realized Gain on Securities.... 3.190 .62 1.66 .--
--------- -------- -------- ----------
Net Asset Value, End of the Period......................... $33.384 $31.02 $24.14 $26.42
========= ======== ======== ==========
Total Return(b)............................................ 19.60% 32.01% (2.46%) 5.42%*
Net Assets at End of the Period (in millions).............. $ 82.4 $41.8 $24.5 $1.4
Ratio of Expenses to Average Net Assets(c)................. 1.89% 1.96% 2.02% 2.31%
Ratio of Net Investment Income (Loss) to Average Net
Assets(c)................................................. (1.10%) (.63%) (1.04%) (1.37%)
Portfolio Turnover......................................... .91% 101% 64% 47%
Average Commission Paid Per Equity Share Traded(d)......... $.0587 -- -- --
</TABLE>
- ------------
* Non-Annualized.
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) The Ratios of Expenses and Net Investment Income to Average Net Assets were
not affected by the assumption of certain expenses by the Adviser.
(d) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.
This disclosure was not required in fiscal years prior to 1996.
(e) Commencement of distribution.
9
<PAGE> 12
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company, commonly
known as a mutual fund. A mutual fund provides, for those who have similar
investment goals, a practical and convenient way to invest in a diversified
portfolio of securities by combining their resources in an effort to achieve
such goals.
Van Kampen American Capital Asset Management, Inc. (the "Adviser") provides
investment advisory and administrative services to the Fund. The Adviser and its
affiliates also manage other mutual funds distributed by Van Kampen American
Capital Distributors, Inc. (the "Distributor"). To obtain prospectuses and other
information on any of these other funds, please call the telephone number on the
cover page of the Prospectus.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The Fund's investment objective is to provide capital appreciation for its
shareholders. Any ordinary income received from portfolio securities is entirely
incidental to the Fund's investment objective. This goal may be changed by the
Fund's Trustees without shareholder approval, but no change is anticipated. If
there is a change in the investment objective of the Fund, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs. There can, of course, be no assurance
that the objective of capital appreciation will be realized; therefore, full
consideration should be given to the risks inherent in the investment techniques
that the Adviser may use to achieve such objective.
As a fundamental investment policy, the Fund under normal conditions invests
at least 65% of its total assets in common stocks of small and medium sized
companies, both domestic and foreign, in the early stages of their life cycle
that the Adviser believes have the potential to become major enterprises.
Investments in such companies may offer greater opportunities for growth of
capital than larger, more established companies, but also may involve certain
special risks. Emerging growth companies often have limited product lines,
markets, or financial resources, and they may be dependent upon one or a few key
people for management. The securities of such companies may be subject to more
abrupt or erratic market movements than securities of larger, more established
companies or the market averages in general. While the Fund will invest
primarily in common stocks, to a limited extent, it may invest in other
securities such as preferred stocks, convertible securities and warrants.
The Fund does not limit its investment to any single group or type of
security. The Fund may also invest in special situations involving new
management, special
10
<PAGE> 13
products and techniques, unusual developments, mergers or liquidations.
Investments in unseasoned companies and special situations often involve much
greater risks than are inherent in ordinary investments, because securities of
such companies may be more likely to experience unexpected fluctuations in
price.
The Fund's primary approach is to seek what the Adviser believes to be
unusually attractive growth investments on an individual company basis. The Fund
may invest in securities that have above average volatility of price movement.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund attempts to reduce overall exposure to risk from declines in securities
prices by spreading its investments over many different companies in a variety
of industries. There is, however, no assurance that the Fund will be successful
in achieving its objective.
The Fund may invest up to 20% of its total assets in securities of foreign
issuers. See "Investment Practices -- Foreign Securities." Additionally, the
Fund may invest up to 10% of the value of its assets in restricted securities
(i.e., securities which may not be sold without registration under the
Securities Act of 1933 (the "1933 Act")) and in other securities not having
readily available market quotations. The Fund may enter into repurchase
agreements with domestic banks and broker-dealers which involves certain risks.
The Fund does not presently expect to commit as much as 5% of its total assets
to investments in either warrants or restricted securities. The risks involved
in investing in restricted securities, warrants and repurchase agreements are
described under "Investment Policies and Techniques" in the Statement of
Additional Information.
- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
domestic banks or broker-dealers in order to earn a return on temporarily
available cash. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. It is the current policy of the
Fund not to invest at the time of purchase more than 25% of its total assets in
securities subject to repurchase agreements, nor more than 10% of its net assets
in securities subject to repurchase agreements that do not mature within seven
days and in any other illiquid securities. In the event of the bankruptcy of the
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities, and the Fund could incur losses
including: (a) a possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) a possible
lack of access to income on the underlying security during this period; and (c)
expenses of enforcing its rights.
11
<PAGE> 14
For the purpose of investing in repurchase agreements, the Adviser aggregates
the cash that substantially all of the funds advised or subadvised by the
Adviser or its affiliate would otherwise invest separately into a joint account.
The cash in the joint account is then invested in repurchase agreements and the
funds that contributed to the joint account share pro rata in the net revenue
generated. The Adviser believes that the joint account produces efficiencies and
economies of scale that may contribute to reduced transaction costs, higher
returns, higher quality investments and greater diversity of investments for the
Fund than would be available to the Fund investing separately. The manner in
which the joint account is managed is subject to conditions set forth in an SEC
exemptive order authorizing this practice, which conditions are designed to
ensure the fair administration of the joint account and to protect the amounts
in that account.
FOREIGN SECURITIES. The Fund may invest up to 20% of its assets in securities
of foreign issuers. Such securities may be subject to foreign government taxes
which would reduce the income yield on such securities. Foreign investments
involve certain risks, such as political or economic instability of the issuer
or of the country of issue, the difficulty of predicting international trade
patterns, fluctuating exchange rates and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of domestic corporations or of the United States
Government. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and, with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Finally, in the
event of a default on any such foreign debt obligations, it may be more
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities.
USING OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS. The Fund expects to
utilize options, futures contracts and options thereon in several different
ways, depending upon the status of the Fund's portfolio and the Adviser's
expectations concerning the securities markets.
In times of stable or rising stock prices, the Fund generally seeks to obtain
maximum exposure to the stock market, i.e., to be "fully invested."
Nevertheless, even when the Fund is fully invested, prudent management requires
that at least a small portion of assets be available as cash to honor redemption
requests and for other short-term needs. The Fund may also have cash on hand
that has not yet been invested. The portion of the Fund's assets that is
invested in cash equivalents does not fluctuate with stock market prices, so
that, in times of rising market prices, the
12
<PAGE> 15
Fund may underperform the market in proportion to the amount of cash equivalents
in its portfolio. By purchasing stock index futures contracts, however, the Fund
can "equitize" the cash portion of its assets and obtain equivalent performance
to investing 100% of its assets in equity securities.
If the Adviser forecasts a market decline, the Fund may take a defensive
position, reducing its exposure to the stock market by increasing its cash
position. By selling stock index futures contracts instead of portfolio
securities, a similar result can be achieved to the extent that the performance
of the stock index futures contracts correlates to the performance of the Fund's
portfolio securities. Sale of futures contracts could frequently be accomplished
more rapidly and at less cost than the actual sale of securities. Once the
desired hedged position has been effected, the Fund could then liquidate
securities in a more deliberate manner, reducing its futures position
simultaneously to maintain the desired balance, or it could maintain the hedged
position.
As an alternative to selling stock index futures contracts, the Fund can
purchase stock index puts (or stock index futures puts) to hedge the portfolio's
risk in a declining market. Since the value of a put increases as the index
declines below a specified level, the portfolio's value is protected against a
market decline to the degree the performance of the index correlates with the
performance of the Fund's investment portfolio. If the market remains stable or
advances, the Fund can refrain from exercising the put and its portfolio will
participate in the advance, having incurred only the premium cost for the put.
In certain cases, the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities.
POTENTIAL RISKS OF OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS. The
purchase and sale of options, futures contracts and related options involve
risks different from those involved with direct investments in underlying
securities. While utilization of options, futures contracts and similar
instruments may be advantageous to the Fund, if the Adviser is not successful in
employing such instruments in managing the Fund's investments, the Fund's
performance will be worse than if the Fund did not make such investments. In
addition, the Fund would pay commissions and other costs in connection with such
investments, which may increase the Fund's expenses and reduce its return. The
Fund is authorized to purchase and sell over-the-counter options ("OTC
Options"). OTC Options are purchased from or sold to securities dealers,
financial institutions of other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. The Fund will sell only OTC Options
(other than OTC currency options) that are subject to a buy-back provision
permitting the Fund to require to the Counterparty to sell the option back
13
<PAGE> 16
to the Fund at a formula price within seven days. The staff of the SEC currently
takes the position that, in general, OTC Options on securities other than U.S.
Government securities purchased by the Fund, and portfolio securities covering
OTC Options sold by the Fund, are illiquid securities subject to the Fund's
limitation on investing in illiquid securities as described below. The Fund may
not purchase or sell futures contracts or related options for which the
aggregate initial margin and premiums exceed 5% of the fair market value of the
Fund's assets.
In order to prevent leverage in connection with the purchase of futures
contracts or call options thereon by the Fund, an amount of cash, cash
equivalents or liquid securities equal to the market value of the obligation
under the futures contracts or options (less any related margin deposits) will
be maintained in a segregated account with the Custodian. The Fund may not
invest more than 10% of its net assets in illiquid securities and repurchase
agreements which have a maturity of longer than seven days. A more complete
discussion of the potential risks involved in transactions in options, futures
contracts and related options, is contained in the Statement of Additional
Information.
PORTFOLIO TURNOVER. The Fund purchases securities which are believed by the
Adviser to have above average potential for capital appreciation. Common stocks
are disposed of in situations where it is believed that potential for such
appreciation has lessened or that other common stocks have a greater potential.
Therefore, the Fund may purchase and sell securities without regard to the
length of time the security is to be, or has been held. The Fund's annual
portfolio turnover rate is shown in the table of "Financial Highlights." The
rate may exceed 100%, which is higher than that of many other investment
companies.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES. The Adviser is responsible for
the placement of orders for the purchase and sale of portfolio securities for
the Fund and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution services rendered
on a continuing basis. The Adviser is authorized to place portfolio transactions
with brokerage firms participating in the distribution of shares of the Fund and
other Van Kampen American Capital mutual funds if it reasonably believes that
the quality of the execution and the commission are comparable to that available
from other qualified brokerage firms. The Adviser is authorized to pay higher
commissions to brokerage firms that provide it with investment and research
information than to firms which do not provide such services if the Adviser
determines that such commissions are reasonable in relation to the overall
services provided. The information received may be used by the Adviser in
managing the assets of other advisory accounts as well as in the management of
the assets of the Fund.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which may not be changed without approval by the vote of a majority of the
14
<PAGE> 17
outstanding voting shares of the Fund (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")). These restrictions provide, among other
things, that the Fund may not:
1. Lend money or securities except by the purchase of a portion of an issue of
bonds, debentures or other obligations of types commonly distributed to
institutional investors publicly or privately (in the latter case the
investment will be subject to the stated limits on investments in
"restricted securities"), and except by the purchase of securities subject
to repurchase agreements;
2. Invest more than 25% of the value of its assets in any one industry;
3. The Fund may not invest in securities issued by other investment companies
except as part of a merger, reorganization or other acquisition and except
to the extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940 act,
as amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act.
4. Sell short provided that short sales "against the box" are not subject to
this limitation;
5. As to 75% of the Fund's total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (not including federal
government securities) or acquire more than 10% of any class of the
outstanding voting securities of any one issuer, except that the Fund may
purchase securities of other investment companies to the extent permitted
by (i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from time
to time, or (iii) an exemption or other relief from the provisions of the
1940 Act.
Thus the Fund retains the right to invest up to 25% of the value of its total
assets in one company, but intends to do so only if a particular company is
believed to afford better than average prospects for market appreciation at a
time when general business conditions and trends in the market as a whole are
considered to make greater diversification less desirable.
ADDITIONAL RESTRICTIONS. The Fund has also undertaken to one or more states to
abide by additional restrictions so long as its securities are registered for
sale in such states. These limitations may change from time to time as permitted
by such states. The most restrictive restrictions presently in effect are that
the Fund shall not:
1. Purchase securities of issuers which have a record of less than three years
continuous operation if such purchase would cause more than 5% of the
Fund's total assets to be invested in the securities of such issuers,
except that the Fund may purchase securities of other investment companies
to the extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules
15
<PAGE> 18
and regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions
of the 1940 Act;
2. Invest more than 10% of its net assets in illiquid securities, including
securities that are not readily marketable, restricted securities and
repurchase agreements that have a maturity of more than seven days;
3. Invest in interests in oil, gas, or other mineral exploration or
developmental programs, except through the purchase of liquid securities of
companies which engage in such businesses.
The Fund also has undertaken that its Distributor, Adviser, the officers and
the directors of such companies and of the Fund will not take short positions in
securities issued by the Fund.
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------
THE ADVISER. The Adviser is a wholly owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $57 billion under management or supervision. Van Kampen American Capital's
more than 40 open-end and 38 closed-end funds and more than 2,500 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. Van Kampen American Capital Distributors, Inc., the distributor of
the Fund and the sponsor of the funds mentioned above, is also a wholly-owned
subsidiary of Van Kampen American Capital.
Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM Holdings II, Inc.
which, in turn, is a wholly-owned subsidiary of Morgan Stanley Group Inc. The
Adviser's principal office is located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley & Co. Incorporated, a registered broker-
dealer and investment manager adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; and global custody, securities clearance services and securities
lending.
16
<PAGE> 19
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed on average daily net assets of the Fund at the annual rate as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
- ------------------------------------------------------- --------------
<S> <C>
First $350 million..................................... 0.575 of 1.00%
Next $350 million...................................... 0.525 of 1.00%
Next $350 million...................................... 0.475 of 1.00%
Over $1,050 million.................................... 0.425 of 1.00%
</TABLE>
Under the Advisory Agreement, the Fund also reimburses the Adviser for the cost
of the Fund's accounting services, which include maintaining its financial books
and records and calculating its daily net asset value. Operating expenses paid
by the Fund include shareholder service agency fees, distribution fees, service
fees, custodial fees, legal and accounting fees, the costs of reports and
proxies to shareholders, directors' fees, and all other business expenses not
specifically assumed by the Adviser. Advisory (management) fee and total
operating expense ratios are shown under the caption "Annual Fund Operating
Expenses and Example" herein.
From time to time, as the Adviser or the Distributor may deem appropriate,
they may voluntarily undertake to reduce the Fund's expenses by reducing the
fees payable to them to the extent of, or bearing expenses in excess of, such
limitations as they may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Investment Advisory Corp.
PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit directors, trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to pre-clearance and other procedures designed to prevent conflicts of
interest.
PORTFOLIO MANAGEMENT. Gary M. Lewis has been primarily responsible for the
day-to-day management of the Fund's investment portfolio since April 1989. Mr.
Lewis has been Senior Vice President of the Adviser since October 31, 1995. He
was previously Vice President -- Portfolio Manager of the Adviser. Since June
1995, Mr. Lewis has been a Senior Vice President of Van Kampen American Capital
Investment Advisory Corp.
17
<PAGE> 20
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ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase and
the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
maximum sales charge of up to 5.75% of the offering price (6.10% of the net
amount invested), reduced on investments of $50,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a CDSC of 1.00% may be imposed on redemption made within one year of the
purchase. Class A shares are subject to an ongoing service fee at an annual rate
of up to 0.25% of the Fund's aggregate average daily net assets attributable to
the Class A shares. Certain purchases of Class A shares qualify for reduced
initial sales charges. See "Purchase of Shares -- Class A Shares."
CLASS B SHARES. Class B shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within five years of purchase. Class B
shares are subject to an ongoing service fee at an annual rate of up to 0.25% of
the Fund's aggregate average daily net assets attributable to the Class B shares
and an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class B shares. Class B
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
B shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. Class B shares automatically
convert to Class A shares eight years after the end of the calendar month in
which the shareholder's order to purchase was accepted. See "Purchase of
Shares -- Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.25% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class C shares. Class C
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
C shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. See "Purchase of Shares -- Class
C Shares."
CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and
any dividend reinvestment plan shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend
18
<PAGE> 21
reinvestment plan shares earned thereon, automatically convert to Class A shares
six years after the end of the calendar month in which the shares were
purchased. Class C shares purchased before January 1, 1997, and any dividend
reinvestment plan shares earned thereon, automatically convert to Class A shares
ten years after the end of the calendar month in which the shares were
purchased. Such conversion will be on the basis of the relative net asset values
per share, without the imposition of any sales load, fee or other charge. The
conversion of such shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the distribution fee and higher transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code, as amended (the
"Code") and (ii) the conversion of shares does not constitute a taxable event
under federal income tax law. The conversion may be suspended if such an opinion
is no longer available and such shares might continue to be subject to the
higher aggregate fees applicable to such class of shares for an indefinite
period.
FACTORS FOR CONSIDERATION. In deciding which class of shares to purchase,
investors should take into consideration their investment goals, present and
anticipated purchase amounts, time horizons and temperaments. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated distribution fees and CDSC on Class B shares prior to conversion
would be less than the initial sales charge on Class A shares purchased at the
same time, and to what extent such differential would be offset by the higher
dividends per share on Class A shares. To assist investors in making this
determination, the table under the caption "Annual Fund Operating Expenses and
Example" sets forth examples of the charges applicable to each class of shares.
In this regard, Class A shares may be more beneficial to the investor who
qualifies for reduced initial sales charges or purchases at net asset value. It
is presently the policy of the Distributor not to accept any order of $500,000
or more for Class B shares or any order of $1 million or more for Class C shares
as it ordinarily would be more beneficial for such an investor to purchase Class
A shares.
Class A shares are not subject to an ongoing distribution fee and,
accordingly, receive correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase for accounts
under $1 million, investors in Class A shares do not have all their funds
invested initially and, therefore, initially own fewer shares. Other investors
might determine that it is more advantageous to purchase either Class B shares
or Class C shares and have all their funds invested initially, although
remaining subject to a CDSC. Ongoing distribution fees on Class B shares and
Class C shares are offset to the extent of the additional funds originally
invested and any return realized on those funds. However, there can be no
assurance as to the return, if any, which will be realized on such additional
funds. For investments held for ten years or more, the relative value
19
<PAGE> 22
upon liquidation of the three classes tends to favor Class A shares or Class B
shares, rather than Class C shares.
Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges or have a longer-term investment horizon.
Class B shares may be appropriate for investors who wish to avoid a front-end
sales charge, put 100% of their investment dollars to work immediately or have a
longer-term investment horizon. Class C shares may be appropriate for investors
who wish to avoid a front-end sales charge, put 100% of their investment dollars
to work immediately, have a shorter-term investment horizon or desire a short
CDSC schedule.
The distribution expenses incurred by the Distributor in connection with the
sale of the shares will be reimbursed, in the case of Class A shares, from the
proceeds of the initial sales charge and, in the case of Class B shares and
Class C shares, from the proceeds of the ongoing distribution fee and any
contingent deferred sales charge incurred upon redemption within five years or
one year, respectively, of purchase. Sales personnel of broker-dealers
distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling such shares. INVESTORS SHOULD UNDERSTAND THAT THE PURPOSE AND FUNCTION
OF THE CONTINGENT DEFERRED SALES CHARGE AND ONGOING DISTRIBUTION FEE WITH
RESPECT TO THE CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE OF THE
INITIAL SALES CHARGE WITH RESPECT TO CLASS A SHARES. See "Distribution and
Service Plans."
GENERAL. Dividends paid by the Fund with respect to Class A shares, Class B
shares and Class C shares will be calculated in the same manner at the same time
on the same day, except that the distribution fees and any incremental transfer
agency costs relating to Class B shares or Class C shares will be borne by the
respective class. See "Distributions from the Fund." Shares of the Fund may be
exchanged, subject to certain limitations, for shares of the same class of
certain other mutual funds distributed by the Distributor. See "Shareholder
Services--Exchange Privilege."
- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------
The Fund offers three classes of shares to the public on a continuous basis
through the Distributor as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are acting as securities dealers ("dealers") and NASD members or eligible
non-NASD
20
<PAGE> 23
members who are acting as brokers or agents or investors ("brokers"). The term
"dealers" and "brokers" are sometimes referred to herein as "authorized
dealers."
Initial investments must be at least $500 for each class of shares and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments. Shares of the Fund may be sold in foreign countries where
permissible. The Fund and the Distributor reserve the right to refuse any order
for the purchase of shares. The Fund also reserves the right to suspend the sale
of the Fund's shares in response to conditions in the securities markets or for
other reasons.
Shares may be purchased on any business day through authorized dealers. Shares
also may be purchased by completing the application accompanying this Prospectus
and forwarding the application, through the authorized dealer, to the
shareholder service agent, ACCESS Investor Services, Inc. ("ACCESS"), a
wholly-owned subsidiary of Van Kampen American Capital. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A shares,
Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or contingent deferred sales charge depending on the class of shares
chosen by the investor, as shown in the tables herein. Net asset value per share
is determined once daily as of the close of trading on the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m., New York time) each day the
Exchange is open. Net asset value per share for each class is determined by
dividing the value of the Fund's securities, cash and other assets (including
accrued interest) attributable to such class less all liabilities (including
accrued expenses) attributable to such class, by the total number of shares of
the class outstanding. Such computation is made by using prices as of the close
of trading on the New York Stock Exchange and (i) valuing securities listed or
traded on a national securities exchange at the last reported sale price, or if
there has been no sale that day, at the mean between the last reported bid and
asked prices, (ii) valuing over-the-counter securities for which the last sale
price is available from the National Association of Securities Dealers Automated
Quotations ("NASDAQ") at that price, and (iii) valuing any securities for which
market quotations are not readily available, and any other assets at fair value
as determined in good faith by the Trustees of the Fund. Short-term investments
are valued in the manner described in the notes to the financial statements
included in the Statement of Additional Information.
Generally, the net asset values per share of the Class A shares, Class B
shares and Class C shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class A
shares, Class B shares and Class C shares may differ from one another,
reflecting the daily expense accruals of the distribution and the higher
transfer agency fees applicable
21
<PAGE> 24
with respect to the Class B shares and Class C shares and the differential in
the dividends paid on the classes of shares. The price paid for shares purchased
is based on the next calculation of net asset value (plus sales charges, where
applicable) after an order is received by an authorized dealer provided such
order is transmitted to the Distributor prior to the Distributor's close of
business on such day. Orders received by authorized dealers after the close of
the Exchange are priced based on the next close, provided they are received by
the Distributor prior to the Distributor's close of business on such day. It is
the responsibility of authorized dealers to transmit orders received by them to
the Distributor so they will be received prior to such time. Orders of less than
$500 are mailed by the authorized dealer and processed at the offering price
next calculated after acceptance by ACCESS.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, has the same rights and is identical in all respects,
except that (i) Class B shares and Class C shares bear the expenses of the
deferred sales arrangement and any expenses (including the higher distribution
fee and incremental transfer agency costs) resulting from such sales
arrangement, (ii) generally, each class has exclusive voting rights with respect
to approvals of the Rule 12b-1 distribution plan pursuant to which its
distribution fee or service fee is paid and (iii) certain shares are subject to
a conversion feature. Each class has different exchange privileges and certain
different shareholder service options available. The net income attributable to
Class B shares and Class C shares and the dividends payable on Class B shares
and Class C shares will be reduced by the amount of the distribution fee and
incremental transfer agency expenses associated with such class of shares. Sales
personnel of authorized dealers distributing the Fund's shares and other persons
entitled to receive compensation for selling such shares may receive differing
compensation for selling Class A shares, Class B shares or Class C shares.
Agreements are in place which provide, among other things and subject to
certain conditions, for certain favorable distribution arrangements for shares
of the Fund with subsidiaries of The Travelers Inc.
The Distributor may from time to time implement programs under which an
authorized dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
authorized dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor, an amount not exceeding the total
applicable sales charges on the sales generated by the authorized dealer at the
public offering price during such programs. Other programs provide, among other
things and subject to certain conditions, for certain favorable distribution
arrangements for shares of the Fund. Also, the Distributor in its discretion may
from time to time, pursuant to objective criteria established by the
Distributor, pay fees to, and sponsor business seminars for, qualifying
authorized dealers for certain services or activities which are
22
<PAGE> 25
primarily intended to result in sales of shares of the Fund. Fees may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to locations within or outside of the United States for meetings or seminars of
a business nature. The Distributor is sponsoring a sales incentive program for
A.G. Edwards & Sons, Inc. ("A.G. Edwards"). The Distributor will reallow its
portion of the Fund's sales concession to A.G. Edwards on sales of Class A
shares of the Fund relating to the "rollover" of any savings into an Individual
Retirement Account ("IRA"), the transfer of assets into an IRA and contributions
to an IRA, commencing on January 1, 1997 and terminating on April 15, 1997. Such
fees paid for such services and activities with respect to the Fund will not
exceed in the aggregate 1.25% of the average total daily net assets of the Fund
on an annual basis. The Distributor may provide additional compensation to
Edward D. Jones & Co. or an affiliate thereof based on a combination of its
sales of shares and increases in assets under management. All of the foregoing
payments are made by the Distributor out of its own assets. These programs will
not change the price an investor will pay for shares or the amount that a Fund
will receive from such sale.
CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value plus a sales charge, as set forth herein.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED
AS % OF TO DEALERS
SIZE OF AS % OF NET AMOUNT (AS A % OF
INVESTMENT OFFERING PRICE INVESTED OFFERING PRICE)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000....................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.......... 4.75% 4.99% 4.00%
$100,000 but less than $250,000......... 3.75% 3.90% 3.00%
$250,000 but less than $500,000......... 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000....... 2.00% 2.04% 1.75%
$1,000,000 or more...................... * * *
- ------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC of
1.00% on redemptions made within one year of the purchase. A commission will
be paid to authorized dealers who initiate and are responsible for purchases
of $1 million or more as follows: 1.00% on sales to $2 million, plus 0.80% on
the next million and 0.50% on the excess over $3 million.
In addition to the reallowances from the applicable public offering price
described above, the Distributor may, from time to time, pay or allow additional
reallowances or promotional incentives, in the form of cash or other
compensation, to authorized dealers that sell shares of the Fund. Authorized
dealers which are
23
<PAGE> 26
reallowed all or substantially all of the sales charges may be deemed to be
underwriters for purposes of the Securities Act of 1933, as amended.
The Distributor may also pay financial institutions (which may include banks)
and other industry professionals that provide services to facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the reallowance allowable to authorized dealers described herein. Such
financial institutions, other industry professionals and authorized dealers are
hereinafter referred to as "Service Organizations." Banks are currently
prohibited under the Glass-Steagall Act from providing certain underwriting or
distribution services. If banking firms were prohibited from acting in any
capacity or providing any of the described services, the Distributor would
consider what action, if any, would be appropriate. The Distributor does not
believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. State securities laws regarding
registration of banks and other financial institutions may differ from the
interpretation of federal law expressed herein and banks and other financial
institutions may be required to register as dealers pursuant to certain state
laws.
QUANTITY DISCOUNTS
Investors purchasing Class A shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described herein.
Investors, or their authorized dealers, must notify the Fund whenever a
quantity discount is applicable to purchases. Upon such notification, an
investor will receive the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, their
spouse and children under 21 years of age and any corporation, partnership or
sole proprietorship which is 100% owned, either alone or in combination, by any
of the foregoing; a trustee or other fiduciary of a single trustee estate or
single fiduciary account, or a "company" as defined in Section 2(a)(8) of the
1940 Act.
As used herein, "Participating Funds" refers to all open-end investment
companies advised by the Adviser or Van Kampen American Capital Investment
Advisory Corp. and distributed by the Distributor.
Volume Discounts. The size of investment shown in the preceding sales charge
table applies to the total dollar amount being invested by any person in shares
of the Fund, or in any combination of shares of the Fund and shares of other
Participating Funds, although other Participating Funds may have different sales
charges.
24
<PAGE> 27
Cumulative Purchase Discount. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds which have been previously purchased and are
still owned.
Letter of Intent. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the preceding sales charge
table. The size of investment shown in the preceding table also includes
purchases of shares of the Participating Funds over a 13-month period based on
the total amount of intended purchases plus the value of all shares of the
Participating Funds previously purchased and still owned. An investor may elect
to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
If the goal is not achieved within the period, the investor must pay the
difference between the sales charge applicable to the purchases made and the
charges previously paid. The initial purchase must be for an amount equal to at
least 5% of the minimum total purchase amount of the level selected. If trades
not initially made under a Letter of Intent subsequently qualify for a lower
sales charge through the 90-day back-dating provisions, an adjustment will be
made at the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustments in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. Additional
information is contained in the application form accompanying this Prospectus.
OTHER PURCHASE PROGRAMS
Purchasers of Class A shares may be entitled to reduced initial sales charges
in connection with unit trust reinvestment programs and purchases by registered
representatives of selling firms or purchases by persons affiliated with the
Fund or the Distributor. The Fund reserves the right to modify or terminate
these arrangements at any time.
Unit Investment Trust Reinvestment Programs. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
shares of the Fund at net asset value and with no minimum initial or subsequent
investment requirement if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the authorized dealer,
if any, through which such participation in the qualifying program was initiated
0.50% of the offering price as a dealer concession or agency commission. Persons
desiring more information
25
<PAGE> 28
with respect to this program, including the applicable terms and conditions
thereof, should contact their authorized dealer or the Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide ACCESS with appropriate backup data
for each participating investor in a computerized format fully compatible with
ACCESS' processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NAV Purchase Options. Class A shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by:
(1) Current or retired trustees or directors of funds advised by the Adviser,
Van Kampen American Capital Investment Advisory Corp. or John Govett &
Co. Limited and such persons' families and their beneficial accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley
Group, Inc. and any of its subsidiaries, employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and registered representatives of
financial institutions that have a selling group agreement with the
Distributor and their spouses and children under 21 years of age when
purchasing for any accounts they beneficially own, or, in the case of any
such financial institution, when purchasing for retirement plans for such
institution's employees.
(4) Registered investment advisers, trust companies and bank trust
departments investing on their own behalf or on behalf of their clients
provided that the aggregate amount invested in the Fund alone, or any
combination of shares of the Fund and shares of other Participating Funds
as described herein under "Purchase of Shares -- Class A Shares -- Volume
Discounts," during the 13 month period commencing with the first
investment pursuant hereto equals at least $1 million. The Distributor
may pay authorized dealers through
26
<PAGE> 29
which purchases are made an amount up to 0.50% of the amount invested,
over a 12 month period following such transaction.
(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $3 million or more and which
invest in multiple fund families through national wirehouse alliance
programs.
(6) Accounts as to which a bank or broker-dealer charges an account
management fee ("wrap accounts"), provided the bank or broker-dealer has
a separate agreement with the Distributor.
(7) Investors purchasing shares of the Fund with redemption proceeds from
other mutual fund complexes on which the investor has paid a front-end
sales charge or was subject to a deferred sales charge, whether or not
paid, if such redemption has occurred no more than 30 days prior to such
purchase.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Code, or custodial accounts
held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(e)(3) of
the Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided, for plans
initially establishing accounts with the Distributor in the Participating
Funds after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating Fund or have
received proposals from the Distributor prior to February 1, 1997 based
on net asset value purchase privileges previously in effect will be
qualified to purchase shares of the Participating Funds at net asset
value for accounts established on or before May 1, 1997. Section 403(b)
and similar accounts for which Van Kampen American Capital Trust Company
serves as custodian will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of
eligible employees, except under certain uniform criteria established by
the Distributor from time to time. Prior to February 1, 1997, a
commission will be paid to authorized dealers who initiate and are
responsible for such purchases within a rolling twelve-month period as
follows: 1.00% on sales to $5 million, plus 0.50% on the next $5 million,
plus 0.25% on the excess over $10 million. For purchases on February 1,
1997 and thereafter, a commission will be paid as follows: 1.00% on sales
to $2 million, plus 0.80% on the next $1 million, plus 0.50% on the next
$47 million, plus 0.25% on the excess over $50 million.
27
<PAGE> 30
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its
endorsement or authorization, on behalf of the group, for purchase of
shares of the Fund and other Participating Funds, (iv) has a membership
that the authorized dealer can certify as to the group's members and (v)
satisfies other uniform criteria established by the Distributor for the
purpose of realizing economies of scale in distributing such shares. A
qualified group does not include one whose sole organizational nexus, for
example, is that its participants are credit card holders of the same
institutions, policy holders of an insurance company, customers of a bank
or broker-dealer, clients of an investment adviser or other similar
groups. Shares purchased in each group's participants account in
connection with this privilege will be subject to a CDSC of 1.00% in the
event of redemption within one year of purchase, and a commission will be
paid to authorized dealers who initiate and are responsible for such
sales to each individual as follows: 1.00% on sales to $2 million, plus
0.80% on the next million and 0.50% on the excess over $3 million.
The term "families" includes a person's spouse, children under 21 years of age
and grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with ACCESS by the investment
adviser, trust company or bank trust department, provided that ACCESS receives
federal funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized dealer may charge a transaction
fee for placing an order to purchase shares pursuant to this provision or for
placing a redemption order with respect to such shares. Authorized dealers will
be paid a service fee as described herein under "Distribution and Service Plans"
on purchases made as described in (3) through (9) above. The Fund may terminate,
or amend the terms of, offering shares of the Fund at net asset value to such
groups at any time.
CLASS B SHARES
Class B shares are offered at net asset value. Class B shares which are
redeemed within five years of purchase are subject to a CDSC at the rates set
forth in the following table charged as a percentage of the dollar amount
subject thereto. The charge is assessed on an amount equal to the lesser of the
then current market value or the cost of the shares being redeemed. Accordingly,
no sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no
28
<PAGE> 31
charge is assessed on shares derived from reinvestment of dividends or capital
gains distributions. It is presently the policy of the Distributor not to accept
any order for Class B shares in an amount of $500,000 or more because it
ordinarily will be more advantageous for an investor making such an investment
to purchase Class A shares.
The amount of the CDSC, if any, varies depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month are aggregated and deemed to have been made on the last day of
the month.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- --------------------------------------------------------------------------
<S> <C>
First.........................................................5.00%
Second........................................................4.00%
Third.........................................................3.00%
Fourth........................................................2.50%
Fifth.........................................................1.50%
Sixth and After...............................................None
- --------------------------------------------------------------------------
</TABLE>
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC, second of shares held for over five years or
shares acquired pursuant to reinvestment of dividends or distributions and third
of shares held longest during the five-year period.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds is subject to a deferred sales charge at a
rate of 4.00% (the applicable rate in the second year after purchase).
A commission or transaction fee of 4.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Additionally, the Distributor
may, from time to time, pay additional promotional incentives, in the form of
cash or other compensation, to authorized dealers that sell Class B shares of
the Fund.
29
<PAGE> 32
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the lesser of the then current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. It is presently the policy of the Distributor
not to accept any order in an amount of $1 million or more for Class C shares
because it ordinarily will be more advantageous for an investor making such an
investment to purchase Class A shares.
