<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1998
REGISTRATION NOS. 2-33214
811-2424
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 58 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 28 [X]
</TABLE>
VAN KAMPEN EMERGING GROWTH FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
1 PARKVIEW PLAZA, PO BOX 5555, OAKBROOK TERRACE, ILLINOIS 60181-5555
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
DENNIS J. MCDONNELL
PRESIDENT
VAN KAMPEN INVESTMENTS INC.
1 PARKVIEW PLAZA
PO BOX 5555
OAKBROOK TERRACE, ILLINOIS 60181-5555
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(313) 407-0700
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share
================================================================================
<PAGE> 2
VAN KAMPEN
EMERGING GROWTH FUND
Van Kampen Emerging Growth Fund is a mutual
fund with an investment objective of capital
appreciation. The Fund's management seeks to
achieve the investment objective by investing
primarily in a portfolio of common stocks of
small and medium sized companies considered by
the Fund's management to be emerging growth
companies.
Shares of the Fund have not been approved or
disapproved by the Securities and Exchange
Commission (SEC) or any state regulators, and
neither the SEC nor any state regulator has
ruled on the accuracy or adequacy of this
prospectus. It is a criminal offense to state
otherwise.
This prospectus is dated DECEMBER 29, 1998.
[VAN KAMPEN FUNDS LOGO]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 5
Investment Objective and Policies.................. 6
Investment Advisory Services....................... 9
Purchase of Shares................................. 10
Redemption of Shares............................... 16
Distributions from the Fund........................ 17
Shareholder Services............................... 18
Federal Income Taxation............................ 20
Financial Highlights............................... 21
</TABLE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
<PAGE> 4
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund is a mutual fund with an investment objective of capital appreciation.
Any ordinary income received from portfolio securities is entirely incidental to
the Fund's investment objective. There can be no assurance the Fund will achieve
its investment objective.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund's management seeks to achieve the
investment objective by investing at least 65% of the Fund's total assets in a
portfolio of common stocks of small and medium sized (with market capitalization
or annual sales less than $2 billion) emerging growth companies. Emerging growth
companies are those domestic or foreign companies that the Fund's management
believes are in the early stages of their life cycles and have the potential to
become major enterprises. Investing in such companies involves risks not
ordinarily associated with investments in larger, more established companies.
The Fund may invest up to 20% of its assets in securities of foreign issuers.
INVESTMENT RISKS
With its portfolio of common stocks of smaller and medium sized, less
established companies, the Fund has greater risks than a fund that invests only
in larger sized, more seasoned companies. Because of the following risks, you
could lose money on your investment in the Fund over the short or long term:
MARKET RISK. Market risk is the possibility that stock prices will decline,
sometimes suddenly and sharply. During an overall market decline, stock prices
of small and medium sized companies (such as those in which the Fund invests)
often fluctuate more and often fall more than the prices of larger company
stocks. It is possible that the stocks of small and medium sized companies will
be more volatile and underperform the overall stock market. Historically,
smaller and medium sized company stocks have sometimes gone through extended
periods when they did not perform as well as larger company stocks.
RISKS OF EMERGING GROWTH COMPANIES. Companies that the Fund's management
believes are emerging growth companies are often companies with limited product
lines, markets, distribution channels or financial resources and the management
of such companies may be dependent upon one or a few key people. The stocks of
emerging growth companies can therefore be subject to more abrupt or erratic
market movements than stocks of larger, more established companies or the stock
market in general.
FOREIGN RISKS. Because the Fund may own securities from foreign issuers, it may
be subject to risks not usually associated with owning securities of U.S.
issuers. These risks can include fluctuations in foreign currencies, foreign
currency exchange controls, political and economic instability, differences in
financial reporting, differences in securities regulation and trading, and
foreign taxation issues.
MANAGER RISK. As with any fund, the Fund's management may not be successful in
selecting the best-performing securities and the Fund's performance may lag
behind that of similar funds.
An investment in the Fund is not a deposit of any bank or other insured
depository institution. Your investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
INVESTOR PROFILE
In light of its objective and investment strategies, the Fund may be appropriate
for investors who:
- - Seek to grow their capital over the long term.
- - Do not need current income from their investment.
- - Are willing to take on the increased risks of investing in smaller and medium
sized, less established companies in exchange for potentially higher capital
appreciation.
- - Can withstand substantial volatility in the value of their shares of the Fund.
Investors should carefully consider the additional risks associated with
investments in smaller and medium sized, less established companies. An
investment in the Fund may not be appropriate for all investors. The Fund is not
intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-term
3
-
<PAGE> 5
investment and the Fund should not be used as a trading vehicle.
ANNUAL PERFORMANCE
One way to measure the risks of investing in the Fund is to look at how its
performance varies from year to year. The following chart shows the annual
returns of the Fund's Class A Shares over the past ten calendar years prior to
the date of this prospectus, as well as its best and worst quarter during that
period. Sales loads are not reflected in this chart. If these sales loads had
been included, the returns shown below would have been lower. Remember that the
past performance of the Fund is not indicative of its future performance.
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
'1988 3.70
'1989 29.06
'1990 1.97
'1991 60.43
'1992 9.73
'1993 23.92
'1994 -7.12
'1995 44.63
'1996 17.91
'1997 21.34
</TABLE>
The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.
During the ten-year period shown in the bar chart, the highest quarterly return
was 25.15% (for the quarter ended March 31, 1991) and the lowest quarterly
return was -19.80% (for the quarter ended September 30, 1990).
COMPARATIVE PERFORMANCE
This table shows how the Fund's performance compares with the Russell 2000 Stock
Index, a broad-based market index that the Fund's management believes is an
applicable benchmark for the Fund. Average annual total returns, assuming
payment of the maximum sales charges, are shown for one-, five-, and ten-year
periods ended December 31, 1997 (the most recently completed calendar year prior
to the date of this prospectus). Remember that the past performance of the Fund
is not indicative of its future performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns Past 10
for the Years
Periods Ended Past Past or Since
December 31, 1997 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen
Emerging Growth
Fund
.......................................................
Class A Shares 14.35% 17.55% 18.35%
.......................................................
Class B Shares 15.40% 17.88% 19.16%(1)
.......................................................
Class C Shares 19.44% -- 17.24%(2)
.......................................................
Russell 2000
Stock Index 22.36% 16.40% 15.77%
.......................................................
</TABLE>
Inception Dates (1) 4/20/92, (2) 7/6/93
4
-
<PAGE> 6
FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
..............................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) Year 1-5.00% Year 1-1.00%
Year 2-4.00% After-None
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
..............................................................
Maximum sales charge
(load) imposed on
reinvested dividends
(as a percentage of
offering price) None None None
..............................................................
Redemption fees (as a
percentage of amount None None None
redeemed)
..............................................................
Exchange fee None None None
..............................................................
</TABLE>
(1) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 1.00% may be imposed on
certain redemptions made within one year of the purchase. See "Purchase of
Shares -- Class A Shares."
ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted from Fund assets):
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.45% 0.45% 0.45%
..............................................................
Distribution and/or 0.22% 1.00%(2) 1.00%(2)
Service (12b-1)
Fees(1)
..............................................................
Other Expenses 0.33% 0.34% 0.34%
..............................................................
Total Annual Fund 1.00% 1.79% 1.79%
Operating Expenses
..............................................................
</TABLE>
(1) Class A Shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
Shares and Class C Shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Purchase of Shares."
(2) Because Distribution and/or Service (12b-1) Fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges. Long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted by National Association of
Securities Dealers, Inc. rules.
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% annual return each year and
that the Fund's operating expenses remain the same each year (except for the ten
year amounts for Class B Shares which reflect the conversion of Class B Shares
to Class A Shares after eight years). Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $671 $875 $1,096 $1,729
......................................................................
Class B Shares $682 $863 $1,120 $1,897*
......................................................................
Class C Shares $282 $563 $ 970 $2,105
......................................................................
</TABLE>
5
-
<PAGE> 7
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $671 $875 $1,096 $1,729
......................................................................
Class B Shares $182 $563 $ 970 $1,897*
......................................................................
Class C Shares $182 $563 $ 970 $2,105
......................................................................
</TABLE>
* Based on conversion to Class A Shares after eight years.
To simplify comparison among funds, all funds are required by the SEC to use a
5% annual return assumption. Class B Shares of the Fund acquired through the
exchange privilege are subject to the contingent deferred sales charge schedule
of the fund from which the shareholder's 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 contingent deferred sales charge. The Fund's
actual annual return and actual expenses for future periods may be greater or
less than those shown.
INVESTMENT OBJECTIVE
AND POLICIES
The Fund's investment objective is to provide capital appreciation. Any ordinary
income received from portfolio securities is entirely incidental to the Fund's
investment objective. This objective may be changed by the Fund's Board of
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 positions and needs. There can, of course, be no assurance
that the investment objective of capital appreciation will be realized and
investors should give full consideration to the risks inherent in the investment
techniques that the Fund's investment adviser may use to achieve such investment
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 cycles
that the Fund's investment 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, distribution channels 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, it may invest to
a limited extent in other securities such as preferred stocks, convertible
securities and warrants.
The Fund does not limit its investments to any single group or type of security.
The Fund may invest in securities involving special situations, such as 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 other types of 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 Fund's investment adviser
believes to be unusually attractive growth investments on an individual company
basis. The Fund may invest in securities that have above average volatility of
price movement. Because prices of common stocks and other securities fluctuate,
the value of an investment in the Fund will vary 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.
6
-
<PAGE> 8
SECURITIES OF FOREIGN ISSUERS
The Fund may invest up to 20% of its assets in securities of foreign issuers.
Such securities may be denominated in U.S. dollars or in currencies other than
U.S. dollars. Investments in foreign securities present certain risks not
ordinarily associated with investments in securities of U.S. issuers. These
risks include fluctuations in foreign exchange rates, political and economic
developments (including war or other instability, expropriation of assets,
nationalization and confiscatory taxation), the imposition of foreign exchange
limitations, withholding taxes on income or capital transactions or other
restrictions, higher transaction costs and difficulty in taking judicial action.
In addition, there generally is less publicly available information about many
foreign issuers, and auditing, accounting and financial reporting requirements
are less stringent and less uniform in many foreign countries. Such securities
may be less liquid than the securities of U.S. corporations. Such securities may
also be subject to greater fluctuations in price than securities of U.S.
corporations. There is generally less government regulation of stock exchanges,
brokers and listed companies abroad than in the U. S., and, with respect to
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect investment
in those countries. Because there is usually less supervision and governmental
regulation of exchanges, brokers and dealers than there is in the U.S., the Fund
may experience settlement difficulties or delays not usually encountered in the
U.S. The risks of foreign investments should be considered carefully by an
investor in the Fund.
USING OPTIONS, FUTURES CONTRACTS
AND RELATED OPTIONS
The Fund expects to utilize options, futures contracts and options on futures
contracts in several different ways, depending upon the status of the Fund's
portfolio and the investment 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 or cash equivalents does not fluctuate
with stock market prices, so that, in times of rising market prices, the Fund
may underperform the market in proportion to the amount of cash or cash
equivalents in its portfolio. By purchasing stock index futures contracts,
however, the Fund can compensate for the cash portion of its assets and may
obtain performance equivalent to investing 100% of its assets in equity
securities.
If the Fund's investment adviser forecasts a market decline, the Fund may seek
to reduce its exposure to the securities markets by increasing its cash
position. By selling stock index futures contracts instead of portfolio
securities, a similar result can be achieved to the extent that the performance
of the futures contracts correlates to the performance of the Fund's portfolio
securities. Sales of futures contracts frequently may be accomplished more
rapidly and at less cost than the actual sale of securities. Once the desired
hedged position has been effected, the Fund could then liquidate securities in a
more deliberate manner, reducing its futures position simultaneously to maintain
the desired balance, or it could maintain the hedged position.
As an alternative to stock index futures contracts, the Fund can engage in stock
index options (or stock index futures options) to manage the portfolio's risk in
advancing or declining markets. For example, the value of a put option generally
increases as the underlying security declines below a specified level, value is
protected against a market decline to the degree the performance of the put
correlates with the performance of the Fund's investment portfolio. If the
market remains stable or advances, the Fund can refrain from exercising the put
and its portfolio will participate in the advance, having incurred only the
premium cost for the put.
The Fund is authorized to purchase and sell listed and over-the-counter options
("OTC Options"). OTC Options are subject to certain additional risks including
default by the other party to the transaction and the liquidity of the
transactions.
In certain cases, the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities. However, such transactions involve
risks different from the direct investment in underlying securities such as
7
-
<PAGE> 9
imperfect correlation between the value of the instruments and the underlying
assets, risks of default by the other party to certain transactions, risks that
the transactions may incur losses that partially or completely offset gains in
portfolio positions, risks that the transactions may not be liquid and manager
risk. In addition, such transactions may involve commissions and other costs,
which may increase the Fund's expenses and reduce its return. A more complete
discussion of options, futures contracts and related options and their risks is
contained in the Statement of Additional Information.
OTHER INVESTMENTS AND
RISK FACTORS
For cash management purposes, the Fund may engage in repurchase agreements with
banks and broker-dealers to earn a return on temporarily available cash. Such
transactions are subject to the risk of default by the other party. It is
currently the policy of the Fund not to invest more than 25% of its total assets
at the time of purchase in securities subject to repurchase agreements.
The Fund may invest up to 10% of the Fund's net assets in illiquid and certain
restricted securities. Such securities may be difficult or impossible to sell at
the time and the price that the Fund would like. Thus, the Fund may have to sell
such securities at a lower price, sell other securities instead to obtain cash
or forego other investment opportunities.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information which can be obtained by investors free of charge as
described on the back cover of this prospectus.
Although the Fund does not intend to engage in substantial short-term trading,
it may sell securities without regard to the length of time they have been held
in order to take advantage of new investment opportunities or when the Fund's
management believes the potential for capital appreciation has lessened or
otherwise. The Fund's portfolio turnover is shown under the heading "Financial
Highlights." The portfolio turnover rate may be expected to vary from year to
year. A high portfolio turnover rate (100% or more) increases the Fund's
transactions costs, including brokerage commissions or dealer costs, 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 Fund's investment adviser considers portfolio changes
appropriate.
