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VAN KAMPEN EMERGING GROWTH FUND
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Van Kampen Emerging Growth Fund (the "Fund") is a diversified, open-end
management investment company, commonly known as a 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
the Fund's investment adviser 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 Asset Management Inc. (the
"Adviser"). 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY 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.
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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, 1997, 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) 421-2833. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related materials at the
SEC's internet web site (http://www.sec.gov).
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VAN KAMPEN FUNDS
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THIS PROSPECTUS IS DATED DECEMBER 29, 1997, AS SUPPLEMENTED ON JANUARY 2, 1998,
MARCH 9, 1998 AND JULY 14, 1998.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 4
Annual Fund Operating Expenses and Example.................. 5
Financial Highlights........................................ 6
The Fund.................................................... 8
Investment Objective and Policies........................... 8
Investment Practices........................................ 9
Investment Advisory Services................................ 11
Alternative Sales Arrangements.............................. 12
Purchase of Shares.......................................... 14
Shareholder Services........................................ 20
Redemption of Shares........................................ 22
Distribution and Service Plans.............................. 24
Distributions from the Fund................................. 25
Tax Status.................................................. 26
Fund Performance............................................ 28
Description of Shares of the Fund........................... 30
Additional Information...................................... 30
</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> 3
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PROSPECTUS SUMMARY
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THE FUND. Van Kampen 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 for each 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 no assurance that the Fund will achieve its investment
objective. See "Investment Objective and Policies."
INVESTMENT POLICY AND RISKS. The Fund seeks to achieve its investment 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."
Class B Shares. Class B shares are offered at net asset value per share and
are subject to a maximum CDSC of 5.00% 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% 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 Asset Management Inc. (the "Adviser") is the
Fund's investment adviser.
DISTRIBUTOR. Van Kampen Funds 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.
3
<PAGE> 4
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SHAREHOLDER TRANSACTION EXPENSES
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<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 Year
original purchase price or redemption proceeds)........... None (2) Year 1--5.00% 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>
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(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."
4
<PAGE> 5
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ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
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<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)................................................... 0.46% 0.46% 0.46%
12b-1 Fees (as a percentage of average daily net
assets)(1)................................................ 0.22% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage of average daily net
assets)................................................... 0.37% 0.39% 0.39%
Total Fund Operating Expenses (as a percentage of average
daily net assets)......................................... 1.05% 1.85% 1.85%
</TABLE>
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(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) 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.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
EXAMPLE: ---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (i) an operating expense ratio of 1.05% for Class
A shares, 1.85% for Class B shares and 1.85% for Class C
shares, (ii) a 5.00% annual return and (iii) redemption at
the end of each time period:
Class A shares.......................................... $68 $89 $112 $178
Class B shares.......................................... $69 $88 $115 $196*
Class C shares.......................................... $29 $58 $100 $217
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 $89 $112 $178
Class B shares.......................................... $19 $58 $100 $196*
Class C shares.......................................... $19 $58 $100 $217
</TABLE>
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* 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. The ten year amount with respect to Class B shares of the
Fund reflects the lower aggregate 12b-1 and service fees applicable to such
shares after conversion to Class A shares. Class B shares acquired through the
exchange privilege are subject to the CDSC 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."