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC and second of shares held for more than one year
or shares acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of 1.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Authorized dealers will also be
paid ongoing commissions and transaction fees of up to 0.75% of the average
daily net assets of the Fund's Class C shares annually commencing in the second
year after purchase. Additionally, the Distributor may, from time to time, pay
additional promotional incentives, in the form of cash or other compensation, to
authorized dealers that sell Class C shares of the Fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The CDSC is waived on redemptions of Class B shares and Class C shares (i)
following the death or disability (as defined in the Code) of a shareholder,
(ii) in connection with required minimum distributions from an IRA or other
retirement plan, (iii) pursuant to the Fund's systematic withdrawal plan but
limited to 12% annually of the initial value of the account, and (iv) effected
pursuant to the right of the Fund to liquidate a Shareholder's account as
described herein under "Redemption of Shares." The CDSC also is waived on
redemptions of Class C shares as it relates to the reinvestment of redemption
proceeds in shares of the same class of the Fund within 120 days after
redemption. See the Statement of Additional Information for further discussion
of waiver provisions.
30
<PAGE> 33
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investments in its shares at little or no extra cost to the investor. Below is a
description of such services.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares are held by ACCESS, the Fund's transfer agent. ACCESS performs
bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a statement
showing the activity in the account. Each shareholder who has an account in
certain of the Participating Funds will receive statements quarterly from ACCESS
showing any reinvestments of dividends and capital gains distributions and any
other activity in the account since the preceding statement. Such shareholder
also will receive separate confirmations for each purchase or sale transaction
other than reinvestment of dividends and capital gains distributions and
systematic purchases or redemptions. Additions to an investment account may be
made at any time by purchasing shares through authorized dealers or by mailing a
check directly to ACCESS.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued, representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a
Surety Bond in a form acceptable to ACCESS. On the date the letter is received
ACCESS will calculate a fee for replacing the lost certificate equal to no more
than 2.00% of the net asset value of the issued shares, and bill the party to
whom the certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge) on the record date. Unless the shareholder instructs otherwise, the
reinvestment plan is automatic. This instruction may be made by telephone by
calling (800) 421-5666 ((800) 772-8889 for the hearing impaired). The investor
may, on the initial application or prior to any declaration, instruct that
dividends be paid in cash and capital gains distributions be reinvested at net
asset value, or that both dividends and capital gains distributions be paid in
cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize ACCESS to charge a bank account on a regular
31
<PAGE> 34
basis to invest predetermined amounts in the Fund. Additional information is
available from the Distributor or authorized investment dealers.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP, and pension and profit sharing plans; 401(k) plans; or
Section 403(b)(7) plans in the case of employees of public school systems and
certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
American Capital Trust Company serves as Custodian under the IRA, 403(b)(7) and
Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of Automated Clearing House. In addition, the shareholder must fill out
the appropriate section of the account application. The shareholder must also
include a voided check or deposit slip from the bank account into which
redemptions are to be deposited together with the completed application. Once
ACCESS has received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing ACCESS.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying
Prospectus or by calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any other
Participating Fund so long as the shareholder has a pre-existing account for
such class of shares of the other fund. Both accounts must be of the same type
and same class, either non-retirement or retirement. Any two non-retirement
accounts can be used. If the accounts are retirement accounts, they must both be
for the same class and of the same type of retirement plan (e.g. IRA, 403(b)(7),
401(k), Keogh) and for the benefit of the same individual. If a qualified,
pre-existing account does not exist, the shareholder must establish a new
account subject to minimum investment and other requirements of the fund into
which distributions would be invested. Distributions are invested into the
selected fund at its net asset value as of the payable date of the distribution.
EXCHANGE PRIVILEGE. Shares of the Fund or of any Participating Fund, other
than Van Kampen American Capital Government Target Fund ("Government Target")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
32
<PAGE> 35
or Van Kampen American Capital Reserve Fund ("Reserve Fund"), may be exchanged
for shares of the same class of shares of any other fund without sales charge,
provided that shares of certain Van Kampen American Capital fixed-income funds
are subject to a 30-day holding period requirement before exchange. Shares of
Government Target may be exchanged for Class A shares of the Fund without sales
charge. Class A shares of Tax Free Money Fund or Reserve Fund that were not
acquired in exchange for Class B shares or Class C shares of a Participating
Fund may be exchanged for Class A shares of the Fund upon payment of the excess,
if any, of the sales charge rate applicable to the shares being acquired over
the sales charge rate previously paid. Shares of Tax Free Money Fund or Reserve
Fund acquired through an exchange of Class B shares or Class C shares may be
exchanged only for the same class of shares of a Participating Fund without
incurring a CDSC. Shares of any Participating Fund may be exchanged for shares
of any other Participating Fund if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund.
Class B shareholders and Class C shareholders of the Fund have the ability to
exchange their shares ("original shares") for the same class of shares of any
other Van Kampen American Capital fund that offers such shares ("new shares") in
an amount equal to the aggregate net asset value of the original shares, without
the payment of any CDSC otherwise due upon redemption of the original shares.
For purposes of computing the CDSC payable upon a disposition of the new shares,
the holding period for the original shares is added to the holding period of the
new shares. Class B shareholders and Class C shareholders would remain subject
to the CDSC imposed by the original fund upon their redemption from the Van
Kampen American Capital complex of funds. The CDSC is based on the holding
period requirement of the original fund.
Shares of the fund to be acquired must be registered for sale in the
investor's state. Exchanges of shares are sales and may result in a gain or loss
for federal income tax purposes, although if the shares exchanged have been held
for less than 91 days, the sales charge paid on such shares is not included in
the tax basis of the exchanged shares, but is carried over and included in the
tax basis of the shares acquired. See the Statement of Additional Information.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
otherwise designated in the application form accompanying this Prospectus. Van
Kampen American Capital and its subsidiaries, including ACCESS (collectively,
"VKAC"), and the Fund employ procedures considered by them to be reasonable to
confirm that instructions communicated by telephone are genuine. Such procedures
include requiring certain personal identification information prior
33
<PAGE> 36
to acting upon telephone instructions, tape recording telephone communications
and providing written confirmation of instructions communicated by telephone. If
reasonable procedures are employed, neither VKAC nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine.
VKAC and the Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. Exchanges are effected
at the net asset value per share next calculated after the request is received
in good order with adjustment for any additional sales charge. If the exchanging
shareholder does not have an account in the fund whose shares are being
acquired, a new account will be established with the same registration, dividend
and capital gain options (except dividend diversification) and authorized dealer
of record as the account from which shares are exchanged, unless otherwise
specified by the shareholder. In order to establish a systematic withdrawal plan
for the new account or reinvest dividends from the new account into another
fund, however, an exchanging shareholder must file a specific written request.
The Fund reserves the right to reject any order to acquire its shares through
exchange. In addition, the Fund may modify, restrict or terminate the exchange
privilege at any time on 60 days' notice to its shareholders of any termination
or material amendment.
A prospectus of any of these mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for information regarding such fund prior
to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares in a single account total $5,000 or
more may establish a quarterly, semiannual or annual withdrawal plan. This plan
provides for the orderly use of the entire account, not only the income but also
the capital, if necessary. Each withdrawal constitutes a redemption of shares on
which any capital gain or loss will be recognized. The planholder may arrange
for monthly, quarterly, semi-annual or annual checks in any amount not less than
$25. Such a systematic withdrawal plan may also be maintained by an investor
purchasing shares for a retirement plan established on a form made available by
the Fund. See "Shareholder Services -- Retirement Plans."
Class B shareholders and Class C shareholders who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends
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<PAGE> 37
and capital gains distributions, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Withdrawals made concurrently
with the purchase of additional shares ordinarily will be disadvantageous to the
shareholder because of the duplication of sales charges. Any taxable gain or
loss will be recognized by the shareholder upon redemption of shares.
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REDEMPTION OF SHARES
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REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their
shares of the Fund at any time. To do so, a written request in proper form must
be sent directly to ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256.
Shareholders may also place redemption requests through an authorized dealer.
Orders received from authorized dealers must be at least $500 unless transmitted
via the FUNDSERV network. The redemption price for such shares is the net asset
value next calculated after an order is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit redemption requests received by them to the Distributor so they will be
received prior to such time.
As described herein under "Purchase of Shares," redemptions of Class B shares
and Class C shares are subject to a CDSC. In addition, a CDSC of 1.00% may be
imposed on redemptions of Class A shares made within one year of purchase for
investments of $1 million or more. The CDSC incurred upon redemption is paid to
the Distributor in reimbursement for distribution-related expenses. A custodian
of a retirement plan account may charge fees based on the custodian's fee
schedule.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
record address has changed within the previous 30 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker/dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it will do so if a special request has been
made to ACCESS. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request. In the event the redemption is requested by a corporation, partnership,
trust, fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not
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<PAGE> 38
shown in the account registration, a copy of the corporate resolution or other
legal documentation appointing the authorized signer and certified within the
prior 60 days must accompany the redemption request. IRA redemption requests
should be sent to the IRA custodian to be forwarded to ACCESS. Where Van Kampen
American Capital Trust Company serves as custodian, special IRA, 403(b)(7), or
Keogh distribution forms must be obtained from and be forwarded to Van Kampen
American Capital Trust Company, P. O. Box 944, Houston, Texas 77001-0944.
Contact the custodian for information.
In the case of redemption requests sent directly to ACCESS, the redemption
price is the net asset value per share next determined after the request is
received in proper form. Payment for shares redeemed will be made by check
mailed within seven days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payment may be postponed or the right
of redemption suspended as provided by the rules of the SEC. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check until it confirms the purchase check has cleared, usually a
period of up to 15 days. Any taxable gain or loss will be recognized by the
shareholder upon redemption of shares.
The Fund may redeem any shareholder account with a net asset value on the date
of the notice of redemption less than the minimum initial investment as
specified in this Prospectus. At least 60 days advance written notice of any
such involuntary redemption is required and the shareholder is given an
opportunity to purchase the required value of additional shares at the next
determined net asset value without sales charge. Any applicable CDSC will be
deducted from the proceeds of this redemption. Any involuntary redemption may
only occur if the shareholder account is less than the minimum initial
investment due to shareholder redemptions.
TELEPHONE REDEMPTIONS. In addition to the regular redemption procedures set
forth above, the Fund permits redemption of shares by telephone and for
redemption proceeds to be sent to the address of record for the account or to
the bank account of record as described below. To establish such privilege a
shareholder must complete the appropriate section of the application form
accompanying this Prospectus or call the Fund at (800) 421-5666 to request that
a copy of the Telephone Redemption Authorization form be sent to them for
completion. To redeem shares contact the telephone transaction line at (800)
421-5684. VKAC and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape recording telephone
communications, and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, neither VKAC nor the Fund
will be liable for following telephone instructions which it reasonably believes
to be genuine. VKAC and the Fund may
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<PAGE> 39
be liable for any losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed. Telephone redemptions may not be
available if the shareholder cannot reach ACCESS by telephone, whether because
all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Fund's regular redemption procedure previously
described. Requests received by ACCESS prior to 4:00 p.m., New York time, on a
regular business day will be processed at the net asset value per share
determined that day. These privileges are available for all accounts other than
retirement accounts. The telephone redemption privilege is not available for
shares represented by certificates. If an account has multiple owners, ACCESS
may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions are expected to be wired on the next business day following the date
of redemption. This service is also not available with respect to shares held in
an individual retirement account (IRA) for which Van Kampen American Capital
Trust Company acts as custodian. The Fund reserves the right at any time to
terminate, limit or otherwise modify this redemption privilege.
REDEMPTION UPON DISABILITY. The Fund will waive the CDSC on redemptions
following the disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Code, which in pertinent part
defines a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of disability before it determines to waive the
CDSC on Class B shares and Class C shares.
In cases of disability, the CDSC on Class B shares and Class C shares will be
waived where the disabled person is either an individual shareholder or owns the
shares as a joint tenant with right of survivorship or is the beneficial owner
of a custodial or fiduciary account, and where the redemption is made within one
year of the initial determination of disability. This waiver of the CDSC on
Class B shares and Class C shares applies to a total or partial redemption, but
only to redemptions of shares held at the time of the initial determination of
disability.
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<PAGE> 40
REINSTATEMENT PRIVILEGE. A Class A shareholder or Class B shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A shares of the Fund. A Class C shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class C shares of the Fund with credit given for any CDSC
paid upon such redemption. Such reinstatement is made at the net asset value
(without sales charge except as described under "Shareholder Services --
Exchange Privilege") next determined after the order is received, which must be
within 180 days after the date of the redemption. Reinstatement at net asset
value is also offered to participants in those eligible retirement plans held or
administered by American Capital Trust Company for repayment of principal (and
interest) on their borrowings on such plans.
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DISTRIBUTION AND SERVICE PLANS
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The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may spend a portion of the Fund's average daily net assets
attributable to each class of shares in connection with distribution of the
respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Distribution Plan and the Service
Plan are being implemented through an agreement with the Distributor and
sub-agreements between the Distributor and brokers, dealers or financial
intermediaries (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance.
CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A shares of the Fund
pursuant to the Distribution Plan and Service Plan. From such amount, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class A shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts. The Fund pays
the Distributor the lesser of the balance of the 0.25% not paid to such brokers,
dealers or financial intermediaries or the amount of the Distributor's actual
distribution-related expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the
38
<PAGE> 41
Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C shares up to 0.75% of the Fund's average daily
net assets attributable to Class C shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution-related expense attributable to the Class C shares. In
addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets attributable to the Class C shares pursuant to the Service Plan in
connection with the ongoing provision of services to holders of such shares by
the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.
OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, with respect to the Class A shares, there is no
carryover of such reimbursement obligations to succeeding years.
The Distributor's actual expenses with respect to Class B shares or Class C
shares for any given year may exceed the amounts payable to the Distributor with
respect to such class of shares under the Distribution Plan, the Service Plan
and payments received pursuant to the CDSC. In such event, with respect to any
such class of shares, any unreimbursed expenses will be carried forward and paid
by the Fund (up to the amount of the actual expenses incurred) in future years
so long as such Distribution Plan is in effect. Except as mandated by applicable
law, the Fund does not impose any limit with respect to the number of years into
the future that such unreimbursed expenses may be carried forward (on a Fund
level basis). Because such expenses are accounted on a Fund level basis, in
periods of extreme net asset value fluctuation such amounts with respect to a
particular Class B share or Class C share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
August 31, 1996, there were $21,282,395 and $309,637 of unreimbursed
distribution-related expenses with respect to Class B shares and Class C shares,
respectively, representing 2.81% and 0.37% of the Fund's net assets attributable
to Class B shares and Class C shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund
39
<PAGE> 42
would not be contractually obligated to pay the Distributor for any expenses not
previously reimbursed by the Fund or recovered through CDSCs.
The Distributor will not use the proceeds from the CDSC applicable to a
particular class of shares to defray distribution-related expenses attributable
to any other class of shares. Various federal and state laws prohibit national
banks and some state-chartered commercial banks from underwriting or dealing in
the Fund's shares. In addition, state securities laws on this issue may differ
from the interpretations of federal law, and banks and financial institutions
may be required to register as dealers pursuant to state law. In the unlikely
event that a court were to find that these laws prevent such banks from
providing such services described above, the Fund would seek alternate providers
and expects that shareholders would not experience any disadvantage.
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DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS. Dividends from stocks and interest earned from other investments
are the Fund's main source of income. Substantially all of this income, less
expenses, is distributed at least annually as dividends to shareholders. Unless
the shareholder instructs otherwise, dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value.
See "Shareholder Services -- Reinvestment Plan." The per share dividends on
Class B shares and Class C shares will be lower than the per share dividends on
Class A shares as a result of the distribution fees and higher incremental
transfer agency fees applicable to such classes of shares.
CAPITAL GAINS. The Fund may realize capital gains or losses when it sells
securities, depending on whether the sales prices for the securities are higher
or lower than their purchase prices. The Fund at least annually distributes to
shareholders the excess, if any, of its total profits on the sale of securities
during the year over its total losses on the sale of securities, including
capital losses carried forward from prior years in accordance with tax laws. As
in the case of dividends, capital gains distributions are automatically
reinvested in additional shares of the Fund at net asset value unless the
shareholder instructs otherwise. See "Shareholder Services -- Reinvestment
Plan."
40
<PAGE> 43
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TAX STATUS
- ------------------------------------------------------------------------------
The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom (Illinois), and reflects applicable tax laws as of
the date of this Prospectus.
FEDERAL INCOME TAXATION. The Fund intends to qualify each year and to elect
to be treated as a regulated investment company under Subchapter M of the Code.
To qualify as a regulated investment company, the Fund must comply with certain
requirements of the Code relating to, among other things, the source of its
income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including tax-exempt interest, taxable
income and net short-term capital gain, but not net capital gains, which are the
excess of net long-term capital gains over net short-term capital losses), it
will not be required to pay federal income taxes on any income distributed to
shareholders. The Fund intends to distribute at least the minimum amount of net
investment income necessary to satisfy the 90% distribution requirement. The
Fund will not be subject to federal income tax on any net capital gains
distributed to shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute, by
December 31 of each year, at least 98% of its ordinary income (not including
tax-exempt income) for such year and at least 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31 of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been
41
<PAGE> 44
liquidated) in order to qualify as a regulated investment company in a
subsequent year.
Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to mark-to-market some of the positions in its portfolio (i.e.,
treat them as if they were sold for fair market value at the end of the
tax-year), which may cause the Fund to recognize income without receiving cash
with which to make distributions in amounts necessary to satisfy the 90%
distribution requirement and the distribution requirements for avoiding income
and excise taxes. The Fund will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.
The Fund's ability to dispose of portfolio securities may be limited by the
requirement for qualification as a regulated investment company that less than
30% of the Fund's annual gross income be derived from the disposition of
securities held for less than three months.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
DISTRIBUTIONS. Distributions of the Fund's net investment income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gains ("capital gains dividends"), if any, are taxable
to shareholders as long-term capital gains regardless of the length of time
shares of the Fund have been held by such shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). Tax-exempt shareholders not subject to federal income tax on
their income generally will not be taxed on distributions from the Fund.
42
<PAGE> 45
Shareholders receiving distributions in the form of additional shares issued
by the Fund will be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the distribution date. The basis of such shares will equal the
fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund will be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31 prior to the date of payment. In
addition, certain other distributions made after the close of a taxable year of
the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
shareholders.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.
SALE OF SHARES. The sale of shares (including transfers in connection with a
redemption or repurchase of shares) will be a taxable transaction for federal
income tax purposes. Selling shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
shares and the amount received. If such shares are held as a capital asset, the
gain or loss will be a capital gain or loss and will be long-term if such shares
have been held for more than one year. Any loss realized upon a taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gains dividends received with respect
to such shares. For purposes of determining whether shares have been held for
six months or less, the holding period is suspended for any periods during which
the shareholder's risk of loss is diminished
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<PAGE> 46
as a result of holding one or more other positions in substantially similar or
related property or through certain options or short sales.
GENERAL. The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal tax consequences of holding and disposing of shares, as
well as the effects of state, local and foreign tax law and any proposed tax law
changes.
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FUND PERFORMANCE
- ------------------------------------------------------------------------------
From time to time the Fund may advertise its total return for prior periods.
Any such advertisement would include at least average annual total return
quotations for one-year, five-year and ten-year periods. Other total return
quotations, aggregate or average, over other time periods may also be included.
The total return of the Fund for a particular period represents the increase
(or decrease) in the value of a hypothetical investment in the Fund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; the calculation assumes
the initial investment is made at the current maximum public offering price
(which includes a maximum sales charge of 5.75% for Class A shares); that all
income dividends or capital gains distributions during the period are reinvested
in Fund shares at net asset value; and that any applicable CDSC has been paid.
The Fund's total return will vary depending on market conditions, the securities
comprising the Fund's portfolio, the Fund's operating expenses and unrealized
net capital gains or losses during the period. Since shares of the Fund were
offered at a maximum sales charge of 8.50% prior to June 12, 1989, actual Fund
total return would have been somewhat less than that computed on the basis of
the current maximum sales charge. Total return is based on historical earnings
and asset value fluctuations and is not intended to indicate future performance.
No adjustments are made to reflect any income taxes payable by shareholders on
dividends and distributions paid by the Fund or to reflect the fact no 12b-1
fees were incurred prior to October 1, 1989.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
Total return is calculated separately for Class A shares, Class B shares and
Class C shares. Total return figures for Class A shares include the maximum
sales charge of 5.75%; total return figures for Class B shares and Class C
include any applicable CDSC. Because of the differences in sales charges and
distribution fees, the total returns for each of the classes will differ.
44
<PAGE> 47
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return,
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the ratings or rankings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds, with the Consumer Price Index, the Dow Jones
Industrial Average Index, Standard & Poor's, NASDAQ, other appropriate indices
of investment securities, or with investment or savings vehicles. The
performance information may also include evaluations of the Fund published by
nationally recognized ranking services and by nationally recognized financial
publications. Such comparative performance information will be stated in the
same terms in which the comparative data or indices are stated. Such
advertisements and sales material may also include a yield quotation as of a
current period. In each case, such total return and yield information, if any,
will be calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce Fund
performance. The Fund will include performance data for each class of shares of
the Fund in any advertisement or information including performance data of the
Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
The Fund's Annual Report contains additional performance information. A copy
of the Annual Report may be obtained without charge by calling or writing the
Fund at the telephone number and address printed on the inside back cover page
of this Prospectus.
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<PAGE> 48
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DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------
The Fund was originally incorporated in Delaware on January 23, 1969 and was
reincorporated by merger into a Maryland corporation on September 19, 1973. The
Fund was reorganized as a Delaware business trust on August 5, 1995.
The Fund is authorized to issue an unlimited number of Class A shares, Class B
shares and Class C shares of beneficial interest. Each class of shares
represents an interest in the same assets of the Fund and generally are
identical in all respects except that each class bears certain expenses and has
exclusive voting rights with respect to its distribution fee. The par value for
each class of shares is $0.01 per share.
The Fund is permitted to issue an unlimited number of classes. Other classes
of shares may be established from time to time in accordance with the provisions
of the Fund's Declaration of Trust. Each class of share is equal as to earnings,
assets and voting privileges, except as noted above, and each class bears the
expenses related to the distribution of its shares. Shares issued by the Fund
are fully paid and non-assessable and have no conversion, preemptive or other
subscription rights, except with respect to the conversion of certain shares
into Class A shares as described above. In the event of liquidation, each of the
shares of the Fund is entitled to its portion of all of the Fund's net assets
after all debt and expenses of the Fund have been paid. Since Class B shares and
Class C shares pay higher distribution expenses, the liquidation proceeds to
Class B shareholders and Class C shareholders are likely to be lower than to
other shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. More detailed information concerning the Fund is
set forth in the Statement of Additional Information.
The Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
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ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
An investment in the Fund may not be appropriate for all investors. The Fund
is not intended to be a complete investment program, and investors should
consider their long-term investment goals and financial needs when making an
investment decision with respect to the Fund. An investment in the Fund is
intended to be a long-term investment, and should not be used as a trading
vehicle.
46
<PAGE> 49
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889
FOR TELEPHONE TRANSACTIONS
DIAL (800) 421-5684
VAN KAMPEN AMERICAN CAPITAL
EMERGING GROWTH FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen American Capital
Emerging Growth Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital
Emerging Growth Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICE WATERHOUSE LLP
1201 Louisiana
Suite 2900
Houston, TX 77002
<PAGE> 50
------------------------------------------------------------------------------
EMERGING GROWTH
FUND
------------------------------------------------------------------------------
P R O S P E C T U S
DECEMBER 29, 1996
------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 51
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
Van Kampen American Capital Emerging Growth Fund (the "Fund") is a
diversified, open-end management investment company. This Statement of
Additional Information is not a Prospectus and should be read in conjunction
with the Fund's Prospectus (the "Prospectus"). This Statement of Additional
Information does not include all the information a prospective investor should
consider before purchasing shares of the Fund. Investors should obtain and read
the Prospectus prior to purchasing shares of the Fund. The Statement of
Additional Information and the related Prospectus are both dated December 29,
1996. A copy of the Prospectus may be obtained without charge by writing or
calling Van Kampen American Capital Distributors, Inc., One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 or (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION.......................................................... B-2
INVESTMENT POLICIES AND TECHNIQUES........................................... B-3
INVESTMENT RESTRICTIONS...................................................... B-9
TRUSTEES AND OFFICERS........................................................ B-12
LEGAL COUNSEL................................................................ B-19
INVESTMENT ADVISORY AGREEMENT................................................ B-19
DISTRIBUTOR.................................................................. B-20
DISTRIBUTION AND SERVICE PLANS............................................... B-21
TRANSFER AGENT............................................................... B-21
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................... B-22
DETERMINATION OF NET ASSET VALUE............................................. B-23
PURCHASE AND REDEMPTION OF SHARES............................................ B-23
EXCHANGE PRIVILEGE........................................................... B-27
TAX STATUS OF THE FUND....................................................... B-28
FUND PERFORMANCE............................................................. B-28
OTHER INFORMATION............................................................ B-29
INDEPENDENT ACCOUNTANTS' REPORT.............................................. B-30
FINANCIAL STATEMENTS......................................................... B-31
NOTES TO FINANCIAL STATEMENTS................................................ B-44
</TABLE>
This Statement of Additional Information is dated December 29, 1996
<PAGE> 52
GENERAL INFORMATION
Van Kampen American Capital Emerging Growth Fund, formerly known as
American Capital Emerging Growth Fund, Inc. (the "Fund"), was originally
incorporated in Delaware on January 23, 1969 and reincorporated by merger into a
Maryland corporation on September 19, 1973. On July 24, 1990 the Fund changed
its name from American Capital Venture Fund, Inc. to American Capital Emerging
Growth Fund, Inc. As of August 5, 1995, the Fund was reorganized as a series of
Van Kampen American Capital Emerging Growth Fund (the "Trust"), a Delaware
business trust.
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor"), and ACCESS
Investor Services, Inc. ("ACCESS") are wholly-owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM Holdings
II, Inc. which, in turn, is a wholly-owned subsidiary of Morgan Stanley Group
Inc. The Adviser's principal office is located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.
Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; and global custody, securities clearance services and securities
lending.
VKAC offers one of the industry's broadest lines of
investments -- encompassing mutual funds, closed-end funds and unit investment
trusts -- and is currently the nation's 5th largest broker-sold mutual fund
group according to Strategic Insight, July 1995. VKAC manages or supervises more
than $57 billion in mutual funds, closed-end funds and unit investment
trusts -- assets which have been entrusted to VKAC in more than 2 million
investor accounts. VKAC has one of the largest research teams (outside of the
rating agencies) in the country, with more than 80 analysts devoted to various
specializations.
VKAC equity fund philosophy is to normally remain fully invested and
diversified across many industries to achieve consistent long-term returns.
VKAC uses a four-step investment process designed to attempt to produce
consistently good short-term results, which should help lead to superior
long-term performance.
Fully Invested: Money invested in a VKAC stock fund will normally be fully
invested in the market to attempt to maximize the potential for long-term
returns. The importance of being fully invested can be illustrated by the
following comparison. By missing fewer than four percent of the months during
the past 68 years, the value of one dollar invested in 1926 was $11.57 at the
end of 1994, compared to $810.54 for one dollar that was invested for the entire
period (Source: Micropal, Inc.). During the most recent five-year period
(1990-1994), the average annual total return for stocks, as measured by the
Standard and Poor's 500 Stock Index, a broad-based, unmanaged index, was 8.87
percent. However, the average annual return for the S&P 500 for the same period
excluding the 20 best days for stock market performance, was just 0.67 percent.
Of course, past performance is no guarantee of future results.
Widely Varied: A widely varied portfolio usually reduces risk and increases
relative stability. Since VKAC's goal is consistency, a widely varied portfolio
across industries is emphasized. VKAC stock funds are varied both in terms of
the number of industries and the number of stocks within each industry in which
they invest. Generally, the stock funds invest in 12 broad economic sectors, and
in many individual stocks within each sector.
Clearly Defined: The basic characteristics of VKAC funds are determined by
a pre-defined profile which remains constant over time.
B-2
<PAGE> 53
Blended Investment Style: Market conditions are constantly changing, which
means the stocks that perform well should be expected to change. A rigid
investment style might cause an investor to suffer when certain types of stocks
lose favor with the market. The two most common investment styles are growth,
which emphasizes companies that are projected to experience rapid growth in
earnings, and value, which focuses on companies whose stock is selling for less
than the company's net worth. At VKAC, our style is blended between growth and
value on a fund-specific basis. The results of our approach are constantly
evaluated and compared to other similar funds. Although past performance is no
guarantee of future results, VKAC remains committed to our belief that this
approach should help maximize potential for long-term returns.
As of December 6, 1996, no person was known by the Fund to own beneficially
or to hold of record 5% or more of the outstanding Class A shares, Class B
shares or Class C shares of the Fund, except as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF CLASS OF PERCENTAGE
OF HOLDER OWNERSHIP SHARES OWNERSHIP
- ----------------------------------------------------------- ----------- --------- ----------
<S> <C> <C> <C>
Record Holders Only:
Van Kampen American Capital Trust Company.................. 13,742,139 A 30.85%
2800 Post Oak Blvd. 8,969,484 B 34.46%
Houston, TX 77056 242,868 C 8.47%
Citibank, N.A. Trustee..................................... 44,540,897 A 6.34%
Travelers, Inc.
401(k) Savings Plan
Attn: Nancy Kronenberg
20th Floor
111 Wall Street
New York, New York 10043-1000
Merrill Lynch Pierce Fenner & Smith Inc. .................. 2,866,141 C 10.43%
For the Sole Benefit of its Customers
Attn Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246-6484
</TABLE>
Van Kampen American Capital Trust Company acts as custodian for certain employee
benefit plans and independent retirement accounts.
INVESTMENT POLICIES AND TECHNIQUES
The following disclosures supplement disclosures set forth in the
Prospectus. Readers must refer also to the Prospectus for a complete
presentation.
The following investment techniques, subject to the Investment Restrictions
below, may be employed by the Fund. These techniques inherently involve the
assumption of a higher degree of risk than normal and the possibility of more
volatile price fluctuations. Investment in the Fund should not be viewed as a
complete investment program and prospective investors are advised to give full
consideration to the risks inherent in the investment techniques used by the
Fund.
Restricted Securities -- The Fund may invest up to 10% of the value of its
net assets in restricted securities (i.e., securities which may not be sold
without registration under the Securities Act of 1933 (the "1933 Act")) and in
other securities that are not readily marketable, including repurchase
agreements maturing in more than seven days. Restricted securities are generally
purchased at a discount from the market price of unrestricted securities of the
same issuer. Investments in restricted securities are not readily marketable
without some time delay. Investments in securities which have no readily
available market value are valued at fair value as determined in good faith by
the Fund's Board of Trustees. Ordinarily, the Fund would invest in restricted
securities only when it receives the issuer's commitment to register the
securities without expense to the Fund. However, registration and underwriting
expenses (which may range from 7% to
B-3
<PAGE> 54
15% of the gross proceeds of the securities sold) may be paid by the Fund. A
Fund position in restricted securities might adversely affect the liquidity and
marketability of such securities, and the Fund might not be able to dispose of
its holdings in such securities at reasonable price levels. For purposes hereof,
investments by the Fund in securities of other investment companies are not
considered restricted securities to the extent permitted by (i) the Investment
Company Act of 1940, as amended (the "1940 Act") from time to time, (ii) the
rules and regulations promulgated by the Securities and Exchange Commission
("SEC") under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief from the provisions of the 1940 Act.
No more than 5% of the total assets of the Fund at the time of purchase
will be invested in either restricted securities or warrants. For purposes
hereof, investments by the Fund in securities of other investment companies are
not considered restricted securities to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief from the provisions of the 1940 Act.
Warrants -- Warrants are in effect longer-term call options. They give the
holder the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price of
the warrant plus the exercise price of the warrant, thus giving him a profit. Of
course, since the market price may never exceed the exercise price before the
expiration date of the warrant, the purchaser of the warrant risks the loss of
the entire purchase price of the warrant. Warrants generally trade in the open
market and may be sold rather than exercised. Warrants are sometimes sold in
unit form with other securities of an issuer. Units of warrants and common stock
may be employed in financing young, unseasoned companies. The purchase price of
a warrant varies with the exercise price of the warrant, the current market
value of the underlying security, the life of the warrant and various other
investment factors. No more than 5% of the total assets of the Fund at the time
of purchase will be invested in either warrants or restricted securities. For
purposes hereof, investments by the Fund in securities of other investment
companies are not considered restricted securities to the extent permitted by
(i) the 1940 Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time, or
(iii) an exemption or other relief from the provisions of the 1940 Act.
Repurchase Agreements -- The Fund may enter into repurchase agreements with
domestic banks or broker-dealers. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the purchaser's holding period. Repurchase
agreements are collateralized by the underlying debt securities and may be
considered to be loans under the 1940 Act. The Fund will make payment for such
securities only upon physical delivery or evidence of book entry transfer to the
account of a custodian or bank acting as agent. The seller under a repurchase
agreement will be required to maintain the value of the underlying securities
marked to market daily at not less than the repurchase price. The underlying
securities (securities of the U.S. Government, or its agencies and
instrumentalities) may have maturity dates exceeding one year. The Fund does not
bear the risk of a decline in value of the underlying security unless the seller
defaults under its repurchase obligation. See "Investment
Practices -- Repurchase Agreements" in the Prospectus for further information.
OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS
WRITING CALL AND PUT OPTIONS
Purpose. The principal reason for writing options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. Such current return could be expected to fluctuate
because premiums earned from an option writing program and dividend or interest
income yields on portfolio securities vary as economic and market conditions
change. Writing options on portfolio securities is likely to result in a higher
portfolio turnover rate.
B-4
<PAGE> 55
Writing Options. The purchaser of a call option pays a premium to the
writer (i.e., the seller) for the right to buy the underlying security from the
writer at a specified price during a certain period. The Fund would write call
options only on a covered basis, which means that, at all times during the
option period, the Fund would own or have the right to acquire securities of the
type that it would be obligated to deliver if any outstanding option were
exercised.
The purchaser of a put option pays a premium to the writer (i.e., the
seller) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would write put options only
on a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its Custodian cash, cash
equivalents or liquid securities in an amount of not less than the exercise
price of the option, or would hold a put on the same underlying security at an
equal or greater exercise price.
Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a writer of a call or put option, the Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously written by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is less (greater) than the premium it received on the sale of the
option. The Fund would also realize a gain if an option it has written lapses
unexercised.
The Fund could write options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. A Fund
could close out its position as a writer of an option only if a liquid secondary
market exists for options of that series, but there is no assurance that such a
market will exist, particularly in the case of over-the-counter options, since
they can be closed out only with the other party to the transaction.
Alternatively, the Fund could purchase an offsetting option, which would not
close out its position as a writer, but would provide an asset of equal value to
its obligation under the option written. If the Fund is not able to enter into a
closing purchase transaction or to purchase an offsetting option with respect to
an option it has written, it will be required to maintain the securities subject
to the call or the collateral underlying the put until a closing purchase
transaction can be entered into (or the option is exercised or expires) even
though it might not be advantageous to do so.
Risks of Writing Options. By writing a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by writing a put option a Fund might become obligated to
purchase the underlying security at an exercise price that exceeds the then
current market price.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security (whether or not
covered) that may be written by a single investor, whether acting alone or in
concert with others, regardless of whether such options are written on one or
more accounts or through one or more brokers. An exchange may order the
liquidation of positions found to be in violation of those limits, and it may
impose other sanctions or restrictions. These position limits may restrict the
number of options the Fund may be able to write.