When market conditions dictate a more "defensive" investment strategy, the Fund
may invest on a temporary basis a portion or all of its assets in securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
prime commercial paper, certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million, and
repurchase agreements. Under normal market conditions, the potential for capital
appreciation on these securities will tend to be lower than the potential for
capital appreciation on other securities owned by the Fund. The effect of taking
such a defensive position may be that the Fund does not achieve its investment
objective.
YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's investment adviser and other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Fund's investment adviser is taking steps that it believes are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that it uses and to obtain reasonable assurances that comparable steps
are being taken by the Fund's other major service providers. At this time, there
can be no assurances that these steps will be sufficient to avoid any adverse
impact to the Fund. In addition, the Year 2000 Problem may adversely affect the
markets and the issuers of securities in which the Fund may invest which, in
turn, may adversely affect the net asset value of the Fund. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies or issuers and overall
economic uncertainty. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in U.S. and foreign financial statements. Accordingly, the Fund's investments
may be adversely affected. The statements above are subject to the Year 2000
Information and Readiness Disclosure Act which Act may limit the legal rights
regarding the use of such statements in the case of a dispute.
8
-
<PAGE> 10
INVESTMENT ADVISORY SERVICES
THE ADVISER. Van Kampen Asset Management Inc. is the Fund's investment adviser
(the "Adviser" or "Asset Management"). The Adviser is a wholly owned subsidiary
of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company with more than two million
retail investor accounts, extensive capabilities for managing institutional
portfolios, and more than $50 billion under management or supervision. Van
Kampen Investments' 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 (the
"Distributor") and the sponsor of the funds mentioned above, is also a wholly
owned subsidiary of Van Kampen Investments. Van Kampen Investments is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, PO Box 5555, Oakbrook
Terrace, Illinois 60181-5555.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its
assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to average daily net assets of the
Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- ------------------------------------------------------
<S> <C> <C> <C>
First $350 million 0.575 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>
Applying this fee schedule, the Fund paid the Adviser an advisory fee at the
effective rate of 0.45% of the Fund's average net assets for the Fund's fiscal
year ended August 31, 1998.
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. Other operating expenses
paid by the Fund include service fees, distribution fees, custodial fees, legal
and accounting fees, the costs of reports and proxies to shareholders, trustees'
fees (other than those who are affiliated persons of the Adviser, Distributor or
Van Kampen Investments) and all other business expenses not specifically assumed
by the Adviser.
From time to time, the Adviser or the Distributor may voluntarily undertake to
reduce the Fund's expenses by reducing the fees payable to them or reducing
other expenses of the Fund in accordance with such limitations as the Adviser or
Distributor may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.").
PERSONAL INVESTMENT POLICIES. The Fund 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 of Ethics permit directors, trustees,
officers and employees to buy and sell securities for their personal accounts
subject to certain restrictions. Persons with access to certain sensitive
information are subject to pre-clearance and other procedures designed to
prevent conflicts of interest.
PORTFOLIO MANAGEMENT. The Fund is managed by 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 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.
9
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<PAGE> 11
PURCHASE OF SHARES
GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.
Initial investments must be at least $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.
Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares bear the sales charge expenses at the time of redemption and any
expenses (including higher distribution fees and transfer agency costs)
resulting from such deferred sales charge arrangement, (ii) generally, each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan (described below) 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 price of the Fund's shares is based upon the Fund's net asset value per
share. The net asset values per share of the Class A Shares, Class B Shares and
Class C Shares are generally expected to be substantially the same. In certain
circumstances, however, the per share net asset values of the classes of shares
may differ from one another, reflecting the daily expense accruals of the higher
distribution fees and transfer agency costs applicable to the Class B Shares and
Class C Shares and the differential in the dividends that may be paid on each
class of shares.
The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading. Net asset value per share for each class is determined by dividing
the value of the Fund's portfolio securities, cash and other assets (including
accrued interest) attributable to such class, less all liabilities (including
accrued expenses) attributable to such class, by the total number of shares of
the class outstanding. Such computation is made by using prices as of the close
of trading on the Exchange and (i) valuing securities listed or traded on a
national securities exchange at the last reported sale price, or if there has
been no sale that day, at the mean between the last reported bid and asked
prices, (ii) valuing over-the-counter securities at the mean between the bid and
asked prices available from the National Association of Securities Dealers
Automated Quotations ("NASDAQ") and (iii) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser using methods determined by the
Fund's Trustees. Short-term securities are valued in the manner described in the
notes to the financial statements included in the Statement of Additional
Information.
The Fund has adopted a distribution plan (the "Distribution Plan") with respect
to each class of its shares pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended (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 pay
distribution fees in connection with the sale and distribution of its shares and
service fees in connection with the provision of ongoing services to
shareholders of each class.
The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. The net income attributable to a class of shares and the
dividends payable on such class of shares will be reduced by the amount of the
distribution fees and other expenses associated with such class of shares. To
assist investors in comparing classes of shares, the tables under the heading
"Fees and Expenses of the Fund" provide a summary of sales charges and expenses
and an example of the sales charges and expenses applicable to each class of
shares.
The shares are offered to the public on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza, PO
Box 5555,
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<PAGE> 12
Oakbrook Terrace, Illinois 60181-5555. 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"). "Dealers" and
"brokers" are sometimes referred to herein as "authorized dealers."
Shares may be purchased on any business day by completing the application
accompanying this prospectus and forwarding the application, directly or through
an authorized dealer, to the Fund's shareholder service agent, Van Kampen
Investor Services Inc. ("Investor Services"), a wholly owned subsidiary of Van
Kampen Investments. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A Shares, Class B Shares or Class C Shares.
Sales personnel of authorized dealers distributing the Fund's shares are
entitled to receive compensation for selling such shares and may receive
differing compensation for selling Class A Shares, Class B Shares or Class C
Shares.
The price paid for shares purchased is based on the next calculation of net
asset value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such day. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the day of the next computed net asset value per share provided
they are received by Investor Services prior to Investor Services' close of
business on such day. It is the responsibility of authorized dealers to transmit
orders received by them to Investor Services so they will be received in a
timely manner. Orders of less than $500 generally are mailed by the authorized
dealer and processed at the offering price next calculated after receipt by
Investor Services.
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.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gains
distributions, unless the investor instructs the Fund otherwise. Investors
wishing to receive cash instead of additional shares should contact the Fund at
(800) 341-2911 or by writing to the Fund, c/o Van Kampen Investors Services
Inc., PO Box 418256, Kansas City, MO 64141-9256.
CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 5.75% of the offering price (or 6.10% of the net amount
invested), reduced on investments of $50,000 or more as follows:
CLASS A SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
As % of As % of
Size of Offering Net Amount
Investment Price Invested
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10%
..........................................................
$50,000 but less than
$100,000 4.75% 4.99%
..........................................................
$100,000 but less than
$250,000 3.75% 3.90%
..........................................................
$250,000 but less than
$500,000 2.75% 2.83%
..........................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
..........................................................
$1,000,000 or more * *
..........................................................
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1.00% on certain redemptions made within one year of
the purchase. The contingent deferred sales charge is assessed on an amount
equal to the lesser of the then current market value or the cost of the shares
being redeemed. Accordingly, no sales charge is imposed on increases in net
asset value above the initial purchase price.
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.
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<PAGE> 13
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
deferred sales charge if redeemed within five years of purchase as shown in the
table as follows:
CLASS B SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
as a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------------------------------
<S> <C> <C> <C>
First 5.00%
................................................
Second 4.00%
................................................
Third 3.00%
................................................
Fourth 2.50%
................................................
Fifth 1.50%
................................................
Sixth and After None
................................................
</TABLE>
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital 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 contingent deferred sales charge, 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 purchase of shares, all
payments during a month are aggregated and deemed to have been made on the last
day of the month.
In determining whether a contingent deferred sales charge 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 contingent deferred sales
charge and then of shares held the longest in the shareholder's account.
The Fund may spend up to 0.75% per year of the average daily net assets
attributable to the Class B Shares of the Fund pursuant to the Distribution
Plan. In addition, the Fund may spend up to 0.25% per year of the Fund's average
daily net assets attributable to the Class B Shares pursuant to the Service Plan
in connection with the ongoing provision of services to holders of such shares
by the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
deferred sales charge of 1.00% of the dollar amount subject to charge if
redeemed within one year of purchase.
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gains distributions.
It is presently the policy of the Distributor not to accept any order for Class
C Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
In determining whether a contingent deferred sales charge 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 contingent deferred sales
charge and then of shares held the longest in the shareholder's account.
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. 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.
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
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<PAGE> 14
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 such shares were purchased. Such conversion
will be on the basis of the relative net asset values per share, without the
imposition of any sales load, fee or other charge. The conversion schedule
applicable to a share of the Fund acquired through the exchange privilege from
another Van Kampen fund is determined by reference to the Van Kampen fund from
which such share was originally purchased.
The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the federal income tax law and (ii) the
conversion of shares does not constitute a taxable event under federal income
tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) in
connection with required minimum distributions from an individual retirement
account ("IRA") or certain other retirement plan distributions, (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 involuntarily
liquidate a shareholder's account as described under the heading "Redemption of
Shares." The contingent deferred sales charge 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. For a
more complete description of contingent deferred sales charge waivers, please
refer to the Statement of Additional Information or contact your authorized
dealer.
QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced sales charges. Investors, or their authorized
dealers, must notify the Fund at the time of the purchase order whenever a
quantity discount is applicable to purchases. Upon such notification, an
investor will 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 Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
VOLUME DISCOUNTS. The size of investment shown in the Class A Shares sales
charge table applies to the total dollar amount being invested by any person in
shares of the Fund, or in any combination of shares of the Fund and shares of
other Participating Funds, although other Participating Funds may have different
sales charges.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds which have been previously purchased and are
still owned.
LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the Class A Shares sales
charge table. The
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<PAGE> 15
size of investment shown in the Class A Shares sales charge table includes
purchases of shares of the Participating Funds over a 13-month period based on
the total amount of intended purchases plus the value of all shares of the
Participating Funds previously purchased and still owned. An investor may elect
to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
The initial purchase must be for an amount equal to at least 5% of the minimum
total purchase amount of the level selected. If trades not initially made under
a Letter of Intent subsequently qualify for a lower sales charge through the
90-day back-dating provisions, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower charge. Such adjustment in
sales charge will be used to purchase additional shares for the shareholder at
the applicable discount category. The Fund initially will escrow shares totaling
5% of the dollar amount of the Letter of Intent to be held by Investor Services
in the name of the shareholder. In the event the Letter of Intent goal is not
achieved within the period, the investor must pay the difference between the
sales charge applicable to the purchases made and the sales charges previously
paid. Such payments may be made directly to the Distributor or, if not paid, the
Distributor will liquidate sufficient escrowed shares to obtain the difference.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced initial sales charges in
connection with the unit investment trust reinvestment program and purchases by
registered representatives of selling firms or purchases by persons affiliated
with the Fund or the Distributor. The Fund reserves the right to modify or
terminate these arrangements at any time.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value per share and with no minimum initial or
subsequent investment requirement, if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The total sales charge for all other
investments made from unit 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 quarterly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, upon written assurance that the purchase is made for investment
purposes and that the shares will not be resold except through redemption by the
Fund, by:
(1) Current or retired trustees or directors of funds advised by Asset
Management or Advisory Corp. and such persons' families and their beneficial
accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser, and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives, of financial institutions that have a selling group
agreement with the Distributor and their spouses and children
14
-
<PAGE> 16
under 21 years of age when purchasing for any accounts they beneficially
own, or, in the case of any such financial institution, when purchasing for
retirement plans for such institution's employees; provided that such
purchases are otherwise permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which purchases are made an amount up to 0.50% of the amount invested, over
a 12-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund families through broker-dealer retirement plan
alliance programs that have entered into agreements with the Distributor and
which are subject to certain minimum size and operational requirements.
Trustees and other fiduciaries should refer to the Statement of Additional
Information for further details with respect to such alliance programs.
(6) Beneficial owners of shares of Participating Funds held by a retirement plan
or held in a tax-advantaged retirement account who purchase shares of the
Fund with proceeds from distributions from such a plan or retirement account
other than distributions taken to correct an excess contribution.
(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by non-profit organizations
defined under Section 501(c)(3) of the Code and assets held by an employer
or trustee in connection with an eligible deferred compensation plan under
Section 457 of the Code. Such plans will qualify for purchases at net asset
value provided, for plans initially establishing accounts with the
Distributor in the Participating Funds after 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 institution, policy holders
of an insurance company, customers of a bank or broker-dealer, clients of an
investment adviser or other similar groups. Shares purchased in each group's
participants account in connection with this privilege will be subject to a
contingent deferred sales charge of 1.00% in the event of redemption within
one year of purchase,
15
-
<PAGE> 17
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 described 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.
REDEMPTION OF
SHARES
Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the heading "Purchase of Shares," redemptions of Class B Shares
and Class C Shares may be subject to a contingent deferred sales charge. In
addition, certain redemptions of Class A Shares for shareholder accounts of $1
million or more may be subject to a contingent deferred sales charge.
Redemptions completed through an authorized dealer or a custodian of a
retirement plan account may involve additional fees charged by the dealer or
custodian.