5
<PAGE> 6
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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
---------------------------------------------------------------------------------------------------
1997 1996(A) 1995(A) 1994 1993 1992(A) 1991 1990 1989 1988
-------- -------- -------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $ 34.347 $ 31.59 $ 24.37 $26.46 $19.03 $20.06 $14.44 $15.19 $11.46 $19.45
-------- -------- -------- ------ ------- ------- ------- ------- ------- -------
Net Investment
Income/Loss.............. (.127) (.096) .05 (.11) (.05) (.015) .035 .105 .29 .27
Net Realized and Unrealized
Gain/Loss................ 8.177 6.043 7.79 (.32) 8.6375 .9275 6.035 (.60) 3.77 (4.7375)
-------- -------- -------- ------ ------- ------- ------- ------- ------- -------
Total from Investment
Operations................. 8.050 5.947 7.84 (.43) 8.5875 .9125 6.07 (.495) 4.06 (4.4675)
-------- -------- -------- ------ ------- ------- ------- ------- ------- -------
Less Distributions from
Net Investment Income...... .-- .-- .-- .-- .-- .0325 .0775 .255 .3175 .38
Net Realized Gain.......... 1.553 3.190 .62 1.66 1.1575 1.91 .3725 .-- .0125 3.1425
-------- -------- -------- ------ ------- ------- ------- ------- ------- -------
Total Distributions......... 1.553 3.190 .62 1.66 1.1575 1.9425 .45 .255 .33 3.5225
-------- -------- -------- ------ ------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period on Securities....... $ 40.844 $ 34.347 $ 31.59 $24.37 $26.46 $19.03 $20.06 $14.44 $15.19 $11.46
======== ======== ======== ====== ======= ======= ======= ======= ======= =======
Total Return(b)............. 24.44% 20.54% 33.11% (1.67%) 46.73% 4.28% 43.30% (3.27%) 36.39% (23.20%)
Net Assets at End of the
Period (In millions)....... $1,970.7 $1,438.5 $1,029.2 $677.1 $ 517.8 $ 312.3 $ 283.6 $ 206.6 $ 209.4 $ 206.8
Ratio of Expenses to Average
Net Assets(c).............. 1.05% 1.10% 1.14% 1.18% 1.10% 1.04% 1.14% 1.15% .97% .90%
Ratio of Net Investment
Income/Loss to Average Net
Assets(c).................. (.30%) (.29%) .19% (.30%) (.27%) (.08%) .21% .65% 2.03% 1.78%
Portfolio Turnover.......... .92% .91% .101% .64% .47% .61% .69% .47% .72% .122%
Average Commission Paid Per
Equity Share Traded(d)..... $ .0609 $ .0587 .-- .-- .-- .-- .-- .-- .-- .--
</TABLE>
(Table and footnotes continued on following page)
6
<PAGE> 7
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FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------- -----------------------
APRIL 20,
1992
COMMENCEMENT
OF
DISTRIBUTION YEAR ENDED AUGUST 31
YEAR ENDED AUGUST 31 TO AUGUST -----------------------
------------------------------------------ 31,
1997 1996(A) 1995(A) 1994 1993(A) 1992(A) 1997 1996(A)
------- ------------- ------ ------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period $32.938.. $ 30.65 $23.86 $ 26.14 $ 18.98 $ 19.66 $33.384 $ 31.02
------- ------------- ------ ------- ------- ------- ------- -------------
Net Investment Loss.............. (.270) (.349) (.16) (.27) (.245) (.065) (.273) (.354)
Net Realized and Unrealized
Gain/Loss...................... 7.674 5.827 7.57 (.35) 8.5625 (.615) 7.793 5.908
------- ------------- ------ ------- ------- ------- ------- -------------
Total from Investment
Operations....................... 7.404 5.478 7.41 (.62) 8.3175 (.68) 7.520 5.554
Less Distributions from Net
Realized Gain 1.553.. 3.190 .62 1.66 1.1575 -- 1.553 3.190
------- ------------- ------ ------- ------- ------- ------- -------------
Net Asset Value, End of the Period $38.789.. $ 32.938 $30.65 $ 23.86 $ 26.14 $ 18.98 $39.351 $ 33.384
======= ============= ====== ======= ======= ======= ======= =============
Total Return(b)................... 23.51% 19.61% 32.01% (2.46%) 45.41% (3.51%)* 23.56% 19.60%
Net Assets at End of the Period
(In millions).................... $1,220.4 $ 757.3 $450.5 $ 252.9 $ 74.5 $ 5.2 $ 139.9 $ 82.4
Ratio of Expenses to Average Net
Assets(c)........................ 1.85% 1.90% 1.97% 2.01% 1.89% 1.86% 1.85% 1.89%
Ratio of Net Investment Loss to
Average Net Assets(c)............ (1.10%) (1.10%) (.64%) (1.07%) (1.07%) (.80%) (1.10%) (1.10%)
Portfolio Turnover................ 92% 91% 101% 64% 47% 61% 92% 91%
Average Commission Paid Per Equity
Share Traded(d).................. $ .0609 $ .0587 -- -- -- -- $ .0609 $ .0587
<CAPTION>
CLASS C SHARES
--------------------------------
JULY 6,
1993
COMMENCEMENT
OF
DISTRIBUTION
TO AUGUST
31,
1995(A) 1994(A) 1993(A)
------- ------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period $ 24.14 $ 26.42 $ 25.07
------- ------- -------
Net Investment Loss.............. (.16) (.25) (.045)
Net Realized and Unrealized
Gain/Loss...................... 7.66 (.37) 1.395
------- ------- -------
Total from Investment
Operations....................... 7.50 (.62) 1.35
Less Distributions from Net
Realized Gain .62 1.66 --
------- ------- -------
Net Asset Value, End of the Period $ 31.02 $ 24.14 $ 26.42