PURCHASING CALL AND PUT OPTIONS
The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire.
Alternatively, call options could be purchased for capital appreciation. Since
the premium paid for a call option is typically a small fraction of the price of
the underlying security, a given amount of funds will purchase call options
covering a much larger quantity of such security than could be purchased
directly. By purchasing call options, the Fund could benefit from any
significant increase in the price of the underlying security to a greater extent
than had it invested the same amount in the security directly. However, because
of the very high volatility of option premiums, the Fund would bear a
significant risk of losing the entire premium if the price of the underlying
security did not rise sufficiently, or if it did not do so before the option
expired.
Put options may be purchased to protect (i.e., hedge) against anticipated
declines in the market value of either specific portfolio securities or of the
Fund's assets generally. Alternatively, put options may be
B-5
<PAGE> 56
purchased for capital appreciation in anticipation of a price decline in
the underlying security and a corresponding increase in the value of the put
option. The purchase of put options for capital appreciation involves the same
significant risk of loss as described above for call options.
In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.
OPTIONS ON STOCK INDEXES
Options on stock indexes are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash upon exercise of the option. Receipt of this
cash amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received
will be the difference between the closing price of the index and the exercise
price of the option, multiplied by a specified dollar multiple. The writer of
the option is obligated, in return for the premium received, to make delivery of
this amount.
Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indexes are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on The Chicago Board Options Exchange, the American Stock Exchange and other
exchanges.
Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.
FUTURES CONTRACTS
The Fund may engage in transactions involving futures contracts and related
options in accordance with the rules and interpretations of the Commodity
Futures Trading Commission ("CFTC") under which the Fund is exempt from
registration as a "commodity pool."
A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of cash equal to a specified dollar amount times
the difference between the stock index value at a specified time and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made.
An interest rate futures contract is an agreement pursuant to which a party
agrees to take or make delivery of a specified debt security (such as U.S.
Treasury bonds or notes) at a specified future time and at a specified price.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its Custodian in an
account in the broker's name an amount of cash, cash equivalents or liquid
securities equal to a percentage (which will normally range between 2 and 10%)
of the contract amount. This amount is known as initial margin. The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transaction. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract, which is returned to the Fund upon termination of the futures
contract and satisfaction of its contractual obligations. Subsequent payments to
and from the broker, called variation margin, are made on a daily basis as the
price of the underlying securities or index fluctuates, making the long and
short positions in the futures contract more or less valuable, a process known
as marking to market.
B-6
<PAGE> 57
For example, when the Fund purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund will receive from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund has purchased a futures contract
and the value of the underlying security has declined, the position would be
less valuable, and the Fund would be required to make a variation margin payment
to the broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract
serves as a temporary substitute for the purchase of individual securities,
which may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
substantially reduces the risk to the Fund of a market decline and, by so doing,
provides an alternative to the liquidation of securities positions in the Fund
with attendant transaction costs.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays and/or losses in liquidating open positions purchased or incur
a loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
The Fund also may invest in foreign stock index futures traded outside the
United States. Foreign stock index futures traded outside the United States
include the Nikkei Index of 225 Japanese stocks traded on the Singapore
International Monetary Exchange ("Nikkei Index"), Osaka Index of 50 Japanese
stocks traded on the Osaka Exchange, Financial Times Stock Exchange Index of the
100 largest stocks on the London Stock Exchange, the All Ordinaries Share Price
Index of 307 stocks on the Sydney, Melbourne Exchanges, Hang Seng Index of 33
stocks on the Hong Kong Stock Exchange, Barclays Share Price Index of 40 stocks
on the New Zealand Stock Exchange and Toronto Index of 35 stocks on the Toronto
Stock Exchange. Futures and futures options on the Nikkei Index are traded on
the Chicago Mercantile Exchange and United States commodity exchanges may
develop futures and futures options on other indices of foreign securities.
Futures and options on United States devised index of foreign stocks are also
being developed. Investments in securities of foreign entities and securities
denominated in foreign currencies involve risks not typically involved in
domestic investment, including fluctuations in foreign exchange rates, future
foreign political and economic developments, and the possible imposition of
exchange controls or other foreign or United States governmental laws or
restrictions applicable to such investments.
Special Risks Associated with Futures Transactions. There are several risks
connected with the use of futures contracts as a hedging device. These include
the risk of imperfect correlation between movements in the price of the futures
contracts and of the underlying securities, the risk of market distortion, the
illiquidity risk and the risk of error in anticipating price movement.
There may be an imperfect correlation (or no correlation) between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for the imperfect correlation, the Fund could buy or sell futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the securities being hedged is greater than the
historical volatility of the securities underlying the futures contract.
Conversely, the Fund could buy or sell futures contracts in a lesser dollar
amount than the dollar amount of securities being hedged if the historical
volatility of the securities being hedged is less than the historical
B-7
<PAGE> 58
volatility of the securities underlying the futures contract. It is also
possible that the value of futures contracts held by the Fund could decline at
the same time as portfolio securities being hedged; if this occurred, the Fund
would lose money on the futures contract in addition to suffering a decline in
value in the portfolio securities being hedged.
There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities or index underlying the
futures contract due to certain market distortions. First, all participants in
the futures market are subject to margin depository and maintenance
requirements. Rather than meet additional margin depository requirements,
investors may close futures contracts through offsetting transactions, which
could distort the normal relationship between the futures market and the
securities or index underlying the futures contract. Second, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions. Due to the possibility of price distortion in the futures markets
and because of the imperfect correlation between movements in futures contracts
and movements in the securities underlying them, a correct forecast of general
market trends by the Adviser may still not result in a successful hedging
transaction.
There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
CFTC regulations require, among other things, (i) that futures and related
options be used solely for bona fide hedging purposes (or meet certain
conditions as specified in CFTC regulations) and (ii) that the Fund not enter
into futures and related options for which the aggregate initial margin and
premiums exceed 5% of the fair market value of the Fund's assets. In order to
prevent leverage in connection with the purchase of futures contracts by the
Fund, an amount of cash, cash equivalents or liquid securities equal to the
market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the Custodian.
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purpose as, it could sell a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to
B-8
<PAGE> 59
offset part of the cost of the strategy to the Fund. The purchase of call
options on futures contracts would be intended to serve the same purpose as the
actual purchase of the futures contracts.
Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Adviser will not purchase
options on futures on any exchange unless in the Adviser's opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances, such as when
there is no movement in the level of the index or in the price of the underlying
security, when the use of an option on a future would result in a loss to the
Fund when the use of a future would not.
ADDITIONAL RISKS OF OPTIONS AND FUTURES TRANSACTIONS
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written on
one or more accounts or through one or more brokers). Option positions of all
investment companies advised by the Adviser are combined for purposes of these
limits. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in a futures contract and thus provide an offset to
losses on the futures contract.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which cannot be changed
without approval by the vote of a majority of the outstanding voting shares
which is defined in 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 of the Fund are present or represented by proxy;
or (ii) more than 50% of the Fund's outstanding voting securities. The
percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities. These restrictions provide
that the Fund shall not:
1. Invest in companies for the purpose of exercising control over or
management of such companies, except that the Fund may purchase
securities of other investment companies to the extent permitted by (i)
the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions
of the 1940 Act;
2. Underwrite securities of other issuers, except that the Fund may acquire
restricted securities and other securities which, if sold, might make
the Fund an underwriter for purposes of the Securities Act of 1933. No
more than 10% of the value of the Fund's net assets may be invested in
such securities;
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<PAGE> 60
3. Invest directly in real estate interests of any nature, although the
Fund may invest indirectly through media such as real estate investment
trusts;
4. Invest in commodities or commodity contracts, except that the Fund may
enter into transactions in futures contracts or related options;
5. Issue any of its securities for (a) services or (b) property other than
cash or securities (including securities of which the Fund is the
issuer), except as a dividend or distribution to its shareholders in
connection with a reorganization;
6. Issue senior securities and shall not borrow money except from banks as
a temporary measure for extraordinary or emergency purposes and in an
amount not exceeding 5% of the Fund's total assets. Notwithstanding the
foregoing, the Fund may enter into transactions in options, futures
contracts and related options and may make margin deposits and payments
in connection therewith;
7. Lend money or securities except by the purchase of a portion of an issue
of bonds, debentures or other obligations of types commonly distributed
to institutional investors publicly or privately (in the latter case the
investment will be subject to the stated limits on investments in
"restricted securities"), and except by the purchase of securities
subject to repurchase agreements;
8. Invest more than 25% of the value of its assets in any one industry;
9. The Fund may not invest in securities issued by other investment
companies except as part of a merger, reorganization or other
acquisition and except to the extent permitted by (i) the 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act;
10. Sell short or borrow for short sales. Short sales "against the box" are
not subject to this limitation; or
11. As to 75% of the Fund's total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer (not including
federal government securities) or acquire more than 10% of any class of
the outstanding voting securities of any one issuer, except that the
Fund may purchase securities of other investment companies to the
extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940
Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act.
Thus the Fund retains the right to invest up to 25% of the value of its
total assets in one company, but intends to do so only if a particular company
is believed to afford better than average prospects for market appreciation at a
time when general business conditions and trends in the market as a whole are
considered to make greater diversification less desirable. Although the Fund may
invest in real estate investment trusts, it does not presently intend to do so.
ADDITIONAL RESTRICTIONS -- The Fund has also undertaken to one or more states to
abide by additional restrictions so long as its securities are registered for
sale in such states. These limitations may change from time to time as permitted
by such states. The most restrictive restrictions presently in effect are that
the Fund shall not:
1. Invest in warrants in excess of 5% of its net assets (including, but not
to exceed 2% in warrants which are not listed on the New York or
American Stock Exchanges);
2. Invest in securities of any company if, to the knowledge of the Fund,
any officer or director of the Fund or of the Adviser owns more than
1/2 of 1% of the outstanding securities of such company, and such
officers and directors who own more than 1/2 of 1%, own in the aggregate
more than five percent of the outstanding securities of such company;
3. Purchase securities of issuers which have a record of less than three
years continuous operation if such purchase would cause more than 5% of
the Fund's total assets to be invested in securities of such issuers,
except that the Fund may purchase securities of other investment
companies to the
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<PAGE> 61
extent permitted by (i) the 1940 Act, as amended from time to time, (ii)
the rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act;
4. Invest more than 10% of its net assets in illiquid securities, including
securities that are not readily marketable, restricted securities (for
purposes hereof, investment by the Fund in securities of other
investment companies are not considered restricted securities to the
extent permitted by (i) the 1940 Act, as amended from time to time, (ii)
the rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act) and repurchase agreements that have a
maturity of more than seven days;
5. Invest in interests in oil, gas, or other mineral exploration or
developmental programs, except through the purchase of liquid securities
of companies which engage in such businesses; or
6. Pledge, mortgage or hypothecate its portfolio securities or other assets
to the extent that the percentage of pledged assets plus the sales load
exceeds ten percent of the offering price of the Fund's shares.
The Fund has also undertaken that its Distributor, Adviser, the officers
and the directors of such companies and of the Fund will not take short
positions in securities issued by the Fund.
In addition to the foregoing, the Fund has undertaken to a certain state
that at least 30 days prior to any change by the Fund in its investment
objective or goal, the Fund will provide written notice to all of its
shareholders in that state regarding such proposed change.
B-11
<PAGE> 62
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and their principal occupations for the last five
years and their affiliations, if any, with Van Kampen American Capital
Investment Advisory Corp. (the "VK Adviser"), Van Kampen American Capital Asset
Management, Inc. (the "AC Adviser"), Van Kampen American Capital Distributors,
Inc. (the "Distributor"), Van Kampen American Capital, Inc. ("Van Kampen
American Capital"), VK/AC Holding, Inc. or ACCESS Investor Services, Inc.
("ACCESS"). For purposes hereof, the terms "Van Kampen American Capital Funds"
or "Fund Complex" includes each of the open-end investment companies advised by
the VK Adviser (excluding The Explorer Institutional Trust) and each of the
open-end investment companies advised by the AC Adviser (excluding the Van
Kampen American Capital Exchange Fund and the Common Sense Trust).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
1632 Morning Mountain Road President of MDT Corporation, a company which develops
Raleigh, NC 27614 manufactures, markets and services medical and scientific
Date of Birth: 07/14/32 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Linda Hutton Heagy................. Managing Partner, Paul Ray Berndtson, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Date of Birth: 06/03/49 of La Salle National Bank. Trustee of each of the Van
Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of the Van
Lyme, CT 06371 Kampen American Capital Funds.
Date of Birth: 11/23/19
R. Craig Kennedy................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. Trustee of
each of the Van Kampen American Capital Funds.
Dennis J. McDonnell*............... President, Chief Operating Officer and a Director of the
One Parkview Plaza VK Adviser, the AC Adviser, Van Kampen American Capital
Oakbrook Terrace, IL 60181 Advisors, Inc. and Van Kampen American Capital
Date of Birth: 05/20/42 Management, Inc. Executive Vice President and a Director
of VK/AC Holding, Inc. and Van Kampen American Capital.
President and Director of Van Kampen Merritt Equity
Advisors Corp. Director of Van Kampen Merritt Equity
Holdings Corp. Director of McCarthy, Crisanti & Maffei,
Inc. Prior to September 1996, Chief Executive Officer
McCarthy, Crisanti & Maffei, Inc. and Chairman and
Director of MCM Asia Pacific Company, Limited. Prior to
July 1996, President, Chief Operating Officer and Trustee
of VSM Inc. and VCJ Inc. President, Chief Executive
Officer and Trustee of each of the Van Kampen American
Capital Funds. President, Chairman of the Board and
Trustee of other investment companies advised by the VK
Adviser. Executive Vice President of other investment
companies advised by the AC Adviser.
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Date of Birth: 03/31/20 Trust Company of Chicago and Continental Illinois
Corporation. Trustee and Co-Chairman of each of the Van
Kampen American Capital Funds.
Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Date of Birth: 02/13/36 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. ("SIPC"). Trustee of each of
the Van Kampen American Capital Funds.
Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Date of Birth: 10/10/22 software programming company specializing in white collar
productivity. Director of Panasia Bank. Trustee of each
of the Van Kampen American Capital Funds.
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995, Dean
155 Hickory Lane of Graduate School and Chairman, Department of Mechanical
Closter, NJ 07624-2322 Engineering, Stevens Institute of Technology. Director of
Date of Birth: 08/02/24 Dynalysis of Princeton, a firm engaged in engineering
research. Trustee and Co-Chairman of each of the Van
Kampen American Capital Funds.
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the Van Kampen
Chicago, IL 60606 American Capital Funds, The Explorer Institutional Trust
Date of Birth: 08/22/39 and the closed-end investment companies advised by the VK
Adviser. Trustee of each of the Van Kampen American
Capital Funds, The Explorer Institutional Trust and the
closed-end investment companies advised by the VK
Adviser.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Date of Birth: 01/31/22 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>
- ---------------
* Such trustees are "interested persons" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. McDonnell is an interested person of the VK
Adviser, the AC Adviser and the Fund by reason of his positions with the VK
Adviser and the AC Adviser. Mr. Whalen is an interested person of the Fund by
reason of his firm acting as legal counsel to the Fund.
B-13
<PAGE> 64
OFFICERS
The address for Curtis W. Morell, Alan T. Sachtleben, Paul R. Wolkenberg,
Tanya M. Loden, Huey P. Falgout, Jr. and Robert Sullivan is 2800 Post Oak Blvd.,
Houston, TX 77056. The address for Peter W. Hegel, Ronald A. Nyberg, Edward C.
Wood III, John L. Sullivan, Nicholas Dalmaso, Scott E. Martin, Weston B.
Wetherell and Steven M. Hill is One Parkview Plaza, Oakbrook Terrace, IL 60181.
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Peter W. Hegel.......... Vice President Executive Vice President of the VK Adviser,
Date of Birth: AC Adviser, Van Kampen American Capital
06/25/56 Management, Inc. and Van Kampen American
Capital Advisors, Inc. Prior to September
1996, Director of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Director
of VSM Inc. Vice President of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Curtis W. Morell........ Vice President and Senior Vice President of the VK Adviser and
Date of Birth: Chief Accounting the AC Adviser. Vice President and Chief
08/04/46 Officer Accounting Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Ronald A. Nyberg........ Vice President and Executive Vice President, General Counsel
Date of Birth: Secretary and Secretary of Van Kampen American
07/29/53 Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen Merritt Equity Advisors Corp. and
Van Kampen Merritt Equity Holdings Corp.
Executive Vice President, General Counsel
and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van
Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc. and ACCESS. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen
American Capital Trust Company. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to September 1996,
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Executive
Vice President and General Counsel of VSM
Inc. and VCJ Inc. Vice President and
Secretary of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Alan T. Sachtleben...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
04/20/42 Inc. Executive Vice President and a
Director of the AC Adviser and Van Kampen
American Capital Advisors, Inc. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
</TABLE>
B-14
<PAGE> 65
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Paul R. Wolkenberg...... Vice President Executive Vice President of VK/AC Holding,
Date of Birth: Inc., Van Kampen American Capital, the
11/10/44 Distributor and the AC Adviser. President,
Chief Executive Officer and a Director of
Van Kampen American Capital Trust Company
and ACCESS. Director of American Capital
Contractual Services, Inc. Vice President
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Edward C. Wood III...... Vice President and Senior Vice President of the VK Adviser,
Date of Birth: Chief Financial Officer the AC Adviser and Van Kampen American
01/11/56 Capital Management, Inc. Vice President and
Chief Financial Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
John L. Sullivan........ Treasurer First Vice President of the VK Adviser and
Date of Birth: the AC Adviser. Treasurer of each of the
08/20/55 Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Tanya M. Loden.......... Controller Vice President of the VK Adviser and the AC
Date of Birth: Adviser. Controller of each of the Van
11/19/59 Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Nicholas Dalmaso........ Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
03/01/65 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser and Van Kampen
American Capital Management, Inc. Assistant
Vice President of Van Kampen American
Capital Advisors, Inc. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
Huey P. Falgout, Jr..... Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
11/15/63 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and ACCESS. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
</TABLE>
B-15
<PAGE> 66
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Scott E. Martin......... Assistant Secretary Senior Vice President, Deputy General
Date of Birth: Counsel and Assistant Secretary of Van
08/20/56 Kampen American Capital and VK/AC Holding,
Inc. Senior Vice President, Deputy General
Counsel and Secretary of the VK Adviser,
the AC Adviser, the Distributor, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc., ACCESS, Van Kampen Merritt
Equity Advisors Corp. and Van Kampen
Merritt Equity Holdings Corp. Prior to
September 1996, Deputy General Counsel and
Secretary of McCarthy, Crisanti & Maffei,
Inc. Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Weston B. Wetherell..... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: and Assistant Secretary of Van Kampen
06/15/56 American Capital, the VK Adviser, the AC
Adviser, the Distributor, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Steven M. Hill.......... Assistant Treasurer Assistant Vice President of the VK Adviser
Date of Birth: and AC Adviser. Assistant Treasurer of each
10/16/64 of the Van Kampen American Capital Funds
and other investment companies advised by
the VK Adviser and the AC Adviser.
Robert Sullivan......... Assistant Controller Assistant Vice President of the VK Adviser
Date of Birth: and the AC Adviser. Assistant Controller of
03/30/33 each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser.
</TABLE>
Each of the foregoing trustees and officers holds the same position with
each of the funds in the Fund Complex. As of December 31, 1995, there were 50
funds in the Fund Complex. Each trustee who is not an affiliated person of the
VK Adviser, the AC Adviser, the Distributor or Van Kampen American Capital (each
a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting
fees for services to the funds in the Fund Complex. Each fund in the Fund
Complex provides a deferred compensation plan to its Non-Affiliated Trustees
that allows trustees to defer receipt of his or her compensation and earn a
return on such deferred amounts based upon the return of the common shares of
the funds in the Fund Complex as more fully described below. Each fund in the
Fund Complex also provides a retirement plan to its Non-Affiliated Trustees that
provides Non-Affiliated Trustees with compensation after retirement, provided
that certain eligibility requirements are met as more fully described below.
The compensation of each Non-Affiliated Trustee includes a retainer by the
funds in the Fund Complex advised by the AC Adviser (the "AC Funds") in an
amount equal to $35,000 per calendar year, due in four quarterly installments on
the first business day of each calendar quarter. The AC Funds pay each
Non-Affiliated Trustee a per meeting fee in the amount of $2,000 per regular
quarterly meeting attended by the Non-Affiliated Trustee, due on the date of
such meeting, plus reasonable expenses incurred by the
B-16
<PAGE> 67
Non-Affiliated Trustee in connection with his or her services as a trustee.
Payment of the annual retainer and the regular meeting fee is allocated among
the AC Funds (i) 50% on the basis of the relative net assets of each AC Fund to
the aggregate net assets of all the AC Funds and (ii) 50% equally to each AC
Fund, in each case as of the last business day of the preceding calendar
quarter. Each AC Fund participating in any special meeting of the trustees
generally pays each Non-Affiliated Trustee a per meeting fee in the amount of
$125 per special meeting attended by the Non-Affiliated Trustee, due on the date
of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee
in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.
The trustees have approved an aggregate compensation cap with respect to
funds in the Fund Complex of $84,000 per Non-Affiliated Trustee per year
(excluding any retirement benefits) for the period July 22, 1995 through
December 31, 1996, subject to the net assets and the number of funds in the Fund
Complex as of July 21, 1995 and certain other exceptions. In addition, each of
the VK Adviser or the AC Adviser, as the case may be, has agreed to reimburse
each fund in the Fund Complex through December 31, 1996 for any increase in the
aggregate trustee's compensation over the aggregate compensation paid by such
fund in its 1994 fiscal year, provided that if a fund did not exist for the
entire 1994 fiscal year appropriate adjustments will be made.
Each Non-Affiliated Trustee can elect to defer receipt of all or a portion
of the compensation earned by such Non-Affiliated Trustee until retirement.
Amounts deferred are retained by the Fund and earn a rate of return determined
by reference to the return on the common shares of the Fund or other funds in
the Fund Complex as selected by the respective Non-Affiliated Trustee. To the
extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
The Fund adopted a retirement plan on January 25, 1996. Under the Fund's
retirement plan, a Non-Affiliated Trustee who is receiving trustee's fees from
the Fund prior to such Non-Affiliated Trustee's retirement, has at least ten
years of service and retires at or after attaining the age of 60, is eligible to
receive a retirement benefit equal to $2,500 per year for each of the ten years
following such trustee's retirement. Trustees retiring prior to the age of 60 or
with fewer than 10 years but more than 5 years of service may receive reduced
retirement benefits from a series. The retirement plan contains a Fund Complex
retirement benefit cap of $60,000 per year. The AC Adviser will reimburse the
Fund for expenses related to the retirement plan through December 31, 1996.
B-17
<PAGE> 68
Additional information regarding compensation and benefits for trustees is
set forth below. The "Registrant" is the Trust, which currently consists of one
operating series. As indicated in the notes accompanying the table, the amounts
relate to either the Registrant's last fiscal year ended August 31, 1996 or the
Fund Complex' last calendar year ended December 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
ESTIMATED TOTAL
PENSION OR ANNUAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS BEFORE DEFERRAL
COMPENSATION BENEFITS ACCRUED FROM FROM REGISTRANT
BEFORE DEFERRAL AS PART OF REGISTRANT AND FUND
FROM REGISTRANT UPON COMPLEX PAID TO
NAME(1) REGISTRANT(2) EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
- --------------------------------------- ---------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan...................... $3,155 $-0- $ 2,500 $84,250
Dr. Richard E. Caruso.................. 600 -0- -0- 57,250
Philip P. Gaughan...................... 1,230 -0- -0- 76,500
Linda Hutton Heagy..................... 2,775 -0- 2,500 38,417
Dr. Roger Hilsman...................... 3,090 -0- 2,500 91,250
R. Craig Kennedy....................... 2,980 -0- 2,500 92,625
Donald C. Miller....................... 2,940 -0- -0- 94,625
Jack E. Nelson......................... 3,090 -0- 2,500 93,625
David Rees............................. 2,300 -0- 2,500 83,250
Jerome L. Robinson..................... 3,090 -0- -0- 89,375
Lawrence J. Sheehan.................... 1,510 -0- -0- 91,250
Dr. Fernando Sisto..................... 3,160 -0- 2,500 98,750
Wayne W. Whalen........................ 3,090 -0- 2,500 93,375
William S. Woodside.................... 3,090 -0- 2,500 79,125
</TABLE>
- ---------------
(1) Mr. McDonnell, a trustee of the Trust, is an affiliated person of the VK
Adviser and AC Adviser and is not eligible for compensation or retirement
benefits from the Registrant. Messrs. Gaughan, Kennedy, Miller, Nelson,
Robinson and Whalen were elected by shareholders to the Board of Trustees on
July 21, 1995. Ms. Heagy was appointed to the Board of Trustees on September
7, 1995. Mr. McDonnell was appointed to the Board of Trustees on January 30,
1996. Mr. Don G. Powell resigned from the Board of Trustees on August 15,
1996, and did not receive any compensation or benefits from the Fund while a
trustee because he was an affiliated person of the VK Adviser and AC
Adviser. Messrs. Gaughan and Rees retired from the Board of Trustees on
January 26, 1996 and January 29, 1996, respectively. Messrs. Caruso and
Sheehan were removed from the Board of Trustees effective September 7, 1995
and January 29, 1996, respectively.
(2) The amounts shown in this column are aggregated from the compensation paid
by each series in operation during the Registrant's fiscal year ended August
31, 1996 before deferral by the trustees under the deferred compensation
plan. The following trustees deferred all or a portion of their compensation
from the Registrant during the fiscal year ended August 31, 1996: Dr.
Caruso, $600; Mr. Gaughan, $630; Ms. Heagy, $2,060; Mr. Kennedy, $2,360; Mr.
Miller, $2,210; Mr. Nelson, $2,360; Mr. Rees, $790; Mr. Robinson, $2,360;
Dr. Sisto, $670; and Mr. Whalen, $2,360. The cumulative deferred
compensation (including interest) accrued with respect to each trustee from
the Registrant as of August 31, 1996 is as follows: Dr. Caruso, $13,431; Mr.
Gaughan, $767; Ms. Heagy, $2,387; Mr. Kennedy, $2,724; Mr. Miller, $2,541;
Mr. Nelson, $2,724; Mr. Rees, $36,787; Mr. Robinson, $2,724; Dr. Sisto,
$24,587; and Mr. Whalen, $2,724. The deferred compensation plan is described
above the Compensation Table. Amounts deferred are retained by the Fund and
earn a rate of return determined by reference to either the return on the
common shares of the Fund or other funds in the Fund Complex as selected by
the respective Non-Affiliated Trustee. To the extent permitted by the 1940
Act, the Fund may invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation.
(3) The amounts shown in this column are zero in the Fund's fiscal year ended
August 31, 1996 because the Adviser has agreed to reimburse the Fund for
expenses related to the retirement plan through December 31, 1996. Absent
such reimbursement, the aggregate expenses of the Fund for all trustees
would have been approximately $10,500 in its fiscal year ended August 31,
1996. The Retirement Plan is described above the Compensation Table.
B-18
<PAGE> 69
(4) The amounts shown in this column are the estimated annual benefits payable
by the Registrant in each year of the 10-year period commencing in the year
of such trustee's retirement from the Registrant (based on $2,500 per series
for each series of the Registrant in operation) assuming: the trustee has 10
or more years of service on the Board of the respective series and retires
at or after attaining the age of 60. The actual annual benefit may be less
if the trustee is subject to the Fund Complex retirement benefit cap or if
the trustee is not fully vested at the time of retirement.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1995, before
deferral by the trustees under the deferred compensation plan. The following
trustees deferred compensation paid by the Registrant and the Fund Complex
during the calendar year ended December 31, 1995; Dr. Caruso, $41,750; Mr.
Gaughan, $57,750; Ms. Heagy, $8,750; Mr. Kennedy, $65,875; Mr. Miller,
$65,875; Mr. Nelson, $65,875; Mr. Rees, $8,375; Mr. Robinson, $62,375; Dr.
Sisto, $30,260; and Mr. Whalen, $65,625. The deferred compensation earns a
rate of return determined by reference to the return on the common shares of
the Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee. To the extent permitted by the 1940 Act, the Fund
may invest in securities of those funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
trustees' Fund Complex compensation cap commenced on July 22, 1995 and
covered the period between July 22, 1995 and December 31, 1995. Compensation
received prior to July 22, 1995 was not subject to the cap. For the calendar
year ended December 31, 1995, while certain trustees received compensation
over $84,000 in the aggregate, no trustee received compensation in excess of
the pro rata amount of the Fund Complex cap for the period July 22, 1995
through December 31, 1995. In addition to the amounts set forth above,
certain trustees received lump sum retirement benefit distributions not
subject to the cap in 1995 related to three mutual funds that ceased
investment operations during 1995 as follows: Mr. Gaughan, $22,136; Mr.
Miller, $33,205; Mr. Nelson, $30,851; Mr. Robinson, $11,068; and Mr. Whalen,
$27,332. The VK Adviser, AC Adviser and their affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. McDonnell and Whalen, the trustees were not trustees of
such investment companies. Combining the Fund Complex with other investment
companies advised by the VK Adviser, AC Adviser and their affiliates, Mr.
Whalen received Total Compensation of $268,857 during the calendar year
ended December 31, 1995.
As of December 6, 1996, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund. As of December 6, 1996, no trustee
or officer of the Fund owns or would be able to acquire 5% or more of the common
stock of VK/AC Holding, Inc. Mr. McDonnell owns, or has the opportunity to
purchase, an equity interest in VK/AC Holding, Inc., the parent company of Van
Kampen American Capital, and has entered into an employment contract (for a term
until February 17, 1998) with Van Kampen American Capital.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The Adviser is responsible for
obtaining and evaluating economic, statistical, and financial data and for
formulating and implementing investment programs in furtherance of the Fund's
investment objective. The Adviser also furnishes at no cost to the Fund (except
as noted herein) the services of sufficient executive and clerical personnel for
the Fund as are necessary to prepare registration statements, prospectuses,
shareholder reports, and notices and proxy solicitation materials. In addition,
the Adviser furnishes at no cost to the Fund the services of a President of the
Fund, one or more Vice Presidents as needed, and a Secretary.
Under the Advisory Agreement, the Fund bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of a Treasurer or other principal
financial officer and the personnel operating under his direction. Charges are
allocated among the investment companies advised or subadvised by the Adviser. A
portion of these amounts were paid to the Adviser or its
B-19
<PAGE> 70
parent in reimbursement of personnel, office space, facilities and equipment
costs attributable to the provision of accounting services to the Fund. The
services provided by the Adviser are at cost. The Fund also pays shareholder
service agency fees, distribution fees, service fees, custodian fees, legal and
auditing fees, the costs of reports to shareholders and all other ordinary
expenses not specifically assumed by the Adviser. The Advisory Agreement also
provides that the Adviser shall not be liable to the company for any actions or
omissions if it acted without willful misfeasance, bad faith, negligence or
reckless disregard of its obligations.
Under the Advisory Agreement, the Fund 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 the Fund at annual rate
of: 0.575% on the first $350 million net assets; 0.525% on the next $350 million
of net assets; 0.475% on the next $350 million of net assets; and 0.425% on the
net assets over $1.05 billion.
The average net asset value for purposes of computing the advisory fee 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 solicitation and
other fees, brokerage or similar payments received by the Adviser or any direct
or indirect majority owned subsidiary of VK/AC Holding Inc., in connection with
the purchase and sale of portfolio investments of the Fund, less any direct
expenses incurred by such subsidiary of VK/AC Holding, Inc. 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 Fund's benefit, and to
advise the Trustees of the Fund 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 VK/AC Holding Inc. to
receive in connection with the Fund's portfolio transactions or other
arrangements which may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed the most restrictive
expense limitations applicable in the states where the Fund's shares are
qualified for sale, the compensation due the Adviser will be reduced by the
amount of such excess and that, if a reduction in and refund of the advisory fee
is insufficient, the Adviser will pay the Fund monthly an amount sufficient to
make up the deficiency, subject to readjustment during the year. Ordinary
business expenses include the investment advisory fee and other operating costs
paid by the Fund except (1) interest and taxes, (2) brokerage commissions, (3)
certain litigation and indemnification expenses as described in the Advisory
Agreement and (4) payments made by the Fund pursuant to the Distribution Plans.
Currently, the most restrictive applicable limitations are 2 1/2% of the
first $30 million, 2% of the next $70 million, and 1 1/2% of the remaining
average net assets.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for 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 not more than 60 days' nor less than 30 days' written notice.
During the fiscal years ended August 31, 1994, 1995 and 1996, the Adviser
received $4,198,993, $5,810,837 and $9,143,675, respectively, in advisory fees
from the Fund. For such periods, the Fund paid $127,374, $158,937 and $280,512,
respectively, for accounting services.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
affiliated and unaffiliated dealers. The Distributor's obligation is an agency
or "best efforts" arrangement under which the Distributor is required to take
and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain
B-20
<PAGE> 71
other costs including the cost of sales literature and advertising. The
Distribution and Service Agreement is renewable from year to year if approved
(a) by the Fund's Trustees or by a vote of a majority of the Fund's outstanding
voting securities and (b) by the affirmative vote of a majority of Trustees who
are not parties to the Distribution and Service Agreement or interested persons
of any party, by votes cast in person at a meeting called for such purpose. The
Distribution and Service Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on 60 days'
written notice.
During the fiscal years ended August 31, 1994, 1995 and 1996, total
underwriting commissions on the sale of shares of the Fund were $5,215,444,
$4,121,579 and $9,865,878, respectively. Of such totals, the amount retained by
the Distributor was $665,400, $334,943 and $960,905, respectively. The remainder
was reallowed to dealers. Of such dealer reallowances, $263,830, $146,147 and
$348,110, respectively, was received by Advantage Capital Corporation, a former
affiliated dealer of the Fund.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through an agreement (the "Distribution and Service Agreement") with the
Distributor of each class of the Fund's shares, sub-agreements between the
Distributor and members of the NASD who are acting as securities dealers and
NASD members or eligible non-members who are acting as brokers or agents and
similar agreements between the Fund and financial intermediaries who are acting
as brokers (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance, which may include, but not
be limited to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
For the year ended August 31, 1996, the Fund paid expenses under the
Distribution Plan of $0, $4,508,341 and $604,472 for the Class A shares, Class B
shares and Class C shares, respectively; and the Fund paid $2,632,384,
$1,502,780 and $0 under the service plan for Class A shares, Class B shares and
Class C shares, respectively.
TRANSFER AGENT
During the fiscal years ended August 31, 1994, 1995 and 1996, ACCESS,
shareholder service agent and dividend disbursing agent for the Fund, received
fees aggregating $2,192,123, $3,515,039 and $5,238,180, respectively for these
services. These services are provided at cost plus a profit.
B-21
<PAGE> 72
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the
Fund 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 Fund 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. In
selecting broker-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 the Fund or the Adviser. Consistent with the Rules of Fair Practice
of the NASD and subject to seeking best execution and such other policies as the
Trustees may determine, the Adviser may consider sales of shares of the Fund and
of the other Van Kampen American Capital mutual funds as a factor in the
selection of firms to execute portfolio transactions for the Fund.