Except as specified below under "Telephone Redemptions Requests," payment for
shares redeemed generally 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. Such payment may, under certain
circumstances, be paid wholly or in part by a distribution-in-kind of portfolio
securities. If the shares to be redeemed have been recently purchased by check,
Investor Services may delay the redemption 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.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 418256, Kansas City, MO 64141-9256. The request for redemption
should indicate the number of shares to be redeemed, the class designation of
such shares and the shareholder's account number. The redemption request must be
signed by all persons in whose names the shares are registered. Signatures must
conform exactly to the account registration. If the proceeds of the redemption
exceed $50,000, or if the proceeds are not to be paid to the record owner at the
record address, or if the record address has changed within the previous 30
days, signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. In the case of shareholders holding
certificates, the certificates for the shares being redeemed properly endorsed
for transfer 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. Contact the IRA custodian for further information.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is
16
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<PAGE> 18
the net asset value per share next determined after the request in proper form
is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. Orders sent through authorized dealers
must be at least $500 (unless transmitted by your authorized dealer via the
FUNDSERV network). The redemption price for such shares is the net asset value
per share next calculated after an order in proper form is received by an
authorized dealer provided such order is transmitted to the Distributor prior to
the Distributor's close of business on such day. It is the responsibility of
authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time. Redemptions completed
through an authorized dealer may involve additional fees charged by the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this prospectus or call the Fund at (800) 341-2911
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. Van Kampen Investments, Investor Services and the Fund employ
procedures considered by them to be reasonable to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring certain
personal identification information prior to acting upon telephone instructions,
tape recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
neither Van Kampen Investments, Investor Services nor the Fund will be liable
for following telephone instructions which it reasonably believes to be genuine.
Telephone redemptions may not be available if the shareholder cannot reach
Investor Services by telephone, whether because all telephone lines are busy or
for any other reason; in such case, a shareholder would have to use the Fund's
other redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for all
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account with a
value on the date of the notice of redemption less than the minimum initial
investment as specified in this prospectus. At least 60 days advance written
notice of any such involuntary redemption will be given and the shareholder will
be given an opportunity to purchase the required value of additional shares at
the next determined net asset value without sales charge. Any involuntary
redemption may only occur if the shareholder account is less than the minimum
initial investment due to shareholder redemptions.
DISTRIBUTIONS FROM THE FUND
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions. Investors will be entitled to begin receiving
dividends on their shares on the business day after Investor Services receives
payment for such shares. However, shares become entitled to dividends on the day
Investor Services receives payment for the shares either through a fed wire or
NSCC settlement. Shares remain entitled to dividends through the day such shares
are processed for payment on redemption.
17
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<PAGE> 19
DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of income. Substantially all of this income, less
expenses, is distributed at least annually as dividends to shareholders.
Dividends are automatically applied to purchase additional shares of the Fund at
the next determined net asset value unless the shareholder instructs otherwise.
The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
CAPITAL 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 purchase prices. Net realized capital gains represent the total
profit from sales of securities minus total losses from sales of securities
including losses carried forward from prior years. The Fund distributes any
taxable net realized capital gains to shareholders at least annually. 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.
SHAREHOLDER SERVICES
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Statement of Additional Information or contact your
authorized dealer.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gains
distribution. Unless the shareholder instructs otherwise, the reinvestment plan
is automatic. This instruction may be made by telephone by calling (800)
341-2911 ((800) 421-2833 for the hearing impaired) or by writing to Investor
Services. The investor may, on the 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 pre-determined amounts in the Fund. Additional
information is available from the Distributor or your authorized dealer.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are in a non-escrow status may
appoint Investor Services as agent by completing the Authorization for
Redemption by Check form and the appropriate section of the application and
returning the form and the application to Investor Services. Once the form is
properly completed, signed and returned to the agent, a supply of checks drawn
on State Street Bank and Trust Company (the "Bank") will be sent to the Class A
shareholder. These checks may be made payable by the Class A shareholder to the
order of any person in any amount of $100 or more.
When a check is presented to the Bank for payment, full and fractional Class A
Shares required to cover the amount of the check are redeemed from the
shareholder's Class A account by Investor Services at the next determined net
asset value per share. Check writing redemptions represent the sale of Class A
Shares. Any gain or loss realized on the sale of shares is a taxable event.
Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A account, the check will
be returned and the shareholder may be subject to additional charges. A Class A
shareholder may not liquidate the entire account by means of a check. The check
writing privilege may be terminated or suspended at any time by the Fund or the
Bank. Retirement plans and accounts that are subject to backup withholding are
not eligible for the privilege.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any
18
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<PAGE> 20
Participating Fund based on the next computed net asset value per share of each
fund after requesting the exchange without any sales charge, subject to certain
limitations. Shares of the Fund may be exchanged for shares of any Participating
Fund only if shares of that Participating Fund are available for sale; however,
during periods of suspension of sales, shares of a Participating Fund may be
available for sale only to existing shareholders of a Participating Fund.
Shareholders seeking an exchange into a Participating Fund should obtain and
read the current prospectus for such fund.
When Class B Shares and Class C Shares are exchanged among Participating Funds,
the holding period for purposes of computing the contingent deferred sales
charge is based upon the date of the initial purchase of such shares from a
Participating Fund. If such Class B Shares or Class C Shares are redeemed and
not exchanged for shares of another Participating Fund, Class B Shares and Class
C Shares are subject to the contingent deferred sales charge schedule imposed by
the Participating Fund from which such shares were originally purchased.
Exchanges of shares are sales 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 the prospectus. Van
Kampen Investments and its subsidiaries, including Investor Services, and the
Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Van Kampen Investments, Investor Services nor
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gains options (except dividend
diversification) and authorized dealer of record as the account from which
shares are exchanged, unless otherwise specified by the shareholder. In order to
establish a systematic withdrawal plan for the new account or reinvest dividends
from the new account into another fund, however, an exchanging shareholder must
submit a specific request. The Fund reserves the right to reject any order to
acquire its shares through exchange. In addition, the Fund may modify, restrict
or terminate the exchange privilege at any time on 60 days' notice to its
shareholders of any termination or material amendment.
For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of his securities, the security upon
which the highest sales charge rate was previously paid is deemed exchanged
first.
Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
A prospectus of any of these Participating 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.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.vankampen.com for further instruction. Van Kampen Investments, Investor
Services and the Fund employ procedures considered
19
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<PAGE> 21
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 Van Kampen Investments, Investor
Services 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.
FEDERAL INCOME TAXATION
Distributions of the Fund's net investment income (consisting generally of
taxable income and net short-term capital gains) 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 (which are the excess of net long-term capital gains over net
short-term capital losses), if any, are taxable to shareholders as long-term
capital gains, whether paid in cash or reinvested in additional shares, and
regardless of how long the shares of the Fund have been held by such
shareholders. Such capital gain dividends may be taxed at different rates
depending on how long the Fund held the securities. While the Fund's investment
objective is to seek capital appreciation, the Fund expects that its
distributions will consist of ordinary income and capital gain dividends.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming such
shares are held as a capital asset). Although distributions generally are
treated as taxable in the year they are paid, distributions declared in October,
November or December, payable to shareholders of record on a specified date in
such month and paid during January of the following year will be treated as
having been distributed by the Fund and received by the shareholders on the
December 31st prior to the date of payment. The Fund will inform shareholders of
the source and tax status of all distributions promptly after the close of each
calendar year.
The sale or exchange of shares is a taxable transaction for federal income tax
purposes. Shareholders that sell their shares will generally recognize gain or
loss in an amount equal to the difference between their adjusted tax basis in
the shares and the amount received. If such shares are held as a capital asset,
the gain or loss will be a capital gain or loss. Any capital gains may be taxed
at different rates depending on how long the shareholder held it shares.
The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to United States withholding tax on certain distributions (whether
received in cash or in shares) at a rate of 30% or such lower rate as prescribed
by an applicable treaty. Prospective foreign investors should consult their
United States tax advisers concerning the tax consequences to them of an
investment in shares.
The Fund intends to qualify as a regulated investment company under the federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its net investment income, the Fund will not be
required to pay federal income taxes on any income it distributed to
shareholders. If the Fund distributes less than 98% of its ordinary income or
less than 98% of its capital gain net income, then the Fund will be subject to a
4% excise tax on such undistributed amounts.
The federal income tax discussion above is for general information only.
Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding, exchanging or selling
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
20
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<PAGE> 22
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the Statement of Additional Information and may be obtained by
shareholders without charge by calling the telephone number on the back cover of
this prospectus. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
Year Ended August 31, Year Ended August 31,
1998(a) 1997 1996(a) 1995(a) 1994 1998(a) 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $40.844 $34.347 $31.59 $24.37 $26.46 $38.769 $32.938
-------- -------- -------- -------- ------ -------- --------
Net Investment
Income/Loss............... (.212) (.127) (.096) .05 (.11) (.515) (.270)
Net Realized and Unrealized
Gain/Loss................. (.750) 8.177 6.043 7.79 (.32) (.681) 7.674
-------- -------- -------- -------- ------ -------- --------
Total from Investment
Operations.................. (.962) 8.050 5.947 7.84 (.43) (1.196) 7.404
Less Distributions from Net
Realized Gain............... 3.753 1.553 3.190 .62 1.66 3.753 1.553
-------- -------- -------- -------- ------ -------- --------
Net Asset Value, End of the
Period...................... $36.129 $40.844 $34.347 $31.59 $24.37 $33.840 $38.789
======== ======== ======== ======== ====== ======== ========
Total Return(b)............... (2.19%) 24.44% 20.54% 33.11% (1.67%) (2.98%) 23.51%
Net Assets at End of the
Period (In millions)........ $1,990.8 $1,970.7 $1,438.5 $1,029.2 $677.1 $1,357.6 $1,220.4
Ratio of Expenses to Average
Net Assets(c)............... 1.00% 1.05% 1.10% 1.14% 1.18% 1.79% 1.85%
Ratio of Net Investment
Income/Loss to Average Net
Assets(c)................... (.50%) (.30%) (.29%) .19% (.30%) (1.29%) (1.10%)
Portfolio Turnover............ 103% 92% 91% 101% 64% 103% 92%
<CAPTION>
Class B Shares Class C Shares
Year Ended August 31,
1996(a) 1995(a) 1994 1998(a) 1997 1996(a) 1995(a) 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $30.65 $23.86 $26.14 $39.351 $33.384 $31.02 $24.14 $26.42
------- ------ ------ ------- ------- ------- ------ ------
Net Investment
Income/Loss............... (.349) (.16) (.27) (.523) (.273) (.354) (.16) (.25)
Net Realized and Unrealized
Gain/Loss................. 5.827 7.57 (.35) (.684) 7.793 5.908 7.66 (.37)
------- ------ ------ ------- ------- ------- ------ ------
Total from Investment
Operations.................. 5.478 7.41 (.62) (1.207) 7.520 5.554 7.50 (.62)
Less Distributions from Net
Realized Gain............... 3.190 .62 1.66 3.753 1.553 3.190 .62 1.66
------- ------ ------ ------- ------- ------- ------ ------
Net Asset Value, End of the
Period...................... $32.938 $30.65 $23.86 $34.391 $39.351 $33.384 $31.02 $24.14
======= ====== ====== ======= ======= ======= ====== ======
Total Return(b)............... 19.61% 32.01% (2.46%) (2.96%) 23.56% 19.60% 32.01% (2.46%)
Net Assets at End of the
Period (In millions)........ $757.3 $450.5 $252.9 $164.7 $139.9 $82.4 $41.8 $24.5
Ratio of Expenses to Average
Net Assets(c)............... 1.90% 1.97% 2.01% 1.79% 1.85% 1.89% 1.96% 2.02%
Ratio of Net Investment
Income/Loss to Average Net
Assets(c)................... (1.10%) (.64%) (1.07%) (1.29%) (1.10%) (1.10%) (.63%) (1.04%)
Portfolio Turnover............ 91% 101% 64% 103% 92% 91% 101% 64%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, 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%.
21
<PAGE> 23
FOR MORE INFORMATION
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or redemptions, call
the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
FUND INFO(R)
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com
VAN KAMPEN EMERGING GROWTH FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Emerging Growth Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO 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
PRICEWATERHOUSECOOPERS LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 24
VAN KAMPEN
EMERGING GROWTH FUND
PROSPECTUS
DECEMBER 29, 1998
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.
You will find additional information about the
Fund in its annual and semiannual reports,
which explain the market conditions and
investment strategies affecting the Fund's
recent performance.
You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.
Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC Public
Reference Room in Washington, DC or online at
the SEC's web site (http://www.sec.gov). For
more information, please call the SEC at (800)
SEC-0330. You can also request these materials
by writing the Public Reference Section of the
SEC, Washington DC, 20549-6009, and paying a
duplication fee.
[VAN KAMPEN FUNDS LOGO]
Investment Company Act File No.
811-2424.
EMG PRO 12/98
<PAGE> 25
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN
EMERGING GROWTH FUND
Van Kampen Emerging Growth Fund is a mutual fund with an investment
objective of capital appreciation. The Fund's management seeks to achieve the
investment objective by investing primarily in a portfolio of common stocks of
small and medium sized companies considered by the Fund's management to be
emerging growth companies.
The Fund is organized as a diversified series of Van Kampen Emerging Growth
Fund, an open-end, management investment company (the "Trust").
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's prospectus (the "Prospectus") dated as of the same date as this Statement
of Additional Information. This Statement of Additional Information does not
include all the information that a prospective investor should consider before
purchasing shares of the Fund. Investors should obtain and read the Prospectus
prior to purchasing shares of the Fund. A Prospectus may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911.
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective and Policies........................... B-4
Options, Futures Contracts and Related Options.............. B-6
Investment Restrictions..................................... B-12
Trustees and Officers....................................... B-15
Investment Advisory Agreement............................... B-25
Distribution and Service.................................... B-26
Transfer Agent.............................................. B-30
Portfolio Transactions and Brokerage Allocation............. B-30
Shareholder Services........................................ B-32
Redemption of Shares........................................ B-34
Contingent Deferred Sales Charge-Class A.................... B-35
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-35
Taxation.................................................... B-37
Fund Performance............................................ B-42
Other Information........................................... B-45
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-13
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED DECEMBER 29, 1998.