======= ======= =======
Total Return(b)................... 32.01% (2.46%) 5.42%*
Net Assets at End of the Period
(In millions).................... $ 41.8 $ 24.5 $ 1.4
Ratio of Expenses to Average Net
Assets(c)........................ 1.96% 2.02% 2.31%
Ratio of Net Investment Loss to
Average Net Assets(c)............ (.63%) (1.04%) (1.37%)
Portfolio Turnover................ 101% 64% 47%
Average Commission Paid Per Equity
Share Traded(d).................. -- -- --
</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 impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to the Adviser's reimbursement of certain expenses was less
than 0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
7
<PAGE> 8
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THE FUND
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The Fund is a diversified, open-end 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 Asset Management Inc. (the "Adviser") provides investment advisory
and administrative services to the Fund. The Adviser and its affiliates also act
as investment adviser to other mutual funds distributed by Van Kampen Funds 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.
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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 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 illiquid securities,
which includes certain restricted securities (i.e., securities which may not be
sold without registration under the Securities Act of 1933 (the "1933 Act"))
that are not readily marketable and other securities not having readily
available market quotations. The Fund may enter into repurchase agreements with
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 that are not readily marketable. 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.
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
8
<PAGE> 9
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.
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
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. Repurchase agreements involve certain risks
in the event of a default by the other party. 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. The Fund will not invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid securities held by the Fund,
exceeds 10% of the value of its assets. 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) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible lack
of access to income on the underlying security during this period; and (c)
expenses of enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an 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 be
fully invested in equity securities. Even when the Fund is fully invested,
however, prudent management requires that at least a small portion of assets be
available as cash to honor redemption requests and for other short-term needs.
The Fund may also have cash on hand that has not yet been invested. The portion
of the Fund's assets that is invested in cash equivalents does not fluctuate
with stock market prices, so that, in times of rising market prices, the Fund
may underperform the market in proportion to the amount of cash equivalents in
its portfolio. By purchasing stock index futures contracts, however, the Fund
can compensate for the cash portion of its assets and may obtain performance
equivalent to investing 100% of its assets in equity securities.
If the Adviser forecasts a market decline, the Fund may seek to reduce its
exposure to the securities markets by increasing its cash position. By selling
stock index futures contracts instead of portfolio securities, a similar result
can be achieved to the extent that the performance of the futures contracts
correlates to the performance of the Fund's portfolio securities. Sales of
futures contracts frequently may be accomplished more rapidly and at less cost
than the actual sale of
9
<PAGE> 10
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 underlying
security declines below a specified level, value is protected against a market
decline to the degree the performance of the put correlates with the performance
of the Fund's investment portfolio. If the market remains stable or advances,
the Fund can refrain from exercising the put and its portfolio will participate
in the advance, having incurred only the premium cost for the put.
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 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.
Potential Risks of Options, Futures Contracts and Related Options. In certain
cases, the options and futures markets provide investment or risk management
opportunities that are not available from direct investments in securities. In
addition, some strategies can be performed with greater ease and at lower cost
by utilizing the options and futures markets rather than purchasing or selling
portfolio securities. However, 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.