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 investment advisory agreement, the Fund's
Trustees have authorized the Adviser to cause the Fund 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
the Fund. The Adviser undertakes that such higher commissions will not be paid
by the Fund 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 commissions paid
by the Fund are reasonable in relation to the expected benefits to the Fund over
the long term. The investment advisory fee paid by the Fund 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 the Fund 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 the Fund. In the opinion of the Adviser, the
benefits from research services to each of the accounts (including the Fund)
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 the Fund will not be disproportionate to the benefits
received by the Fund on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations among the Fund and other advisory accounts, the main factors
considered by the Adviser are the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities, the
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<PAGE> 73
availability of cash for investment, the size of investment commitments
generally held, and opinions of the persons responsible for recommending the
investment.
The Adviser's brokerage practices are monitored on a quarterly basis by the
Brokerage Review Committee comprised of Fund Trustees who are not affiliated
persons (as defined in the 1940 Act) of the Adviser.
Brokerage commissions paid by the Fund on portfolio transactions for the
fiscal years ended August 31, 1994, 1995 and 1996 totalled $1,276,466,
$2,701,471 and $2,543,118, respectively. During the year ended August 31, 1996,
the Fund paid $1,190,265 in brokerage commissions on transactions totalling
$798,204,711 to brokers selected primarily on the basis of research services
provided to the Adviser.
Prior to December 20, 1994, the Fund placed brokerage transactions with
brokers who were considered affiliated persons of the Adviser's former parent,
The Travelers Inc. Such affiliated persons included Smith Barney Inc. ("Smith
Barney") and Robinson Humphrey, Inc. ("Robinson Humphrey"). Effective December
20, 1994, Smith Barney and Robinson Humphrey ceased to be affiliates of the
Adviser. The negotiated commission paid to an affiliated broker on any
transaction would be comparable to that payable to a non-affiliated broker in a
similar transaction. The Fund paid the following commissions to these brokers
during the periods shown:
Commissions Paid:
<TABLE>
<CAPTION>
ROBINSON
SMITH BARNEY HUMPHREY
------------ --------
<S> <C> <C>
Fiscal year 1994................................................ $ 27,068 $5,250
Fiscal year 1995................................................ $ 8,143 --
Fiscal year 1996................................................ $ 87,874 --
------- ------
Fiscal year 1996 Percentages:
Commissions with affiliate to total commissions............... 3.46% --
Value of brokerage transactions with affiliate to total
transactions............................................... 0.22% --
</TABLE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined as of the close of the New York
Stock Exchange (the "Exchange") (currently 4:00 p.m. New York time) on each
business day on which the Exchange is open. The Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The assets belonging to the Class A shares, the Class B shares and the
Class C shares will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting the expenses
and liabilities allocated to that class.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements the section in the Fund's Prospectus
captioned "Purchase of Shares."
PURCHASE OF SHARES
Shares of the Fund are sold in a continuous offering and may be purchased
on any business day through authorized dealers.
ALTERNATIVE SALES ARRANGEMENTS
The Fund offers three classes of shares: Class A shares, Class B shares and
Class C shares. The three classes of shares each represent interests in the same
portfolio of investments of the Fund, have the same rights and are identical in
all respects, except that Class B shares and Class C shares bear the expenses of
the
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<PAGE> 74
deferred sales arrangements, distribution fees, and any expenses (including
higher transfer agency costs) resulting from such sales arrangements, and each
class has exclusive voting rights with respect to the Rule 12b-1 distribution
plan pursuant to which the distribution fee is paid.
During special promotions, the entire sales charge on Class A shares may be
reallowed to dealers, and at such times dealers may be deemed to be underwriters
for purposes of the 1933 Act.
INVESTMENTS BY MAIL
A shareholder investment account may be opened by completing the
application accompanying the Prospectus and forwarding the application, through
the authorized dealer, to ACCESS, at P.O. Box 419319, Kansas City, Missouri
64141-6319. The account is opened only upon acceptance of the application by the
shareholder service agent. The minimum initial investment of at least $500 per
class of shares, in the form of a check payable to the Fund, must accompany the
application. This minimum may be waived by the Distributor for plans involving
continuing investments. Minimum subsequent investments of at least $25 per class
of shares may be mailed directly to ACCESS. All such investments are made at the
public offering price of Fund shares next computed following receipt of payment
by ACCESS. Confirmations of the opening of an account and of all subsequent
transactions in the account are forwarded by ACCESS to the investor's dealer.
In processing applications and investments, ACCESS acts as agent for the
investor and for the dealer named thereon, and also as agent for the
Distributor, in accordance with the terms of the Prospectus. If ACCESS ceases to
act as such, a successor company named by the Fund will act in the same
capacities so long as the account remains open.
CUMULATIVE PURCHASE DISCOUNT
The reduced sales charges reflected in the sales charge table as shown in
the Prospectus apply to purchases of Class A shares of the Fund where the
aggregate investment is $50,000 or more. For purposes of determining eligibility
for volume discounts, spouses and their children under 21 years of age are
treated as a single purchaser, as is a trustee or other fiduciary purchasing for
a single fiduciary account. An aggregate investment includes all shares of the
Fund and all shares of certain other Van Kampen American Capital mutual funds
described in the Prospectus (the "Participating Funds") which have been
previously purchased and are still owned, plus the shares being purchased. The
current offering price is used to determine the value of all such shares. The
same reduction is applicable to purchases under a Letter of Intent as described
in the next paragraph. THE DEALER MUST NOTIFY THE DISTRIBUTOR AT THE TIME AN
ORDER IS PLACED FOR A PURCHASE WHICH WOULD QUALIFY FOR THE REDUCED CHARGE ON THE
BASIS OF PREVIOUS PURCHASES. SIMILAR NOTIFICATION MUST BE MADE IN WRITING WHEN
SUCH AN ORDER IS PLACED BY MAIL. The reduced sales charge will not be applied if
such notification is not furnished at the time of the order. The reduced sales
charge will also not be applied should a review of the records of the
Distributor or ACCESS fail to confirm the representations concerning the
investor's holdings.
LETTER OF INTENT
Purchases of Class A shares of the Participating Funds described above
under "Cumulative Purchase Discount" made pursuant to the Letter of Intent and
the value of all shares of such Participating Funds previously purchased and
still owned are also included in determining the applicable quantity discount. A
Letter of Intent permits an investor to establish a total investment goal to be
achieved by any number of investments over a 13-month period. Each investment
made during the period will receive the reduced sales charge applicable to the
amount represented by the goal as if it were a single investment. Escrowed
shares totaling 5% of the dollar amount of the Letter of Intent are held by
ACCESS in the name of the shareholder. The effective date of a Letter of Intent
may be back-dated up to 90 days in order that any investments made during this
90-day period, valued at the investor's cost, can become subject to the Letter
of Intent. The Letter of Intent does not obligate the investor to purchase the
indicated amount. In the event the Letter of Intent goal is not achieved within
the 13-month period, the investor is required to pay the difference between
sales charges otherwise applicable to the purchases made during this period and
sales charges actually paid. Such
B-24
<PAGE> 75
payment may be made directly to the Distributor or, if not paid, the Distributor
will liquidate sufficient escrowed shares to obtain such difference. If the goal
is exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding the investor in shares of the Fund the amount of
excess sales charges, if any, paid during the 13-month period.
REDEMPTION OF SHARES
Redemptions are not made on days during which the 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 Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
For certain full service participant directed profit sharing and money
purchase plans and Qualified 401(k) Retirement Plans and for investments in the
amount of $1,000,000 or more of Class A shares of the Fund ("Qualified
Purchaser"), the front-end sales charge will be waived and a contingent deferred
sales charge ("CDSC -- Class A") of 1.00% is imposed in the event of certain
redemptions within one year of the purchase. If a CDSC -- Class A is imposed
upon redemption, the amount of the CDSC -- Class A will be equal to the lesser
of a specified percentage of the net asset value of the shares at the time of
purchase, or 1.00% of the net asset value of the shares at the time of
redemption.
The CDSC -- Class A will only be imposed if a Qualified Purchaser redeems
an amount which causes the value of the account to fall below the total dollar
amount of purchase payments made by the Qualified Purchaser without an initial
sales charge during the one-year period prior to the redemption. The CDSC --
Class A will be waived in connection with redemptions by certain Qualified
Purchasers (e.g., retirement plans qualified under Section 401(a) of the
Internal Revenue Code, as amended (the "Code") and deferred compensation plans
under Section 457 of the Code) required to obtain funds to pay distributions to
beneficiaries pursuant to the terms of the plans. Such payments include, but are
not limited to, death, disability, retirement or separation from service. No
CDSC -- Class A will be imposed on exchanges between funds. For purposes of the
CDSC -- Class A, when shares of one fund are exchanged for shares of another
fund, the purchase date for the shares of the fund exchanged into will be
assumed to be the date on which shares were purchased in the fund from which the
exchange was made. If the exchanged shares themselves are acquired through an
exchange, the purchase date is assumed to carry over from the date of the
original election to purchase shares subject to a CDSC -- Class A rather than a
front-end load sales charge. In determining whether a CDSC -- Class A is
payable, it is assumed that shares held the longest are the first to be
redeemed.
Cumulative Purchase Discounts and Letters of Intent will apply to the net
asset value privilege. Also, in order to establish an amount of $1,000,000 or
more, a Qualified Purchaser may aggregate shares of other participating funds
described as "Participating Funds" in the Prospectus.
As described in the Prospectus under "Redemptions of Shares," redemption of
Class B and Class C shares is subject to a contingent deferred sales charge.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B
AND C").
The CDSC -- Class B and C is waived on redemptions of Class B shares and
Class C shares in the circumstances described below:
(a) Redemption Upon Disability or Death
The Fund will waive the CDSC -- Class B and C on redemptions following the
death or disability of a Class B and Class C shareholder. An individual will be
considered disabled for this purpose if he or she meets
B-25
<PAGE> 76
the definition thereof in Section 72(m)(7) of the Internal Revenue Code (the
"Code"), which in pertinent part defines a person as disabled if such person "is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long-continued and indefinite duration." While the Fund does
not specifically adopt the balance of the Code's definition which pertains to
furnishing the Secretary of Treasury with such proof as he or she may require,
the Distributor will require satisfactory proof of death or disability before it
determines to waive the CDSC -- Class B and C.
In cases of disability or death, the CDSC -- Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC -- Class B and C applies to a total or partial
redemption, but only to redemptions of shares held at the time of the death or
initial determination of disability.
(b) Redemption in Connection with Certain Distributions from Retirement
Plans
The Fund will waive the CDSC -- Class B and C when a total or partial
redemption is made in connection with certain distributions from Retirement
Plans. The charge will be waived upon the tax-free rollover or transfer of
assets to another Retirement Plan invested in one or more Van Kampen American
Capital funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held onto the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC -- Class B and C is applicable in the event that such acquired shares
are redeemed following the transfer or rollover. The charge also will be waived
on any redemption which results from the return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code, the return of excess deferral
amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be specified by the shareholder upon his or her
election to participate in the Plan. The CDSC -- Class B and C may be waived on
redemptions made under the Plan.
The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from the Fund without the imposition of a CDSC -- Class
B and C may not exceed a maximum of 12% annually of the shareholder's initial
account balance. The Fund reserves the right to change the terms and conditions
of the Plan and the ability to offer the Plan.
(d) Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC -- Class B and C
upon such involuntary redemption.
B-26
<PAGE> 77
(e)Reinvestment of Redemption Proceeds in Shares of the Same Fund
Within 120 Days After Redemption
A shareholder who has redeemed Class C shares of a Fund may reinvest, with
credit for any CDSC -- Class C paid on the redeemed shares, any portion or all
of his or her redemption proceeds (plus that amount necessary to acquire a
fractional share to round off his or her purchase to the nearest full share) in
shares of the Fund, provided that the reinvestment is effected within 120 days
after such redemption and the shareholder has not previously exercised this
reinvestment privilege with respect to Class C shares of the Fund. Shares
acquired in this manner will be deemed to have the original cost and purchase
date of the redeemed shares for purposes of applying the CDSC -- Class C to
subsequent redemptions.
(f) Redemption by Adviser
The Fund may waive the CDSC -- Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
EXCHANGE PRIVILEGE
The following supplements the discussion of "Shareholder
Services -- Exchange Privilege" in the Prospectus:
By use of the exchange privilege, the investor authorizes ACCESS to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by ACCESS to be genuine. Van Kampen American Capital and its
subsidiaries, including ACCESS and the Fund employ procedures considered by them
to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen American Capital, ACCESS nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Van Kampen
American Capital, ACCESS and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed.
For purposes of determining the sales charge rate previously paid on Class
A shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of his securities, the security upon
which the highest sales charge rate was previously paid is deemed exchanged
first.
Exchange requests received on a business day prior to the time shares of
the funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
A prospectus of any of these mutual funds may be obtained from any dealer
or the Distributor. An investor considering an exchange to one of such funds
should refer to the prospectus for additional information regarding such fund.
B-27
<PAGE> 78
TAX STATUS OF THE FUND
The Trust and any of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund intends to
qualify each year and to elect to be treated as a regulated investment company
under the Code. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its net investment income (including tax-exempt
interest, taxable income and net short-term capital gain, but not net capital
gains, which are the excess of net long-term capital gains over the net short-
term capital losses) in each year, it will not be required to pay federal income
taxes on any income distributed to shareholders. The Fund intends to distribute
at least the minimum amount of net investment income necessary to satisfy the
90% distribution requirement. The Fund will not be subject to federal income tax
on any net capital gains distributed to shareholders.
FUND PERFORMANCE
The Fund's average annual total return (computed in the manner described in
the Prospectus) for Class A shares of the Fund for the one-year, five-year and
ten-year periods ended August 31, 1996 was 13.60%, 17.88% and 14.89%,
respectively. The Fund's average annual total return (computed in the manner
described in the Prospectus) for Class B shares of the Fund for the one-year and
the three-year and four month periods (period since the date of inception) ended
August 31, 1996 was 14.61% and 19.09%, respectively. The Fund's average annual
total return for Class C shares of the Fund for the one-year and the two-year
and two month periods (period since the date of inception) ended August 31, 1996
was 18.60% and 16.57%, respectively. These results are based on historical
earnings and asset value fluctuations and are not intended to indicate future
performance. Such information should be considered in light of the Fund's
investment objective and policies as well as the risks incurred in the general
level of prices of common securities available for purchase and sale by the
Fund. The past five-year and ten-year periods generally have been ones of rising
common stock prices, subject to interim fluctuations.
Total return is computed separately for Class A, Class B and Class C
shares.
From time to time, in reports or other communications, or in advertising or
sales materials, the Adviser may announce the results of actual tests performed
by DALBAR Financial Securities, Inc., an independent research firm, as they
relate to the level of services for mutual fund investors, and may refer to the
Missouri Quality Award received by ACCESS, the Fund's transfer agent, in 1993.
In addition, the Adviser may also refer to the Houston Awards for Quality
received by American Capital in 1994.
The Funds may, from time to time: (1) illustrate the benefits of
tax-deferral by comparing taxable investments to investments made through
tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
and (3) in reports or other communications to shareholders or in advertising
material, illustrate the benefits of compounding at various assumed rates of
return. Such illustrations may be in the form of charts or graphs and will not
be based on historical returns experienced by the Funds.
The Fund invests in small and mid-sized companies which the Adviser expects
to have rising earnings estimates, accelerating growth rates in both revenues
and per-share earnings and rising profit margins. Emerging growth funds may be
an important component of a diversified portfolio. In addition, the Fund
attempts to remain fully invested and diversified across many industries to
attempt to achieve consistent performance.
Since the Fund's commencement of investment operations on October 2, 1970,
the world has experienced a number of significant political and economic events.
For example, in 1971, there were wage and price freezes to attempt to control
inflation. In 1973 the dollar was devalued and the OPEC oil embargo was in
effect. 1976 saw sweeping tax law changes, and in 1979 the CPI rose over 13%,
it's largest rise in 33 years. In 1982, the country was in a recession, in 1985
the U.S. deficit became the largest in the world and the U.S. was now a debtor
nation. 1987 saw the stock market crash. The Persian Gulf War began in 1991, and
the Dow Jones Industrial Average hit a record high of 4000 in 1995.
B-28
<PAGE> 79
From time to time marketing materials may provide a portfolio manager
update on the Fund or discuss general economic conditions. The top 10 holdings
of the Fund may also be listed in marketing pieces.
OTHER INFORMATION
CUSTODY OF ASSETS -- All securities owned by the Fund and all cash,
including proceeds from the sale of shares of the Fund and of securities in the
Fund's investment portfolio, are held by State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110, as Custodian.
SHAREHOLDER REPORTS -- Semi-annual statements are furnished to shareholders
and annually such statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 1201 Louisiana, Suite
2900, Houston, Texas 77002, the independent accountants for the Fund, performs
annual audits of the Fund's financial statements.
B-29
<PAGE> 80
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and Board of Trustees of
Van Kampen American Capital Emerging Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen American Capital
Emerging Growth Fund (the "Fund") at August 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
October 10, 1996
B-30
<PAGE> 81
PORTFOLIO OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
Market Value
Security Description Shares (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 96.1%
CONSUMER DURABLES 1.4%
American Travellers Corp. (b)............................. 375,000 $ 11,672
Beazer Homes USA Inc. (b)................................. 125,000 1,813
Blyth Industries Inc. (b)................................. 60,000 2,760
Gentex Corp. (b).......................................... 85,000 2,040
Harman International Industries Inc....................... 150,000 6,581
Oakwood Homes Corp........................................ 120,000 2,820
Sturm Ruger & Co. Inc..................................... 110,000 3,946
----------
31,632
----------
CONSUMER NON-DURABLES 7.0%
Borders Group Inc. (b).................................... 165,000 5,342
Coca-Cola Enterprises Inc................................. 200,000 8,075
Designer Holdings Ltd. (b)................................ 150,000 3,319
Fila Holdings,-- ADR (Italy) (b).......................... 310,000 30,070
Gadzooks Inc. (b)......................................... 187,500 7,125
Liz Claiborne Inc......................................... 200,000 6,950
Loehmann's Inc. (b)....................................... 50,000 1,244
Mossimo Inc. (b).......................................... 50,100 2,273
Nautica Enterprises Inc. (b).............................. 465,000 12,322
Nike Inc., Class B........................................ 350,000 37,800
Oakley Inc. (b)........................................... 150,000 6,150
Revlon Inc., Class A (b).................................. 65,000 1,942
St. John Knits Inc........................................ 200,000 7,975
Tommy Hilfiger Corp. (b).................................. 325,000 16,291
USA Detergents Inc. (b)................................... 175,000 5,337
Wolverine World Wide Inc.................................. 300,000 7,238
----------
159,453
----------
CONSUMER SERVICES 13.8%
Accustaff Inc. (b)........................................ 625,000 14,531
Amresco Inc. (b).......................................... 200,000 4,775
Anchor Gaming (b)......................................... 125,000 6,828
Apac Teleservices Inc. (b)................................ 325,000 14,381
Apollo Group Inc., Class A (b)............................ 225,000 5,737
Boston Chicken Inc. (b)................................... 117,500 4,083
Career Horizons Inc. (b).................................. 150,000 5,231
Caribiner International Inc. (b).......................... 35,700 1,232
Claremont Technology Group (b)............................ 20,000 555
Clear Channel Communications (b).......................... 300,000 24,712
Corestaff Inc. (b)........................................ 265,000 11,130
Corrections Corp. of America.............................. 850,000 27,412
Dave & Buster's Inc. (b).................................. 100,000 2,200
Doubletree Corp. (b)...................................... 290,000 10,984
Evergreen Media Corp., Class A (b)........................ 550,000 17,325
First USA Paymentech Inc. (b)............................. 27,400 1,034
Gartner Group Inc. New.................................... 450,000 14,063
Ha-Lo Industries Inc. (b)................................. 150,000 3,750
Hospitality Franchise Systems Inc. (b).................... 410,000 24,549
Imperial Credit Industries (b)............................ 175,000 5,294
Infinity Broadcasting Corp. (b)........................... 312,500 8,555
Interpublic Group Cos. Inc................................ 150,000 6,788
Landry's Seafood Restaurants (b).......................... 52,300 1,445
Meredith Corp............................................. 250,000 10,750
</TABLE>
See Notes to Financial Statements
B-31
<PAGE> 82
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Security Description Shares (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
MGM Grand Inc. (b)........................................ 85,000 $ 3,209
Mirage Resorts Inc. (b)................................... 350,000 8,138
National Data Corp........................................ 200,000 8,400
Omnicom Group............................................. 150,000 6,806
Penske Motorsports Inc. (b)............................... 100,000 2,719
Prime Hospitality Corp. (b)............................... 150,000 2,850
Promus Hotel Corp. (b).................................... 200,000 6,025
RAC Financial Group Inc. (b).............................. 45,000 1,575
Rainforest Cafe Inc. (b).................................. 150,000 4,200
Regal Cinemas Inc. (b).................................... 325,000 12,106
Reynolds & Reynolds Co.................................... 175,000 8,772
Robert Half International Inc. (b)........................ 72,100 2,379
Romac International Inc. (b).............................. 17,000 527
Sitel Corp. (b)........................................... 200,000 7,025
Sodak Gaming Inc. (b)..................................... 85,000 4,420
Suburban Lodges of America (b)............................ 60,000 1,410
Sun International Hotels Ltd. (b)......................... 35,000 1,658
Telespectrum Worldwide Inc. (b)........................... 130,000 2,291
Vincam Group Inc. (b)..................................... 50,000 1,500
Whittman Hart Inc. (b).................................... 26,600 951
----------
314,305
----------
ENERGY 5.7%
Baker Hughes Inc.......................................... 125,000 3,781
Benton Oil & Gas Co. (b).................................. 150,000 2,981
BJ Services Co., including 40,000 warrants expiring
04/13/2000 (b)............................................ 100,008 4,378
Chesapeake Energy Corp. (b)............................... 400,000 21,500
Comstock Resources Inc. (b)............................... 200,000 2,100
Cooper Cameron Corp. (b).................................. 85,000 4,484
Diamond Offshore Drilling (b)............................. 150,000 7,650
Ensco International Inc. (b).............................. 85,000 2,486
Flores & Rucks Inc. (b)................................... 150,000 4,931
Forcenergy, Inc. (b)...................................... 150,000 3,244
Global Marine Inc. (b).................................... 500,000 7,187
Marine Drilling Co. Inc. (b).............................. 250,000 2,187
Noble Drilling Corp. (b).................................. 225,000 3,206
Pogo Producing Co......................................... 300,000 10,238
Reading & Bates Corp. New (b)............................. 250,000 6,125
Rowan Cos. Inc. (b)....................................... 625,000 9,609
Rutherford-Moran Oil Co. (b).............................. 60,000 1,463
Smith International Inc. (b).............................. 350,000 12,163
Sonat Offshore Drilling Inc. (b).......................... 300,000 16,388
United Meridian Corp. (b)................................. 85,000 3,379
----------
129,480
----------
FINANCE 9.1%
Aames Financial Corp...................................... 232,500 11,363
American Bankers Insurance Group.......................... 125,000 5,938
Bank of Boston Corp....................................... 200,000 10,550
Cityscape Financial Corp. (b)............................. 150,000 4,125
CMAC Investment Corp...................................... 150,000 9,375
Conseco Inc............................................... 275,000 11,550
Contifinancial Corp. (b).................................. 95,800 2,754
CRA Managed Care Inc. (b)................................. 40,000 1,780
</TABLE>
See Notes to Financial Statements
B-32
<PAGE> 83
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Security Description Shares (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Cullen Frost Bankers Inc................................... 130,000 $ 3,705
Exel Ltd................................................... 163,000 5,460
Finova Group Inc........................................... 250,000 13,750
First Bank System Inc...................................... 100,000 6,425
Firstar Corp............................................... 200,000 9,450
Green Tree Financial Corp.................................. 325,000 11,294
Household International Inc................................ 85,000 6,736
IMC Mortgage Co. (b)....................................... 25,000 822
Money Store Inc............................................ 250,000 6,000
North Fork Bancorporation Inc.............................. 125,000 3,875
Old Republic International Corp............................ 150,000 3,338
PennCorp Financial Group Inc............................... 256,000 7,808
Peoples Heritage Financial................................. 150,000 3,300
Star Banc Corp............................................. 85,000 6,694
Student Loan Marketing Association New..................... 150,000 11,044
SunAmerica Inc............................................. 265,000 18,053
TCF Financial Corp......................................... 250,000 9,344
TIG Holdings Inc........................................... 100,000 2,875
Vesta Insurance Group Inc.................................. 112,500 4,345
Washington Mutual Inc...................................... 440,000 15,950
----------
207,703
----------
HEALTH CARE 12.8%
Access Health Inc. (b)..................................... 235,000 11,926
Amisys Managed Care Systems (b)............................ 70,000 1,435
Clintrials Research Inc. (b)............................... 32,100 1,316
CNS Inc. (b)............................................... 100,000 1,787
Compdent Corp. (b)......................................... 125,000 4,281
Curative Health Services Inc. (b).......................... 100,000 1,900
Dura Pharmaceuticals Inc. (b).............................. 600,000 20,850
Elan PLC-ADR (Ireland) (b)................................. 170,000 5,334
ESC Medical Systems Ltd. (b)............................... 90,000 2,441
Genetics Institute Inc. (b)................................ 112,400 6,969
Guidant Corp............................................... 400,000 20,300
HBO & Co................................................... 960,000 52,440
Health Management Associates Inc., New Class A (b)......... 487,500 11,091
Health Management Systems Inc. (b)......................... 207,500 5,732
Healthsouth Rehabilitation (b)............................. 450,000 14,569
Henry Schein Inc. (b)...................................... 98,000 3,258
Hologic Inc. (b)........................................... 200,000 7,950
Intelligent Medical Imaging (b)............................ 42,500 638
Jones Medical Industries Inc............................... 175,000 7,000
Lunar Corp. (b)............................................ 35,100 1,237
Medicis Pharmaceutical, Class A (b)........................ 165,000 6,747
Mentor Corp................................................ 250,000 7,906
Minimed Inc. (b)........................................... 175,000 3,806
Omnicare Inc............................................... 700,000 17,150
Orthodontic Centers of America (b)......................... 150,000 5,662
Parexel International Corp. (b)............................ 90,000 4,365
Phycor Inc. (b)............................................ 200,000 6,550
Physician Sales & Service Inc. (b)......................... 200,000 3,500
Quintiles Transnational Corp. (b).......................... 150,000 11,344
Renal Treatment Centers Inc. (b)........................... 310,000 10,114
</TABLE>
See Notes to Financial Statements
B-33
<PAGE> 84
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Security Description Shares (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE (CONTINUED)
Rexall Sundown Inc. (b).................................... 150,000 $ 5,194
Tenet Healthcare Corp...................................... 150,000 3,150
Thermedics Inc. (b)........................................ 175,000 4,769
Total Renal Care Holdings (b).............................. 150,000 6,169
United Dental Care Inc. (b)................................ 100,000 3,875
Universal Health Services Inc., Class B (b)................ 150,000 3,825
Urocor Inc. (b)............................................ 50,000 688
Veterinary Centers of America (b).......................... 200,000 4,225
----------
291,493
----------
PRODUCER MANUFACTURING 3.6%
Camco International Inc.................................... 125,000 4,234
Danaher Corp............................................... 200,000 8,300
Foster Wheeler Corp........................................ 150,000 6,469
Granite Construction Inc................................... 187,500 3,563
Greenfield Industries Inc.................................. 130,000 3,770
Mueller Industries Inc. (b)................................ 100,000 3,538
Precision Castparts Co..................................... 175,000 8,553
Sanifill Inc. (b).......................................... 225,000 10,434
Shaw Group Inc. (b)........................................ 85,000 2,794
Thermo Instrument Systems Inc. (b)......................... 60,000 2,325
U.S. Filter Corp. (b)...................................... 375,000 9,797
United Waste Systems Inc. (b).............................. 450,000 13,275
USA Waste Services Inc. (b)................................ 150,000 4,125
----------
81,177
----------
RAW MATERIALS/PROCESSING INDUSTRIES 2.1%
Cytec Industries Inc. (b).................................. 85,000 2,954
Goodrich, B.F. Co.......................................... 250,000 9,375
Millipore Corp............................................. 150,000 5,737
Pentair Inc................................................ 150,000 4,087
Praxair Inc................................................ 225,000 9,253
Raychem Corp............................................... 150,000 10,294
Sealed Air Corp. (b)....................................... 90,000 3,409
Titanium Metals Corp. (b).................................. 100,000 2,388
----------
47,497
----------
RETAIL 8.9%
Bed, Bath & Beyond Inc. (b)................................ 450,000 10,181
CDW Computer Centers Inc. (b).............................. 135,000 8,775
Central Garden & Pet Co. (b)............................... 200,000 4,925
Claires Stores Inc......................................... 265,000 8,745
CompUSA, Inc. (b).......................................... 250,000 10,031
Consolidated Stores Corp. (b).............................. 250,000 9,500
Corporate Express Inc. (b)................................. 325,000 12,187
Dollar General Corp........................................ 52,100 1,680
Eagle Hardware & Garden (b)................................ 150,000 3,338
Eckerd Corp. (b)........................................... 90,000 2,205
Gap Inc.................................................... 300,000 10,500
Hughes Supply Inc.......................................... 35,000 1,356
Inacom Corp. (b)........................................... 125,000 3,375
Jacor Communications, Class A (b).......................... 112,500 3,769
Just for Feet Inc. (b)..................................... 150,000 6,713
Kroger Co. (b)............................................. 200,000 8,475
Petco Animal Supplies (b).................................. 200,000 4,800
Planet Hollywood International Inc., Class A (b)........... 125,000 3,047
</TABLE>
See Notes to Financial Statements
B-34
<PAGE> 85
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Security Description Shares (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
RETAIL (CONTINUED)
Richfood Holdings Inc...................................... 150,000 $ 5,700
Ross Stores Inc............................................ 200,000 7,700
Safeway Inc. (b)........................................... 400,000 14,500
Saks Holdings Inc. (b)..................................... 250,000 8,531
Staples Inc. (b)........................................... 300,000 5,925
Stein Mart Inc. (b)........................................ 210,000 4,384
Tiffany & Co. New.......................................... 225,000 7,847
TJX Cos. Inc. New.......................................... 150,000 4,800
U.S. Office Products Co. (b)............................... 225,000 5,963
Vons Cos. Inc. (b)......................................... 325,000 14,381
Wet Seal Inc., Class A (b)................................. 125,000 4,562
Zale Corp. New (b)......................................... 275,000 4,984
----------
202,879
----------
TECHNOLOGY 28.9%
ABR Information Services Inc. (b).......................... 42,500 2,401
Acxiom Corp. (b)........................................... 200,000 7,600
ADC Telecommunications Inc. (b)............................ 179,200 10,170
Applix Inc. (b)............................................ 150,000 3,825
Ascend Communications Inc. (b)............................. 600,000 31,425
Aspect Development Inc. (b)................................ 20,000 525
Aspect Telecommunications Corp. (b)........................ 250,000 13,000
Aspen Technology Inc. (b).................................. 125,000 8,656
BDM International Inc. (b)................................. 60,000 3,180
BMC Industries Inc. ....................................... 140,000 4,200
BMC Software Inc. (b)...................................... 260,000 19,370
Boston Communications Group (b)............................ 50,000 862
Cadence Design Systems Inc. (b)............................ 650,000 19,256
Cambridge Technology Partners Inc. (b)..................... 300,000 8,475
Cascade Communications (b)................................. 540,000 36,787
CBT Group Ltd.-- ADR (Ireland) (b)......................... 22,600 1,011
Checkpoint Systems Inc. (b)................................ 250,000 7,219
Ciber Inc. (b)............................................. 85,000 2,146
Cisco Systems Inc. (b)..................................... 500,000 26,375
Citrix Systems Inc. (b).................................... 200,000 8,400
Clarify Inc. (b)........................................... 20,000 836
Computer Associates International Inc...................... 175,000 9,187
Compuware Corp. (b)........................................ 175,000 7,525
Comverse Technology Inc. (b)............................... 94,600 3,335
Concord EFS Inc. (b)....................................... 200,000 5,050
Dell Computer Corp. (b).................................... 310,000 20,809
DSP Communications Inc. (b)................................ 450,000 22,894
Dynatech Corp.............................................. 85,000 3,336
Engineering Animation Inc. (b)............................. 42,000 809
Factset Research Systems Inc. (b).......................... 42,500 861
GT Interactive Software Corp. (b).......................... 165,000 2,805
Input/Output Inc. (b)...................................... 275,000 9,728
Inso Corp. (b)............................................. 125,000 6,406
Integrated Systems Inc. (b)................................ 150,000 4,988
Legato Systems Inc. (b).................................... 200,000 7,900
Lucent Technologies Inc.................................... 147,500 5,439
McAfee Associates Inc. (b)................................. 675,000 40,247
Medic Computer Systems Inc. (b)............................ 250,000 8,719
</TABLE>
See Notes to Financial Statements
B-35
<PAGE> 86
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Security Description Shares (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Meta Software Inc. (b).................................... 40,000 $ 520
MetaTools Inc. (b)........................................ 30,000 540
Microware Systems Corp. (b)............................... 42,500 877
Network General Corp. (b)................................. 241,700 4,109
Newbridge Networks Corp. (b).............................. 150,000 8,644
Oracle Systems Corp. (b).................................. 550,000 19,387
PairGain Technologies Inc. (b)............................ 615,000 40,744
Parametric Technology Corp. (b)........................... 410,000 18,565
Paychex Inc............................................... 262,500 14,044
Peoplesoft Inc. (b)....................................... 410,000 31,467
Picturetel Corp. (b)...................................... 225,000 7,397
Proxim Inc. (b)........................................... 150,000 4,875
Remedy Corp. (b).......................................... 12,300 560
Sapient Corp. (b)......................................... 12,350 534
Security Dynamics Technologies Inc. (b)................... 175,000 11,419
Shiva Corp. (b)........................................... 250,000 12,625
Sterling Commerce Inc. (b)................................ 85,000 2,635
Structural Dynamics Research Corp. (b).................... 200,000 5,050
Sun Microsystems Inc. (b)................................. 400,000 21,750
Sunguard Data Systems Inc. (b)............................ 325,000 13,894
Sykes Enterprises Inc. (b)................................ 57,550 2,586
Systemsoft Corp. (b)...................................... 150,000 4,875
TCSI Corp. (b)............................................ 127,500 3,060
Technology Solutions Co. (b).............................. 125,000 3,687
Transition Systems Inc. (b)............................... 160,600 3,634
U.S. Robotics Corp. (b)................................... 300,000 15,750
Uniphase Corp. (b)........................................ 50,000 1,862
Vantive Corp. (b)......................................... 85,000 3,740
Verilink Corp. (b)........................................ 14,900 384
Viasoft Inc. (b).......................................... 180,000 10,710
Visio Corp. (b)........................................... 25,700 925
Vitesse Semiconductor (b)................................. 200,000 6,375
Wind River Systems Inc. (b)............................... 150,000 5,213
----------
658,194
----------
TRANSPORTATION 0.6%
Comair Holdings Inc....................................... 187,500 4,500
Continental Airlines Inc., Class B (b).................... 450,000 10,181
----------
14,681
----------
UTILITIES 2.2%
ACC Corp. (b)............................................. 300,000 14,250
Airtouch Communications, Inc. Class B (Convertible
Preferred Stock, 6.00% coupon, maturity 08/16/99)......... 24,167 695
Airtouch Communications, Inc. Class C (Convertible
Preferred Stock, 4.25% coupon, maturity 08/16/16)......... 15,520 739
Cincinnati Bell Inc....................................... 250,000 11,937
Frontier Corp............................................. 300,000 8,850
LCI International Inc. (b)................................ 400,000 14,150
----------
50,621
----------
TOTAL COMMON AND PREFERRED STOCKS
(Cost $1,567,050,376) (a)........................................ 2,189,115
----------
</TABLE>
See Notes to Financial Statements
B-36
<PAGE> 87
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Security Description (000)
- --------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS AT AMORTIZED COST 5.2%
COMMERCIAL PAPER 1.9%
General Electric Capital Corp.