<PAGE> 26
GENERAL INFORMATION
The Fund was originally incorporated in Delaware on January 23, 1969 under
the name American Capital Venture Fund, Inc. The Fund was reincorporated by
merger into a Maryland corporation on September 19, 1973 under the same name. On
July 24, 1990 the Fund changed its name from American Capital Venture Fund, Inc.
to American Capital Emerging Growth Fund, Inc. As of August 5, 1995, the Fund
was reorganized under the name Van Kampen American Capital Emerging Growth Fund
as a series of the Trust. The Trust is organized as a business trust under the
laws of the State of Delaware. On July 14, 1998, the Fund and the Trust adopted
their present names.
Van Kampen Asset Management Inc. (the "Adviser" or "Asset Management"), Van
Kampen Funds Inc. (the "Distributor"), and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The principal office of the Fund, the Adviser,
the Distributor and Van Kampen Investments is located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555.
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 securities lending.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
The Fund currently offers 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 provisions of the Declaration of Trust. Each
class of shares of the Fund 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. Shares of the Trust entitle their holders
to one vote per share; however, separate votes are taken by each series on
matters affecting an individual series and separate votes are taken by each
class of a series on matters affecting an individual class of such series. For
example, a change in investment policy for a series would be voted upon by
shareholders of only the series involved and a change in the distribution fee
for a class of a series would be voted upon by
B-2
<PAGE> 27
shareholders of only the class of such series involved. Except as otherwise
described in the Prospectus or herein, shares do not have cumulative voting
rights, preemptive rights or any conversion, subscription or exchange rights.
The 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, as amended (the "1940 Act"), or rules or regulations promulgated by
the Securities and Exchange Commission ("SEC").
In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be lower than to holders of
Class A Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
present at a meeting of shareholders (or such higher vote as may be required by
the 1940 Act or other applicable law) and except that the Trustees cannot amend
the Declaration of Trust to impose any liability on shareholders, make any
assessment on shares or impose liabilities on the Trustees without approval from
each affected shareholder or Trustee, as the case may be.
Statements contained in this Statements of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
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<PAGE> 28
As of December 3, 1998, no person was known by the Fund to own beneficially
or to hold of record 5% or more of the outstanding Class A Shares, Class B
Shares or Class C Shares of the Fund, except as follows:
<TABLE>
<CAPTION>
Amount of
Ownership at
December 3, Class Percentage
Name and Address of Holder 1998 of Shares Ownership
-------------------------- --------------- --------- ----------
<S> <C> <C> <C>
Van Kampen Trust Company..................... 16,197,506.02 A 28.87%
2800 Post Oak Blvd. 13,535,459.11 B 32.13%
Houston, TX 77056 377,914.55 C 7.45%
Merrill Lynch Pierce Fenner & Smith Inc...... 5,071,522.62 C 11.88%
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
Citibank, N.A. Trustee....................... 56,110,985.93 A 6.20%
Travelers, Inc. 401(K) Savings Plan
Attn: Nancy Kronenberg
111 Wall Street
Floor 14
New York, NY 10043-1000
</TABLE>
- ------------------------------------
Van Kampen Trust Company acts as custodian for certain employee benefit
plans
and independent retirement accounts.
INVESTMENT OBJECTIVE AND POLICIES
The following disclosures supplement disclosures set forth under the same
caption in the Prospectus and do not, standing alone, present a complete or
accurate explanation of the matters disclosed. Readers must refer also to this
caption in the Prospectus for a complete presentation of the matters disclosed
below.
The following investment techniques, subject to the Investment Restrictions
below, may be employed by the Fund. These techniques inherently involve the
assumption of a higher degree of risk than normal and the possibility of more
volatile price fluctuations. Investment in the Fund should not be viewed as a
complete investment program and prospective investors are advised to give full
consideration to the risks inherent in the investment techniques used by the
Fund.
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. It is the current policy of the Fund not to invest at the time of
purchase more than 25% of its assets in securities subject to repurchase
agreements. Repurchase agreements involve certain risks in the event of default
B-4
<PAGE> 29
by the other party. The Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by the Adviser under guidelines
approved by the Trustees. The Fund will not invest in repurchase agreements
maturing in more than seven days if any such investment, together with any other
illiquid securities held by the Fund, would exceed the Fund's limitation on
illiquid securities described below. In the event of the bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible lack of access to
income on the underlying security during this period; and (c) expenses of
enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
Repurchase agreements are fully collateralized by the underlying debt
securities and are considered to be loans under the 1940 Act. The Fund pays for
such securities only upon physical delivery or evidence of book entry transfer
to the account of a custodian or bank acting as agent. The seller under a
repurchase agreement will be required to maintain the value of the underlying
securities marked-to-market daily at not less than the repurchase price. The
underlying securities (normally securities of the U.S. Government, or its
agencies and instrumentalities) may have maturity dates exceeding one year. The
Fund does not bear the risk of a decline in value of the underlying security
unless the seller defaults under its repurchase obligation.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year. The
turnover rate may vary greatly from year to year as well as within a year. The
Fund's portfolio turnover rate (the lesser of the value of the securities
purchased or securities sold divided by the average value of the securities held
in the Fund's portfolio excluding all securities whose maturities at acquisition
were one year or less) is shown in the table of "Financial Highlights" in the
Prospectus. A high portfolio turnover rate (100% or more) increases the Fund's
transaction costs, including brokerage commissions, and may result in the
realization of more short-term capital gains than if the Fund had a lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Adviser deems portfolio changes appropriate.
B-5
<PAGE> 30
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities,
which includes repurchase agreements which have a maturity of longer than seven
days and generally includes securities that are restricted from sale to the
public without registration under the Securities Act of 1933, as amended (the
"1933 Act"). Restricted securities are often purchased at a discount from the
market price of unrestricted securities of the same issuer reflecting the fact
that such securities may not be readily marketable without some time delay.
Investments in securities which have no ready market are valued at fair value as
determined in good faith by the Adviser in accordance with procedures approved
by the Fund's Trustees. Ordinarily, the Fund would invest in restricted
securities only when it receives the issuer's commitment to register the
securities without expense to the Fund. However, registration and underwriting
expenses (which may range from 7% to 15% of the gross proceeds of the securities
sold) may be paid by the Fund. Restricted securities which can be offered and
sold to qualified institutional buyers under Rule 144A under the 1933 Act ("144A
Securities") and are determined to be liquid under guidelines adopted by and
subject to the supervision of the Fund's Board of Trustees are not subject to
the limitation on illiquid securities. Such 144A Securities are subject to
monitoring and may become illiquid to the extent qualified institutional buyers
become, for a time, uninterested in purchasing such securities. Factors used to
determine whether 144A Securities are liquid include, among other things, a
security's trading history, the availability of reliable pricing information,
the number of dealers making quotes or making a market in such security and the
number of potential purchasers in the market for such security. For purposes
hereof, investments by the Fund in securities of other investment companies will
not be considered investments in restricted securities to the extent permitted
by (i) the 1940 Act, (ii) the rules and regulations promulgated by the SEC under
the 1940 Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act.
WARRANTS
Warrants are in effect longer-term call options. They give the holder the
right to purchase a given number of shares of a particular company at specified
prices within certain periods of time. The purchaser of a warrant expects that
the market price of the security will exceed the purchase price of the warrant
plus the exercise price of the warrant, thus giving him a profit. Of course,
since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young, unseasoned companies. The purchase price of a
warrant varies with the exercise price of the warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS
SELLING CALL AND PUT OPTIONS
Purpose. The principal reason for selling options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities
B-6
<PAGE> 31
alone. Such current return could be expected to fluctuate because premiums
earned from an option selling program and dividend or interest income yields on
portfolio securities vary as economic and market conditions change. Selling
options on portfolio securities is likely to result in a higher portfolio
turnover rate.
Selling Options. The purchaser of a call option pays a premium to the
seller (i.e., the writer) for the right to buy the underlying security from the
seller at a specified price during a certain period. The Fund would write call
options only on a covered basis or for cross-hedging purposes. A call option is
covered if, at all times during the option period, the Fund would own or have
the right to acquire securities of the type that it would be obligated to
deliver if any outstanding option were exercised. An option is for cross-hedging
purposes if it is not covered by the security subject to the option, but is
designed to provide a hedge against another security which the Fund owns or has
the right to acquire. In such circumstances, the Fund collateralizes the option
by maintaining in a segregated account with the Fund's custodian cash or liquid
securities in an amount not less than the market value of the underlying
security, marked to market daily, while the option is outstanding.
The purchaser of a put option pays a premium to the seller (i.e., the
writer) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would sell put options only on
a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its custodian cash or liquid
securities in an amount of not less than the exercise price of the option, or
would hold a put on the same underlying security at an equal or greater exercise
price.
Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a writer of a call or put option, the Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously sold by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is less (greater) than the premium it received on the sale of the
option. The Fund would also realize a gain if an option it has written lapses
unexercised.
The Fund could sell options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. The
Fund could close out its position as a seller of an option only if a liquid
secondary market exists for options of that series, but there is no assurance
that such a market will exist, particularly in the case of over-the-counter
options, since they can be closed out only with the other party to the
transaction. Alternatively, the Fund could purchase an offsetting option, which
would not close out its position as a seller, but would provide an asset of
equal value to its obligation under the option sold. If the Fund is not able to
enter into a closing purchase transaction or to purchase an offsetting option
with respect to an option it has sold, it will be required to maintain the
securities subject to the call or the collateral securing the option until a
closing purchase transaction can be entered into (or the option is exercised or
expires) even though it might not be advantageous to do so.
Risks of Writing Options. By selling a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by
B-7
<PAGE> 32
selling a put option the Fund might become obligated to purchase the underlying
security at an exercise price that exceeds the then current market price.
PURCHASING CALL AND PUT OPTIONS
The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire.
Alternatively, call options could be purchased for capital appreciation. Since
the premium paid for a call option is typically a small fraction of the price of
the underlying security, a given amount of funds will purchase call options
covering a much larger quantity of such security than could be purchased
directly. By purchasing call options, the Fund could benefit from any
significant increase in the price of the underlying security to a greater extent
than had it invested the same amount in the security directly. However, because
of the very high volatility of option premiums, the Fund would bear a
significant risk of losing the entire premium if the price of the underlying
security did not rise sufficiently, or if it did not do so before the option
expired.
Put options may be purchased to protect (i.e., hedge) against anticipated
declines in the market value of either specific portfolio securities or of the
Fund's assets generally. Alternatively, put options may be purchased for capital
appreciation in anticipation of a price decline in the underlying security and a
corresponding increase in the value of the put option. The purchase of put
options for capital appreciation involves the same significant risk of loss as
described above for call options.
In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.
OPTIONS ON STOCK INDICES
Options on stock indices are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash which amount will depend upon the closing
level of the stock index upon which the option is based being greater than (in
the case of a call) or less than (in the case of a put) the exercise price of
the option. The amount of cash received will be the difference between the
closing price of the index and the exercise price of the option, multiplied by a
specified dollar multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount.
Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indices are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on several exchanges.
Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the
B-8
<PAGE> 33
Fund may offset its position in stock index options prior to expiration by
entering into a closing transaction on an exchange, or it may let the option
expire unexercised.
FUTURES CONTRACTS
The Fund may engage in transactions involving futures contracts and related
options in accordance with the rules and interpretations of the Commodity
Futures Trading Commission ("CFTC") under which the Fund would be exempt from
registration as a "commodity pool."
A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of an amount of cash equal to a specified dollar
amount multiplied by the difference between the stock index value at a specified
time and the price at which the futures contract originally was struck. No
physical delivery of the underlying stocks in the index is made.
Currently, stock index futures contracts can be purchased with respect to
several indices on various exchanges. Differences in the stocks included in the
indices may result in differences in correlation of the futures contracts with
movements in the value of the securities being hedged.
An interest rate futures contract is an agreement pursuant to which a party
agrees to take or make delivery of a specified debt security (such as U.S.
Treasury bonds or notes) at a specified future time and at a specified price.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its custodian in an
account in the broker's name an amount of cash or liquid securities equal to a
percentage (which will normally range between 2% and 10%) of the contract
amount. This amount is known as initial margin. The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transaction. Rather, the initial margin is in the nature
of a performance bond or good faith deposit on the contract, which is returned
to the Fund upon termination of the futures contract and satisfaction of its
contractual obligations. Subsequent payments to and from the broker, called
variation margin, are made on a daily basis as the price of the underlying
securities or index fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as marking to market.
For example, when the Fund purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund receives from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund purchases a futures contract and
the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the
B-9
<PAGE> 34
advance at a time when the Fund is otherwise fully invested ("anticipatory
hedge"). Such purchase of a futures contract would serve as a temporary
substitute for the purchase of individual securities, which may be purchased in
an orderly fashion once the market has stabilized. As individual securities are
purchased, an equivalent amount of futures contracts could be terminated by
offsetting sales. The Fund may sell futures contracts in anticipation of or in a
general market or market sector decline that may adversely affect the market
value of the Fund's securities ("defensive hedge"). To the extent that the
Fund's portfolio of securities changes in value in correlation with the
underlying security or index, the sale of futures contracts would substantially
reduce the risk to the Fund of a market decline and, by so doing, provides an
alternative to the liquidation of securities positions in the Fund. Ordinarily
commissions on futures transactions are lower than transaction costs incurred in
the purchase and sale of securities.
The Fund also may invest in foreign stock index futures traded outside the
United States which involve additional risks including fluctuations in foreign
exchange rates, foreign currency exchange controls, political and economic
instability, differences in financial reporting and securities regulation and
trading, and foreign taxation issues.
Special Risks Associated with Futures Transactions. There are several risks
connected with the use of futures contracts as a hedging device. These include
the risk of imperfect correlation between movements in the price of the futures
contracts and of the underlying securities, the risk of market distortion, the
illiquidity risk and the risk of error in anticipating price movement.
There may be an imperfect correlation (or no correlation) between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for the imperfect correlation, the Fund could buy or sell futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the securities being hedged is greater than the
historical volatility of the securities underlying the futures contract.
Conversely, the Fund could buy or sell futures contracts in a lesser dollar
amount than the dollar amount of securities being hedged if the historical
volatility of the securities being hedged is less than the historical volatility
of the securities underlying the futures contracts. It is also possible that the
value of futures contracts held by the Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.