In order to prevent leverage in connection with the purchase of futures
contracts or call options thereon by the Fund, an amount of cash 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, including certain OTC Options deemed
illiquid 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
for capital appreciation. 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% in any given year, which is higher than
that of many other investment companies. A higher portfolio turnover rate
increases the Fund's transactions costs, including brokerage commissions, and
may result in the realization of more short-term capital gains than if the Fund
had lower portfolio turnover. The turnover rate will not be a limiting factor,
however, if the Adviser deems portfolio changes appropriate.
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 may place portfolio transactions, to the
extent permitted by law, with brokerage firms affiliated with the Fund, the
Adviser or the Distributor and with firms participating in the distribution of
shares of the Fund if it reasonably believes that the quality of the execution
and the commission are comparable to that available from other qualified 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
10
<PAGE> 11
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 fundamental investment
restrictions which may not be changed without approval by a vote of a majority
of the 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. 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.
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
THE ADVISER. The Adviser is a wholly owned subsidiary of Van Kampen
Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset management
company with more than two million retail investor accounts, extensive
capabilities for managing institutional portfolios, and more than $60 billion
under management or supervision. Van Kampen's more than 50 open-end and 39
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen Funds Inc., the
distributor of the Fund and the sponsor of the funds mentioned above, is also a
wholly-owned subsidiary of Van Kampen. Van Kampen is an indirect wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley Asset Management Inc., an investment
adviser, Morgan Stanley & Co. Incorporated, a registered broker-dealer and
investment adviser, and Morgan Stanley International, are engaged in a wide
range of financial services. Their principal businesses include securities
underwriting, distribution and trading; merger, acquisition, restructuring and
other corporate finance advisory activities; merchant banking; stock brokerage
and research services; credit services; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; and global custody, securities clearance services and securities
lending.
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
11
<PAGE> 12
(the "Advisory Agreement"), the Fund pays the Adviser a monthly fee computed
based upon an annual rate applied to average daily net assets of the Fund 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 service fees, distribution fees, custodian fees, legal and
accounting fees, the costs of reports and proxies to shareholders, trustees'
fees (other than those who are affiliated persons as defined in the 1940 Act of
the Adviser, Distributor or Van Kampen), 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 the Adviser or the Distributor 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 Investment
Advisory Corp. ("Advisory Corp.").
PERSONAL INVESTMENT 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. The Fund is managed by a management team headed by Gary
M. Lewis. Mr. Lewis has been Senior Vice President of the Adviser since October
31, 1995 and Advisory Corp. since June, 1995. Prior to that time, Mr. Lewis was
Vice President -- Portfolio Manager of the Adviser. Dudley Brickhouse, David
Walker and Janet Willis are now responsible as co-managers for the day-to-day
management of the Fund's investment portfolio. Mr. Brickhouse has been an
Associate Portfolio Manager of the Adviser and Advisory Corp. since September,
1997. Prior to that time, Mr. Brickhouse was with NationsBank Investment
Management. Mr. Walker has been Assistant Vice President of the Adviser and
Advisory Corp. since June, 1995. Prior to that time, Mr. Walker was a
Quantitative Analyst of the Adviser. Ms. Willis has been an Officer of the
Adviser and Advisory Corp since January, 1997. Prior to that time, Ms. Willis
was an Associate Portfolio Manager of the Adviser. Prior to that time, Ms.
Willis was with AIM Capital Management, Inc.
- --------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- --------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund 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 certain redemptions 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
12
<PAGE> 13
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
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
"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 reinvestment plan shares received 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 received 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 schedule applicable to a share acquired through the exchange
privilege is determined by reference to the Participating Fund from which such
share was originally purchased.
The conversion of such shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, 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 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 higher aggregate fees and CDSC on Class B shares and Class C shares 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 may be 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 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
13
<PAGE> 14
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 CDSC
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 CDSC 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 higher distribution fees and 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 advised by the Adviser and its affiliates and
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 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 of the Fund 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, Van Kampen Investor Services Inc. ("Investor
Services"), a wholly-owned subsidiary of Van Kampen. 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
for each class 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 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.