($43,850,000 par, yielding 5.28%, 09/03/96 maturity)............. $ 43,824
----------
UNITED STATES AGENCY OBLIGATIONS 3.3%
Federal Home Loan Mortgage Corp.
($20,000,000 par, yielding 5.22%, 09/03/96 maturity)............. 19,991
Federal Home Loan Mortgage Corp.
($42,000,000 par, yielding 5.33%, 09/23/96 maturity)............. 41,858
Federal National Mortgage Association
($12,000,000 par, yielding 5.26%, 09/10/96 maturity)............. 11,983
----------
73,832
----------
TOTAL SHORT-TERM INVESTMENTS AT AMORTIZED COST.................... 117,656
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3%)...................... (28,608)
----------
NET ASSETS 100.0%................................................. $2,278,163
----------
</TABLE>
(a) At August 31,1996, for federal income tax purposes, cost is $1,567,689,974,
the aggregate gross unrealized appreciation is $658,264,580 and the
aggregate gross unrealized depreciation is $36,839,508, resulting in net
unrealized appreciation of $621,425,072.
(b) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
B-37
<PAGE> 88
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
All amounts, except for Maximum Offering Price information, reported in
thousands
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $1,567,050) (Note 1)............ $2,189,115
Short-Term Investments at Amortized Cost (Note 1).................. 117,656
Cash............................................................... 31
Receivables:
Securities Sold................................................... 10,216
Fund Shares Sold.................................................. 7,153
Dividends......................................................... 368
Other.............................................................. 389
----------
Total Assets...................................................... 2,324,928
----------
LIABILITIES:
Payables:
Securities Purchased.............................................. 39,139
Fund Shares Repurchased........................................... 4,626
Distributor and Affiliates (Notes 2 and 6)........................ 1,423
Investment Advisory Fee (Note 2).................................. 891
Income Distributions.............................................. 27
Accrued Expenses................................................... 540
Deferred Compensation and Retirement Plans (Note 2)................ 119
----------
Total Liabilities................................................. 46,765
----------
NET ASSETS......................................................... $2,278,163
----------
NET ASSETS CONSIST OF:
Capital (Note 3)................................................... $1,575,363
Net Unrealized Appreciation on Securities.......................... 622,065
Accumulated Net Realized Gain on Securities........................ 80,843
Accumulated Net Investment Loss.................................... (108)
----------
NET ASSETS......................................................... $2,278,163
----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $1,438,510,020 and 41,881,537 shares of beneficial
interest issued and outstanding) (Note 3)......................... $ 34.35
Maximum sales charge (5.75%* of offering price)................... 2.10
----------
Maximum offering price to public.................................. $ 36.45
----------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $757,276,242 and 22,990,616 shares of beneficial interest
issued and outstanding) (Note 3).................................. $ 32.94
----------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $82,376,318 and 2,467,560 shares of beneficial interest issued
and outstanding) (Note 3)......................................... $ 33.38
----------
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
B-38
<PAGE> 89
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1996
All amounts reported in thousands
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $ 7,954
Dividends............................................................ 7,264
--------
Total Income........................................................ 15,218
--------
EXPENSES:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and
C of $2,632, $6,011 and $605, respectively) (Note 6)................ 9,248
Investment Advisory Fee (Note 2)..................................... 9,144
Shareholder Services (Note 2)........................................ 6,192
Trustees Fees and Expenses (Note 2).................................. 75
Legal (Note 2)....................................................... 29
Other ............................................................... 1,446
--------
Total Expenses...................................................... 26,134
Less Expenses Reimbursed............................................ 11
--------
Net Expenses........................................................ 26,123
--------
NET INVESTMENT LOSS.................................................. $(10,905)
--------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments......................................................... $145,442
Futures............................................................. 11,954
--------
Net Realized Gain on Securities...................................... 157,396
--------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................. 426,603
End of the Period:
Investments......................................................... 622,065
--------
Net Unrealized Appreciation on Securities During the Period.......... 195,462
--------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES........................ $352,858
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ $341,953
--------
</TABLE>
See Notes to Financial Statements
B-39
<PAGE> 90
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended August 31, 1996 and 1995
All amounts reported in thousands
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 1996 August 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss......................... $ (10,905) $ (789)
Net Realized Gain on Securities............. 157,396 101,066
Net Unrealized Appreciation on Securities
During the Period.......................... 195,462 262,801
---------- ----------
Change in Net Assets from Operations........ 341,953 363,078
---------- ----------
Distributions from Net Realized Gain on
Securities:
Class A Shares............................. (105,610) (17,526)
Class B Shares............................. (51,572) (7,315)
Class C Shares............................. (4,735) (663)
---------- ----------
Total Distributions........................ (161,917) (25,504)
---------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................. 180,036 337,574
---------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................... 2,600,527 1,262,019
Net Asset Value of Shares Issued Through
Dividend Reinvestment....................... 150,678 23,641
Cost of Shares Repurchased.................. (2,174,636) (1,056,089)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................ 576,569 229,571
---------- ----------
TOTAL INCREASE IN NET ASSETS................ 756,605 567,145
NET ASSETS:
Beginning of the Period..................... 1,521,558 954,413
---------- ----------
End of the Period (Including accumulated net
investment loss of $108 and $76,
respectively).............................. $2,278,163 $1,521,558
---------- ----------
</TABLE>
See Notes to Financial Statements
B-40
<PAGE> 91
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31
------------------------------------------------
Class A Shares 1996(a) 1995(a) 1994 1993 1992(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $ 31.59 $ 24.37 $ 26.46 $ 19.03 $20.06
-------- -------- ------- ------- ------
Net Investment
Income/Loss............... (.096) .05 (.11) (.05) (.015)
Net Realized and
Unrealized Gain/Loss on
Securities............... 6.043 7.79 (.32) 8.6375 .9275
-------- -------- ------- ------- ------
Total from Investment
Operations................. 5.947 7.84 (.43) 8.5875 .9125
-------- -------- ------- ------- ------
Less:
Distributions from Net
Investment Income........ -- -- -- -- .0325
Distributions from Net
Realized Gain on
Securities............... 3.190 .62 1.66 1.1575 1.91
-------- -------- ------- ------- ------
Total Distributions........ 3.190 .62 1.66 1.1575 1.9425
-------- -------- ------- ------- ------
Net Asset Value, End of the
Period..................... $ 34.347 $ 31.59 $ 24.37 $ 26.46 $19.03
-------- -------- ------- ------- ------
Total Return (b)........... 20.54% 33.11% (1.67%) 46.73% 4.28%
Net Assets at End of the
Period (In millions)....... $1,438.5 $1,029.2 $ 677.1 $ 517.8 $312.3
Ratio of Expenses to
Average Net Assets (c)..... 1.10% 1.14% 1.18% 1.10% 1.04%
Ratio of Net Investment
Income/Loss to Average Net
Assets (c)................ (.29%) .19% (.30%) (.27%) (.08%)
Portfolio Turnover......... 91% 101% 64% 47% 61%
Average Commission Paid Per
Equity Share Traded (d).... $ .0587 -- -- -- --
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment
of maximum sales charge or contingent deferred sales charge.
(c) The Ratios of Expenses and Net Investment Income to Average Net Assets were
not affected by the assumption of certain expenses by VKAC.
(d) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were
applicable. This disclosure was not required in fiscal years prior to 1996.
See Notes to Financial Statements
B-41
<PAGE> 92
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 20, 1992
Year Ended August 31 (Commencement of
---------------------------------- Distribution)
Class B Shares 1996(a) 1995(a) 1994 1993(a) to August 31, 1992(a)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period. $ 30.65 $ 23.86 $ 26.14 $ 18.98 $ 19.66
------- ------- ------- ------- -------
Net Investment Loss.... (.349) (.16) (.27) (.245) (.065)
Net Realized and
Unrealized Gain/Loss
on Securities......... 5.827 7.57 (.35) 8.5625 (.615)
------- ------- ------- ------- -------
Total from Investment
Operations.............. 5.478 7.41 (.62) 8.3175 (.68)
Less Distributions from
Net Realized Gain on
Securities.............. 3.190 .62 1.66 1.1575 --
------- ------- ------- ------- -------
Net Asset Value, End of
the Period.............. $32.938 $ 30.65 $ 23.86 $ 26.14 $ 18.98
------- ------- ------- ------- -------
Total Return (b)........ 19.61% 32.01% (2.46%) 45.41% (3.51%)*
Net Assets at End of the
Period (In millions).... $ 757.3 $ 450.5 $ 252.9 $ 74.5 $ 5.2
Ratio of Expenses to
Average Net Assets (c).. 1.90% 1.97% 2.01% 1.89% 1.86%
Ratio of Net Investment
Loss to Average Net
Assets (c)............. (1.10%) (.64%) (1.07%) (1.07%) (.80%)
Portfolio Turnover...... 91% 101% 64% 47% 61%
Average Commission Paid
Per Equity Share Traded
(d)..................... $ .0587 -- -- -- --
</TABLE>
*Non-Annualized (a) Based on average shares outstanding. (b) Total Return is
based upon Net Asset Value which does not include payment
of maximum sales charge or contingent deferred sales charge.
(c) The Ratios of Expenses and Net Investment Income to Average Net Assets were
not affected by the assumption of certain expenses by VKAC.
(d) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were
applicable. This disclosure was not required in fiscal years prior to 1996.
See Notes to Financial Statements
B-42
<PAGE> 93
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 6, 1993
Year Ended August 31 (Commencement of
------------------------- Distribution)
Class C Shares 1996(a) 1995(a) 1994(a) to August 31, 1993(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $ 31.02 $ 24.14 $ 26.42 $ 25.07
------- ------- ------- -------
Net Investment Loss......... (.354) (.16) (.25) (.045)
Net Realized and Unrealized
Gain/Loss on Securities.... 5.908 7.66 (.37) 1.395
------- ------- ------- -------
Total from Investment
Operations................... 5.554 7.50 (.62) 1.35
Less Distributions from Net
Realized Gain on Securities. 3.190 .62 1.66 --
------- ------- ------- -------
Net Asset Value, End of the
Period....................... $33.384 $ 31.02 $ 24.14 $ 26.42
------- ------- ------- -------
Total Return (b)............. 19.60% 32.01% (2.46%) 5.42%*
Net Assets at End of the
Period (In millions)......... $ 82.4 $ 41.8 $ 24.5 $ 1.4
Ratio of Expenses to Average
Net Assets (c)............... 1.89% 1.96% 2.02% 2.31%
Ratio of Net Investment Loss
to Average Net Assets (c)... (1.10%) (.63%) (1.04%) (1.37%)
Portfolio Turnover........... 91% 101% 64% 47%
Average Commission Paid Per
Equity Share Traded (d)...... $ .0587 -- -- --
</TABLE>
*Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment
of maximum sales charge or contingent deferred sales charge.
(c) The Ratios of Expenses and Net Investment Income to Average Net Assets were
not affected by the assumption of certain expenses by VKAC.
(d) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were
applicable. This disclosure was not required in fiscal years prior to 1996.
See Notes to Financial Statements
B-43
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen American Capital Emerging Growth
Fund (the "Fund") is organized as a Delaware business trust, and is registered
as a diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund seeks capital appreciation by
principally investing in common stock of small- and medium-sized companies that
are considered to be emerging growth companies. The Fund commenced investment
operations on October 2, 1970. The distribution of the Fund's Class B and Class
C shares commenced on April 20, 1992 and July 6, 1993, respectively.
The following is a summary of significant accounting policies consistently fol-
lowed by the Fund in the preparation of its financial statements. The prepara-
tion 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 as-
sets 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. Un-
listed securities and listed securities for which the last sale price is not
available are valued at the mean of the bid and asked prices or, if not avail-
able, their fair value as determined using procedures established 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 ba-
sis. 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 in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are 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 re-
quired 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 discounts on
debt securities purchased are amortized over the life of the security. Premiums
on debt securities are not amortized. Market discounts are recognized at the
time of sale as realized gains for book purposes and ordinary income for tax
purposes.
D. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required. Net realized
gains or losses may differ for financial and tax reporting purposes primarily
as a result of the deferral of losses for tax purposes resulting from wash
sales.
E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays dividends annu-
ally from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may
B-44
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
include short-term capital gains and gains on option and futures transactions.
All short-term capital gains and a portion of option and futures gains are in-
cluded in ordinary income for tax purposes. For federal income tax purposes,
net operating losses may not be used to offset income generated in future tax
years. Therefore, $10,872,648 of net investment loss generated by the Fund for
federal income tax purposes has been reclassified from accumulated net
investment loss to capital. Due to inherent differences in the recognition of
certain expenses under generally accepted accounting principles and federal
income tax purposes, the amount of net investment income may differ between
book and federal income tax purposes for a particular period. These differences
are temporary in nature, but may result in book basis net investment losses for
certain periods.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under
the terms of the Fund's Investment Advisory Agreement, the Adviser will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------------------
<S> <C>
First $350 million.................................................. .575 of 1%
Next $350 million................................................... .525 of 1%
Next $350 million................................................... .475 of 1%
Over $1.05 billion.................................................. .425 of 1%
</TABLE>
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom, coun-
sel to the Fund, of which a trustee of the Fund is an affiliated person. For
the year ended August 31, 1996, the Fund recognized expenses of approximately
$280,500 representing Van Kampen American Capital Distributors, 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 August 31, 1996, the Fund
recognized expenses of approximately $5,238,200, representing ACCESS' cost of
providing transfer agency and shareholder services plus a profit.
Additionally, for the year ended August 31, 1996, the Fund paid VKAC approxi-
mately $241,100 related to the direct cost of consolidating the VKAC open-end
fund complex. Payment was contingent upon realization by the Fund of cost effi-
ciencies resulting from the consolidation. Certain officers and trustees of
the Fund are also officers and directors of VKAC.
The Fund does not compensate its officers or trustees who are officers of
VKAC. The Fund has implemented deferred compensation and retirement plans for
its trustees. Under the deferred compensation plan, trustees may elect to defer
all or a portion of their compensation to a later date. The retirement plan
covers those trustees who are not officers of VKAC. At August 31, 1996, VKAC
owned 134,139, 33 and 20 shares of Classes A, B and C, respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common shares, Classes A, B and C
each with a par value of $.01 per share. There are an unlimited number of
shares of each class authorized.
B-45
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
At August 31, 1996, capital aggregated $896,965,895, $609,646,269 and
$68,750,890 for Classes A, B, and C, respectively. For the year ended August
31, 1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A......................................... 66,836,175 $ 2,183,518,085
Class B......................................... 10,106,960 320,855,919
Class C......................................... 2,983,871 96,153,092
----------- ---------------
Total Sales...................................... 79,927,006 $ 2,600,527,096
----------- ---------------
Dividend Reinvestment:
Class A......................................... 3,364,624 $ 98,887,480
Class B......................................... 1,686,231 47,788,460
Class C......................................... 139,345 4,002,009
----------- ---------------
Total Dividend Reinvestment...................... 5,190,200 $ 150,677,949
----------- ---------------
Repurchases:
Class A......................................... (60,900,150) $(1,998,962,701)
Class B......................................... (3,501,676) (110,876,294)
Class C......................................... (2,004,148) (64,797,520)
----------- ---------------
Total Repurchases................................ (66,405,974) $(2,174,636,515)
----------- ---------------
</TABLE>
At August 31, 1995, capital aggregated $620,618,673, $355,310,081 and
$33,738,418 for Classes A, B, and C, respectively. For the year ended August
31, 1995, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A......................................... 41,742,312 $ 1,085,793,746
Class B......................................... 6,061,426 150,468,438
Class C......................................... 1,006,637 25,757,240
----------- ---------------
Total Sales...................................... 48,810,375 $ 1,262,019,424
----------- ---------------
Dividend Reinvestment:
Class A......................................... 721,895 $ 16,392,292
Class B......................................... 302,136 6,692,531
Class C......................................... 24,801 556,128
----------- ---------------
Total Dividend Reinvestment...................... 1,048,832 $ 23,640,951
----------- ---------------
Repurchases:
Class A......................................... (37,660,418) $ (980,641,481)
Class B......................................... (2,263,921) (57,495,439)
Class C......................................... (697,504) (17,952,313)
----------- ---------------
Total Repurchases................................ (40,621,843) $(1,056,089,233)
----------- ---------------
</TABLE>
B-46
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are sub-
ject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C
shares will be imposed on most redemptions made within five years of the pur-
chase for Class B and one year of the purchase for Class C as detailed in the
following schedule. The Class B and C shares bear the expense of their respec-
tive deferred sales arrangements, including higher distribution and service
fees and incremental transfer agency costs.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
First........................................................... 5.00% 1.00%
Second.......................................................... 4.00% None
Third........................................................... 3.00% None
Fourth.......................................................... 2.50% None
Fifth........................................................... 1.50% None
Sixth and Thereafter............................................ None None
</TABLE>
For the year ended August 31, 1996, VKAC, as Distributor for the Fund, received
commissions on sales of the Fund's Class A shares of approximately $1,390,200
and CDSC on redeemed shares of approximately $1,248,400. Sales charges do not
represent expenses to the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $2,068,461,517 and
$1,622,441,981, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments,
such as to attempt to protect the Fund against possible changes in the market
value of its portfolio or generate potential gain. All of the Fund's portfolio
holdings, including derivative instruments, are marked to market each day
with the change in value reflected in the unrealized appreciation/depreciation
on securities. During the period, the Fund invested in futures contracts, a
type of derivative. A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded stock index futures. These contracts
are generally used to provide the return of an index without purchasing all of
the securities underlying the index or as a substitute for purchasing specific
securities. A realized gain or loss is recognized upon disposition of a
contract. When the Fund takes delivery of the security underlying the contract,
the cost of the security acquired through delivery is adjusted by the
unrealized gain or loss on the contract.
Upon entering into futures contracts, the Fund maintains, in a segregated ac-
count with its custodian, securities with a value equal to its obligation under
the futures contracts. During the period the futures contract is open, payments
are received from or made to the broker based upon changes in the value of the
contract (the variation margin).
B-47
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1996
- --------------------------------------------------------------------------------
Transactions in futures contracts for the year ended August 31, 1996, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at August 31, 1995....................................... 150
Futures Opened....................................................... 800
Futures Closed....................................................... (950)
----
Outstanding at August 31, 1996....................................... -0-
----
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A shares and 1.00% each of
Class B and Class C shares are accrued daily. Included in these fees for the
year ended August 31, 1996, are payments to VKAC of approximately $5,255,600.
B-48
<PAGE> 99
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Independent Accountants' Report
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<C> <S>
1.1 -- First Amended and Restated Agreement and Declaration of Trust
incorporated herein by reference to Form N-1A of Registrant's
Registration No. 33-77800, Post- Effective Amendment No. 53 filed on
December 22, 1995.
1.2 -- Certificate of Amendment incorporated herein by reference to Form
N-1A of Registrant's Registration No. 33-77800, Post-Effective
Amendment No. 53 filed on December 22, 1995.
1.3 -- Certificate of Designation incorporated herein by reference to Form
N-1A of Registrant's Registration No. 33-77800, Post-Effective
Amendment No. 53 filed on December 22, 1995.
2 -- Amended and Restated Bylaws incorporated herein by reference to Form
N-1A of Registrant's Registration No. 33-77800, Post-Effective
Amendment No. 53 filed on December 22, 1995.
3 -- Inapplicable.
4.1 -- Specimen Class A Shares Certificate incorporated herein by reference
to Form N-1A of Registrant's Registration No. 33-77800,
Post-Effective Amendment No. 53 filed on December 22, 1995.
4.2 -- Specimen Class B Shares Certificate incorporated herein by reference
to Form N-1A of Registrant's Registration No. 33-77800,
Post-Effective Amendment No. 53 filed on December 22, 1995.
4.3 -- Specimen Class C Shares Certificate incorporated herein by reference
to Form N-1A of Registrant's Registration No. 33-77800,
Post-Effective Amendment No. 53 filed on December 22, 1995.
5 -- Investment Advisory Agreement.
6.1 -- Distribution and Service Agreement.
6.2 -- Form of Dealer Agreement.
6.3 -- Form of Broker Fully Disclosed Selling Agreement.
6.4 -- Form of Bank Fully Disclosed Selling Agreement.
7 -- Inapplicable.
8.1 -- Custodian Contract.
</TABLE>
C-1
<PAGE> 100
<TABLE>
<C> <S>
8.2 -- Transfer Agency and Servicing Agreement incorporated herein by
reference to Form N-1A of Registrant's Registration No. 33-77800,
Post-Effective Amendment No. 53 filed on December 22, 1995.
9 -- Data Access Services Agreement.
10 -- Opinion of Counsel.
11.1 -- Consent of Independent Accountants.
11.2 -- Consent of Trustees incorporated herein by reference (Exhibit 11.2 to
Form N-1A of Registrant, Registration No. 2-33214, Post-Effective
Amendment No. 52, filed on July 19, 1995).
12 -- Inapplicable.
13 -- Inapplicable.
14.1 -- Individual Retirement Account Brochure with Application incorporated
herein by reference (Exhibit 14.2 to Form N-1A of Van Kampen American
Capital Reserve Fund, Registration No. 2-50870, Post-Effective
Amendment No. 31, filed on September 24, 1993).
14.2 -- 403(b)(7) Custodial Account incorporated herein by reference (Exhibit
14.2 to Form N-1A of Van Kampen American Capital Reserve Fund,
Registration No. 2-50870, Post-Effective Amendment No. 30, filed on
September 24, 1992).
14.3 -- ORP 403(b)(7) Custodial Account incorporated herein by reference
(Exhibit 14.3 to Form N-1A of Van Kampen American Capital Reserve
Fund, Registration No. 2-50870, Post-Effective Amendment No. 30,
filed on September 24, 1992).
14.4 -- Retirement Plans for the Small Business-Forms Package and Plan
Documents incorporated herein by reference (Exhibit 14.9 to Form N-1A
of Van Kampen American Capital Emerging Growth Fund, Post-Effective
Amendment No. 44, Registration No. 2-33214 filed on December 21,
1990).
14.5 -- Prototype Profit Sharing/Money Purchase Plan and Trust incorporated
herein by reference (Exhibit 14.5 to Form N-1A of Van Kampen American
Capital Growth and Income Fund, Registration No. 2-21657,
Post-Effective Amendment No. 61, filed on March 26, 1991).
14.6 -- Prototype 401(k) Plan and Trust incorporated herein by reference
(Exhibit 14.6 to Form N-1A of Van Kampen American Capital Growth and
Income Fund, Registration No. 2-21657, Post-Effective Amendment No.
61, filed on March 26, 1991).
14.7 -- Salary Reduction Simplified Employee Pension Plan incorporated herein
by reference (Exhibit 14.7 to Form N-1A of Van Kampen American
Capital World Portfolio Series Trust, Registration No. 33-37879,
Post-Effective Amendment No. 9, filed on September 24, 1993).
15.1 -- Plan of Distribution Pursuant to Rule 12b-1.
15.2 -- Service Plan.
15.3 -- Form of Shareholder Assistance Agreement.
15.4 -- Form of Administrative Services Agreement.
16 -- Computation Measure for of Performance Information.
17.1 -- List of Certain Investment Companies in Response to Item 29(a).
17.2 -- List of Officers and Directors of Van Kampen American Capital
Distributors, Inc. in Response to Item 29(b).
</TABLE>
C-2
<PAGE> 101
<TABLE>
<C> <S>
18 -- Multiple Class Plan.
19 -- Power of Attorney.
27 -- Financial Data Schedules.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
AS OF DECEMBER 6, 1996
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
----------------------------------------------- ------------------------
<S> <C>
Shares of Beneficial Interest, $0.01 par value
Class A Shares 152,460
Class B Shares 119,627
Class C Shares 11,143
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
thereof to which such person would otherwise be subject by reason of (i) not
acting in good faith in the reasonable belief that such person's actions were
not in the best interests of the Trust, (ii) willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office (iii) for a criminal proceeding, not having a reasonable cause
to believe that such conduct was unlawful (collectively, "Disabling Conduct").
Absent a court determination that an officer or trustee seeking indemnification
was not liable on the merits or guilty of Disabling Conduct in the conduct of
his or her office, the decision by the Registrant to indemnify such person must
be based upon the reasonable determination of independent counsel or non-party
independent trustees, after review of the facts, that such officer or trustee is
not guilty of Disabling Conduct in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission
C-3
<PAGE> 102
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by the trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" 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.
(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17.1 incorporated by
reference herein.
(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
officers thereof are set forth in Exhibit 17.2. Except as disclosed under the
heading, "Trustees and Officers" in Part B of this Registration Statement, none
of such persons has any position or office with Registrant.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181. ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; (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.
There are no management related services contracts not discussed in Part A.
ITEM 32. UNDERTAKINGS.
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.
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 trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
C-4
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Van Kampen American Capital
Emerging Growth Fund certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, and 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 State of Illinois, on the 20th
day of December, 1996.
VAN KAMPEN AMERICAN CAPITAL
EMERGING GROWTH FUND
By: /s/ RONALD A. NYBERG
------------------------------------
(Ronald A. Nyberg, Vice President
and Secretary)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on December 20, 1996 by the
following persons in the capacities indicated:
<TABLE>
<S> <C>
Principal Executive Officer:
/s/ DENNIS J. McDONNELL* Chairman, President and
- --------------------------------------------- Trustee
(Dennis J. McDonnell)
Principal Financial Officer:
/s/ EDWARD C. WOOD III* Vice President and Chief
- --------------------------------------------- Financial Officer
(Edward C. Wood III)
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- ---------------------------------------------
(J. Miles Branagan)
/s/ LINDA H. HEAGY* Trustee
- ---------------------------------------------
(Linda H. Heagy)
/s/ ROGER HILSMAN* Trustee
- ---------------------------------------------
(Roger Hilsman)
/s/ R. CRAIG KENNEDY* Trustee
- ---------------------------------------------
(R. Craig Kennedy)
/s/ DONALD C. MILLER* Trustee
- ---------------------------------------------
(Donald C. Miller)
/s/ JACK E. NELSON* Trustee
- ---------------------------------------------
(Jack E. Nelson)
/s/ JEROME L. ROBINSON* Trustee
- ---------------------------------------------
(Jerome L. Robinson)
/s/ FERNANDO SISTO* Trustee
- ---------------------------------------------
(Fernando Sisto)
/s/ WAYNE W. WHALEN* Trustee
- ---------------------------------------------
(Wayne W. Whalen)
/s/ WILLIAM S. WOODSIDE* Trustee
- ---------------------------------------------
(William S. Woodside)
* Signed pursuant to a power of attorney filed herewith.
/s/ RONALD A. NYBERG
- ---------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
<PAGE> 104
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
INDEX TO EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 55 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON DECEMBER 26, 1996
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
5 -- Investment Advisory Agreement.
6.1 -- Distribution and Service Agreement.
6.2 -- Form of Dealer Agreement.
6.3 -- Form of Broker Fully Disclosed Selling Agreement.
6.4 -- Form of Bank Fully Disclosed Selling Agreement.
8.1 -- Custodian Contract.
9 -- Data Access Services Agreement.
10 -- Opinion of Counsel.
11.1 -- Consent of Independent Accountants.
15.1 -- Plan of Distribution Pursuant to Rule 12b-1.
15.2 -- Service Plan.
15.3 -- Form of Shareholder Assistance Agreement.
15.4 -- Form of Administrative Services Agreement.
16 -- Computation Measure for Performance Information.
17.1 -- List of Certain Investment Companies in Response to Item 29(a).
17.2 -- List of Officers and Directors of Van Kampen American Capital Distributors, Inc. in
Response to Item 29(b).
18 -- Multiple Class Plan.
19 -- Power of Attorney.
27 -- Financial Data Schedules.
</TABLE>
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this 31st day of October, 1996, by
and between VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND, a Delaware
business trust (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 FUND's
Trustees and in conformity with applicable laws, the FUND's Agreement and
Declaration of Trust ("Declaration of Trust"), By-laws, registration
statements, prospectus and stated investment objectives, policies and
restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing
of routine legal services except for services provided by outside counsel to
the FUND selected by the Trustees, and the supervision of the FUND's Treasurer
and the personnel working under his direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND trustee and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Trustees of 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
<PAGE> 2
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 trustees and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office
space, facilities, and equipment used by the Treasurer and such personnel in
the performance of their normal duties for the FUND which consist of
maintenance of the accounts, books and other documents which constitute the
record forming the basis for the FUND's financial statements, preparation of
such financial statements and other FUND documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the FUND's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the FUND selected by the Trustees; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the FUND and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the FUND; (xi) all other expenses incidental to holding meetings of the FUND's
shareholders including proxy solicitations therefor; (xii) expenses for
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the FUND's membership in
trade associations approved by the Trustees; 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 trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the FUND
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.
(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
2
<PAGE> 3
others and engage in other activities, so long as the services rendered to the
FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (the "1940
Act"), any of the shareholders, trustees, officers and employees of the FUND
may be a shareholder, trustee, director, officer or employee of, or be
otherwise interested in, the ADVISER, and in any person controlled by or under
common control with the ADVISER, and the ADVISER, and any person controlled by
or under common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or
to any shareholder of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
(3) Compensation Payable to ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed
at the following annual rates:
.575% on the first $350 million of the FUND's average daily net assets; .525%
on the next $350 million of the FUND's average daily net assets; .475% on the
next $350 million of the FUND's average daily net assets; and .425% of any
excess over $1.05 billion.
Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month calculated in the
manner provided in the FUND's Declaration of Trust. 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 VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the FUND, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with the FUND's portfolio transactions and
shall advise the Trustees 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 VK/AC Holding, Inc., to receive in connection with
the FUND's portfolio transactions or other arrangements which may benefit the
FUND.
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<PAGE> 4
In the event that the ordinary business expenses of the FUND for any fiscal
year should exceed the most restrictive expense limitation applicable in the
states where the FUND's shares are qualified for sale, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess. The
ADVISER's compensation shall be so reduced by a reduction or a refund thereof,
at the time such compensation is payable after the end of each calendar month
during such fiscal year of the FUND, and if such amount should exceed such
monthly compensation, the ADVISER shall pay the FUND an amount sufficient to
make up the deficiency, subject to readjustment during the FUND's fiscal year.
For purposes of this paragraph, all ordinary business expenses of the FUND
shall include the investment advisory fee and other operating expenses paid by
the FUND except (i) for interest and taxes; (ii) brokerage commissions; (iii)
as a result of litigation in connection with a suit involving a claim for
recovery by the FUND; (iv) as a result of litigation involving a defense
against a liability asserted against the FUND, provided that, if the ADVISER
made the decision or took the actions which resulted in such claim, it acted in
good faith without negligence or misconduct; (v) any indemnification paid by
the FUND to its officers and trustees and the ADVISER in accordance with
applicable state and federal laws as a result of such litigation; and (vi)
amounts paid to Van Kampen American Capital Distributors, Inc., the distributor
of the FUND's shares, in connection with a distribution plan adopted by the
FUND's Directors pursuant to Rule 12b-1 under the Investment Company Act of
1940.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4) Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any
of such records upon the FUND's request. The ADVISER further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the Act.
(5) Duration of Agreement
This Agreement shall become effective on the date hereof, and shall remain
in full force until May 30, 1997 unless sooner terminated as hereinafter
provided. This Agreement shall continue in force from year to year thereafter,
but only so long as such continuance is approved at least annually by the vote
of a majority of the FUND's Trustees 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 Trustees or a majority of the FUND's outstanding voting securities.
This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the
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FUND's Trustees, by vote of a majority of the FUND's outstanding voting
securities, or by the ADVISER, on 60 days' written notice, or upon such shorter
notice as may be mutually agreed upon. Such termination shall be without
payment of any penalty.
(6) Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the 1940 Act and
the Rules and Regulations thereunder, subject, however, to such exemptions as
may be granted to either the ADVISER or the FUND by the Securities and Exchange
Commission (the "Commission"), or such interpretive positions as may be taken
by the Commission or its staff, under the 1940 Act, and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the Rules and Regulations thereunder.
The execution of this Agreement has been authorized by the FUND's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Fund or
the Trustees of the FUND as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the FUND individually but are binding only upon the
assets and property of the FUND. A Certificate of Trust in respect of the Fund
is on file with the Secretary of State of Delaware.
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 EMERGING GROWTH FUND
By: /s/ DENNIS J. MCDONNELL
---------------------------------------
Name: Dennis J. McDonnell
-------------------------------------
Its: President
--------------------------------------
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ PETER W. HEGEL
---------------------------------------
Name: Peter W. Hegel
-------------------------------------
Its: Executive Vice-President
--------------------------------------
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<PAGE> 1
EXHIBIT 6.1
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of July 26, 1996 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
(the "Fund"), and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations
of front-end sales charges, distribution fees, service fees and contingent
deferred sales charges. Classes of shares, if any, subject to a front-end
sales charge and a distribution and/or service fee are referred to herein as
"FESC Classes" and the Shares of such classes are referred to herein as "FESC
Shares." Classes of shares, if any, subject to a contingent-deferred sales
charge and a distribution and/or a service fee are referred to herein as "CDSC
Classes" and Shares of such classes are referred to herein as "CDSC Shares."
Classes of shares, if any, subject to a front-end sales charge, a
contingent-deferred sales charge and a distribution and/or service fee are
referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares." The Fund reserves the right to
refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.
The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.
The Distributor agrees that it will not take any long or short
positions in the Shares, except for long positions in those Shares purchased by
the Distributor in accordance with any systematic sales plan described in the
then current Prospectus of the Fund and except as permitted by Section 2
hereof, and that so far as it can control the situation, it will prevent any of
its trustees, officers or shareholders from taking any long or short positions
in the Shares, except for legitimate investment purposes.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of
Trustees; (c) upon the exercise of purchase or subscription rights granted to
the holders of Shares on a pro rata basis; (d) in connection with the automatic
reinvestment of dividends and distributions from the Fund; or (e) in connection
with the issue and sale of Shares to trustees, officers and employees of the
Fund; to directors, officers and employees of the investment adviser of the
Fund or any principal underwriter (including the Distributor) of the Fund; to
retirees of the Distributor that purchased shares of any mutual fund
distributed by the Distributor prior to retirement; to directors, officers and
employees of Van Kampen American Capital, Inc. (formerly The Van Kampen Merritt
Companies, Inc.) (the parent of the Distributor), VK/AC Holding, Inc. (formerly
VKM Holdings, Inc.)(the parent of The Van Kampen Merritt Companies, Inc.) and
to the subsidiaries of VK/AC Holding, Inc.; and to any trust, pension,
profit-sharing or other benefit plan for any of the aforesaid persons as
permitted by Rule 22d-1 under the Investment Company Act of 1940 (the "1940
Act").