There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities or index underlying the
futures contract due to certain market distortions. First, all participants in
the futures market are subject to margin depository and maintenance
requirements. Rather than meet additional margin depository requirements,
investors may close futures contracts through offsetting transactions, which
could distort the normal relationship between the futures market and the
securities or index underlying the futures contract. Second, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions. Due to the possibility of price distortion in the futures markets
and because of the imperfect correlation between movements in
B-10
<PAGE> 35
futures contracts and movements in the securities underlying them, a correct
forecast of general market trends by the Adviser may still not result in a
successful hedging transaction.
There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in a futures contract and thus provide an offset to
losses on the futures contract.
The Fund will not enter into futures contracts or options transactions
(except for closing transactions) other than for bona fide hedging purposes if,
immediately thereafter, the sum of its initial margin and premiums on open
futures contracts and options exceed 5% of the fair market value of the Fund's
assets; however, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In order to prevent leverage in connection with the purchase of
futures contracts by the Fund, an amount of cash or liquid securities equal to
the market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the custodian.
B-11
<PAGE> 36
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purposes as, the sale of a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts is intended to serve the same purpose as the actual purchase
of the futures contracts.
Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Adviser will not purchase
options on futures on any exchange unless in the Adviser's opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances, such as when
there is no movement in the price of the underlying security or index, when the
use of an option on a future would result in a loss to the Fund when the use of
a future would not.
ADDITIONAL RISKS OF OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
TRANSACTIONS
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written on
one or more accounts or through one or more brokers). Option positions of all
investment companies advised by the Adviser are combined for purposes of these
limits. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which may not be changed without approval by the vote of a majority of its
outstanding voting securities which is defined by the 1940 Act as the lesser of
(i) 67% or more of the voting
B-12
<PAGE> 37
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy;
or (ii) more than 50% of the Fund's outstanding voting securities. The
percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities. These restrictions provide
that the Fund shall not:
1. Invest in companies for the purpose of exercising control over or
management of such companies, except that the Fund may purchase
securities of other investment companies to the extent permitted by (i)
the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions
of the 1940 Act;
2. Underwrite securities of other issuers, except that the Fund may
acquire restricted securities and other securities which, if sold,
might make the Fund an underwriter for purposes of the Securities Act
of 1933. No more than 10% of the value of the Fund's net assets may be
invested in such securities;
3. Invest directly in real estate interests of any nature, although the
Fund may invest indirectly through media such as real estate investment
trusts;
4. Invest in commodities or commodity contracts, except that the Fund may
enter into transactions in futures contracts or related options;
5. Issue any of its securities for (a) services or (b) property other than
cash or securities (including securities of which the Fund is the
issuer), except as a dividend or distribution to its shareholders in
connection with a reorganization;
6. Issue senior securities and shall not borrow money except from banks as
a temporary measure for extraordinary or emergency purposes and in an
amount not exceeding 5% of the Fund's total assets. Notwithstanding the
foregoing, the Fund may enter into transactions in options, futures
contracts and related options and may make margin deposits and payments
in connection therewith;
7. Lend money or securities except by the purchase of a portion of an
issue of bonds, debentures or other obligations of types commonly
distributed to institutional investors publicly or privately (in the
latter case the investment will be subject to the stated limits on
investments in "restricted securities"), and except by the purchase of
securities subject to repurchase agreements;
8. Invest more than 25% of the value of its assets in any one industry;
9. Invest in securities issued by other investment companies except as
part of a merger, reorganization or other acquisition and except to the
extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940
Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act;
10. Sell short or borrow for short sales. Short sales "against the box" are
not subject to this limitation; or
11. As to 75% of the Fund's total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer (not including
federal government securities) or acquire more than 10% of any class of
the outstanding voting securities of any one issuer, except that the
Fund may purchase securities of other investment companies to the
extent permitted by (i) the 1940 Act, as amended
B-13
<PAGE> 38
from time to time, (ii) the rules and regulations promulgated by the
SEC under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act.
Thus the Fund retains the right to invest up to 25% of the value of its
total assets in one company, but intends to do so only if a particular company
is believed to afford better than average prospects for market appreciation at a
time when general business conditions and trends in the market as a whole are
considered to make greater diversification less desirable. Although the Fund may
invest in real estate investment trusts, it does not presently intend to do so.
B-14
<PAGE> 39
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are
referred to herein collectively as the "Advisers". For purposes hereof, the term
"Fund Complex" includes each of the open-end investment companies advised by the
Advisers (excluding Van Kampen Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to
1632 Morning Mountain Road August 1996, Chairman, Chief Executive
Raleigh, NC 27614 Officer and President, MDT Corporation (now
Date of Birth: 07/14/32 known as Getinge/Castle, Inc., a subsidiary
of Getinge Industrier AB), a company which
develops, manufactures, markets and services
medical and scientific equipment.
Trustee/Director of each of the funds in the
Fund Complex.
Richard M. DeMartini*..................... Chairman and Chief Executive Officer of
Two World Trade Center International Private Client Group, a
66th Floor division of Morgan Stanley Dean Witter & Co.
New York, NY 10048 Chairman of Dean Witter Futures & Currency
Date of Birth: 10/12/52 Management Inc. and Demeter Management
Corporation. Director of Dean Witter Reynolds
Inc. Chairman and Director of Dean Witter
Capital Corporation. Chairman, Chief
Executive Officer, President and a Director
of Dean Witter Alliance Capital Corporation,
Director of the National Healthcare
Resources, Inc., Morgan Stanley Dean Witter
Distributors, Inc., Dean Witter Realty Inc.,
Dean Witter Reynolds Venture Equities Inc.,
DW Window Covering Holding, Inc., and is a
member of the Morgan Stanley Dean Witter
Management Committee. Prior to December of
1998, Mr. DeMartini was President and Chief
Operating Officer of Morgan Stanley Dean
Witter Individual Asset Management and a
Director of Morgan Stanley Dean Witter Trust
FSB. Formerly Vice Chairman of the Board of
the National Association of Securities
Dealers, Inc. and Chairman of the Board of
the Nasdaq Stock Market, Inc. Trustee of the
TCW/DW Funds, Director of the Morgan Stanley
Dean Witter Funds and Trustee/ Director of
each of the funds in the Fund Complex.
</TABLE>
B-15
<PAGE> 40
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Prior to 1997,
233 South Wacker Drive Partner, Ray & Berndtson, Inc., an executive
Suite 7000 recruiting and management consulting firm.
Chicago, IL 60606 Formerly, Executive Vice President of ABN
Date of Birth: 06/03/48 AMRO, N.A., a Dutch bank holding company.
Prior to 1992, Executive Vice President of La
Salle National Bank. Trustee on the
University of Chicago Hospitals Board, Vice
Chair of the Board of The YMCA of
Metropolitan Chicago and a member of the
Women's Board of the University of Chicago.
Prior to 1996, Trustee of The International
House Board. Trustee/Director of each of the
funds in the Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W. of the United States. Formerly, advisor to
Washington, D.C. 20036 the Dennis Trading Group Inc. Prior to 1992,
Date of Birth: 02/29/52 President and Chief Executive Officer,
Director and Member of the Investment
Committee of the Joyce Foundation, a private
foundation. Trustee/Director of each of the
funds in the Fund Complex.
Jack E. Nelson............................ President, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser. President,
Date of Birth: 02/13/36 Nelson Ivest Brokerage Services Inc., a
member of the National Association of
Securities Dealers, Inc. ("NASD") and
Securities Investors Protection Corp.
("SIPC"). Trustee/Director of each of the
funds in the Fund Complex.
Don G. Powell*............................ Chairman and a Director of Van Kampen
2800 Post Oak Blvd. Investments, the Advisers, the Distributor
Houston, TX 77056 and Investor Services. Director or officer of
Date of Birth: 10/19/39 certain other subsidiaries of Van Kampen
Investments. Chairman of River View
International Inc. Chairman of the Board of
Governors and the Executive Committee of the
Investment Company Institute. Prior to July
of 1998, Director and Chairman of VK/AC
Holding, Inc. Prior to November 1996,
President, Chief Executive Officer and a
Director of VK/AC Holding, Inc.
Trustee/Director of each of the funds in the
Fund Complex and Trustee of other funds
advised by the Advisers or Van Kampen
Management Inc.
</TABLE>
B-16
<PAGE> 41
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Phillip B. Rooney......................... Vice Chairman and Director of The
One ServiceMaster Way ServiceMaster Company, a business and
Downers Grove, IL 60515 consumer services company. Director of
Date of Birth: 07/08/44 Illinois Tool Works, Inc., a manufacturing
company and the Urban Shopping Centers Inc.,
a retail mall management company. Trustee,
University of Notre Dame. Prior to 1998,
Director of Stone Smurfit Container Corp., a
paper manufacturing company. Formerly,
President, Chief Executive Officer and Chief
Operating Officer of Waste Management, Inc.,
an environmental services company.
Trustee/Director of each of the funds in the
Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean
155 Hickory Lane of the Graduate School, Stevens Institute of
Closter, NJ 07624 Technology. Director, Dynalysis of Princeton,
Date of Birth: 08/02/24 a firm engaged in engineering research.
Trustee/Director of each of the funds in the
Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex, and
Date of Birth: 08/22/39 other open-end and closed-end funds advised
by the Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the
Fund Complex, and Trustee/Managing General
Partner of other open-end and closed-end
funds advised by the Advisers or Van Kampen
Management Inc.
Paul G. Yovovich.......................... Private investor. Prior to April 1996,
Sears Tower President of Advance Ross Corporation.
233 South Wacker Drive Director of 3Com Corporation, APAC
Suite 9700 Teleservices, Inc., and COMARCO, Inc.
Chicago, IL 60606 Trustee/Director of each of the Funds in the
Date of Birth: 10/29/53 Fund Complex.
</TABLE>
- ------------------------------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. DeMartini and
Powell are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter & Co. or its affiliates.
B-17
<PAGE> 42
OFFICERS
Messrs. McDonnell, Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin,
Wetherell and Hill are located at 1 Parkview Plaza, PO Box 5555, Oakbrook
Terrace, IL 60181-5555. The Fund's other officers are located at 2800 Post Oak
Blvd., Houston, TX 77056.
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Dennis J. McDonnell.................. Executive Vice President and a Director of Van
Date of Birth: 05/20/42 Kampen Investments. President, Chief Operating
President Officer and a Director of the Advisers, Van
Kampen Advisors Inc., and Van Kampen Management
Inc. Prior to July of 1998, Director and
Executive Vice President of VK/AC Holding, Inc.
Prior to April of 1998, President and a Director
of Van Kampen Merritt Equity Advisors Corp. Prior
to April of 1997, Mr. McDonnell was a Director of
Van Kampen Merritt Equity Holdings Corp. Prior to
September of 1996, Mr. McDonnell was Chief
Executive Officer and Director of MCM Group,
Inc., McCarthy, Crisanti & Maffei, Inc. and
Chairman and Director of MCM Asia Pacific
Company, Limited and MCM (Europe) Limited. Prior
to July of 1996, Mr. McDonnell was President,
Chief Operating Officer and Trustee of VSM Inc.
and VCJ Inc. President of each of the funds in
the Fund Complex. President, Chairman of the
Board and Trustee/Managing General Partner of
other investment companies advised by the
Advisers or their affiliates.
Peter W. Hegel....................... Executive Vice President of the Advisers, Van
Date of Birth: 06/25/56 Kampen Management Inc. and Van Kampen Advisors
Vice President Inc. Prior to July of 1996, Mr. Hegel was a
Director of VSM Inc. Prior to September of 1996,
he was a Director of McCarthy, Crisanti & Maffei,
Inc. Vice President of each of the funds in the
Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
John L. Sullivan..................... First Vice President of Van Kampen Investments
Date of Birth: 08/20/55 and the Advisers. Treasurer, Vice President and
Treasurer, Vice President and Chief Chief Financial Officer of each of the funds in
Financial Officer the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Curtis W. Morell..................... Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 President and Chief Accounting Officer of each of
Vice President and Chief Accounting the funds in the Fund Complex and certain other
Officer investment companies advised by the Advisers or
their affiliates.
</TABLE>
B-18
<PAGE> 43
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Ronald A. Nyberg..................... Executive Vice President, General Counsel,
Date of Birth: 07/29/53 Secretary and Director of Van Kampen Investments.
Vice President and Secretary Mr. Nyberg is Executive Vice President, General
Counsel, Assistant Secretary and a Director of
the Advisers and the Distributor, Van Kampen
Advisors Inc., Van Kampen Management Inc., Van
Kampen Exchange Corp., American Capital
Contractual Services, Inc. and Van Kampen Trust
Company. Executive Vice President, General
Counsel and Assistant Secretary of Investor
Services and River View International Inc.
Director or officer of certain other subsidiaries
of Van Kampen Investments. Director of ICI Mutual
Insurance Co., a provider of insurance to members
of the Investment Company Institute. Prior to
July of 1998, Director and Executive Vice
President, General Counsel and Secretary of VK/AC
Holding, Inc. Prior to April of 1998, Executive
Vice President, General Counsel and Director of
Van Kampen Merritt Equity Advisors Corp. Prior to
April of 1997, he was Executive Vice President,
General Counsel and a Director of Van Kampen
Merritt Equity Holdings Corp. Prior to September
of 1996, he was General Counsel of McCarthy,
Crisanti & Maffei, Inc. Prior to July of 1996,
Mr. Nyberg was Executive Vice President and
General Counsel of VSM Inc. and Executive Vice
President and General Counsel of VCJ Inc. Vice
President and Secretary of each of the funds in
the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Paul R. Wolkenberg................... Executive Vice President and Director of Van
Date of Birth: 11/10/44 Kampen Investments. Executive Vice President of
Vice President Asset Management and the Distributor. President
and a Director of Investor Services. President
and Chief Operating Officer of Van Kampen
Recordkeeping Services Inc. Prior to July of
1998, Director and Executive Vice President of
VK/AC Holding, Inc. Vice President of each of the
funds in the Fund Complex and certain other
investment companies advised by the Advisers or
their affiliates.