14
<PAGE> 15
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 higher distribution fee and
transfer agency costs applicable 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 Investor
Services.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights except that (i) Class B shares
and Class C shares bear the expenses of the deferred sales arrangement and any
expenses (including the higher distribution fee and 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, (iii) each class
of shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature and (v) certain classes of shares have different
shareholder service options available. The 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 other
expenses associated with such 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.
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 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. In some instances additional compensation or promotional incentives may
be offered to brokers, dealers or financial intermediaries that have sold or may
sell significant amounts of shares during specified periods of time. The
Distributor 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, 1998 and terminating on April 15, 1998. 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. Such fees paid for such services and activities with respect to the
Fund will not exceed in the aggregate 1.25% of the average total daily net
assets of the Fund on an annual basis. These programs will not change the price
an investor will pay for shares or the amount that a Fund will receive from such
sale.
15
<PAGE> 16
CLASS A SHARES
The public offering price of Class A shares is the net asset value plus a
sales charge, as set forth below.
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 $1 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 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 below.
Investors, or their authorized dealers, must notify the Fund at the time of
the purchase order whenever a quantity discount is applicable to purchases. Upon
such notification, an investor will 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, his or
her spouse and children under 21 years of age and any corporation, partnership
or sole proprietorship which is 100% owned, either alone or in combination, by
any of the foregoing; a trustee or other fiduciary purchasing for a single trust
or for a single fiduciary account, or a "company" as defined in Section 2(a)(8)
of the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
Volume Discounts. The size of investment shown in the 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.
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.
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<PAGE> 17
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 sales charge 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 charges 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
sales 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 investment 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 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 Investor Services with appropriate
backup data for each participating investor in a computerized format fully
compatible with Investor Services' 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 the Fund,
by:
(1) Current or retired trustees or directors of funds advised by the Adviser
or Advisory Corp. 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; provided that such purchases are otherwise
permitted by such institutions.
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<PAGE> 18
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers
through which purchases are made an amount up to 0.50% of the amount
invested, over a 12 month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans
which invest in multiple fund families through broker-dealer retirement
plan alliance programs that have entered into agreements with the
Distributor and which are subject to certain minimum size and operational
requirements. Trustees and other fiduciaries should refer to the
Statement of Additional Information for further detail with respect to
such alliance programs.
(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares
of the Fund with proceeds from distributions from such a plan or
retirement account other than distributions taken to correct an excess
contribution.
(7) Accounts as to which a bank or broker-dealer charges an account
management fee ("wrap accounts"), provided the bank or broker-dealer has
a separate agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the 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 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.
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its
endorsement or authorization, on behalf of the group, for purchase of
shares of the Fund and Participating Funds, (iv) has a membership that
the authorized dealer can certify as to the group's members and (v)
satisfies other uniform criteria established by the Distributor for the
purpose of realizing economies of scale in distributing such shares. A
qualified group does not include one whose sole organizational nexus, for
example, is that its participants are credit card holders of the same
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 $1 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 Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as
18
<PAGE> 19
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 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
YEAR SINCE PURCHASE DOLLAR AMOUNT 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 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.
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.
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<PAGE> 20
A commission or transaction fee of 1.00% of the purchase amount will generally
be paid to authorized dealers at the time of purchase. Authorized dealers also
will 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 generally 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, (iv) in
circumstances under which no commission or transaction fee is paid to authorized
dealers at the time of purchase of such shares, and (v) 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 180 days after redemption. See the Statement of
Additional Information for further discussion of waiver provisions.
- --------------------------------------------------------------------------------
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. The
following is a description of such services.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares of the Fund are held by Investor Services, the Fund's transfer
agent. Investor Services performs bookkeeping, data processing and
administrative services related to the maintenance of shareholder accounts.
Except as described in 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 any of the Participating Funds
will receive statements quarterly from Investor Services 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 Investor Services.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen Funds, c/o Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain
a Surety Bond in a form acceptable to Investor Services. On the date the letter
is received Investor Services will calculate 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 replacement 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) 421-2833 for the hearing impaired) or in writing
to Investor Services. 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 Investor Services to charge a bank account on
a regular 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; 401(k) plans; Section 403(b)(7) plans in the case of
employees of public school systems and certain non-profit organizations; or
other
20
<PAGE> 21
pension or profit sharing plans. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
Trust Company serves as custodian under the IRA, 403(b)(7) and 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 ACH. In addition, the shareholder must fill out the appropriate
section of the account application. The shareholder must also include a voided
check or deposit slip from the bank account into which redemptions are to be
deposited together with the completed application. Once Investor Services has
received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing Investor
Services.