The Distributor shall have the right to buy from the Fund the Shares needed,
but not more than the Shares needed (except for reasonable allowances for
clerical errors, delays and errors of transmission and cancellation of orders)
to fill unconditional orders for Shares received by the Distributor from
dealers, agents and investors during each period when particular net asset
values and public offering prices are in
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<PAGE> 2
effect as provided in Section 3 hereof; and the price which the Distributor
shall pay for the Shares so purchased shall be the respective net asset
value used in determining the public offering price on which such orders were
based. The Distributor shall notify the Fund at the end of each such period,
or as soon thereafter on that business day as the orders received in such
period have been compiled, of the number of Shares of each class that the
Distributor elects to purchase hereunder.
3. Public Offering Price. The public offering price per Share shall
be determined in accordance with the then current Prospectus of the Fund. In
no event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess
of the applicable maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as in effect
from time to time. The net asset value per share for each class of Shares,
respectively, shall be determined in the manner provided in the Declaration of
Trust and By-Laws of the Trust as then amended, the Certificate of Designation
with respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the
exemptive order with respect to the Fund (Release No. IC-19600) issued by the
Securities and Exchange Commission on July 28, 1993, as it may be amended from
time to time or succeeded by other exemptive orders or rules promulgated by the
Securities and Exchange Commission under the 1940 Act. The Fund will cause
immediate notice to be given to the Distributor of each change in net asset
value as soon as it is determined. Discounts to dealers purchasing FESC Shares
from the Distributor for resale and to brokers and other eligible agents making
sales of FESC Shares to investors and compensation payable from the Distributor
to dealers, brokers and other eligible agents making sales of CDSC Shares and
Combination Shares shall be set forth in the selling agreements between the
Distributor and such dealers or agents, respectively, as from time to time
amended, and, if such discounts and compensation are described in the then
current Prospectus for the Fund, shall be as so set forth.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund
Shares, the Distributor will in all respects duly comply with all state and
federal laws relating to the sale of such securities and with all applicable
rules and regulations of all regulatory bodies, including without limitation
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and all applicable rules and regulations of the Securities and Exchange
Commission under the 1940 Act, and will indemnify and save the Fund harmless
from any damage or expense on account of any unlawful act by the Distributor or
its agents or employees. The Distributor is not, however, to be responsible
for the acts of other dealers or agents, except to the extent that they shall
be acting for the Distributor or under its direction or authority. None of the
Distributor, any dealer, any agent or any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus heretofore or hereafter
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") (as any such Registration Statement and
Prospectus may have been or may be amended from time to time), covering the
Shares, and in any supplemental information to any such Prospectus approved by
the Fund in connection with the offer or sale of Shares. None of the
Distributor, any dealer, any broker or any other person is authorized to act as
agent for the Fund in connection with the offering or sale of Shares to the
public or otherwise. All such sales shall be made by the Distributor as
principal for its own account.
In selling Shares to investors, the Distributor will adopt and comply
with certain standards, as set forth in Exhibit III attached hereto as to when
each respective class of Shares may appropriately be sold to particular
investors. The Distributor will require every broker, dealer and other
eligible agent participating in the offering of the Shares to agree to adopt
and comply with such standards as a condition precedent to their participation
in the offering.
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<PAGE> 3
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of
Shares under the federal securities laws, and the Fund
will exercise its best efforts to obtain said
registration and qualification;
(ii) all expenses in connection with the printing of any
notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any
other notice or communication sent to shareholders
in connection with any meeting of the shareholders or
otherwise, any annual, semiannual or other reports or
communications sent to the shareholders, and the
expenses of sending prospectuses relating to the Shares
to existing shareholders;
(iii) all expenses of any federal or state original-issue tax
or transfer tax payable upon the issuance, transfer or
delivery of Shares from the Fund to the Distributor;
and
(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent Shares.
(b) The Distributor will also permit its officers and employees
to serve without compensation as trustees and officers of the Fund if duly
elected to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket
costs and expenses actually incurred by it in connection with distribution of
each class of Shares respectively in accordance with the terms of a plan (the
"12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as
such 12b-1 Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder with respect to a
class of Shares unless and until this Agreement shall have been approved for
each such class by a majority of the Board of Trustees of the Fund and by a
majority of the "Disinterested Trustees" (as such term is defined in such 12b-1
Plan) by vote cast in person at a meeting called for the purpose of voting on
this Agreement. A copy of such 12b-1 Plan as in effect on the date of this
Agreement is attached as Exhibit I hereto. The Fund reserves the right to
terminate such 12b-1 Plan with respect to a class of Shares at any time, as
specified in the Plan. The persons authorized to direct the payment of funds
pursuant to this Agreement and the 12b-1 Plan shall provide to the Fund's Board
of Trustees, and the Trustees shall review, at least quarterly, a written
report with respect to each of the classes of Shares of the amounts so paid and
the purposes for which such expenditures were made for each such class of
Shares.
(d) The Fund shall compensate the Distributor for providing
services to, and the maintenance of, shareholder accounts in the Fund
(including prepaying service fees to eligible brokers, dealers and financial
intermediaries and expenses incurred in connection therewith) and the
Distributor may pay as agent for and on behalf of the Fund a service fee with
respect to each class of Shares to brokers, dealers and financial
intermediaries for the provision of shareholder services and the maintenance of
shareholder accounts in the Fund in the amount with respect to each class of
Shares set forth from time to time in the Fund's prospectus. The Fund shall
compensate the Distributor for such expenses in accordance with the terms of a
service plan (the "Service Plan"), as such Service Plan may be in effect from
time to time; provided, however, that no service fee payments shall be due or
paid to the Distributor hereunder with respect to a class of Shares unless and
until this Agreement shall have been approved for each such class by a majority
of the Board of Trustees of the Fund and by a majority of the Disinterested
Trustees by vote cast in person at a meeting called for the purpose of voting
on this Agreement. A copy of such Service Plan as in effect on the date of
this Agreement is attached as Exhibit II hereto. The Fund reserves the right
to terminate such Service Plan with respect to a class of Shares at any time,
as specified in the Plan. The persons authorized to direct the payment of
funds pursuant to this Agreement and the Service Plan shall provide to the
Fund's Board of Trustees, and the Trustees shall
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<PAGE> 4
review, at least quarterly, a written report with respect to each of the
classes of Shares of the amounts paid as service fees for each such class of
Shares.
6. Redemption of Shares. In connection with the Fund's redemption of
its Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal
and state legislation, any applicable rules of the National Association of
Securities Dealers, Inc., and any applicable rules and regulations of the
Securities and Exchange Commission under the 1940 Act, the Distributor may
accept offers of holders of Shares to resell such Shares to the Fund on such
terms and conditions and at such prices as described and provided for in the
then current Prospectus of the Fund.
(b) The Distributor agrees to notify the Fund at such times as
the Fund may specify of the number of each class of Shares, respectively,
repurchased for the Fund's account and the time or times of such repurchases,
and the Fund shall notify the Distributor of the prices and, in the case of a
class of CDSC Shares or Combination Shares, of the deferred sales charge as
described below, if any, applicable to repurchases of Shares of such class.
(c) The Fund shall have the right to suspend or revoke the
foregoing authorization at any time; unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by telegraph or by written instrument from any of the Fund's officers.
In the event that the Distributor's authorization is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of
the Board of Trustees of the Fund.
(d) The Distributor agrees that all repurchases of Shares made
by the Distributor shall be made only as agent for the Fund's account and
pursuant to the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to
pay, for the Fund's account, the repurchase price (together with any applicable
contingent deferred sales charge) of any Shares so repurchased for the Fund
against the authorized transfer of book shares from an open account and against
delivery of any other documentation required by the Board of Trustees of the
Fund or, in the case of certificated Shares, against delivery of the
certificates representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other
compensation in respect of any repurchases of FESC Shares for the Fund under
the foregoing authorization and appointment as agent. With respect to any
repurchase of CDSC Shares or Combination Shares, the Distributor shall receive
the deferred sales charge, if any, applicable to the respective class of Shares
that have been held for less than a specified period of time with respect to
such class as set forth from time to time in the Fund's Prospectus. The
Distributor shall receive no other commission or other compensation in respect
of any repurchases of CDSC Shares or Combination Shares for the Fund under the
foregoing authorization and appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms
of this Agreement are redeemed or repurchased by the Fund or by the Distributor
as agent or are tendered for redemption within seven business days after the
date of the Distributor's confirmation of the original purchase by the
Distributor, the Distributor shall forfeit the amount above the net asset value
received by it in respect of such Shares, provided that the portion, if any, of
such amount re-allowed by the Distributor to dealers or agents shall be
repayable to the Fund only to the extent recovered by the Distributor from the
dealer or agent concerned. The Distributor shall include in agreements with
such dealers and agents a corresponding provision for the forfeiture by them of
their concession with respect to FESC Shares
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<PAGE> 5
purchased by them or their principals and redeemed or repurchased by the Fund
or by the Distributor as agent within seven business days after the date of the
Distributor's confirmation of such initial purchases.
7. Indemnification. The Fund agrees to indemnify and hold harmless
the Distributor and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground
that the registration statement, Prospectus, shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading under the 1933 Act or any other statute or the common law. However,
the Fund does not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund by or on behalf of the
Distributor. In no case (i) is the indemnity of the Fund in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its securityholders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this Section with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or any such person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any such
person (or after the Distributor or the person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund shall
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them.
If the Fund does not elect to assume the defense of any suit, it will reimburse
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of the
Shares.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of its trustees and officers and each person,
if any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the 1933 Act
or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor. In no
case (i) is the indemnity of the Distributor in favor of the Fund or any person
indemnified to be deemed to protect the Fund or any such person against any
liability to which the Fund or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligation and duties
under this Amended Agreement, or (ii) is the Distributor to be liable under its
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<PAGE> 6
indemnity agreement contained in this paragraph with respect to any claim made
against the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the Fund or
person (or after the Fund or such person shall have received notice of service
on any designated agent). However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and trustees and to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
Fund or controlling persons, defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the Distributor does
not elect to assume the defense of any suit, it will reimburse the Fund,
officers and trustees or controlling person or persons, defendant or defendants
in the suit, for the reasonable fees and expenses of any counsel retained by
them. The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Shares.
8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.
9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
10. Notice. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party or at such other address as such party shall have
designated in writing.
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11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Secretary
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
7
<PAGE> 1
EXHIBIT 6.2
-------------------------------------------------------
DEALER AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
-------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to sell to you shares
of any of the Van Kampen American Capital open-end investment companies (the
"Open-End Funds" or, individually, an "Open-End Fund") and Van Kampen American
Capital closed-end investment companies (the "Closed-End Funds" or,
individually, a "Closed-End Fund") distributed by Van Kampen American Capital
Distributors, Inc. ("VKAC") pursuant to the terms and conditions contained
herein. Collectively, the Open-End Funds and Closed-End Funds sometimes are
referred to herein as the "Funds" or, individually, as a "Fund".
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to sell to you
shares of each Open-End Fund and each Closed-End Fund prior to the Effective
Date (as defined herein) of each Fund's Registration Statement (as defined
herein) (the "Initial Offering Period") and after the Effective Date of each
Fund's Registration Statement (the "Continuous Offering Period") (if any) as
described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the registration statement for the fund on the effective date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any preliminary Statement of Additional Information included at
any time as a part of the registration statement for any Fund prior to the
effective date and which is authorized by VKAC for use in connection with the
offering of shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a broker-dealer registered with the Securities and
Exchange Commission (the "SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or, in the alternative,
that you are a foreign dealer or bank, not required to be registered as a
broker-dealer with the SEC and not required or eligible for membership in the
NASD. If you are such an NASD member, you agree that in making sales of shares
of the one or more classes of shares of each Fund you will comply with all
applicable rules of the NASD, including without limitation rules pertaining to
the opening, approval, supervision and monitoring of customer accounts, the
NASD's Interpretation with Respect to Free-Riding and Withholding and Sections
8, 24 and 36 of Article III of the NASD's Rules of Fair Practice. If you are
such an unregistered foreign dealer or bank, you agree not to offer or sell, or
to agree to offer or sell, directly or indirectly, except through VKAC, any
shares to any party to whom such shares may not be sold unless you are so
registered and a member of the NASD, and in making sales of such shares you
agree to comply with the NASD's Interpretation with Respect to Free-Riding and
Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules of
Fair Practice as though you were a member in
1
<PAGE> 2
good standing of the NASD and to comply with Section 25 of such Article III as
it applies to a nonmember broker or dealer in a foreign country. You and we
agree to abide by all other Rules and Regulations of the NASD, including
Section 26 of its Rules of Fair Practice, and all applicable state and Federal
laws, rules and regulations. Your acceptance also constitutes a representation
that you have been duly authorized by proper corporate or partnership action to
enter into this Agreement and to perform your obligations hereunder. You will
not accept any orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. In all sales of shares of the Funds to the public you
shall act as dealer for your own account, and you shall have no authority in
any transaction to act as agent for the Fund or for VKAC.
3. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the "Registration
Statement") on the SEC Form applicable to the respective Fund. The date on
which the Registration Statement is declared effective by the SEC is referred
to herein as the "Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you expressly
acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) in any state prior to the Effective Date of the
Registration Statement with respect thereto or (ii) in any state in which such
offer or sale would be unlawful prior to registration or qualification under
the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus. You agree that you will distribute to the
public only (a) the Preliminary Prospectus, the Prospectus and any amendment or
supplement thereto and (b) sales literature or other documents expressly
authorized for such distribution by VKAC.
(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, you will be
responsible for confirming such indications of interest with your customers
following the Effective Date. Indications of interest with respect to shares
of a class of a Fund's shares transmitted to VKAC prior to the Effective Date
will be conditioned upon the occurrence of the Effective Date and the
registration or qualification of the respective class of shares in the
respective state.
(d) Indications of interest with respect to shares
of a class of a Fund's shares which are not canceled by you prior to the latter
of the Effective Date and the registration or qualification of the respective
class of the Fund's shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for shares of such class of shares of the Fund.
(e) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Prospectus
and this Agreement.
4. After the Effective Date, you will not offer shares of a
class of the Fund's shares for sale in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state or where you
are not qualified to act as a dealer, except for states in which they are
exempt from qualification.
5. In the event that you offer shares of the Fund for sale
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
2
<PAGE> 3
6. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to sell the shares in such jurisdiction shall be solely your responsibility.
7. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
8. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion.
9. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance or transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the sale or, at its option, to sell the shares
ordered back to the Fund, and in either case, VKAC may hold you responsible for
any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
10. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
11. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
12. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done
so, (ii) notify the Fund of the request so that the Fund can fulfill the
request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VKAC, to bring all subsequent changes to
such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus (and not the Statement of Additional Information) for such Fund
filed pursuant to Rule 497 under the Securities Act of 1933, as amended.
3
<PAGE> 4
13. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares of Funds sold to you shall be issued only if
specifically requested.
14. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
15. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
16. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
17. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
18. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
19. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE ONLY TO OPEN-END FUNDS
20. Each of the Open-End Fund's is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
21.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. The dealer discount
applicable to any sale of shares of a class of FESC Shares of an Open-End Fund
shall be a percentage of the applicable public offering price for such shares
as provided for in the then-current Prospectus of such Open-End Fund or, if not
so provided, as provided to you from time to time in writing by VKAC.
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. The dealer
sales compensation payable by VKAC applicable to any sale of shares of a class
of CDSC Shares of an Open-End Fund shall be the percentage of the applicable
public offering price for such shares as provided for in the then-current
Prospectus of such Open-End Fund or, if not so provided, as provided to you
from time to time in writing by VKAC.
22. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.
4
<PAGE> 5
23. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately sell the various classes of shares
of the Open-End Funds to investors and that you will sell such shares only in
accordance therewith.
24.(a) You agree to purchase shares of an Open-End Fund only
from VKAC or from your customers. If you purchase shares of an Open-End Fund
from VKAC, you agree that all such purchases shall be made only: (i) to cover
orders already received by you from your customers or (ii) for your own bona
fide investment. If you purchase shares of an Open-End Fund from your
customers, you agree to pay such customers not less than the applicable
repurchase price for such shares as established by the then-current Prospectus
for such Open-End Fund. VKAC in turn agrees that it will not purchase any
shares from an Open-End Fund except for the purpose of covering purchase orders
that it has already received.
(b) With respect to shares of a class of CDSC Shares
of an Open-End Fund purchased from your customers, you additionally agree to
resell such shares only to VKAC as agent for the Fund at the repurchase price
for such shares as established by the then-current Prospectus of such Open-End
Fund. You acknowledge and understand that shares of a class of CDSC Shares of
an Open-End Fund may be subject to a CDSC payable to VKAC as set forth in the
Prospectus for such Open-End Fund in effect at the time of the original
purchase of such shares from the Open-End Fund and that the repurchase price
for such shares that will be paid by VKAC will reflect the imposition of any
applicable CDSC.
25.(a) You shall sell shares of a class of shares of an
Open-End Fund only: (i) to customers at the applicable public offering price
or (ii) to VKAC as agent for the Open-End Fund at the repurchase price in the
then-current Prospectus of such Open-End Fund. In such a sale to VKAC, you may
act either as principal for your own account or as agent for your customer. If
you act as principal for your own account in purchasing shares of a class of
shares of an Open-End Fund for resale to VKAC, you agree to pay your customer
not less than the price that you receive from VKAC. If you act as agent for
your customer in selling shares of a class of shares of an Open-End Fund to
VKAC, you agree not to charge your customer more than a fair commission for
handling the transaction. You acknowledge and understand that CDSC Shares of
an Open-End Fund may be subject to a CDSC payable to VKAC as set forth in the
Prospectus of such Open-End Fund in effect at the time of the original purchase
of such CDSC Shares and that the repurchase price that will be paid by VKAC for
such CDSC Shares will reflect the imposition of any such CDSC.
26. If any shares of a class of FESC Shares of an Open-End
Fund sold to or by you under the terms of this Agreement are repurchased by the
Fund or by VKAC as agent for the Fund or are tendered for redemption within
seven business days after the date of VKAC's confirmation of the original
purchase, it is agreed that you shall forfeit your right to any dealer discount
received by you on such FESC Shares. VKAC will notify you of any such
repurchase or redemption within ten business days from the date on which the
repurchase or redemption order in proper form is delivered to VKAC or to the
Fund, and you shall forthwith refund to VKAC the full dealer discount allowed
to you on such sale. VKAC agrees, in the event of any such repurchase or
redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the discount allowed to you, to pay
such refund forthwith to the Fund.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
27. No Closed-End Fund will issue fractional shares.
28. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers and dealers participating in the Initial Offering
Period or among brokers, dealers and banks in the Continuous Offering Period,
as the case may be, on other than a pro rata basis, which may result in
5
<PAGE> 6
certain brokers, dealers and banks not being allocated the full amount of
shares of such fund sold by them while certain other brokers, dealers and banks
may receive their full allocation.
29. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during the Initial
Offering Period to VKAC within the time period as specified in such Closed-End
Fund's Prospectus (or in the time period as extended by VKAC in writing). You
also agree to transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public offering price for
such Closed-End Fund is next determined after your receipt of such order as set
forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
30. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VKAC for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VKAC will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later that
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you in the Initial Offering Period or the Continuous
Offering Period are resold in the open market or otherwise during the
Forfeiture Period, VKAC reserves the right to require you to forfeit any sales
concessions and other additional compensation with respect to such shares. In
the event of a forfeiture, VKAC may withhold any forfeited sales concessions
and other additional compensation that has not yet been paid or from other
amounts yet to be paid to you (whether or not payable with respect to such
shares) and you agree to repay to VKAC, promptly upon demand, any forfeited
sales concessions and other compensation that has been paid. Determinations of
the amounts to be paid to you or by you to VKAC shall be made by VKAC and shall
be conclusive.
31. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time), and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
32. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
33. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
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<PAGE> 7
34. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
sell shares of the Prime Rate Fund is subject to further terms and conditions
in addition to those set forth above as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC, and
that no secondary market for the shares of the Prime Rate Fund exists
currently, or is expected to develop. You also expressly acknowledge and agree
that, in the event your customer cancels their order for shares after
confirmation, such shares may not be repurchased, remarketed or otherwise
disposed of by or through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund which have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Dealer Agreement,
keeping a copy for your files and returning the original to us.
Accepted and Agreed to:
(PRINT OR TYPE)
Dated: ________________________________________ By:
Its:
________________________________________
Broker-Dealer Name
________________________________________
Broker-Dealer Taxpayer ID Number
VAN KAMPEN AMERICAN CAPITAL
________________________________________ DISTRIBUTORS, INC.
Address
________________________________________
City, State, Zip
By: ________________________________________
Signature
________________________________________
Name
________________________________________
Title
_________________________________________
Phone
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<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
8
<PAGE> 1
EXHIBIT 6.3
---------------------------------------------------------
BROKER FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
---------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to
you shares of any of the Van Kampen American Capital open-end investment
companies (the "Open-End Funds" or, individually, an "Open-End Fund") and Van
Kampen American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen American
Capital Distributors, Inc. ("VKAC") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a broker-dealer that desires to make available shares of such Funds to
your customers on a fully disclosed basis wherein VKAC would confirm
transactions of your customers in a Fund directly to them.
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to make available
to you shares of each Open-End Fund and each Closed-End Fund, prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (the
"Initial Offering Period") and after the Effective Date of each Fund's
Registration Statement (as defined herein) (the "Continuous Offering Period")
(if any) as described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the registration statement for the fund on the effective date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any preliminary Statement of Additional Information included at
any time as a part of the registration statement for any Fund prior to the
effective date and that is authorized by VKAC for use in connection with the
offering of shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a securities broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"). You agree
to abide by the laws, rules and regulations of the SEC and NASD, including
without limitation rules pertaining to the opening, approval, supervision and
monitoring of customer accounts, the NASD's Interpretation with Respect to
Free-Riding and Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice. You and we agree to abide by all other Rules
and Regulations of the NASD, including Section 26 of its Rules of Fair
Practice. Your acceptance also constitutes a representation that you have been
duly authorized by proper corporate or partnership action to enter into this
Agreement and to perform your obligations hereunder. You will not accept any
orders from any broker, dealer or financial institution who is purchasing from
you with a view toward distribution unless you have obtained such person's or
entity's written consent to be bound by the terms of this Agreement.
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2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities Investor's
Protection Act, your customers will be considered customers of VKAC and not of
your firm. VKAC has been granted an exemption from the NASD rules of Fair
Practice, Article III Section 45 requirements to send customer statements and
thus will not due so. Customer statements showing account activity and
balances will be mailed to the customer by the Funds each time a financial
transaction occurs in their account and on a monthly basis. Nothing herein
shall cause your firm's customers to be interpreted as customers of VKAC for
any other purpose, or to negate the intent of any other section of this
agreement, including, but not limited to, the delineation of responsibilities
as set forth elsewhere in this agreement.
3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent for the Fund
or for VKAC.
4. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the "Registration
Statement") on the SEC form applicable to the respective Fund. The date on
which the Registration Statement is declared effective by the SEC is referred
to herein as the "Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you expressly
acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the Registration
Statement or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus.
(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, upon your
instruction VKAC will send confirmation of such indications of interest
directly to your customers in writing, together with copies of the Preliminary
Prospectus for the Fund, and send copies of the confirmations to you.
Indications of interest with respect to shares of a class of a Fund's shares
transmitted to VKAC prior to the Effective Date are subject to acceptance or
rejection by VKAC in its sole discretion and are conditioned upon the
occurrence of (i) the Effective Date and (ii) the registration or qualification
of the respective class of shares in the respective state.
(d) Indications of interest with respect to shares
of a class of a Fund's shares not cancelled by you prior to or on the later of
(i) the Effective Date and (ii) the registration or qualification of the
respective class of shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for Shares.
(e) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together with copies of
the Prospectus for the Fund, and send copies of the confirmations to you.
(f) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies that
you discover and will promptly bring to VKAC's attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(g) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or rejection by
VKAC in its sole discretion.
5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state, except for
states in which they are exempt from qualification.
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6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to make the shares available in such jurisdiction shall be solely your
responsibility.
8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (a)
the Preliminary Prospectus, the Prospectus and any amendment or supplement
thereto and (b) sales literature or other documents expressly authorized for
such distribution by VKAC.
10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VKAC of any errors
or discrepancies that you discover and shall promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance of transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VKAC may hold you responsible
for any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done
so, (ii) notify the Fund of the request so that the Fund can fulfill the
request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates,
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<PAGE> 4
number of copies and persons to whom sent) of copies of any Preliminary
Prospectus (and any Statement of Additional Information) and/or Prospectus (and
any Statement of Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VKAC, to bring all
subsequent changes to such Preliminary Prospectus or Prospectus to the
attention of anyone to whom such material shall have been distributed. You
further agree to furnish to persons who receive a confirmation of sale of
shares of any Fund a copy of the Prospectus for such Fund filed pursuant to
Rule 497 under the Securities Act of 1933, as amended. Upon your request, VKAC
will furnish to such persons a copy of the Prospectus for such Fund filed
pursuant to Rule 497 under the Securities Act of 1993, as amended.
15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except for servicing and
informational mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers only if
specifically requested.
17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
22. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
24.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. On each order for shares of
a class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. You will remit
payment of the aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to receive the
applicable selling compensation for such shares as
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<PAGE> 5
provided for in the then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by VKAC.
25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.
26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately make available the various classes
of shares of the Open-End Funds to investors and that you will make available
such shares only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering price, (ii) from
VKAC and (iii) to cover orders already received by you from your customers.
VKAC in turn agrees that it will not purchase any shares from an Open-End Fund
except for the purpose of covering purchase orders that it has already
received.
28.(a) If any shares of a class of FESC Shares of an Open-End
Fund sold to your customers under the terms of this Agreement are repurchased
by the Fund or by VKAC as agent for the Fund or are tendered for redemption
within seven business days after the date of VKAC's confirmation of the
original purchase, it is agreed that you shall forfeit your right to any agency
commission received by you on such FESC Shares. VKAC will notify you of any
such repurchase or redemption within ten business days from the date on which
the repurchase or redemption order in proper form is delivered to VKAC or to
the Fund, and you shall forthwith refund to VKAC the full agency commission
allowed to you on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the agency commission allowed to
you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by the Fund or
by VKAC as agent for the Fund or are tendered for redemption within seven
business days after the date of VKAC's confirmation of the original purchase,
it is agreed that you shall forfeit your right to any sales compensation
received by you on such CDSC Shares. We will notify you of any such repurchase
or redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the Fund, and you
shall forthwith refund to VKAC the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, if permitted by applicable laws,
banks participating in the Initial Offering Period or among brokers, dealers
and banks in the Continuous Offering Period, as the case may be, on other than
a pro rata basis, which may result in certain brokers, dealers and banks not
being allocated the full amount of shares of such Fund sold by them while
certain other brokers, dealers and banks may receive their full allocation.
31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during the Initial
Offering Period to VKAC within the time period as specified in such Closed-End
Fund's Prospectus (or in the time period as extended by VKAC in writing). You
also agree to transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public offering price for
such Closed-End Fund is next determined after your receipt of such order, as
set forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements
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<PAGE> 6
of such programs are satisfied). In no event will any Closed-End Fund
reimburse VKAC for any such sales concessions or other additional compensation
or pay any such concession or other additional compensation or allowance
directly to you. VKAC will specify for each Closed-End Fund a period after the
date that the shares of such Closed-End Fund are listed on the New York Stock
Exchange, the American Stock Exchange or another national securities market
system (which period will end no later than the first dividend payment date
with respect to such Closed-End Fund) during which sales concessions and other
additional compensation are subject to forfeiture as provided in the following
sentence (the "Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing shares will be
required to transfer ownership of such shares. In the event that any shares of
a Closed-End Fund sold through an order received from you in the Initial
Offering Period or the Continuous Offering Period are resold in the open market
or otherwise during the Forfeiture Period, VKAC reserves the right to require
you to forfeit any sales concessions and other additional compensation with
respect to such shares. In the event of a forfeiture, VKAC may withhold any
forfeited sales concessions and other additional compensation that has not yet
been paid or from other amounts yet to be paid to you (whether or not payable
with respect to such shares), and you agree to repay to VKAC, promptly upon
demand, any forfeited sales concessions and other compensation that has been
paid. Determinations of the amounts to be paid to you or by you to VKAC shall
be made by VKAC and shall be conclusive.
33. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time) and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and, (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
make available to you shares of the Prime Rate Fund is subject to further terms
and conditions in addition to those set out above, as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC and
that no secondary market for the shares of the Prime Rate Fund exists currently
or is expected to develop. You also expressly acknowledge and agree that, in
the event your customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed of by or
through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund that have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
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<PAGE> 7
THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE
FUND'S CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Broker Fully
Disclosed Clearing Agreement, keeping a copy for your files and returning the
original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated: ___________________________________________ By:
___________________________________________ Its:
VAN KAMPEN AMERICAN CAPITAL
__________________________________________ DISTRIBUTORS, INC.
Broker-Dealer Name
________________________________________
Broker-Dealer Taxpayer ID Number
________________________________________
Address
________________________________________
City, State, Zip
By: ________________________________________
Signature
________________________________________
Name
________________________________________
Title
________________________________________
Phone
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<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
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EXHIBIT 6.4
----------------------------------------------------------------------
BANK FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
-----------------------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to
you shares of any of the Van Kampen American Capital open-end investment
companies (the "Open-End Funds" or, individually, an "Open-End Fund") and Van
Kampen American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen American
Capital Distributors, Inc. ("VKAC") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a bank that desires to make available shares of such Funds to your
customers on a fully disclosed basis wherein VKAC would confirm transactions of
your customers in a Fund directly to them. You agree not to make available
shares of such Funds during any fixed price offering of such shares.
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to make available
to you shares of each Open-End Fund and each Closed-End Fund prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (as
defined herein) (the "Initial Offering Period"), to the extent permitted by
applicable law, and after the Effective Date of each Fund's Registration
Statement (the "Continuous Offering Period") (if any) as described in such
Closed-End Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the Registration Statement for the Fund on the Effective Date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any Statement of Additional Information included at any time as
a part of the Registration Statement for any Fund prior to the Effective Date
and that is authorized by VKAC for use in connection with the offering of
shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, and have been duly authorized to
enter into this Agreement and perform your obligations hereunder. This
Agreement as well as your authority to make shares available to your customers
will automatically terminate if you shall cease to be a bank as defined above.
You agree not to offer or sell shares of any Fund except through VKAC. You
will not accept any orders from any broker, dealer or financial institution who
is purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities Investor's
Protection Act, your customers will be considered customers of VKAC and not of
your firm. VKAC has been granted an exemption from the NASD rules of Fair
Practice, Article III Section 45 requirements to send customer statements and
thus will not due so. Customer statements showing account activity and
balances will be mailed to the customer by the Funds each time a financial
transaction occurs in their account and on a monthly basis. Nothing herein
shall cause your firm's customers to be interpreted as customers of VKAC for
any other purpose, or to negate
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<PAGE> 2
the intent of any other section of this agreement, including, but not limited
to, the delineation of responsibilities as set forth elsewhere in this
agreement.
3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent for the Fund
or for VKAC. The customers in question are for all purposes your customers and
not customers of VKAC. We will clear transactions for each of your customers
only upon your authorization, it being understood in all cases that (a) you are
acting as the agent for the customer; (b) the transactions are without recourse
against you by the customer except to the extent that your failure to transmit
orders in a timely fashion results in a loss to your customer; (c) as between
you and the customer, the customer will have full beneficial ownership of the
Fund shares; (d) each transaction is initiated solely upon the order of the
customer; and (e) each transaction is for the account of the customer and not
for your account.
4. Each Fund has filed with the Securities and Exchange
Commission (the "SEC") and the securities commissions of one or more states a
Registration Statement (the "Registration Statement") on the SEC form
applicable to the respective Fund. The date on which the Registration
Statement is declared effective by the SEC is hereinafter referred to as the
"Effective Date". Prior to the Effective Date of the Registration Statement
with respect to a particular Fund, you expressly acknowledge and understand
that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the Registration
Statement or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
(b) Except to the extent permitted by law, you will
not solicit or transmit to VKAC any indications of interest to purchase shares
during any fixed-price offering.
(c) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus.
(d) In the event and to the extent permitted by
applicable law you transmit indications of interest to VKAC for accumulation
prior to the Effective Date, upon your instruction VKAC will send confirmation
of such indications of interest directly to your customers in writing, together
with copies of the Preliminary Prospectus for the Fund, and send copies of the
confirmations to you. Indications of interest with respect to shares of a
class of a Fund's shares transmitted to VKAC prior to the Effective Date are
subject to acceptance or rejection by VKAC in its sole discretion and are
conditioned upon the occurrence of (i) the Effective Date and (ii) the
registration or qualification of the respective class of shares in the
respective state.
(e) Indications of interest with respect to shares
of a class of a Fund's shares not canceled by you prior to or on the later of
(i) the Effective Date and (ii) the registration or qualification of the
respective class of shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for Shares solely to the extent permitted by
applicable law.
(f) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together with copies of
the Prospectus for the Fund, and send copies of the confirmations to you.
(g) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies that
you discover and will promptly bring to VKAC's attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(h) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or rejection by
VKAC in its sole discretion.
2
<PAGE> 3
5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state, except for
states in which they are exempt from qualification.
6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to make the shares available in such jurisdiction shall be solely your
responsibility.
8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (i)
the Prospectus and any amendment or supplement thereto and (ii) sales
literature or other documents expressly authorized for such distribution by
VKAC.
10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VKAC of any errors
or discrepancies that you discover and shall promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance or transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VKAC may hold you responsible
for any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive
3
<PAGE> 4
a Statement of Additional Information, you will (i) provide such person with a
Statement of Additional Information without charge and notify the Fund that you
have done so, (ii) notify the Fund of the request so that the Fund can fulfill
the request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VKAC, to bring all subsequent changes to
such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus for such Fund filed pursuant to Rule 497 under the Securities Act of
1933, as amended. Upon your request, VKAC will furnish to such persons a copy
of the Prospectus for such Fund filed pursuant to Rule 497 Under the Securities
Act of 1993, as amended.
15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except for servicing and
informational mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers only if
specifically requested.
17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
22. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
24. (a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. On each order for shares of
a class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
4
<PAGE> 5
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. You will remit
payment of the aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to receive the
applicable selling compensation for such shares as provided for in the
then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute an Administrative Service Agreement.
26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately make available the various classes
of shares of the Open-End Funds to investors and that you will make available
such shares only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering price, (ii) from
VKAC and (iii) to cover orders already received by you from your customers.
VKAC in turn agrees that it will not purchase any shares from an Open-End Fund
except for the purpose of covering purchase orders that it has already
received.