Edward C. Wood III................... Senior Vice President of the Advisers, Van Kampen
Date of Birth: 01/11/56 Investments and Van Kampen Management Inc. Senior
Vice President Vice President and Chief Operating Officer of the
Distributor. Vice President of each of the funds
in the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
</TABLE>
B-19
<PAGE> 44
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Tanya M. Loden....................... Vice President of Van Kampen Investments and the
Date of Birth: 11/19/59 Advisers. Controller of each of the funds in the
Controller Fund Complex and other investment companies
advised by the Advisers or their affiliates.
Nicholas Dalmaso..................... Associate General Counsel and Assistant Secretary
Date of Birth: 03/01/65 of Van Kampen Investments. Vice President,
Assistant Secretary Associate General Counsel and Assistant Secretary
of the Advisers, the Distributor, Van Kampen
Advisors Inc. and Van Kampen Management Inc.
Assistant Secretary of each of the funds in the
Fund Complex and other investment companies
advised by the Advisers or their affiliates.
Huey P. Falgout, Jr.................. Vice President, Assistant Secretary and Senior
Date of Birth: 11/15/63 Attorney of Van Kampen Investments. Vice
Assistant Secretary President, Assistant Secretary and Senior
Attorney of the Advisers, the Distributor,
Investor Services, Van Kampen Management Inc.,
American Capital Contractual Services, Inc., Van
Kampen Exchange Corp. and Van Kampen Advisors
Inc. Assistant Secretary of each of the funds in
the Fund Complex and other investment companies
advised by the Advisers or their affiliates.
Scott E. Martin...................... Senior Vice President, Deputy General Counsel and
Date of Birth: 08/20/56 Assistant Secretary of Van Kampen Investments.
Assistant Secretary Senior Vice President, Deputy General Counsel and
Secretary of the Advisers, the Distributor,
Investor Services, American Capital Contractual
Services, Inc., Van Kampen Management Inc., Van
Kampen Exchange Corp., Van Kampen Advisors Inc.,
Van Kampen Insurance Agency of Illinois Inc., Van
Kampen System Inc. and Van Kampen Recordkeeping
Services Inc. Prior to July of 1998, Senior Vice
President, Deputy General Counsel and Assistant
Secretary of VK/AC Holding, Inc. Prior to April
of 1998, Van Kampen Merritt Equity Advisors Corp.
Prior to April of 1997, Senior Vice President,
Deputy General Counsel and Secretary of Van
Kampen American Capital Services, Inc. and Van
Kampen Merritt Holdings Corp. Prior to September
of 1996, Mr. Martin was Deputy General Counsel
and Secretary of McCarthy, Crisanti & Maffei,
Inc., and prior to July of 1996, he was Senior
Vice President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc. Assistant
Secretary of each of the funds in the Fund
Complex and other investment companies advised by
the Advisers or their affiliates.
</TABLE>
B-20
<PAGE> 45
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Weston B. Wetherell.................. Vice President, Associate General Counsel and
Date of Birth: 06/15/56 Assistant Secretary of Van Kampen Investments,
Assistant Secretary the Advisers, the Distributor, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
Prior to September of 1996, Mr. Wetherell was
Assistant Secretary of McCarthy, Crisanti &
Maffei, Inc. Assistant Secretary of each of the
funds in the Fund Complex and other investment
companies advised by the Advisers or their
affiliates.
Steven M. Hill....................... Vice President of Van Kampen Investments and the
Date of Birth: 10/16/64 Advisers. Assistant Treasurer of each of the
Assistant Treasurer funds in the Fund Complex and other investment
companies advised by the Advisers or their
affiliates.
Michael Robert Sullivan.............. Assistant Vice President of the Advisers.
Date of Birth: 03/30/33 Assistant Controller of each of the funds in the
Assistant Controller Fund Complex and other investment companies
advised by the Advisers or their affiliates.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 65 operating funds in the Fund Complex. For purposes of the following
compensation and benefits discussion, the Fund Complex is divided into the
following three groups: the funds advised by Asset Management (the "AC Funds"),
the funds advised by Advisory Corp. excluding funds organized as series of the
Van Kampen Series Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Van Kampen Series Fund, Inc. (the "MS Funds").
Each trustee/director who is not an affiliated person of Van Kampen Investments,
the Advisers or the Distributor (each a "Non-Affiliated Trustee") is compensated
by an annual retainer and meeting fees for services to the funds in the Fund
Complex. Each fund in the Fund Complex (except the money market series of the MS
Funds) provides a deferred compensation plan to its Non-Affiliated Trustees that
allows trustees/directors to defer receipt of their compensation and earn a
return on such deferred amounts. Deferring compensation has the economic effect
as if the Non-Affiliated Trustee reinvested his or her compensation into the
funds. Each fund in the Fund Complex (except the money market series of the MS
Funds) provides a retirement plan to its Non-Affiliated Trustees that provides
Non-Affiliated Trustees with compensation after retirement, provided that
certain eligibility requirements are met as more fully described below.
The trustees recently reviewed and adopted a standardized compensation and
benefits program for each fund in the Fund Complex. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes an annual retainer in
an amount equal to $50,000 per calendar year, due in four quarterly installments
on the first business day of each quarter. Payment of the annual retainer is
allocated among the funds in the Fund Complex (except the money market series of
the MS Funds) on the basis of the relative net assets of each fund as of the
last business day of the preceding calendar quarter. Effective
B-21
<PAGE> 46
January 1, 1998, the compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex (except the money market series
of the MS Funds) in the amount of $200 per quarterly or special meeting attended
by the Non-Affiliated Trustee, due on the date of the meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.
For each AC Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from the AC
Funds includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting
fee in the amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.
For each VK Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from each VK
Fund includes an annual retainer in an amount equal to $2,500 per calendar year,
due in four quarterly installments on the first business day of each calendar
quarter. Each Non-Affiliated Trustee receives a per meeting fee from each VK
Fund in the amount of $125 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee
from each VK Fund in the amount of $125 per special meeting attended by the Non-
Affiliated Trustee, due on the date of such meeting, plus reasonable expenses
incurred by the Non-Affiliated Trustee in connection with his or her services as
a trustee, provided that no compensation will be paid in connection with certain
telephonic special meetings.
For the period from July 2, 1997 up to and including December 31, 1997, the
compensation of each Non-Affiliated Trustee from the MS Funds was based
generally on the compensation amounts and methodology used by such funds prior
to their joining the current Fund Complex on July 2, 1997. Each trustee/director
was elected as a director of the MS Funds on July 2, 1997. Prior to July 2,
1997, the MS Funds were part of another fund complex (the "Prior Complex") and
the former directors of the MS Funds were paid an aggregate fee allocated among
the funds in the Prior Complex that resulted in individual directors receiving
total compensation between approximately $8,000 to $10,000 from the MS Funds
during such funds' last fiscal year.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated
B-22
<PAGE> 47
Trustee until retirement. Amounts deferred are retained by the Fund and earn a
rate of return determined by reference to the return on the common shares of
such Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such Non-Affiliated
Trustee had invested in one or more funds in the Fund Complex. To the extent
permitted by the 1940 Act, the Fund may invest in securities of those funds
selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Year First Compensation Benefits Benefits from before
Appointed or before Accrued as the Fund Deferral from
Elected to Deferral from Part of Upon Fund
Name(1) the Board the Fund(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1991 $6,269 $35,691 $60,000 $111,197
Linda Hutton Heagy* 1995 6,069 3,861 60,000 111,197
R. Craig Kennedy* 1995 6,269 2,652 60,000 111,197
Jack E. Nelson* 1995 6,269 18,385 60,000 104,322
Jerome L. Robinson 1995 800 10,810 15,750 107,947
Phillip B. Rooney* 1997 6,269 6,002 60,000 74,697
Dr. Fernando Sisto* 1978 6,269 68,615 60,000 111,197
Wayne W. Whalen* 1995 6,269 12,658 60,000 111,197
</TABLE>
- ------------------------------------
* Currently a member of the Board of Trustees.
(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Mr. Robinson retired from the Board of
Trustees on December 31, 1997. Mr. Yovovich joined the Board of Trustees on
October 22, 1998
B-23
<PAGE> 48
and therefore has no historical information to report in the table. Trustees not
eligible for compensation are not included in the compensation table.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended August 31, 1998. The
following trustees deferred compensation from the Fund during the fiscal
year ended August 31, 1998: Mr. Branagan, $6,269; Ms. Heagy, $6,069; Mr.
Kennedy, $3,135; Mr. Nelson, $6,269; Mr. Robinson, $800; Mr. Rooney, $6,269;
Dr. Sisto, $3,135; and Mr. Whalen, $6,269. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to either the
return on the common shares of the Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each Fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation. The cumulative
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from the Fund as of August 31, 1998 is
as follows: Mr. Branagan, $9,247; Dr. Caruso, $8,681; Mr. Gaughan, $812; Ms.
Heagy, $12,668; Mr. Kennedy, $7,040; Mr. Miller, $4,465; Mr. Nelson,
$13,369; Mr. Rees, $36,006; Mr. Robinson, $8,002; Mr. Rooney, $6,260; Dr.
Sisto, $31,682; Mr. Vernon, $3,427; and Mr. Whalen, $13,361. The deferred
compensation plan is described above the Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for each of the trustees for the Funds' respective fiscal years
ended in 1998. The retirement plan is described above the Compensation
Table.
(4) For Mr. Robinson, this is the sum of the actual annual benefits payable by
the operating investment companies in the Fund Complex as of the date of his
retirement for each year of the 10-year period since his retirement. For the
remaining trustees, this is the sum of the estimated maximum annual benefits
payable by the operating investment companies in the Fund Complex for each
year of the 10-year period commencing in the year of such trustee's
anticipated retirement. The Retirement Plan is described above the
Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all operating investment companies in the Fund Complex as of December 31,
1997 before deferral by the trustees under the deferred compensation plan.
Because the funds in the Fund Complex have different fiscal year ends, the
amounts shown in this column are presented on a calendar year basis. Certain
trustees deferred all or a portion of their aggregate compensation from the
Fund Complex during the calendar year ended December 31, 1997. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
Advisers and their affiliates also serve as investment adviser for other
investment companies; however, with the exception of Mr. Whalen, the
Non-Affiliated Trustees were not trustees of such investment companies.
Combining the Fund Complex with other investment companies
B-24
<PAGE> 49
advised by the Advisers and their affiliates, Mr. Whalen received Total
Compensation of $268,447 during the calendar year ended December 31, 1997.
As of December 3, 1998, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate and
implement the Fund's investment objectives. The Adviser also furnishes the
services of the Fund's President and such other executive and clerical personnel
as are necessary to prepare the various reports and statements and conduct the
Fund's day-to-day operations. The Fund, however, bears the cost of its
accounting services, which include maintaining its financial books and records
and calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of the Fund's Treasurer and the
personnel operating under his direction. Charges are allocated among the
investment companies advised or subadvised by the Adviser or its affiliates. A
portion of these amounts is paid to the Adviser or its affiliates in
reimbursement of personnel, office space, facilities and equipment costs
attributable to the provision of accounting services to the Fund. The Fund also
pays distribution fees, service fees, custodian fees, legal and auditing fees,
the costs of reports to shareholders, and all other ordinary business expenses
not specifically assumed by the Adviser. The Advisory Agreement also provides
that the Adviser shall not be liable to the Fund for any actions or omissions if
it acted without willful misfeasance, bad faith, negligence or reckless
disregard of its obligations.
Under the Advisory Agreement, the Fund pays to the Adviser, as compensation
for the services rendered, facilities furnished, and expenses paid by it, a
monthly fee payable computed based upon an annual rate applied to the average
daily net assets of the Fund as follows: 0.575% on the first $350 million of
average net assets; 0.525% on the next $350 million of average net assets;
0.475% on the next $350 million of average net assets; and 0.425% on the net
assets over $1.05 billion.
The Fund's average net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month. The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any other direct or indirect majority owned subsidiary of Van Kampen
Investments in connection with the purchase and sale of portfolio investments
less any direct expenses incurred by such subsidiary of Van Kampen Investments,
in connection with obtaining such commissions, fees, brokerage or similar
payments. The Adviser agrees to use its best efforts to recapture tender
solicitation fees and exchange offer fees for the Fund's benefit and to advise
the Trustees of the Fund of any other commissions, fees, brokerage or similar
payments which may be possible for the Adviser or any other direct or indirect
majority owned subsidiary of Van Kampen
B-25
<PAGE> 50
Investments to receive in connection with the Fund's portfolio transactions or
other arrangements which may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed the most restrictive
expense limitation applicable in the states where the Fund's shares are
qualified for sale, the compensation due the Adviser will be reduced by the
amount of such excess and that, if a reduction in and refund of the advisory fee
is insufficient, the Adviser will pay the Fund monthly an amount sufficient to
make up the deficiency, subject to readjustment during the year. Ordinary
business expenses include the investment advisory fee and other operating costs
paid by the Fund except (1) interest and taxes, (2) brokerage commissions, (3)
certain litigation and indemnification expenses as described in the Advisory
Agreement and (4) payments made by the Fund pursuant to the distribution plans.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.
During the fiscal years ended August 31, 1996, 1997 and 1998, the Adviser
received $9,143,675, $12,830,014 and $17,650,513, respectively, in advisory fees
from the Fund. For such periods the Fund paid $280,512, $359,930 and $761,115,
respectively, for accounting services.
DISTRIBUTION AND SERVICE
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's
Trustees or (ii) by vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of Trustees who are not
parties to the Distribution and Service Agreement or interested persons of any
party, by votes cast in person at a meeting called for such purpose. The
Distribution and Service Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on 90 days'
written notice. Total underwriting
B-26
<PAGE> 51
commissions on the sale of shares of the Fund for the last three fiscal periods
are shown in the chart below. Advantage Capital Corporation is a former
affiliated dealer of the Fund.