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) 421-2833 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
Participating Fund so long as the investor has a pre-existing account for such
class of shares of the other fund. Both accounts must be of the same type,
either non-retirement or retirement. If the accounts are retirement accounts,
they must both be for the same class and of the same type of retirement plan
(e.g. IRA, 403(b)(7), 401(k), 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 may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset values of
each fund after requesting the exchange without any sales charge, subject to
certain limitations. Shares of the Fund may be exchanged for shares of any
Participating Fund only if shares of that Participating Fund are available for
sale; however, during periods of suspension of sales, shares of a Participating
Fund may be available for sale only to existing shareholders of a Participating
Fund. Shareholders seeking an exchange into a Participating Fund should obtain
and read the current prospectus for such Fund.
To be eligible for exchange, shares of the Fund must have been registered in
the shareholder's name at least 30 days prior to an exchange. Shares of the Fund
registered in a shareholder's name for less than 30 days may only be exchanged
upon receipt of prior approval of the Adviser. Under normal circumstances, it is
the policy of the Adviser not to approve such request.
When Class B shares and Class C shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such shares from a Participating Fund (the
"original fund"). Upon redemption from the Participating Funds' complex of
funds, Class B shares and Class C share are subject to the CDSC schedule imposed
by the original fund.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written
request to Investor Services 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 and its subsidiaries, including Investor Services
(collectively, "VK"), 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 VK nor the Fund
will be liable for following telephone instructions which it reasonably believes
to be genuine. VK and the Fund may be liable for any losses due to unauthorized
or fraudulent instructions if reasonable procedures are not followed. If the
exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be
21
<PAGE> 22
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 additional 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 at the offering price next computed after receipt of instructions 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 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 gain or loss realized by the shareholder upon redemption of shares
is a taxable event.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the Internet. Please refer to our web site @ www.vkac.com
for further instruction. VK and the Fund employ procedures considered by them to
be reasonable to confirm that instructions communicated through the Internet are
genuine. Such procedures include requiring use of a personal identification
number prior to acting upon Internet instructions and providing written
confirmation of instructions communicated through the Internet. If reasonable
procedures are employed, neither VK nor the Fund will be liable for following
instructions through the Internet which it reasonably believes to be genuine. If
an account has multiple owners, Investor Services may rely on the instructions
of any one owner.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
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 Van Kampen Investor Services Inc., 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 certain 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
22
<PAGE> 23
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 Investor Services. 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 shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 120 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to Investor Services. Where Van Kampen Trust
Company serves as custodian, special IRA, 403(b)(7), or Keogh distribution forms
must be obtained from and be forwarded to Van Kampen Trust Company, P. O. Box
944, Houston, Texas 77001-0944. Contact the custodian for information.
In the case of redemption requests sent directly to Investor Services, the
redemption price is the net asset value per share next determined after the
request is received. Payment for shares redeemed will be made by check mailed
within seven days after acceptance by Investor Services 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, Investor Services may
delay mailing a redemption check until it confirms the purchase check has
cleared, which may take up to 15 days. A taxable gain or loss will be recognized
by the shareholder upon redemption of shares.
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. VK 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 VK nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. VK
and the Fund may 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 Investor Services by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's regular redemption
procedure previously described. Requests received by Investor Services 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, Investor Services may rely on the instructions of any one
owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions 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
23
<PAGE> 24
retirement account (IRA) for which Van Kampen Trust Company acts as custodian.
The Fund reserves the right at any time to terminate, limit or otherwise modify
this redemption privilege.
GENERAL REDEMPTION INFORMATION. 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
involuntary redemption may only occur if the shareholder account is less than
the minimum initial investment due to shareholder redemptions.
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.
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 Van Kampen Trust Company for repayment of
principal (and interest) on their borrowings on such plans.