28. (a) If any shares of a class of FESC Shares of an
Open-End Fund sold to your customers under the terms of this Agreement are
repurchased by the Fund or by VKAC as agent for the Fund or are tendered for
redemption within seven business days after the date of VKAC's confirmation of
the original purchase, it is agreed that you shall forfeit your right to any
agency commission received by you on such FESC Shares. VKAC will notify you of
any such repurchase or redemption within ten business days from the date on
which the repurchase or redemption order in proper form is delivered to VKAC or
to the Fund, and you shall forthwith refund to VKAC the full agency commission
allowed to you on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the agency commission allowed to
you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by the Fund or
by VKAC as agent for the Fund or are tendered for redemption within seven
business days after the date of VKAC's confirmation of the original purchase,
it is agreed that you shall forfeit your right to any sales compensation
received by you on such CDSC Shares. We will notify you of any such repurchase
or redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the Fund, and you
shall forthwith refund to VKAC the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, to the extent permitted by
applicable law, banks participating in the Initial Offering Period or among
brokers, dealers and banks participating in the Continuous Offering Period, as
the case may be, on other than a pro rata basis, which may result in certain
brokers, dealers and banks not being allocated the full amount of shares of
such Fund sold by them while certain other brokers, dealers and banks may
receive their full allocation.
31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received, to the extent
permitted by applicable law, during the Initial Offering Period to VKAC within
the time period as specified in such Closed-End Fund's Prospectus (or in the
time period as extended by VKAC in writing). You also agree to transmit any
customer order received during the
5
<PAGE> 6
Continuous Offering Period to VKAC prior to the time that the public offering
price for such Closed-End Fund is next determined after your receipt of such
order, as set forth in the Closed-End Fund's Prospectus. There is no assurance
that each Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VKAC for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VKAC will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later than
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you, to the extent permitted by applicable law, in the
Initial Offering Period or the Continuous Offering Period are resold in the
open market or otherwise during the Forfeiture Period, VKAC reserves the right
to require you to forfeit any sales concessions and other additional
compensation with respect to such shares. In the event of a forfeiture, VKAC
may withhold any forfeited sales concessions and other additional compensation
that has not yet been paid or from other amounts yet to be paid to you (whether
or not payable with respect to such shares), and you agree to repay to VKAC,
promptly upon demand, any forfeited sales concessions and other compensation
that has been paid. Determinations of the amounts to be paid to you or by you
to VKAC shall be made by VKAC and shall be conclusive.
33. During the Initial Offering Period or any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time) and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and, (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
make available to you shares of the Prime Rate Fund is subject to further terms
and conditions in addition to those set out above, as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC and
that no secondary market for the shares of the Prime Rate Fund exists currently
or is expected to develop. You also expressly acknowledge and agree that, in
the event your
6
<PAGE> 7
customer cancels their order for shares after confirmation, such shares may not
be repurchased, remarketed or otherwise disposed of by or through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund that have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Bank Fully
Disclosed Clearing Agreement, keeping a copy for your files and returning the
original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated: ________________________________________ By:
Its:
________________________________________
Bank Name VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
________________________________________
Bank Taxpayer ID Number
________________________________________
Address
________________________________________
City, State, Zip
________________________________________
Phone
________________________________________
Signature
________________________________________
Name
________________________________________
Title
7
<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
8
<PAGE> 1
EXHIBIT 8.1
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By
It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . 5
2.7 Payment of Fund Moneys . . . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . 7
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in Securities System . . . . . . . 8
2.11 Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . 10
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Fund Securities . . . . . . . . 11
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States . . . . . . . . . . . . 11
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . 11
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . . . 11
3.3 Foreign Securities Systems . . . . . . . . . . . . . . . . 12
3.4 Agreements with Foreign Banking Institutions . . . . . . . 12
3.5 Access of Independent Accountants of the Fund . . . . . . 12
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . . . 12
3.7 Transactions in Foreign Custody Account . . . . . . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . . . 13
3.9 Liability of Custodian . . . . . . . . . . . . . . . . . . 13
3.10 Reimbursement for Advances . . . . . . . . . . . . . . . . 14
3.11 Monitoring Responsibilities . . . . . . . . . . . . . . . 14
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.13 Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . 15
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . 16
6. Actions Permitted Without Express Authority . . . . . . . . . . . 16
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . 17
8. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10. Opinion of Fund's Independent Accountants . . . . . . . . . . . . 18
11. Reports to Fund by Independent Public Accountants . . . . . . . . 18
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 18
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 18
14. Effective Period, Termination and Amendment . . . . . . . . . . . 19
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 20
16. Interpretive and Additional Provisions . . . . . . . . . . . . . . 21
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 22
19. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. Shareholder Communications . . . . . . . . . . . . . . . . . . . . 22
21. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on
Appendix A which evidences its agreement to be bound hereby by executing a copy
of this Contract (each such fund is individually hereafter referred to as
the "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets
of the Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities") pursuant to the
provisions of the Fund's governing documents. The Fund agrees to deliver to
the Custodian all securities and cash of the Fund, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, beneficial
interest or partnership interest, as applicable, of the Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property of a Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Fund from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of the Fund, and provided
that the Custodian shall have no more or less responsibility or liability to
the Fund on account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian. The Custodian may
employ as sub-custodian for the Fund's foreign securities the foreign banking
institutions and foreign securities depositories designated in Schedule A
hereto but only in accordance with the provisions of Article 3.
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<PAGE> 5
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, to be held by it
in the United States including all domestic securities owned by such
Fund, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian (the "Direct Paper System") pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee
2
<PAGE> 6
name of any agent appointed pursuant to Section 2.9 or into
the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
3
<PAGE> 7
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board or of the
Executive Committee of the Fund signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Fund to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
4
<PAGE> 8
Article 1. All securities accepted by the Custodian under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund ,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for a
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited with
each such bank or trust company shall on behalf of each applicable
Fund be approved by vote of a majority of the Board of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to such Fund
as of specified times agreed upon from time to time by the Fund and
the Custodian in the amount of checks received in payment for Shares
of such Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when
5
<PAGE> 9
due on securities held hereunder. Income due each Fund on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of a Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of
a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case
of repurchase agreements entered into between the Fund and
the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
6
<PAGE> 10
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
7
<PAGE> 11
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice
and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
8
<PAGE> 12
5) The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, required by Article 14
hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Fund for any loss or damage to the Fund resulting from use of
the Securities System by reason of any negligence, misfeasance
or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may
have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or
damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund ;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
9
<PAGE> 13
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated account
or accounts for and on behalf of each such Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund , the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund , a certified copy of a
resolution of the Board or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Fund held by it
and in connection with transfers of securities.
10
<PAGE> 14
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board,
the Custodian and the Fund may agree to amend Schedule A hereto from
time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt
of Proper Instructions, the Fund may instruct the Custodian to cease
the employment of any one or more such sub-custodians for maintaining
custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in
11
<PAGE> 15
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
the Fund will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
the Fund will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Fund;
(d) officers of or auditors employed by, or other representatives of
the Custodian, including to the extent permitted under applicable law
the independent public accountants for the Fund, will be given access
to the books and records of the foreign banking institution relating
to its actions under its agreement with the Custodian; and (e) assets
of the Fund held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund securities and other assets and
advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking
12
<PAGE> 16
institution for the Custodian on behalf of the Fund indicating, as to
securities acquired for a Fund, the identity of the entity having
physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this
13
<PAGE> 17
paragraph 3.9, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to the
Fund for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Fund
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable Fund shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that the
Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the
subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Fund's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of
14
<PAGE> 18
said Act. The appointment of any such branch as a sub-custodian shall
be governed by paragraph 1 of this Contract. (b) Cash held for each
Fund in the United Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Fund such payments as are received for Shares of that Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of
payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares of
a Fund, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by
a holder of Shares, which checks have been furnished by the Fund to the holder
of Shares, when presented to the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time between the Fund and
the Custodian.
15
<PAGE> 19
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of the Fund
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the Board of the
Fund accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for the
Funds' assets. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund ;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of the
Fund.
16
<PAGE> 20
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of the Fund as conclusive evidence (a) of the authority of any person to
act in accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the governing documents of the Fund as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if the Custodian and the Fund execute the
applicable Price Source Authorization (the "Authorization"), the Custodian
shall keep such books of account and/or compute such net asset value per share
pursuant to the terms of the Authorization and the attachments thereto. If so
directed, the Custodian shall also calculate daily the net income of the Fund
as described in the Fund's currently effective Prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Fund shall be made at the time or times described from
time to time in the Fund's currently effective Prospectus.
9. Records
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Fund and held by the Custodian and shall, when requested to
17
<PAGE> 21
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in
18
<PAGE> 22
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United states (except as specifically provided in Article 3.9)
and regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S.
bank, as contemplated by paragraph 3.12 hereof, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from
or caused by, the direction or authorization by the Fund to maintain custody of
any securities or cash of the Fund in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of
some other form, the Fund, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the
Fund assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30)
19
<PAGE> 23
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Fund act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of the Fund has approved the initial use of a
particular Securities System by such Fund and the receipt of a certificate of
the Secretary or an Assistant Secretary that the Board has reviewed any
subsequent change regarding the use by such Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a Fund act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of the
Fund has reviewed the use by such Fund of the Direct Paper System; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund may at any
time by action of its Board (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund shall be appointed by the Board
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of the Fund then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of the
Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such
20
<PAGE> 24
termination shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of the
Fund and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of the Fund and to transfer
to an account of such successor custodian all of the securities of the Fund
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the governing documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
17. Additional Funds
In the event that Van Kampen American Capital Distributors , Inc.
establishes any funds in addition to the Funds listed on Appendix A with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references herein to
the "Fund" are to each of the Funds listed on Appendix A individually, as if
21
<PAGE> 25
this Contract were between each such individual Fund and the Custodian. With
respect to any Fund which issues shares in separate classes or series, each
class or series of such Fund shall be treated as a separate Fund hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Funds and the Custodian relating to the custody of
the Fund's assets.
20. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund. For the Fund's protection, the Rule prohibits the requesting company
from using the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consent or object by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name,
address, and share positions of each Fund listed on
Exhibit A.
NO [X] The Custodian is not authorized to release the name,
address, and share positions of each Fund listed on
Exhibit A.
22
<PAGE> 26
21. Limitation of Liability.
The execution of this Contract has been authorized by each Fund's
Board. This Contract is executed on behalf of each Fund or the trustees of
such Fund as trustees and not individually and the obligations of the Fund
under this Contract are not binding upon any of the Fund's trustees, officers
or shareholders individually but are binding only upon the assets and property
of the Fund. A Certificate of Trust in respect of each Fund is on file with
the Secretary of State of Delaware.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 21st day of June, 1995.
ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A
/s/ HUEY P. FALGOUT, JR. By: /s/ NORI L. GABERT
- ------------------------ -----------------------------------
Nori L. Gabert, Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------ -----------------------------------
Executive Vice President
23
<PAGE> 27
APPENDIX A
FUND NAMES
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Common Stock Fund
Domestic Strategic Income Fund
Emerging Growth Fund
Global Equity Fund
Government Fund
Money Market Fund
Multiple Strategy Fund
Real Estate Securities Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Municipal Bond Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Insured Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Utilities Income Fund
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
24
<PAGE> 1
EXHIBIT 9
DATA ACCESS SERVICES AGREEMENT
This Data Access Services Agreement is a supplement to that certain
Custodian Contract dated June 21, 1995 between the undersigned each of the
Funds listed on Appendix A of the Custodian Contract (the "Customer") and State
Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, the Customer desires the ability to access certain
Customer-related data ("Customer Data") maintained by State Street on data
bases under the control and ownership of State Street ("Data Access Services");
and
WHEREAS, State Street agrees to grant the Customer such access to the
Customer Data as is consistent with the policy and standards issued from time
to time by State Street.
NOW THEREFORE, the parties agree as follows:
1. Services
A. State Street maintains Customer Data within its proprietary data
base system. State Street agrees to provide the Customer with certain Data
Access Services as provided herein and in the Data Access operating procedures
as may be issued from time to time.
B. Customer agrees to use the Data Access Services solely for its
internal use and benefit and not for resale or other transfer or disposition
to, or use by or for the benefit of any other person or organization without
the prior written approval of State Street. Customer agrees to comply with user
identification and other password control requirements and other security
procedures as may be issued from time to time by State Street.
2. Proprietary Information
Customer acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to Customer by State Street as part of the Data Access
Services constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to State Street.
Customer agrees to treat all Proprietary Information as proprietary to State
Street and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, Customer agrees for itself and its employees and agents:
(1) to access Customer Data solely from locations as may be designated
in writing by State Street and solely in accordance with State Street's
applicable user documentation;
(2) to refrain from copying or duplicating in any way the Proprietary
Information;
(3) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform State Street in a timely manner of such fact and dispose of
such information in accordance with State Street's instructions;
<PAGE> 2
(4) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility or
other location, except with the prior written consent of State Street;
(5) that the Customer shall have access only to those authorized
transactions agreed upon by the parties;
(6) to honor all reasonable written requests made by State Street to
protect at State Street's expense the rights of State Street in
Proprietary Information at common law, under federal copyright law and
under other federal or state law.
Customer's obligation to maintain the confidentiality of the
Proprietary Information shall not apply where such:
(1) was already in Customer's possession prior to disclosure by State
Street, and such was received by Customer without obligation of
confidence;
(2) is or becomes publicly available without breach of this Agreement;
(3) is rightly received by Customer from a third party, who is not a
current or former employee, officer, director or agent of State Street,
without obligation of confidence;
(4) is disclosed by Customer with the written consent of State Street;
or
(5) is released in accordance with a valid order of a court or
governmental agency.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this section 2. The obligations of this section
shall survive any earlier termination of this agreement.
3. Warranties
If Customer notifies State Street that any of the Data Access Services
do not operate in material compliance with the most recently issued user
documentation for such services, State Street shall endeavor in a timely
manner to correct such failure. Organizations from which State Street may
obtain certain data included in the Data Access Services are solely responsible
for the contents of such data and Customer agrees to make no claim against
State Street arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED
ON AN AS IS, AS AVAILABLE BASIS. STATE STREET EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
4. Limitation of Liability
State Street shall not be liable to the Customer for any loss or damage
claimed to have resulted from the use of the Data Access Services except for
the direct loss or damage resulting from the negligence or willful conduct of
State
-2-
<PAGE> 3
Street. STATE STREET SHALL NOT BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES) IN ANY WAY DUE TO OR ARISING IN CONNECTION WITH CUSTOMER'S USE
OF THE DATA ACCESS SERVICES OR THE PERFORMANCE OF OR FAILURE TO PERFORM STATE
STREET'S OBLIGATIONS UNDER THIS AGREEMENT. This disclaimer applies without
limitation to claims (i) arising from the provision of the Data Access
Services, the delivery, installation, use, maintenance, or removal of State
Street provided equipment, or any failure or delay in connection with any of
the foregoing; (ii) regardless of the form of action, whether in contract, tort
(including negligence), strict liability, or otherwise; and (iii) regardless of
whether such damages are foreseeable. Further, in no event shall State Street be
liable for any claims that arise more than one (1) year prior to the
institution of suit therefor or any claim arising from causes beyond State
Street's control.
5. Force Majeure
State Street shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Customer as a result of
work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility of
performance.
6. Exclusive Remedy
In consideration of the fees charged for Data Access Services, if any,
Customer's exclusive recovery with respect to Data Access Services regardless
of the basis of the claims asserted by it against State Street shall not exceed
six (6) times the average monthly fees billed to Customer hereunder and
computed by averaging the monthly billing for each of the twelve months
preceding the month in which the damage or injury is alleged to have occurred,
but if this agreement has not been in effect for twelve months preceding such
date, then by averaging the monthly billings for each of the preceding months
that this agreement has been in effect.
7. Indemnification
The Customer agrees to indemnify and hold State Street free and
harmless from any expense, loss, damage or claim including reasonable
attorney's fees, (collectively "costs") suffered by State Street and caused by
or resulting from (i) the negligence or willful misconduct in the use by the
Customer, its employees or agents, of the Data Access Services or the
application software systems supporting such services, including any costs
incurred by State Street resulting from a security breach at the Customer's
location or committed by its former or present employees or agents and (ii)
claims resulting from incorrect Customer Originated Electronic Financial
Instruction.
8. Customer Originated Electronic Financial Instruction ("COEFI")
If the transactions available to Customer include the ability to
originate electronic instructions to State Street in order to (i) effect the
transfer or movement of cash or securities held under custody or (ii) transmit
accounting or other information (such transactions constituting a "COEFI"),
then in such event State Street shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is
-3-
<PAGE> 4
undertaken in conformity with security procedures established by State Street
from time to time.
9. Injunctive Relief
In the event of a breach or threatened breach by Customer of Section 1
or 2 hereof, State Street shall be entitled to obtain injunctive relief in
addition to any other remedies available at law or equity.
10. General
10.1 Term of Agreement. This agreement is effective from the date
it is accepted by State Street and shall remain in full force
and effect until terminated as hereinafter provided. Either
party may terminate this agreement for any reason by giving the
other party at least thirty days prior written notice of
termination. In addition, either party may terminate this
agreement immediately for failure of the other party to comply
with any material term and condition by giving the other party
written notice of termination. This agreement shall in any
event terminate contemporaneously with the Custodian Contract
applicable hereto.
10.2 Charges. Charges, if any, for Data Access Services shall be
as agreed upon between the parties from time to time.
10.3 Assignment; Successors. This Agreement shall not be assigned
by either party without the prior written consent of the other
party, except that either party may assign to a successor of
all or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such
party.
10.4 Survival. All provisions regarding indemnification,
warranty, liability and limits thereon, and confidentiality
and/or protection of proprietary rights and trade secrets shall
survive the termination of this agreement.
10.5 Consent to Breach not Waiver. No term or provision hereof
shall be deemed waived and no breach excused, unless such
waiver or consent shall be in writing and signed by the party
claimed to have waived or consented. Any consent by any party
to, or waiver of, a breach by the other, whether express or
implied, shall not constitute a consent to, waiver of, or
excuse for any other different or subsequent breach.
11. Signatory
The individual signing the agreement represents that he or she is an
authorized officer of the Customer (and, if identified below or on an attached
schedule, such investment manager or other party as may use Data Access
Services with respect to the Customer) so as to cause this agreement to be a
valid and binding obligation upon the Customer (and, if applicable, such other
parties as may be identified on the signature line below or on an attached
schedule).
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement.
STATE STREET BANK AND EACH OF THE VAN KAMPEN
TRUST COMPANY AMERICAN CAPITAL FUNDS
LISTED ON APPENDIX A OF
THE CUSTODIAN CONTRACT
By: [Illegible]
---------------------------
Title: Executive Vice President By: /s/ NORI L. GABERT
------------------------ --------------------
Nori L. Gabert
Date:
------------------------- Title: Vice President
-----------------
Date: June 21, 1995
------------------
<PAGE> 1
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]
EXHIBIT 10
December 26, 1996
Van Kampen American Capital
Emerging Growth Fund
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Emerging Growth Fund --
Registration Statement on Form N-1A
(File Nos. 2-33214 and 811-2424)
Ladies and Gentlemen:
We have acted as counsel to Van Kampen American Capital Emerging Growth
Fund (the "Trust"), a Delaware business trust, in connection with the
preparation of Post-Effective Amendment No. 55 to the Trust's Registration
Statement on Form N-1A (as amended, the "Registration Statement") to be filed
under the Securities Act of 1933, as amended (the "1933 Act"), and the
Investment Company Act of 1940, as amended (the "1940 Act"), with the
Securities and Exchange Commission (the "Commission") on or about December 26,
1996. The Registration Statement relates to the registration under the
1933 Act and 1940 Act of an indefinite number of each of Class A Shares of
beneficial interest, par value $.01 per share, Class B Shares of beneficial
interest, par value $.01 per share, and Class C Shares of beneficial interest,
par value $.01 per share, of the Trust (collectively, the "Shares").
This opinion is delivered in accordance with the requirements of Item
24(b)(10) of Form N-1A under the 1933 Act and the 1940 Act.
In connection with this opinion, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Certificate of Trust filed with the Secretary of State of Delaware, (ii)
<PAGE> 2
Van Kampen American Capital
Emerging Growth Fund
December 26, 1996
Page 2
the Agreement and Declaration of Trust and By-Laws of the Trust, each as
amended to date (the "Declaration of Trust" and "By-Laws", respectively), (iii)
the Certificate of Designation establishing the series of the Trust,
(iv) the resolutions adopted by the Board of Trustees of the Trust relating to
the authorization, issuance and sale of the Shares, the filing of the
Registration Statement and any amendments or supplements thereto and related
matters and (v) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In such examination we have assumed the legal capacity of natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed, photostatic, or other copies
and the authenticity of the originals of such latter documents. As to any
facts material to such opinion which were not independently established, we
have relied on statements or representations of officers and other
representatives of the Trust or others.
Members of our firm are admitted to the practice of law in the State
of Illinois and we do not express any opinion as to the law of any other
jurisdiction other than matters relating to the Delaware business
organizational statutes (including statutes relating to Delaware business
trusts) and the federal laws of the United States of America to the extent
specifically refund to herein.
Based upon and subject to the foregoing, we are of the opinion that the
issuance and sale of Shares by the Trust have been validly authorized and,
assuming certificates therefor have been duly executed, countersigned,
registered and delivered or the shareholders' accounts have been duly credited
and the Shares represented thereby have been fully paid for, such Shares will
be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 10 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Counsel" in the Registration Statement. In
giving this consent, we do not hereby
<PAGE> 3
Van Kampen American Capital
Emerging Growth Fund
December 26, 1996
Page 3
admit that we are in the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom (Illinois)
<PAGE> 1
EXHIBIT 11.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 55, Amendment No. 25 to
the registration statement on Form N-1A (the "Registration Statement") of our
report dated October 10, 1996, relating to the financial statements and
financial highlights of Van Kampen American Capital Emerging Growth Fund, which
appears in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "Independent Accountants" in such Prospectus
and to the reference to us under the heading "Independent Accountants" in such
Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
December 26, 1996
<PAGE> 1
Exhibit 15.1
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL EMERGING
GROWTH FUND (the "Fund"). This Distribution Plan describes the material terms
and conditions under which assets of the Fund may be used in connection with
financing distribution related activities with respect to each of its classes
of shares of beneficial interest (the "Shares"), each of which is offered and
sold subject to a different combination of front-end sales charges,
distribution fees, service fees and contingent deferred sales charges.1
Classes of shares, if any, subject to a front-end sales charge and a
distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End Shares."
Classes of shares, if any, subject to a contingent-deferred sales charge and a
distribution and/or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred
sales charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares."
The Fund has adopted a service plan (the "Service Plan") pursuant to
which the Fund is authorized to expend on an annual basis a portion of its
average net assets attributable to any or each class of Shares in connection
with the provision by the principal underwriter (within the meaning of the 1940
Act) of the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has
entered into a distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Inc. (the "Distributor"),
pursuant to which the Distributor acts as the principal underwriter with
respect to each class of Shares and provides services to the Fund and acts as
agent on behalf of the Fund in connection with the implementation of the
Service Plan. The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement the
Distribution and Services Agreement, the Service Plan and this Distribution
Plan.
1. The Fund hereby is authorized to pay the Distributor a distribution
fee with respect to each class of its Shares to compensate the Distributor for
activities which are primarily intended to result in the sale of such Shares
("distribution related activities") performed by the Distributor with respect
to the respective class of Shares of the Fund. Such distribution related
activities include without limitation: (a) printing and distributing copies of
any prospectuses and annual and interim reports of the Fund (after the Fund has
prepared and set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing or otherwise
manufacturing and distributing any other literature or materials of any nature
used by such Distributor in connection with promoting, distributing or offering
the Shares; (c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the provision of
information programs and shareholder services intended to enhance the
attractiveness of investing in the Fund; (e) incurring initial outlay expenses
in connection with compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal services to
shareholders and the maintenance of
____________________
1 The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
shareholder accounts of all classes of Shares, including paying interest on and
incurring other carrying costs on funds borrowed to pay such initial outlays;
and (f) acting as agent for the Fund in connection with implementing this
Distribution Plan pursuant to the Selling Agreements.
2. The amount of the distribution fee hereby authorized with respect to
each class of Shares of the Fund shall be as follows:
a. With respect to Class A Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.15% of the Fund's average daily net
assets attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The
Fund may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.15% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by
the Fund pursuant to the Service Plan and (ii) the actual amount of
distribution related expenses incurred by the Distributor with respect to Class
A Shares.
b. With respect to Class B Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.90% of the Fund's average daily net
assets attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class B
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.
c. With respect to Class C Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.90% of the Fund's average daily net
assets attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class C Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class C
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class C Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class C Shares.
3. Payments pursuant to this Distribution Plan shall not be made more
often than monthly upon receipt by the Fund of a separate written expense
report with respect to each class of Shares setting forth the expenses
qualifying for such reimbursement allocated to each class of Shares and the
purposes thereof.
4. In the event that amounts payable hereunder with respect to shares of
a Front-End Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of such class, there
is no carryforward of reimbursement obligations to succeeding years. In the
event the amounts payable hereunder with respect to shares of a CDSC Class or a
Combination Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of the respective
class, such unreimbursed distribution expenses will be carried forward and paid
by the Fund hereunder in future years so long as this Distribution Plan remains
in effect, subject to applicable laws
2
<PAGE> 3
and regulations. Reimbursements for distribution related expenses payable
hereunder with respect to a particular class of Shares may not be used to
subsidize the sale of Shares of any other class of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect
to such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Trust and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries as
compensation for the above-mentioned activities and services. Such
reallocation shall be in an amount as set forth from time to time in the Fund's
prospectus. Such Selling Agreements shall provide that the Financial
Intermediaries shall provide the Distributor with such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be
paid only pursuant to written agreements between the Fund and such other person
the terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
8. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Distribution Plan, the Service
Plan and the agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Trustees or the
Disinterested Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.
9. This Distribution Plan shall become effective upon its approval by (a)
a majority of the Board of Trustees and a majority of the Disinterested
Trustees by vote cast separately with respect to each class of Shares cast in
person at a meeting called for the purpose of voting on this Distribution Plan,
and (b) with respect to each class of Shares, a "majority of the outstanding
voting securities" (as such phrase is defined in the 1940 Act) of such class of
Shares voting separately as a class.
10. This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
11. This Distribution Plan may be terminated with respect to a class of
Shares without penalty at any time by a majority of the Disinterested Trustees
or by a "majority of the outstanding voting securities" of the respective
class of Shares of the Fund.
12. This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material
3
<PAGE> 4
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Distribution Plan to changes in the Rule or
to other changes in the 1940 Act or the rules and regulations thereunder shall
not be deemed to be material amendments.
13. To the extent any service fees paid by the Fund pursuant to the
Service Plan are deemed to be payments for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the meaning of the Rule, the terms and provisions of such plan and any payments
made pursuant to such plan hereby are authorized pursuant to this Distribution
Plan in the amounts and for the purposes authorized in the Service Plan without
any further action by the Board of Trustees or the shareholders of the Fund.
To the extent the terms and provisions of the Service Plan conflict with the
terms and provisions of this Distribution Plan, the terms and provisions of the
Service Plan shall prevail with respect to amounts payable pursuant thereto.
This paragraph 13 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued
by the Fund within the meaning of the Rule.
14. The Trustees of the Trust have adopted this Distribution Plan as
trustees under the Declaration of Trust of the Fund and the policies of the
Fund adopted hereby are not binding upon any of the Trustees or shareholders
of the Fund individually, but bind only the trust estate.
4
<PAGE> 1
Exhibit 15.2
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
SERVICE PLAN
The plan set forth below (the "Service Plan") for the VAN KAMPEN
AMERICAN CAPITAL EMERGING GROWTH FUND (the "Fund") describes the material terms
and conditions under which assets of the Fund may be used to compensate the
Fund's principal underwriter, within the meaning of the Investment Company Act
of 1940, as amended (the "1940 Act"), brokers, dealers and other financial
intermediaries (collectively "Financial Intermediaries") for providing personal
services to shareholders and/or the maintenance of shareholder accounts with
respect to each of its Class A Shares of beneficial interest (the "Class A
Shares"), its Class B Shares of beneficial interest (the "Class B Shares"), and
its Class C Shares of beneficial interest (the "Class C Shares") The Class A
Shares, Class B Shares and Class C Shares sometimes are referred to herein
collectively as the "Shares." Each class of Shares is offered and sold subject
to a different combination of front-end sales charges, distribution fees,
service fees and contingent deferred sales charges.1 Classes of shares, if any,
subject to a front-end sales charge and a distribution and/or service fee are
referred to herein as "Front-End Classes" and the Shares of such classes are
referred to herein as "Front-End Shares." Classes of shares, if any, subject to
a contingent-deferred sales charge and a distribution and or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and Shares of such
class are referred to herein as "Combination Shares."
The Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to which the Fund is authorized to expend on an annual basis a portion
of its average net assets attributable to each class of Shares in connection
with financing distribution related activities. The Fund also has entered into
a distribution and services agreement (the "Distribution and Services
Agreement") with Van Kampen American Capital Distributors, Inc. (the
"Distributor"), pursuant to which the Distributor acts as agent on behalf of
the Fund in connection with the implementation of the Service Plan and acts as
the principal underwriter with respect to each class of Shares. The
Distributor may enter into selling agreements (the "Selling Agreements") with
brokers, dealers and other financial intermediaries ("Financial
Intermediaries") in order to implement the Distribution Agreement, the
Distribution Plan and this Service Plan.
1. The Fund hereby is authorized to pay a service fee with respect to its
Class A Shares, Class B Shares and Class C Shares to any person who sells such
Shares and provides personal services to shareholders and/or maintains
shareholder accounts in an annual amount not to exceed 0.15% of the average
annual net asset value of the Shares maintained in the Fund by such person that
were sold on or after the date on which this Service Plan was first
implemented. The aggregate annual amount of all such payments with respect to
each such class of Shares may not exceed 0.15% of the Fund's average annual net
assets attributable to the respective class of Shares sold on or after the date
on which this Service Plan was first implemented and maintained in the Fund
more than one year.
2. Payments pursuant to this Service Plan may be paid or prepaid on
behalf of the Fund by the Distributor acting as the Fund's agent.
____________________
1 The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
3. Payments by the Fund to the Distributor pursuant to this Service Plan
shall not be made more often than monthly upon receipt by the Fund of a
separate written expense report with respect to each class of Shares setting
forth the expenses qualifying for such reimbursement allocated to each class of
Shares and the purposes thereof.
4. In the event that amounts payable hereunder with respect to a class of
Shares do not fully reimburse the Distributor for pre-paid service fees, such
unreimbursed service fee expenses will be carried forward and paid by the Fund
hereunder in future years so long as this Service Plan remains in effect,
subject to applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular class of Shares
may not be used to subsidize services provided with respect to any other class
of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
service related expenses incurred with respect to a class of Shares prior to
the later of (a) the implementation of this Service Plan with respect to such
class of Shares or (b) the date that such Financial Intermediary enters into a
Selling Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Fund and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. Such Selling Agreements shall provide that
the Financial Intermediaries shall provide the Distributor with such
information as is reasonably necessary to permit the Distributor to comply with
the reporting requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Service Agreement, the Fund is
hereby authorized to pay a service fee to any person that is not an "affiliated
person" or "interested person" of the Fund or its "investment adviser" or
"principal underwriter" (as such terms are defined in the 1940 Act) who
provides any of the foregoing services for the Fund. Such fee shall be paid
only pursuant to written agreements between the Fund and such other person the
terms of which permit payments to such person only in accordance with the
provisions of this Service Agreement and which have the approval of a majority
of the Disinterested Trustees by vote cast separately with respect to each
class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
8. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Service Plan and the
agreements contemplated hereby, the purposes for which such payments were made
and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.
9. This Service Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.
10. This Service Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at
a meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.
2
<PAGE> 3
11. This Service Plan and any agreement contemplated hereby shall continue
in effect beyond the first anniversary of its adoption by the Board of Trustees
of the Fund only so long as (a) its continuation is approved at least annually
in the manner set forth in clause (a) of paragraph 10 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
12. This Service Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund. This Service Plan may not be amended in any material
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Service Plan to changes in Rule 12b-1 under
the 1940 Act, the rules and regulations thereunder or the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. shall not be
deemed to be material amendments.
13. The Trustees of the Fund have adopted this Service Plan as trustees
under the Declaration of Fund of the Fund and the policies of the Fund
adopted hereby are not binding upon any of the Trustees or shareholders of the
Fund individually, but bind only the trust estate.