<TABLE>
<CAPTION>
Dealer
Reallowances
Received by
Total Amounts Advantage
Underwriting Retained by Capital
Commissions Distributor Corporation
------------ ----------- ------------
<S> <C> <C> <C>
Fiscal Year Ended August 31, 1998......... 10,514,502 1,579,902 N/A
Fiscal Year Ended August 31, 1997......... 9,199,563 1,405,408 N/A
Fiscal Year Ended August 31, 1996......... 9,865,878 960,905 348,110
</TABLE>
With respect to sales of Class A Shares of the Fund, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:
CLASS A SHARES SALES CHARGE TABLE
<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 or more.......................... * * *
- ------------------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1.00% on redemptions made within one year of the
purchase. A commission or transaction fee will certain be paid by the
Distributor at the time of purchase directly out of the Distributor's assets
(and not out of the Fund's assets) to authorized dealers who initiate and are
responsible for purchases of $1 million or more computed based on a percentage
of the dollar value of such shares sold as follows: 1.00% on sales to $2
million, plus 0.80% on the next $1 million and 0.50% on the excess over $3
million.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.
Proceeds from any deferred sales charge and any distribution fees on Class
B Shares and Class C Shares of the Fund are paid to the Distributor and are used
by the Distributor to defray its distribution related expenses in connection
with the sale of the Fund's shares, such as the payment to authorized dealers
for selling such shares. With respect to Class C Shares, the authorized dealers
generally are paid the ongoing commission and transaction
B-27
<PAGE> 52
fees of up to 0.75% of the average daily net assets of the Fund's Class C Shares
annually commencing in the second year after purchase.
In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
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 for meetings or seminars
of a business nature. In some instances additional compensation or promotional
incentives may be offered to brokers, dealers or financial intermediaries that
have sold or may sell significant amounts of shares during specified periods of
time. The Distributor may provide additional compensation to Edward D. Jones &
Co. or an affiliate thereof based on a combination of its 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.
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 interpretations of federal law expressed herein, and banks and other
financial institutions may be required to register as dealers pursuant to
certain state laws.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through an agreement (the "Distribution and Service Agreement") with the
Distributor of each class of the Fund's shares, sub-agreements between the
Distributor and members of the NASD who are acting as securities dealers and
NASD members or eligible non-members who are acting as brokers or agents and
similar agreements between the Fund and financial intermediaries
B-28
<PAGE> 53
who are acting as brokers (collectively, "Selling Agreements") that may provide
for their customers or clients certain services or assistance, which may
include, but not be limited to, processing purchase and redemption transactions,
establishing and maintaining shareholder accounts regarding the Fund, and such
other services as may be agreed to from time to time and as may be permitted by
applicable statute, rule or regulation. Brokers, dealers and financial
intermediaries that have entered into sub-agreements with the Distributor and
sell shares of the Fund are referred to herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
The Plans generally provide for the Fund to reimburse the lesser of (i) the
distribution and service fees at the rates specified in the prospectus or (ii)
the amount of the Distributor's actual expenses incurred less any deferred sales
charges it received. For Class A Shares, to the extent the Distributor is not
fully reimbursed in a given year, there is no carryover of such unreimbursed
amounts to succeeding years. For each of the Class B Shares and Class C Shares,
to the extent the Distributor is not fully reimbursed in a given year, any
unreimbursed expenses for such class will be carried forward and paid by the
Fund in future years so long as such Plans are 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 of 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, 1998, there were $50,291,821 and $1,712,607 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 3.70% and 1.04% of the Fund's net assets attributable
to Class B Shares and Class C Shares, respectively. If the Plan were 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 deferred sales charge.
For the fiscal year ended August 31, 1998, the Fund's aggregate expenses
under the Plans for Class A Shares were $4,639,893 or 0.22% of the Class A
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for payments made to
B-29
<PAGE> 54
financial intermediaries for servicing Fund shareholders and for administering
the Plans. For the fiscal year ended August 31, 1998, the Fund's aggregate
expenses under the Class B Plan were $14,112,296 or 1.00% of the Class B Shares'
average net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $10,679,276 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class B Shares of the Fund and
$3,433,020 for fees paid to financial intermediaries for servicing Class B
shareholders and administering the Plans. For the fiscal year ended August 31,
1998, the Fund's aggregate expenses under the Plans for Class C Shares were
$1,675,769 or 1.00% of the Class C Shares' average net assets. Such expenses
were paid to reimburse the Distributor for the following payments; $750,413 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class C Shares of the Fund and $925,356 for fees paid to financial
intermediaries for servicing Class C shareholders and administering the Class C
Plan.
The Distributor has entered into agreements with (i) The Prudential
Insurance Company of America ("Prudential") under which the Fund shall be
offered pursuant to the PruArray Programs; (ii) Smith Barney Inc. ("Smith
Barney") under which the Fund shall be offered pursuant to the MultiChoice
Program; and (iii) Merrill Lynch ("Merrill") under which the Fund shall be
offered pursuant to the Merrill Program. Trustees and other fiduciaries of
retirement plans seeking to invest in multiple fund families through
broker-dealer retirement plan alliance programs should contact Prudential, Smith
Barney or Merrill for further information concerning the PruArray, MultiChoice
and Merrill Programs including, but not limited to, minimum size and operational
requirements.
TRANSFER AGENT
The Fund's transfer agent is Van Kampen Investor Services Inc., PO Box
418256, Kansas City, MO 64141-9256. During the fiscal years ending August 31,
1996, 1997 and 1998, Investor Services received fees aggregating $5,238,180,
$6,379,297 and $8,453,842, respectively for these services. Prior to 1998, these
services were provided at cost plus a profit. Beginning in 1998, the transfer
agency prices are determined through negotiations with the Fund's Board of
Trustees and are based on competitive benchmarks.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Trustees of the Fund.
The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker/dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more
B-30
<PAGE> 55
than one firm can offer comparable execution services. In selecting among such
firms, consideration may be given to those firms which supply research and other
services in addition to execution services. The Adviser is authorized to pay
higher commissions to brokerage firms that provide it with investment and
research information than to firms which do not provide such services if the
Adviser determines that such commissions are reasonable in relation to the
overall services provided. No specific value can be assigned to such research
services which are furnished without cost to the Adviser. Since statistical and
other research information is only supplementary to the research efforts of the
Adviser to the Fund and still must be analyzed and reviewed by its staff, the
receipt of research information is not expected to reduce its expenses
materially. The investment advisory fee is not reduced as a result of the
Adviser's receipt of such research services. Services provided may include (a)
furnishing advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (c) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement and custody). Research services furnished by firms through
which the Fund effects its securities transactions may be used by the Adviser in
servicing all of its advisory accounts; not all of such services may be used by
the Adviser in connection with the Fund. The Adviser also may place portfolio
transactions, to the extent permitted by law, with brokerage firms affiliated
with the Fund, the Adviser or the Distributor and with brokerage firms
participating in the distribution of the Fund's shares if it reasonably believes
that the quality of execution and the commission are comparable to that
available from other qualified firms. Similarly, to the extent permitted by law
and subject to the same considerations on quality of execution and comparable
commission rates, the Adviser may direct an executing broker to pay a portion or
all of any commissions, concessions or discounts to a firm supplying research or
other services or to a firm participating in the distribution of the Fund's
shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.
Effective October 31, 1996, Morgan Stanley Group Inc. ("Morgan Stanley")
became an affiliate of the Adviser. Effective May 31, 1997, Dean Witter Discover
& Co. ("Dean Witter") became an affiliate of the Adviser. The Trustees have
adopted certain policies incorporating the standards of Rule 17e-1 issued by the
SEC under the 1940 Act which requires that the commissions paid to affiliates of
the Fund must be reasonable and fair compared to the commissions, fees or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities during a comparable period
of time. The rule and procedures also contain review requirements
B-31
<PAGE> 56
and require the Adviser to furnish reports to the Trustees and to maintain
records in connection with such reviews. After consideration of all factors
deemed relevant, the Trustees will consider from time to time whether the
advisory fee for the Fund will be reduced by all or a portion of the brokerage
commission given to affiliated brokers.
The Fund paid the following commissions to all brokers and affiliated
brokers during the periods shown:
Commissions Paid:
<TABLE>
<CAPTION>
Affiliated Brokers
----------------------
All Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Commissions paid:
Fiscal year 1996............................ $2,543,118 N/A N/A
Fiscal year 1997............................ $3,352,010 $32,244 $ --
Fiscal year 1998............................ $5,315,617 $ -- $ --
Fiscal year 1998 Percentages:
Commissions with affiliate to total
commissions............................ -- --
Value of brokerage transactions with
affiliate to total transactions........ -- --
</TABLE>
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
INVESTMENT ACCOUNT
Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
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 shareholders
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
B-32
<PAGE> 57
such certificates upon redemption thereof. In addition, if such certificates are
lost the shareholder must write to Van Kampen Funds, c/o Investor Services, PO
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.
RETIREMENT PLANS
Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and 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 the Prospectus or by calling (800)
341-2911 ((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 per
share as of the payable date of the distribution.
B-33
<PAGE> 58
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.
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 contingent deferred sales charge. Initial account balance
means the amount of the shareholder's investment at the time the election to
participate in the plan is made.
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 plans are reinvested in additional shares
at the next determined net asset value per share. 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. The Fund reserves the right to amend or terminate
the systematic withdrawal program on 30 days' notice to its shareholders.
REINSTATEMENT PRIVILEGE
A Class A shareholder or Class B shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of the Fund. A Class C shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C Shares of the Fund with credit given for any contingent deferred sales
charge paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge) next determined after the order is
received, which must be within 180 days after the date of the redemption.
Reinstatement at net asset value per share is also offered to participants in
those eligible retirement plans held or administered by Van Kampen Trust Company
for repayment of principal (and interest) on their borrowings on such plans.
REDEMPTION OF SHARES
Redemptions are not made on days during which the Exchange is closed. The
right of redemption may be suspended and the payment therefor may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably
B-34
<PAGE> 59
practicable or it is not reasonably practicable for the Fund to fairly determine
the value of its net assets; or (d) the SEC, by order, so permits.
Additionally, if the Board of Trustees determines that payment wholly or
partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. Shareholders may
incur brokerage charges upon the sale of portfolio securities so received in
payment of redemptions.
CONTINGENT DEFERRED SALES CHARGE-CLASS A ("CDSC-CLASS A")
For purposes of the CDSC-Class A, when shares of one fund are exchanged for
shares of another fund, the purchase date for the shares of the fund exchanged
into will be assumed to be the date on which shares were purchased in the fund
from which the exchange was made. If the exchanged shares themselves are
acquired through an exchange, the purchase date is assumed to carry over from
the date of the original election to purchase shares subject to a CDSC-Class A
rather than a front-end load sales charge. In determining whether a CDSC-Class A
is payable, it is assumed that shares held the longest are the first to be
redeemed.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC-CLASS B
AND C")
As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge. The CDSC-Class B and C is waived on redemptions of Class B Shares and
Class C Shares in the circumstances described below:
REDEMPTION UPON DEATH OR DISABILITY
The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Code, which in pertinent part
defines a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of death or disability before it determines to
waive the CDSC-Class B and C.
In cases of death or disability, the CDSC-Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC-Class B and C applies to a total or partial redemption,
but only to redemptions of shares held at the time of the death or initial
determination of disability.
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REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS
The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The charge will be waived upon the tax-free rollover or transfer of
assets to another retirement plan invested in one or more Participating Funds;
in such event, as described below, the Fund will "tack" the period for which the
original shares were held on to the holding period of the shares acquired in the
transfer or rollover for purposes of determining what, if any, CDSC-Class B and
C is applicable in the event that such acquired shares are redeemed following
the transfer or rollover. The charge also will be waived on any redemption which
results from the return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code, the return of excess deferral amounts pursuant to Code
Section 401(k)(8) or 402(g)(2), or from the death or disability of the employee
(see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the charge will be
waived on any minimum distribution required to be distributed in accordance with
Code Section 401(a)(9).
The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.
REDEMPTION PURSUANT TO A FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be specified by the shareholder upon his or her
election to participate in the Plan. The CDSC-Class B and C will be waived on
redemptions made under the Plan.
The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from the Fund without the imposition of a CDSC-Class B
and C may not exceed a maximum of 12% annually of the shareholder's initial
account balance. The Fund reserves the right to change the terms and conditions
of the Plan and the ability to offer the Plan.
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC-Class B and C upon
such involuntary redemption.
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REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder who has redeemed Class C Shares of a Fund may reinvest at net
asset value, with credit for any CDSC-Class C paid on the redeemed shares, any
portion or all of his or her redemption proceeds (plus that amount necessary to
acquire a fractional share to round off his or her purchase to the nearest full
share) in Class C Shares of the Fund, provided that the reinvestment is effected
within 180 days after such redemption and the shareholder has not previously
exercised this reinvestment privilege with respect to Class C Shares of the
Fund. Shares acquired in this manner will be deemed to have the original cost
and purchase date of the redeemed shares for purposes of applying the CDSC-Class
C to subsequent redemptions.
REDEMPTION BY ADVISER
The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
TAXATION
FEDERAL INCOME TAXATION
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the source of
its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including 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 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. 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
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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.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
PASSIVE FOREIGN INVESTMENT COMPANIES. 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: (i) at least
75% of its gross income is passive income or (ii) 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 on (i) a portion of any "excess
distribution" received on such stock or (ii) any gain from a sale or disposition
of such stock (collectively, "PFIC income"), plus interest on such amounts, even
if the regulated investment company distributes the PFIC income as a taxable
dividend to its shareholders. 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 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 to satisfy the 90%
distribution requirement and the distribution requirement for avoiding income
and excise taxes. In most instances it will be very difficult to make this
election due to certain requirements imposed with respect to the election.
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As an alternative to making the above-described election to treat the PFIC
as a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (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 dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election 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.
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 gain 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 gain dividends), see "Capital Gains Rates" below. Tax-exempt
shareholders not subject to federal income tax on their income generally will
not be taxed on distributions from the Fund.