- --------------------------------------------------------------------------------
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 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
24
<PAGE> 25
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 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, 1997, there were $38,683,458 and $1,651,844 of unreimbursed
distribution-related expenses with respect to Class B shares and Class C shares,
respectively, representing 3.17% and 1.18% 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 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.
- --------------------------------------------------------------------------------
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 may be lower than
the per share dividends on Class A shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
25
<PAGE> 26
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."
- --------------------------------------------------------------------------------
TAX STATUS
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXATION. The Fund has qualified and intends to continue to
qualify each year to be treated as a regulated investment company under
Subchapter M of the Code. To qualify as a regulated investment company, the Fund
must comply with certain requirements of the Code relating to, among other
things, the source of its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its 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 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 recognize income or gain 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. Under recently enacted legislation,
this requirement will no longer be applicable to the Fund beginning on July 1,
1998.
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
26
<PAGE> 27
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). For a summary of the tax rates applicable to capital gains
(including capital gains dividends), see "Capital Gains Rates Under the 1997 Tax
Act" below. Tax-exempt shareholders not subject to federal income tax on their
income generally will not be taxed on distributions from the Fund.
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. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
Under Code Section 988, foreign currency gains or losses from certain forward
contracts not traded in the interbank market as well as certain other gains or
losses attributable to currency exchange rate fluctuations are typically treated
as ordinary income or loss. Such income or loss may increase or decrease (or
possibly eliminate) the Fund's income available for distribution. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
Fund's income available for distribution is decreased or eliminated, all or a
portion of the dividends declared by the Fund may be treated for federal income
tax purposes as a return of capital or, in some circumstances, as capital gain.
Generally, a shareholder's tax basis in Fund shares will be reduced to the
extent that an amount distributed to such shareholder is treated as a return of
capital.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income passive or (2) an average
of at least 50% of its assets produce, or are held for the production of,
passive income. Under certain circumstances, a regulated investment company that
holds stock of a PFIC will be subject to federal income tax (i) on a portion of
any "excess distribution" received on the stock or (ii) on any gain from a sale
or disposition of the stock (collectively, "PFIC income"), plus interest
thereon, even if the regulated investment company distributes the PFIC income as
a taxable dividend to its stockholders. The balance of the PFIC income will be
included in the regulated investment company's investment company taxable income
and, accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders. If the Fund invests in a PFIC and elects to
treat the PFIC as a "qualified electing fund," then in lieu of the foregoing tax
and interest obligation, the Fund would be required to include in income each
year
27
<PAGE> 28
its pro rata share of the qualified electing fund's annual ordinary earnings and
net capital gain, which most likely would have to be distributed by the Fund to
satisfy the distribution requirement for avoiding income and excise taxes. In
many instances it may be very difficult to make this election due to certain
requirements imposed with respect to the election.
Under provisions of the Taxpayer Relief Act of 1997 (the "1997 Tax Act")
generally effective for taxable years beginning after December 31, 1997, the
Fund may make an election to annually mark-to-market certain publicly traded
PFIC stock (a "PFIC Mark-to-Market Election"). "Marking-to-market," in this
context, means recognizing as ordinary income or loss each year an amount equal
to the difference between the Fund's adjusted tax basis in such PFIC stock and
its fair market value. Losses will be allowed only to the extent of net
mark-to-market gain previously included by the Fund pursuant to the election for
prior taxable years. The Fund may be required to include in its taxable income
for the first taxable year in which it makes a PFIC Mark-to-Market Election an
amount equal to the interest charge that would otherwise accrue with respect to
distributions on, or proceeds from dispositions of, the PFIC stock. This amount
would not be deductible from the Fund's taxable income. The PFIC Mark-to-Market
Election generally applies to the taxable year for which made and to all
subsequent taxable years, unless the Internal Revenue Service consents to
revocation of the election. By making the PFIC Mark-to-Market Election, the Fund
could ameliorate the adverse tax consequences arising from its ownership of PFIC
stock, but in any particular year may be required to recognize income in excess
of the distributions it receives from the PFIC and proceeds from the
dispositions of PFIC stock.