3
<PAGE> 1
EXHIBIT 15.3
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
SHAREHOLDER ASSISTANCE AGREEMENT
This Agreement is entered into as of the ___ day of ________, 19__, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
Merritt, Inc.) (the "Company") and the undersigned (the "Broker-Dealer").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, the Broker-Dealer is registered as a broker-dealer with the
National Association of Securities Dealers, Inc.; and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") and a service plan (the "Service Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), relating to such Fund, the Distribution Plans being described in
the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution assistance agreements such as this Agreement with
broker-dealers selected by the Company, and the Broker-Dealer has been so
selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such broker-dealer on or after the effective date
of this Agreement, as determined pursuant to Section 4 hereof, and held at the
close of each day in accounts of clients or customers of a particular
broker-dealer, such amount being referred to herein as the "Holding Level"; for
purposes of calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing prior to such
effective date shall be deemed to have been shares sold prior to such effective
date to the extent of the number of shares held in such account immediately
after the close of business on the day prior to such effective date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Broker-Dealer agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Broker-Dealer shall be entitled distribution fee and
service fee to payments, if any, to be paid by the Company at the annual
percentage rate of the Holding Level set forth from time to time in the then
current Prospectus of the Fund on a quarterly basis (prorated for any portion
of such period during which this Agreement is in effect for less than the full
amount of such period); it is understood and agreed that the Company may make
final and binding determinations as to whether such continuing compliance and
as to whether or not any Fund shares are to be considered in determining the
Holding Level of any particular broker-dealer and what Fund shares, if any, are
to be attributed to such purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to the
Broker-Dealer named above and portions of the payments may be, in the
discretion of the Broker-Dealer, paid over to individual registered
representatives of said Broker-Dealer to whom there have been
1
<PAGE> 2
assigned accounts of clients or customers of the Broker-Dealer with respect to
which the respective Holding Level was determined.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Broker-Dealer shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be), and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act), of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Broker-dealer, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
----------------------------
Broker-dealer Firm Name
By:
- ------------------------ -------------------------
Firm Address Senior Vice President
By:
---------------------
Title:
------------------
2
<PAGE> 3
SCHEDULE 1
1. For Class A Shares, Class B Shares and Class C Shares:
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund
Van Kampen American Capital Ohio Tax Free Income Fund
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Utility Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
<PAGE> 4
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
2. For Class A Shares Only:
Van Kampen American Capital Tax Free Money Fund
<PAGE> 1
EXHIBIT 15.4
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is entered into as of the ___ day of ________, 19__, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
American Capital, Inc.) (the "Company") and the undersigned (the
"Intermediary").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and a Service Plan (the
"Service Plan") relating to such Fund, the Distribution Plans being described
in the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution services agreements such as this Agreement with
certain financial intermediaries selected by the Company, and the Intermediary
has been so selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such financial intermediary on or after the
effective date of this Agreement, as determined pursuant to Section 4 hereof,
and held at the close of each day in accounts of clients or customers of
particular intermediary, such amount being referred to herein as the "Holding
Level"; for purposes of calculating the Holding Level, shares of such Fund
which are redeemed or otherwise disposed of from any account existing prior to
such effective date shall be deemed to have been shares sold prior to such
effective date to the extent of the number of shares held in such account
immediately after the close of business on the day prior to such effective
date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Intermediary agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Intermediary shall be entitled to distribution fee and
service fee payments, if any, to be paid by the Company with respect to each
class of the Fund's shares at the annual percentage rate of the Holding Level
set forth from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during which this
Agreement is in effect for less than the full amount of such period); it is
understood and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as to whether or
not any Fund shares are to be considered in determining the Holding Level of
any particular financial intermediary and what Fund shares, if any, are to be
attributed to such purpose to a particular financial intermediary, to a
different financial intermediary or to no financial intermediary.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
1
<PAGE> 2
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Intermediary shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Intermediary may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the Fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the
Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be) and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Intermediary, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By:
- ------------------ ----------------------
Intermediary Senior Vice President
- ------------------
Address
By:
---------------
Title
2
<PAGE> 3
SCHEDULE 1
1. For Class A Shares, Class B Shares and Class C Shares:
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund
Van Kampen American Capital Ohio Tax Free Income Fund
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Utility Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
<PAGE> 4
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
2. For Class A Shares Only:
Van Kampen American Capital Tax Free Money Fund
<PAGE> 1
EXHIBIT 16
EMERGING GROWTH FUND -- CLASS A SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED AUGUST 31, 1996
<TABLE>
<S> <C> <C> <C>
n
Formula................................................................. P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $1,135.99 = ERV
n
One year period ended 8/31/96........................................... 1 =
TOTAL RETURN FOR THE PERIOD............................................. 13.60% = T
Excluding Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $1,205.41 = ERV
n
One year period ended 08/31/96.......................................... 1 =
TOTAL RETURN FOR THE PERIOD............................................. 20.54% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED AUGUST 31, 1996
n
Formula................................................................. P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $2,275.65 = ERV
n
Five years ended 08/31/96............................................... 5 =
TOTAL RETURN FOR THE PERIOD............................................. 17.88% = T
Excluding Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $2,414.05 = ERV
n
Five years ended 08/31/96............................................... 5 =
TOTAL RETURN FOR THE PERIOD............................................. 19.28% = T
</TABLE>
<PAGE> 2
EMERGING GROWTH FUND -- CLASS A SHARES
TOTAL RETURN CALCULATION TEN YEARS ENDED AUGUST 31, 1996
<TABLE>
<S> <C> <C> <C>
n
Formula................................................................. P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $4,005.66 = ERV
n
Ten years ended 08/31/96................................................ 10 =
TOTAL RETURN FOR THE PERIOD............................................. 14.89% = T
Excluding Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $4,249.30 = ERV
Ten years ended 08/31/96................................................ 10 = (n)
TOTAL RETURN FOR THE PERIOD............................................. 15.57% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1996
n
Formula................................................................. P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $60,463.97 = ERV
n
Inception through 08/31/96.............................................. 25.92 =
TOTAL RETURN FOR THE PERIOD............................................. 17.15% = T
Excluding Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $64,154.81 = ERV
n
Inception through 08/31/96.............................................. 25.92 =
TOTAL RETURN FOR THE PERIOD............................................. 17.42% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1996
Formula................................................................. ERV - P
--------- = T
P
Including Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $60,463.97 = ERV
TOTAL RETURN FOR THE PERIOD............................................. 5,946.40% = T
Excluding Payment of the Sales Charge
Net Asset Value......................................................... $34.35
Initial Investment...................................................... $1,000.00 = P
Ending Redeemable Value................................................. $64,154.81 = ERV
TOTAL RETURN FOR THE PERIOD............................................. 6,315.48% = T
</TABLE>
<PAGE> 3
EMERGING GROWTH FUND -- CLASS B SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED AUGUST 31, 1996
<TABLE>
<S> <C> <C> <C>
n
Formula.................................................................. P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value.......................................................... $32.94
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,146.08 = ERV
n
One year period ended 08/31/96........................................... 1 =
TOTAL RETURN FOR THE PERIOD.............................................. 14.61% = T
Excluding Payment of the CDSC
Net Asset Value.......................................................... $32.94
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,196.08 = ERV
n
One year period ended 08/31/96........................................... 1 =
TOTAL RETURN FOR THE PERIOD.............................................. 19.61% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1996
n
Formula.................................................................. P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value.......................................................... $32.94
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $2,146.00 = ERV
n
Inception through 08/31/96............................................... 4.37 =
TOTAL RETURN FOR THE PERIOD.............................................. 19.09% = T
Excluding Payment of the CDSC
Net Asset Value.......................................................... $32.94
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $2,161.00 = ERV
n
Inception through 08/31/96............................................... 4.37 =
TOTAL RETURN FOR THE PERIOD.............................................. 19.28% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1996
Formula.................................................................. ERV - P
--------- = T
P
Including Payment of the CDSC
Net Asset Value.......................................................... $32.94
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $2,146.00 = ERV
TOTAL RETURN FOR THE PERIOD.............................................. 114.60% = T
Excluding Payment of the CDSC
Net Asset Value.......................................................... $32.94
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $2,161.00 = ERV
TOTAL RETURN FOR THE PERIOD.............................................. 116.10% = T
</TABLE>
<PAGE> 4
EMERGING GROWTH FUND -- CLASS C SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED AUGUST 31, 1996
<TABLE>
<S> <C> <C> <C>
n
Formula.................................................................. P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value.......................................................... $33.38
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,186.01 = ERV
n
One year period ended 08/31/96........................................... 1 =
TOTAL RETURN FOR THE PERIOD.............................................. 18.60% = T
Excluding Payment of the CDSC
Net Asset Value.......................................................... $33.38
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,196.01 = ERV
One year period ended 08/31/96........................................... 1 = n
TOTAL RETURN FOR THE PERIOD.............................................. 19.60% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1996
n
Formula.................................................................. P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value.......................................................... $33.38
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,623.44 = ERV
n
Inception through 08/31/96............................................... 3.16 =
TOTAL RETURN FOR THE PERIOD.............................................. 16.57% = T
Excluding Payment of the CDSC
Net Asset Value.......................................................... $33.38
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,623.44 = ERV
n
Inception through 08/31/96............................................... 3.16 =
TOTAL RETURN FOR THE PERIOD.............................................. 16.57% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1996
Formula.................................................................. ERV - P
--------- = T
P
Including Payment of the CDSC
Net Asset Value.......................................................... $33.83
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,623.44 = ERV
TOTAL RETURN FOR THE PERIOD.............................................. 62.34% = T
Excluding Payment of the CDSC
Net Asset Value.......................................................... $33.83
Initial Investment....................................................... $1,000.00 = P
Ending Redeemable Value.................................................. $1,623.44 = ERV
TOTAL RETURN FOR THE PERIOD.............................................. 62.34% = T
</TABLE>
<PAGE> 1
EXHIBIT 17.1
EXHIBIT 17
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
DECEMBER 17, 1996
Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Cova Series Trust
Cova Capital Quality Income Portfolio
Cova Capital High Yield Portfolio
Cova Growth and Income Portfolio
Cova Money Market Portfolio
Cova Stock Index Portfolio
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Common Stock Fund
Van Kampen American Capital Domestic Strategic Income Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Government Fund
<PAGE> 2
Van Kampen American Capital Money Market Fund
Van Kampen American Capital Multiple Strategy Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
Internet Trust
Michigan Real Estate Income and Growth Trust
Van Kampen American Capital Insured Income Trust
Van Kampen American Capital Insured Income Trust (Intermediate)
Strategic Ten Trust, United States
Strategic Ten Trust, United Kingdom
Strategic Ten Trust, Hong Kong
Strategic Five Trust, United States
Van Kampen American Capital Equity Opportunity Trust
Great International Firms Trust
Gruntal & Co. Incorporated Undervalued Growth Opportunities Trust
Principal Trust Princor Emerging Growth and Treasury
International Assets Advisory Corporation Global Blue Chip Trust
Renaissance Trust
Mississippi Insured Municipal Trust
Blue Chip Opportunity and Treasury Trust
Wheat First Butcher Singer Wheat First Strategic Opportunity Unit Trust
Baby Boomer Opportunity Trust
Van Kampen American Capital Utility Income Trust
Global Energy Trust
Michigan Select Trust
International Assets Advisory Corp. Latin American Trust
Brand Name Equity Trust
<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust................................. Series 1
Insured Municipals Income Trust......................................... Series 1 through 382
Insured Municipals Income Trust (Discount).............................. Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term)............... Series 1 through 105
1009 Insured Municipals Income Trust (Intermediate Term)................ Series 5 through 89
Insured Municipals Income Trust (Limited Term).......................... Series 9 through 85
Insured Municipals Income Trust (Premium Bond Series)................... Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity)........ Series 1 and 2
Insured Tax Free Bond Trust............................................. Series 1 through 6
Insured Tax Free Bond Trust (Limited Term).............................. Series 1
Investors' Quality Tax-Exempt Trust..................................... Series 1 through 93
Investors' Quality Tax-Exempt Trust-Intermediate........................ Series 1
Investors' Corporate Income Trust....................................... Series 1 through 12
Investors' Governmental Securities Income Trust......................... Series 1 through 7
Van Kampen Merritt International Bond Income Trust...................... Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust............................. Series 1
Alabama Insured Municipals Income Trust................................. Series 1 through 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Arizona Investors' Quality Tax-Exempt Trust............................. Series 1 through 16
Arizona Insured Municipals Income Trust................................. Series 1 through 17
Arkansas Insured Municipals Income Trust................................ Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust............................ Series 1
California Insured Municipals Income Trust.............................. Series 1 through 161
California Insured Municipals Income Trust (Premium Bond Series)........ Series 1
California Insured Municipals Income Trust (1st Intermediate Series).... Series 1 through 3
California Investors' Quality Tax-Exempt Trust.......................... Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered)...... Series 1 through 22
Colorado Insured Municipals Income Trust................................ Series 1 through 82
Colorado Investors' Quality Tax-Exempt Trust............................ Series 1 through 18
Connecticut Insured Municipals Income Trust............................. Series 1 through 32
Connecticut Investors' Quality Tax-Exempt Trust......................... Series 1
Delaware Investor's Quality Tax-Exempt Trust............................ Series 1 and 2
Florida Insured Municipal Income Trust -- Intermediate.................. Series 1 and 2
Florida Insured Municipals Income Trust................................. Series 1 through 110
Florida Investors' Quality Tax-Exempt Trust............................. Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered)......... Series 1 through 13
Georgia Insured Municipals Income Trust................................. Series 1 through 82
Georgia Investors' Quality Tax-Exempt Trust............................. Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust.............................. Series 1
Investors' Quality Municipals Trust (AMT)............................... Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust.............................. Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust............................ Series 1 through 58
Louisiana Insured Municipals Income Trust............................... Series 1 through 17
Maine Investor's Quality Tax-Exempt Trust............................... Series 1
Maryland Investors' Quality Tax-Exempt Trust............................ Series 1 through 80
Massachusetts Insured Municipals Income Trust........................... Series 1 through 34
Massachusetts Insured Municipals Income Trust (Premium Bond Series)..... Series 1
Michigan Financial Institutions Trust................................... Series 1
Michigan Insured Municipals Income Trust................................ Series 1 through 141
Michigan Insured Municipals Income Trust (Premium Bond Series).......... Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series)...... Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust............................ Series 1 through 30
Michigan Select Trust................................................... Series 1
Minnesota Insured Municipals Income Trust............................... Series 1 through 59
Minnesota Investors' Quality Tax-Exempt Trust........................... Series 1 through 21
Mississippi Insured Municipals Income Trust............................. Series 1
Missouri Insured Municipals Income Trust................................ Series 1 through 100
Missouri Insured Municipals Income Trust (Premium Bond Series).......... Series 1
Missouri Investors' Quality Tax-Exempt Trust............................ Series 1 through 15
Missouri Insured Municipals Income Trust (Intermediate Laddered
Maturity)............................................................. Series 1
Nebraska Investors' Quality Tax-Exempt Trust............................ Series 1 through 9
New Mexico Insured Municipals Income Trust.............................. Series 1 through 18
New Jersey Insured Municipals Income Trust.............................. Series 1 through 115
New Jersey Investors' Quality Tax-Exempt Trust.......................... Series 1 through 22
New Jersey Insured Municipals Income Trust (Intermediate Laddered
Maturity)............................................................. Series 1 and 4
New York Insured Municipals Income Trust-Intermediate................... Series 1 through 6
New York Insured Municipals Income Trust (Limited Term)................. Series 1
New York Insured Municipals Income Trust................................ Series 1 through 138
New York Insured Tax-Free Bond Trust.................................... Series 1
New York Insured Municipals Income Trust (Intermediate Laddered
Maturity)............................................................. Series 1 through 17
New York Investors' Quality Tax-Exempt Trust............................ Series 1
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
North Carolina Investors' Quality Tax-Exempt Trust...................... Series 1 through 89
Ohio Insured Municipals Income Trust.................................... Series 1 through 105
Ohio Insured Municipals Income Trust (Premium Bond Series).............. Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term)................ Series 1
Ohio Insured Municipals Income Trust (Intermediate Laddered Maturity)... Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust................................ Series 1 through 16
Oklahoma Insured Municipal Income Trust................................. Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust.............................. Series 1 through 53
Pennsylvania Insured Municipals Income Trust -- Intermediate............ Series 1 through 6
Pennsylvania Insured Municipals Income Trust............................ Series 1 through 226
Pennsylvania Insured Municipals Income Trust (Premium Bond Series)...... Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust........................ Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust...................... Series 1 through 84
Stepstone Growth Equity and Treasury Securities Trust................... Series 1
Tennessee Insured Municipals Income Trust............................... Series 1-3 and 5-38
Texas Insured Municipals Income Trust................................... Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder).............. Series 1
Virginia Investors' Quality Tax-Exempt Trust............................ Series 1 through 75
Van Kampen American Capital Equity Opportunity Trust.................... Series 1 through 46
Van Kampen American Capital Utility Income Trust........................ Series 1 through 8
Van Kampen American Capital Insured Income Trust........................ Series 1 through 63
Van Kampen American Capital Insured Income Trust (Intermediate Term).... Series 1 through 62
Van Kampen Merritt Select Equity Trust.................................. Series 1
Van Kampen Merritt Select Equity and Treasury Trust..................... Series 1
Washington Insured Municipals Income Trust.............................. Series 1
West Virginia Insured Municipals Income Trust........................... Series 1 through 7
Principal Financial Institutions Trust.................................. Series 1
Internet Trust.......................................................... Series 1 through 4
Michigan Real Estate Income and Growth Trust............................ Series 1
Strategic Ten Trust, United States...................................... Series 1 through 11
Strategic Ten Trust, United Kingdom..................................... Series 1 through 11
Strategic Ten Trust, Hong Kong.......................................... Series 1 through 11
Strategic Five Trust, United States..................................... Series 1 through 5
Great International Firms Trust......................................... Series 1
Undervalued Growth Opportunities Trust.................................. Series 1
Emerging Growth and Treasury............................................ Series 1
Global Blue Chip Trust.................................................. Series 1
Renaissance Trust....................................................... Series 1
Blue Chip Opportunity and Treasury Trust................................ Series 1 through 4
Wheat First Strategic Opportunity Unit Trust............................ Series 1
Baby Boomer Opportunity Trust........................................... Series 1
Global Energy Trust..................................................... Series 1 through 2
Latin American Trust.................................................... Series 1
Brand Name Equity Trust................................................. Series 1 through 3
</TABLE>
<PAGE> 1
EXHIBIT 17.2
OFFICERS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------------- ---------------------------------- --------------------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX
William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer
Ronald A. Nyberg Executive Vice President & General Oakbrook Terrace, IL
Counsel
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Debra A. Nichols Sr. Vice President Houston, TX
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL
Timothy K. Brown 1st Vice President Laguna Niguel, CA
James S. Fosdick 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President San Francisco, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Thomas M. Byron Vice President Oakbrook Terrace, IL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
Richard J. Charlino Vice President Houston, TX
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Houston, TX
Tracey M. DeLusant Vice President Lynbrook, NY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
David B. Dibo Vice President Oakbrook Terrace, IL
Howard A. Doss Vice President Tampa, FL
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhaven Vice President Denver, CO
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
Gregory Heffington Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Robert S. Hunt Vice President Baltimore, MD
Lowell Jackson Vice President Norcross, GA
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
S. William Lehew III Vice President Charlotte, NC
Robert C. Lodge Vice President Philadelphia, PA
Walter Lynn Vice President Flower Mound, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Ruth L. McKeel Vice President Oakbrook Terrace, IL
John Mills Vice President Kenner, LA
Robert Muller, Jr. Vice President Houston, TX
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Boston, MA
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
James D. Stevens Vice President Boston, MA
William C. Strafford Vice President Granger, IN
David A. Tabone Vice President Phoenix, AZ
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Jeff Warland Vice President Oakbrook Terrace, IL
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
James R. Yount Vice President Seattle, WA
Patrick M. Zacchea Vice President New York, NY
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Brian P. Arcara Asst. Vice President Philadelphia, PA
Christopher M. Bisaillon Asst. Vice President Oakbrook Terrace, IL
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Robert C. Brooks Asst. Vice President Manchester, MA
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL
Deanna Margaret Chiaro Asst. Vice President San Jose, CA
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Daniel R. DeJong Asst. Vice President Oakbrook Terrace, IL
Melissa B. Epstein Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Scott F. Heyer Asst. Vice President Tampa, FL
Jeffrey S. Kinney Asst. Vice President Oakbrook Terrace, IL
Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Patricia D. Lathrop Asst. Vice President Tampa, FL
Tony E. Leal Asst. Vice President Houston, TX
Ivan R. Lowe Asst. Vice President Houston, TX
Linda S. MacAyeal Asst. Vice President Oakbrook Terrace, IL
Ann Therese McGrath Asst. Vice President Laguna, CA
Stuart R. Moehlman Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
Gregory S. Parker Asst. Vice President Houston, TX
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Jeffrey S. Rourke Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Traci T. Sorensen Asst. Vice President Oakbrook Terrace, IL
Gary Steele Asst. Vice President Philadelphia, PA
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Robert A. Watson Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
Gina Grippo Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
Francis McGarvey Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ---------------------------------
<S> <C> <C>
Don G. Powell Chairman & CEO 2800 Post Oak Blvd.
Houston, TX 77056
William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181
William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT 18
MULTI-CLASS PLAN
FOR
VAN KAMPEN AMERICAN CAPITAL FAMILY OF FUNDS
This Plan is adopted pursuant to Rule 18f-3 under the Act to provide
for the issuance and distribution of multiple classes of shares by each of the
Funds in accordance with the terms, procedures and conditions set forth below.
A majority of the Trustees of the Funds, including a majority of the Trustees
who are not interested persons of the Funds within the meaning of the Act,
found this Multi-Class Plan, including the expense allocations, to be in the
best interest of each Fund and each Class of Shares of each Fund and adopted
this Plan on January 26, 1996.
A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
1. The Act - Investment Company Act of 1940, as amended.
2. CDSC - contingent deferred sales charge.
3. CDSC Period - the period of years following acquisition during
which Shares are assessed a CDSC upon redemption.
4. Class - a class of Shares of a Fund.
5. Class A Shares - shall have the meaning ascribed in Section B. 1.
6. Class B Shares - shall have the meaning ascribed in Section B. 1.
7. Class C Shares - shall have the meaning ascribed in Section B. 1.
8. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of
Shares as defined in a Plan of Distribution and/or board
resolutions.
9. Distribution Fee - a fee paid by a Fund to the Distributor in
reimbursement of Distribution Expenses.
10. Distributor - Van Kampen American Capital Distributors, Inc.
11. Fund - an investment company listed on Exhibit A hereto and each
series thereof.
12. Money Market Fund - Van Kampen American Capital Reserve Fund or
Van Kampen American Capital Tax Free Money Market Fund.
<PAGE> 2
13. Plan of Distribution - Any plan adopted under Rule 12b-1 under the
Act with respect to payment of a Distribution Fee.
14. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders and/or
the maintenance of shareholder accounts.
15. Share - a share of beneficial interest in a Fund.
16. Trustees - the trustees of a Fund.
B. Classes. Each Fund may offer three Classes as follows:
1. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Trustees and set forth in the Funds' prospectus,
which may be reduced or eliminated for Money Market Funds,
larger purchases, under a combined purchase privilege, under a
right of accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act
and as set forth in the Fund's prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing, may be subject to a CDSC for the CDSC Period set forth
in Section D.1. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with Rule
22c-1 and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service
Fees approved from time to time by the Trustees and set forth in
the Funds' prospectus. Although shares of Van Kampen American
Capital Tax Free Money Market Fund are not designated as "Class A"
they are substantially similar to Class A Shares as defined herein
and shall be treated as Class A shares for the purposes of this
Plan.
2. Class B Shares. Class B Shares shall be (1) offered at net asset
value, (2) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares three to ten years after the calendar month in which the
shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.
3. Class C Shares. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC Period set forth
in Section D. 1. , (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares eight to fifteen years after the calendar month in which
the shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.
<PAGE> 3
C. Rights and Privileges of Classes. Each Class of each Fund will
represent an interest in the same portfolio of investments of that
Fund and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except as
described otherwise herein.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class
B Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be one year. The CDSC Period for Class B Shares shall be at
least three but not more than ten years as recommended by the
Distributor and approved by the Trustees.
2. CDSC Rate. The CDSC rate shall be recommended by the Distributor
and approved by the Trustees. If a CDSC is imposed for a period
greater than one year the CDSC rate must decline during the CDSC
Period such that (a) the CDSC rate is less in the last year of the
CDSC Period than in the first and (b) in each succeeding year the
CDSC rate shall be less than or equal to the CDSC rate in the
preceding year.
3. Disclosure and Changes. The CDSC rates and CDSC Period shall be
disclosed in a Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved as set forth in Section L.
4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current market value or the cost of
the Shares being redeemed. No sales charge shall be imposed on
increases in the net asset value of the Shares being redeemed above
the initial purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares and Class C
Shares are to be redeemed when not all of such Shares would be
subject toa CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares under circumstances
previously approved by the Trustees and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of Shares subject
to a CDSC shall be computed in accordance with Rule 22c-1 and
Section 22(d) of the Act and the rules and regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of
a Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in
<PAGE> 4
connection with the sale of Shares subject to a CDSC and
Distribution Expenses to the extent of such commissions and
Distribution Expenses eligible for reimbursement and approved by
the Trustees.
E. Service and Distribution Fees. Class A Shares shall be subject to a
Service Fee and Class B and Class C Shares shall be subject to a
Service Fee and a Distribution Fee. The Service Fee applicable to any
class shall not exceed 0.25% per annum of the average daily net assets
of the Class and the Distribution Fee shall not exceed 0.75% per annum
of the average daily net assets of the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees shall be
governed by the plans adopted by the Fund with respect to such fees
and Rule 12b-1 of the Act.
F. Conversion. Shares purchased through the reinvestment of dividends
and distributions paid on Shares subject to conversion shall be
treated as if held in a separate sub-account . Each time any Shares
in a Shareholder's account (other than Shares held in the sub-
account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset
values of the two Classes without the imposition of any sales load or
other charge. So long as any Class of Shares converts into Class A
Shares, the Distributor shall waive or reimburse each Fund, or take
such other actions with the approval of the Trustees as may be
reasonably necessary, to ensure the expenses, including payments
authorized under a Plan of Distribution, applicable to the Class A
Shares are not higher than the expenses, including payments authorized
under the Plan of Distribution, applicable to the class of shares
converting into Class A Shares.
G. Allocation of Expenses, Income and Gains Among Classes.
1. Expenses applicable to a particular class. Each Class of each
Fund shall pay any Service Fee, Distribution Fee and CDSC
applicable to that Class. Other expenses applicable to a
particular Class such as incremental transfer agency fees, but not
including advisory or custodial fees or other expenses related to
the management of the Fund's assets, shall be allocated between
Classes in different amounts if they are actually incurred in
different amounts by the Classes or the Classes receive services
of a different kind or to a different degree than other Classes.
2. Distribution Expenses. Distribution Expenses actually
attributable to the sale of all Classes shall be allocated to each
Class based upon the ratio which sales of each Class bears to the
sales of all Shares of the Fund. For this purpose, Shares issued
upon reinvestment of dividends or distributions, upon conversion
from Class B Shares or Class C Shares to Class A Shares or upon
stock splits will not be considered sales.
3. Income, capital gains and losses, and other expenses applicable to
all Classes. Income, realized and unrealized capital gains and
losses, and expenses such as advisory fees applicable to all
Classes shall be allocated to each Class on the basis of the net
asset value of that Class in relation to the net asset value of
the Fund.
<PAGE> 5
4. Determination of nature of expenses. The Trustees shall determine
in their sole discretion whether any expense other than those
listed herein is properly treated as attributed to a particular
Class or all Classes.
H. Exchange Privilege. Exchanges of Shares shall be permitted between
Funds as follows.
1. General. Shares of one Fund may be exchanged for Shares of the
same Class of another Fund at net asset value and without sales
charge, provided that
a. The Distributor may specify that certain Funds may not be
exchanged within a designated period, which shall not exceed
90 days, after acquisition without prior Distributor approval.
b. Class A Shares of a Money Market Fund that were not acquired
in exchange for Class B or Class C Shares of a Fund may be
exchanged for Class A Shares of another Fund only upon payment
of the excess, if any, of the sales charge rate applicable to
the Shares being acquired over the sales charge rate
previously paid.
c. Shares of a Money Market Fund acquired through an exchange of
Class B Shares or Class C Shares may be exchanged only for the
same Class of another Fund as the Class they were acquired in
exchange for or any Class into which those shares were
converted.
2. Target Fund. Shares of Van Kampen American Capital Government
Target Fund may be exchanged for Class A Shares of a Fund.
3. CDSC Computation. The acquired Shares will remain subject to the
CDSC rate schedule and CDSC Period for the original Fund upon the
redemption of the Shares from the Van Kampen American Capital
complex of funds. For purposes of computing the CDSC payable on a
disposition of the new Shares, the holding period for the
original Shares shall be added to the holding period of the new
Shares.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on
any matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that
d. If any amendment is proposed to the plan under which Service
Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by Class A
Shares under that plan, then no Class B Shares or Class C
Shares shall convert into Class A Shares of that Fund until
the holders of Class B Shares and Class C Shares of that Fund
have also approved the proposed amendment.
<PAGE> 6
e. If the holders of either the Class B Shares and/or Class C
Shares referred to in subparagraph a. do not approve the
proposed amendment, the Trustees of the Fund and the
Distributor shall take such action as is necessary to ensure
that the Class voting against the amendment shall convert into
another Class identical in all material respects to Class A
Shares of the Fund as constituted prior to the amendment.
2. Shareholders shall have separate voting rights on any matter
submitted to shareholders in which the interest of one Class
differs from the interests of any other Class.
J. Dividends. Dividends paid by a Fund with respect to each Class, to
the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in substantially
the same amount, except any Distribution Fees,Service Fees or
incremental expenses relating to a particular Class will be borne
exclusively by that Class.
K. Reports to Trustees. The Distributor shall provide to the Trustees of
each Fund quarterly and annual statements concerning distribution and
Shareholder servicing expenditures complying with paragraph (b)(3)(ii)
of Rule 12b-1 of the Act, as it may be amended from time to time. The
Distributors also shall provide the Trustees such information as the
Trustees may from time to time deem to be reasonably necessary to
evaluate this Plan.
L. Amendment. Any material amendment to this Plan shall be approved by
the affirmative vote of a majority of the Trustees of a Fund,
including the affirmative vote of the trustees of the Fund
who are not interested persons of the Fund, except that any amendment
that increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares of the
affected Class. The Distributor shall provide the Trustees such
information as may be reasonably necessary to evaluate any amendment
to this Plan.
<PAGE> 7
EXHIBIT A
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL PACE FUND
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST
<PAGE> 1
POWER OF ATTORNEY EXHIBIT 19
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open-End Trusts, as indicated on Schedule 1 attached hereto
and incorporated by reference, each a Delaware business trust, except for the
Van Kampen American Capital Pennsylvania Tax Free Income Fund, being a
Pennsylvania business trust (individually, a "Trust"), do hereby, in the
capacities shown below, individually appoint Dennis J. McDonnell and Ronald A.
Nyberg, each of Oakbrook Terrace, Illinois, and each of them, as the agents and
attorneys-in-fact with full power of substitution and resubstitution, for each
of the undersigned, to execute and deliver, for and on behalf of the
undersigned, any and all amendments to the Registration Statement filed by each
Trust with the Securities and Exchange Commission pursuant to the provisions of
the Securities Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Dated: March 1, 1996
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/ s / Fernando Sisto, Sc.D Trustee
- ----------------------------------------------
Fernando Sisto, Sc.D.
/ s / Donald C. Miller Trustee
- ----------------------------------------------
Donald C. Miller
/ s / Don G. Powell Trustee
- ----------------------------------------------
Don G. Powell
/ s / Dennis J. McDonnell Trustee
- ----------------------------------------------
Dennis J. McDonnell
/ s / J. Miles Branagan Trustee
- ----------------------------------------------
J. Miles Branagan
/ s / Linda Hutton Heagy Trustee
- ----------------------------------------------
Linda Hutton Heagy
/ s / Roger Hilsman, Ph.D. Trustee
- ----------------------------------------------
Roger Hilsman, Ph.D.
/ s / William Stewart Woodside Trustee
- ----------------------------------------------
William Stewart Woodside
/ s / R. Craig Kennedy Trustee
- ----------------------------------------------
R. Craig Kennedy
/ s / Jack E. Nelson Trustee
- ----------------------------------------------
Jack E. Nelson
/ s / Wayne W. Whalen Trustee
- ----------------------------------------------
Wayne W. Whalen
/ s / Jerome L. Robinson Trustee
- ----------------------------------------------
Jerome L. Robinson
/ s / Edward C. Wood III Vice President and
- ----------------------------------------------
Edward C. Wood III Chief Financial Officer
</TABLE>
<PAGE> 2
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
3. VAN KAMPEN AMERICAN CAPITAL TRUST
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
8. VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
9. VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
10. VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
11. VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
12. VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
13. VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
14. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
15. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
16. VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
17. VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
18. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
19. VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
20. VAN KAMPEN AMERICAN CAPITAL PACE FUND
21. VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
22. VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
23. VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND
24. VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
25. VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
26. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
27. VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> EMERGING GROWTH - CLASS A
<NUMBER> 01
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 1684706
<INVESTMENTS-AT-VALUE> 2306771
<RECEIVABLES> 17737
<ASSETS-OTHER> 389
<OTHER-ITEMS-ASSETS> 31
<TOTAL-ASSETS> 2324928
<PAYABLE-FOR-SECURITIES> 39139
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7626
<TOTAL-LIABILITIES> 46765
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 896966
<SHARES-COMMON-STOCK> 41882
<SHARES-COMMON-PRIOR> 32581
<ACCUMULATED-NII-CURRENT> (10905)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80843
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 622065
<NET-ASSETS> 1438510
<DIVIDEND-INCOME> 7264
<INTEREST-INCOME> 7954
<OTHER-INCOME> 0
<EXPENSES-NET> 26123
<NET-INVESTMENT-INCOME> (10905)
<REALIZED-GAINS-CURRENT> 157396
<APPREC-INCREASE-CURRENT> 195462
<NET-CHANGE-FROM-OPS> 341953
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (105610)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66836
<NUMBER-OF-SHARES-REDEEMED> (60900)
<SHARES-REINVESTED> 3364
<NET-CHANGE-IN-ASSETS> 409269
<ACCUMULATED-NII-PRIOR> (76)
<ACCUMULATED-GAINS-PRIOR> 85363
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9144
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26134
<AVERAGE-NET-ASSETS> 1242835
<PER-SHARE-NAV-BEGIN> 31.59
<PER-SHARE-NII> (.096)
<PER-SHARE-GAIN-APPREC> 6.043
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (3.190)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.347
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> EMERGING GROWTH - CLASS B
<NUMBER> 02
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 1684706
<INVESTMENTS-AT-VALUE> 2306771
<RECEIVABLES> 17737
<ASSETS-OTHER> 389
<OTHER-ITEMS-ASSETS> 31
<TOTAL-ASSETS> 2324928
<PAYABLE-FOR-SECURITIES> 39139
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7626
<TOTAL-LIABILITIES> 46765
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 609646
<SHARES-COMMON-STOCK> 22991
<SHARES-COMMON-PRIOR> 14699
<ACCUMULATED-NII-CURRENT> (10905)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80843
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 622065
<NET-ASSETS> 757276
<DIVIDEND-INCOME> 7264
<INTEREST-INCOME> 7954
<OTHER-INCOME> 0
<EXPENSES-NET> 26123
<NET-INVESTMENT-INCOME> (10905)
<REALIZED-GAINS-CURRENT> 157396
<APPREC-INCREASE-CURRENT> 195462
<NET-CHANGE-FROM-OPS> 341953
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (51572)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10107
<NUMBER-OF-SHARES-REDEEMED> (3502)
<SHARES-REINVESTED> 1686
<NET-CHANGE-IN-ASSETS> 306781
<ACCUMULATED-NII-PRIOR> (76)
<ACCUMULATED-GAINS-PRIOR> 85363
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9144
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26134
<AVERAGE-NET-ASSETS> 601112
<PER-SHARE-NAV-BEGIN> 30.65
<PER-SHARE-NII> (.349)
<PER-SHARE-GAIN-APPREC> 5.827
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (3.190)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.938
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> EMERGING GROWTH - CLASS C
<NUMBER> 03
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 1684706
<INVESTMENTS-AT-VALUE> 2306771
<RECEIVABLES> 17737
<ASSETS-OTHER> 389
<OTHER-ITEMS-ASSETS> 31
<TOTAL-ASSETS> 2324928
<PAYABLE-FOR-SECURITIES> 39139
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7626
<TOTAL-LIABILITIES> 46765
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68751
<SHARES-COMMON-STOCK> 2468
<SHARES-COMMON-PRIOR> 1348
<ACCUMULATED-NII-CURRENT> (10905)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80843
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 622065
<NET-ASSETS> 82376
<DIVIDEND-INCOME> 7264
<INTEREST-INCOME> 7954
<OTHER-INCOME> 0
<EXPENSES-NET> 26123
<NET-INVESTMENT-INCOME> (10905)
<REALIZED-GAINS-CURRENT> 157396
<APPREC-INCREASE-CURRENT> 195462
<NET-CHANGE-FROM-OPS> 341953
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4735)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2984
<NUMBER-OF-SHARES-REDEEMED> (2004)
<SHARES-REINVESTED> 139
<NET-CHANGE-IN-ASSETS> 40549
<ACCUMULATED-NII-PRIOR> (76)
<ACCUMULATED-GAINS-PRIOR> 85363
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9144
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26134
<AVERAGE-NET-ASSETS> 60447
<PER-SHARE-NAV-BEGIN> 31.02
<PER-SHARE-NII> (.354)
<PER-SHARE-GAIN-APPREC> 5.908
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (3.190)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.384
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