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. For a summary of the tax rates applicable to
capital gains, see "Capital Gains Rates Under the 1997 Tax Act" below. Any loss
recognized upon a taxable disposition of shares held for six months or less will
be treated as a long-term capital loss to the extent of any capital 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 as a result of holding one or more other positions in substantially
similar or related property or through certain options or short sales.
CAPITAL GAINS RATES UNDER THE 1997 TAX ACT.. Under the 1997 Tax Act, the
maximum tax rates applicable to net capital gains recognized by individuals and
other non-corporate taxpayers are (i) the same as ordinary income rates for
capital assets held for one year or less, (ii) 28% for capital assets held for
more than one year but not more than 18 months and (iii) 20% for capital assets
held for more than 18 months. The 1997 Tax Act did not affect the maximum
long-term capital gains rate for corporations which remains at 35%. The new tax
rates for capital gains under the 1997 Tax Act described above apply to
distributions of capital gains dividends by regulated investment companies such
as the Fund as well as to sales and exchanges of shares in regulated investment
companies such as the Fund. With respect to capital losses recognized on
dispositions of shares held six months or less where such losses are treated as
long-term capital losses to the extent of prior capital gains dividends received
on such shares (see "Sale of Shares" above), it is unclear how such capital
losses offset the capital gains referred to above. Shareholders should consult
their own tax advisors as to the application of the new capital gains rates to
their particular circumstances.
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 purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its total return for prior periods.
Any such advertisement would include at least average annual total return
quotations for one year, five year and ten year periods. Other total return
quotations, aggregate or average, over other time periods may also be included.
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<PAGE> 29
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 Class A shares of the Fund
were offered at a maximum sales charge of 8.50% prior to June 12, 1989, actual
Fund total return would have been somewhat less than that computed on the basis
of the current maximum sales charge. Total return is based on historical
earnings and asset value fluctuations and is not intended to indicate future
performance. No adjustments are made to reflect any income taxes payable by
shareholders on dividends and 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. Class A shares total return figures include the maximum sales
charge of 5.75%; Class B shares and Class C shares total return figures include
any applicable CDSC. Because of the differences in sales charges and
distribution fees, the total returns for each of the classes will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield 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 rankings or ratings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds with the Consumer Price Index, the Dow Jones
Industrial Average Index, Standard & Poor's indices, or 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 standard performance information required by the SEC as described
above.
The Fund's Annual Report and Semi-Annual Report contain additional performance
information. A copy of the Annual Report or Semi-Annual Report may be obtained
without charge by calling or writing the Fund at the telephone number and
address printed on the cover of this Prospectus.
29
<PAGE> 30
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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 again reorganized as a business trust under the laws of the State of
Delaware as of August 5, 1995 and on July 14, 1998 adopted its current name.
The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share, divided into classes.
The Fund currently offers three classes of shares, designated Class A shares,
Class B shares and Class C shares. Other classes may be established from time to
time in accordance with the provisions of the Fund's Declaration of Trust. 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
distribution expenses and has exclusive voting rights with respect to its
distribution fee. Except as described herein, there are no conversion,
preemptive or other subscription rights. 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 fees and transfer agency
costs, 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. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
1940 Act. 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.
- --------------------------------------------------------------------------------
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.
The fiscal year end of the Fund is August 31. The Fund sends to its
shareholders at least semi-annually reports showing the Fund's portfolio and
other information. An Annual Report, containing financial statements audited by
the Fund's independent accountants, is sent to shareholders each year. After the
end of each year, shareholders will receive federal tax information regarding
dividends and capital gains distribution.
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<PAGE> 31
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911
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) 421-2833
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424
VAN KAMPEN EMERGING GROWTH FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN ASSET MANAGEMENT INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Emerging Growth Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Emerging Growth Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICE WATERHOUSE LLP
200 East Randolph Drive
Chicago, IL 60601
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EMERGING GROWTH
FUND
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P R O S P E C T U S
DECEMBER 29, 1997, AS SUPPLEMENTED
ON JANUARY 2, 1998, MARCH 9, 1998 AND JULY 14, 1998
VAN KAMPEN FUNDS
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