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. Fund distributions
generally will not qualify for the dividends received deduction for
corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such
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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.
SALE OF SHARES
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) will be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
and the amount received. If such shares are held as a capital asset, the gain or
loss will be a capital gain or loss. For a summary of the tax rates applicable
to capital gains, see "Capital Gains Rates" below. Any loss recognized upon a
taxable disposition of shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends received with
respect to such shares. For purposes of determining whether shares have been
held for six months or less, the holding period is suspended for any periods
during which the shareholder's risk of loss is diminished as a result of holding
one or more other positions in substantially similar or related property or
through certain options or short sales.
CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers is (i) the same as the maximum
ordinary income tax rate for capital assets held for one year or less or (ii)
20% for capital assets held for more than one year. A special 28% tax rate may
apply to a portion of the capital gain dividends paid by the Fund with respect
to its taxable year ended August 31, 1998. The maximum long-term capital gains
rate for corporations is 35%.
Non-U.S. Shareholders. A shareholder who is not (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized
under the laws of the United States or any state thereof, (iii) an estate, the
income of which is subject to United States federal income taxation regardless
of its source or (iv) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
fiduciaries who have the authority to control all substantial decisions of the
trust (a "Non-U.S. Shareholder") generally will be subject to withholding
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of United States federal income tax at a 30% rate (or lower applicable treaty
rate) on dividends from the Fund (other than capital gain dividends) that are
not "effectively connected" with a United States trade or business carried on by
such shareholder. Accordingly, investment in the Fund is likely to be
appropriate for a Non-U.S. Shareholder only if such person can utilize a foreign
tax credit or corresponding tax benefit in respect of such United States
withholding tax.
Non-effectively connected capital gain dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) a Non-U.S.
Shareholder that is not present in the United States for more than 182 days
during the taxable year (assuming that certain other conditions are met).
However, certain Non-U.S. Shareholders may nonetheless be subject to backup
withholding on capital gain dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.
If income from the Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
at the tax rates applicable to United States citizens or domestic corporations.
Non-U.S. Shareholders that are corporations may also be subject to an additional
"branch profits tax" with respect to income from the Fund that is effectively
connected with a United States trade or business.
The United States Treasury Department recently issued Treasury regulations
generally effective for payments made after December 31, 1999 concerning the
withholding of tax and reporting for certain amounts paid to nonresident alien
individuals and foreign corporations (the "Final Withholding Regulations").
Among other things, the Final Withholding Regulations may require Non-U.S.
Shareholders to furnish new certification of their foreign status after December
31, 1999. Prospective investors should consult their tax advisors concerning the
applicability and effect of the Final Withholding Regulations on an investment
in shares.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their tax advisers with respect to the
tax implications of purchasing, holding and disposing of shares.
Backup Withholding. The Fund may be required to withhold federal income tax
at a rate of 31% ("backup withholding") from dividends and redemption proceeds
paid to non-corporate shareholders. This tax may be withheld from dividends if
(i) the shareholder fails to furnish the Fund with its correct taxpayer
identification number, (ii) the IRS notifies the Fund that the shareholder has
failed to properly report certain interest and dividend income to the IRS and to
respond to notices to that effect or (iii) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above.
The Fund must report annually to the IRS and to each Non-U.S. Shareholder
the amount of dividends paid to such shareholder and the amount, if any, of tax
withheld pursuant to backup withholding rules with respect to such dividends.
This information may
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also be made available to the tax authorities in the Non-U.S. Shareholder's
country of residence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a Shareholder may be refunded or
credited against such shareholder's United States federal income tax liability,
if any, provided that the required information is furnished to the IRS.
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.
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
contingent deferred sales charge has been paid. The Fund's total return will
vary depending on market conditions, the securities comprising the Fund's
portfolio, the Fund's operating expenses and unrealized net capital gains or
losses during the period. Since Class A Shares of the Fund were offered at a
maximum sales charge of 8.50% prior to June 12, 1989, actual Fund total return
would have been somewhat less than that computed on the basis of the current
maximum sales charge. Total return is based on historical earnings and asset
value fluctuations and is not intended to indicate future performance. No
adjustments are made to reflect any income taxes payable by shareholders on
dividends and 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.
The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative non-standardized total return is calculated by measuring the value of
an initial investment in a given class of shares of the Fund at a given time,
deducting the maximum initial sales charge, if any, determining the value of all
subsequent reinvested distributions, and dividing
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the net change in the value of the investment as of the end of the period by the
amount of the initial investment and expressing the result as a percentage.
Non-standardized total return will be calculated separately for each class of
shares.
Non-standardized total return calculations do not reflect the imposition of
a contingent deferred sales charge, and if any such contingent deferred sales
charge with respect to the contingent deferred sales charge imposed at the time
of redemption were reflected, it would reduce the performance quoted.
Total return is calculated separately for Class A Shares, Class B Shares
and Class C Shares. Total return figures for Class A Shares include the maximum
sales charge of 5.75%; total return figures for Class B Shares and Class C
Shares include any applicable contingent deferred sales charge. Because of the
differences in sales charges and distribution fees, the total returns for each
class of shares will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.
From time to time marketing materials may provide a portfolio manager
update, an adviser update or discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sectors, ten largest holdings and other Fund asset
structures. Materials may also mention how the Distributor believes the Fund
compares relative to other Van Kampen funds. Materials may also discuss the
Dalbar Financial Services study from 1984 to 1994 which studied investor cash
flow into and out of all types of mutual funds. The ten year study found that
investors who bought mutual fund shares and held such shares outperformed
investors who bought and sold. The Dalbar study conclusions were consistent
regardless of if shareholders purchased their funds in direct or sales force
distribution channels. The study showed that investors working with a
professional representative have tended over time to earn higher returns than
those who invested directly. The Fund will also be marketed on the internet.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, 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
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publications. Such comparative performance information will be stated in the
same terms in which the comparative data or indices are stated. Such
advertisements and sales material may also include a yield quotation as of a
current period. In each case, such total return and yield information, if any,
will be calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce the
Fund's performance. The Fund will include performance data for each class of
shares of the Fund in any advertisement or information including performance
data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations 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 back cover of the Prospectus.
The Fund invests in small and mid-sized companies which the Adviser expects
to have rising earnings estimates, accelerating growth rates in both revenues
and per-share earnings and rising profit margins. Emerging growth funds may be
important components of a diversified portfolio. The Fund seeks to remain fully
invested and diversified across many industries to achieve consistent long-term
performance. From time to time marketing materials may provide a portfolio
manager update, an Adviser update or discuss general economic conditions and
outlooks. The top 10 holdings of the Fund may also be listed in marketing
pieces. Materials may also mention how Van Kampen Investments believes the Fund
compares relative to other Van Kampen funds. Materials may also discuss the
Dalbar Financial Services study form 1984 to 1994 which examined investor cash
flow into and out of all types of mutual funds. The ten year study found the
investors who bought mutual fund shares and held such shares outperformed
investors who bought and sold. The Dalbar study conclusions were consistent
regardless if shareholders purchased their funds in direct or sales force
distribution channels. The study showed that investors working with a
professional representative have tended over time to earn higher returns than
those who invested other than with a professional representative. The Fund may
also be marketed on the internet.
The Fund's average annual total return, assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one year period ended
August 31, 1998 was -7.81%, (ii) the five year period ended August 31, 1998 was
12.60% and (iii) the ten year period ended August 31, 1998 was 18.00%. The
Fund's average annual total return, assuming payment of the maximum sales
charge, for Class B Shares of the Fund for (i) the one year period ended August
31, 1998 was -7.34%, (ii) the five year period ended August 31, 1998 was 12.85%
and (iii) the six year, four month period since April 20, 1992, the commencement
of distribution for Class B Shares of the Fund, through August 31, 1998 was
16.11%. The average annual total return, assuming payment of the maximum sales
charge, for Class C Shares of the Fund for (i) the one year period ended August
31, 1998 was -3.84% (ii) the five year period ended August 31, 1998 was 13.05%
and (iii) the five year, two month period since July 6, 1993, the commencement
of distribution for Class C Shares of the Fund, through August 31, 1998 was
13.78%. These
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results are based on historical earnings and asset value fluctuations and are
not intended to indicate future performance. Such information should be
considered in light of the Fund's investment objective and policies as well as
the risks incurred in the Fund's investment practices.
The Fund may, from time to time: (1) illustrate the benefits of
tax-deferral by comparing taxable investments to investments made through
tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
and (3) in reports or other communications to shareholders or in advertising
material, illustrate the benefits of compounding at various assumed rates of
return. Such illustrations may be in the form of charts or graphs and will not
be based on historical returns experienced by the Fund.
OTHER INFORMATION
CUSTODY OF ASSETS
All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by State Street Bank and Trust Company, 225 West Franklin Street,
Boston, Massachusetts 02110, as Custodian.
SHAREHOLDER REPORTS
Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 200 East Randolph Drive, Chicago, Illinois
60601, the independent accountants for the Fund, performs an annual audit of the
Fund's financial statements.
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
B-45
<PAGE> 70
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN EMERGING GROWTH FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Emerging Growth Fund
(the "Fund") at August 31, 1998, and the results of its operations, the changes
in its net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
October 2, 1998
F-1
<PAGE> 71
PORTFOLIO OF INVESTMENTS
August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 94.7%
CONSUMER DISTRIBUTION 18.5%
American Eagle Outfitters (a)............................... 250,000 $ 8,750,000
Ann Taylor Stores Corp. (a)................................. 400,000 9,725,000
Bally Total Fitness Holdings (a)............................ 220,000 3,355,000
Barnes & Noble, Inc. (a).................................... 450,000 12,178,125
Bed Bath & Beyond, Inc. (a)................................. 203,900 3,682,944
Best Buy Co., Inc. (a)...................................... 1,650,000 64,968,750
Costco Cos., Inc. (a)....................................... 925,000 43,532,812
CVS Corp.................................................... 600,000 21,825,000
Dayton Hudson Corp.......................................... 450,000 16,200,000
Dollar Tree Stores, Inc. (a)................................ 450,000 13,050,000
Earthgrains Co.............................................. 275,000 7,562,500
Family Dollar Stores, Inc................................... 1,400,000 17,762,500
Gap, Inc.................................................... 500,000 25,531,250
Goody's Family Clothing, Inc. (a)........................... 520,000 9,360,000
Herman Miller, Inc.......................................... 550,400 11,283,200
Home Depot, Inc............................................. 700,000 26,950,000
Ingram Micro, Inc., Class A (a)............................. 275,000 12,375,000
Interface, Inc., Class A (a)................................ 578,900 7,091,525
Kohl's Corp. (a)............................................ 650,000 29,534,375
Lexmark International Group, Inc., Class A (a).............. 652,300 39,504,919
Lowe's Cos., Inc............................................ 1,349,600 47,320,350
McKesson Corp............................................... 400,000 30,000,000
Micro Warehouse, Inc. (a)................................... 150,000 2,437,500
Pacific Sunwear of California, Inc. (a)..................... 431,250 7,870,313
Proffitt's, Inc. (a)........................................ 700,000 17,850,000
Ross Stores, Inc............................................ 299,000 10,876,125
Safeway, Inc. (a)........................................... 822,500 32,385,937
Staples, Inc................................................ 1,375,000 37,296,875
Tandy Corp.................................................. 195,000 10,639,687
The Mens Wearhouse, Inc. (a)................................ 200,000 4,687,500
TJX Cos., Inc............................................... 1,675,000 37,373,437
Trans World Entertainment Corp. (a)......................... 150,000 2,550,000
United Stationers, Inc. (a)................................. 175,000 10,368,750
Whole Foods Market, Inc. (a)................................ 59,500 2,461,813
Williams Sonoma, Inc. (a)................................... 500,000 12,750,000
--------------
651,091,187
--------------
CONSUMER DURABLES 0.4%
Kaufman & Broad Home Corp................................... 200,000 4,275,000
Pulte Corp.................................................. 200,000 5,775,000
Shaw Industries, Inc........................................ 350,000 5,293,750
--------------
15,343,750
--------------
CONSUMER NON-DURABLES 2.7%
Abercrombie & Fitch Co., Class A (a)........................ 625,000 26,875,000
Borders Group, Inc. (a)..................................... 525,000 9,942,187
Jones Apparel Group, Inc. (a)............................... 600,000 11,625,000
Linens N Things, Inc. (a)................................... 850,000 19,868,750
Tommy Hilfiger Corp. (a).................................... 190,000 8,882,500
Twinlab Corp. (a)........................................... 173,500 5,053,188
Westpoint Stevens, Inc. (a)................................. 400,000 11,850,000
--------------
94,096,625
--------------
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 72
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES 12.4%
American Disposal Services, Inc. (a)........................
250,000 $ 7,328,125
Apollo Group, Inc., Class A (a).............................
500,000 15,187,500
Cablevision Systems Corp., Class A (a)......................
600,000 20,325,000
Capstar Broadcasting Corp., Class A (a).....................
509,500 8,629,656
Chancellor Media Corp., Class A (a).........................
1,875,000 66,914,062
Clear Channel Communications, Inc. (a)......................
1,150,000 51,750,000
Consolidated Graphics, Inc. (a).............................
260,000 13,016,250
Earthlink Network, Inc. (a).................................
175,000 4,637,500
International Network Services (a)..........................
200,000 6,600,000
Interpublic Group of Cos., Inc..............................
405,000 23,085,000
Jacor Communications, Inc., Class A (a).....................
723,900 42,710,100
Mail-Well, Inc. (a).........................................
200,000 3,325,000
Meredith Corp...............................................
575,000 19,298,438
Metris Cos., Inc............................................
150,000 8,850,000
Omnicom Group, Inc..........................................
625,000 29,765,625
Outdoor Systems, Inc. (a)...................................
812,500 18,890,625
PMT Services, Inc. (a)......................................
300,000 5,100,000
Robert Half International, Inc. (a).........................
397,500 19,080,000
SFX Entertainment, Inc., Class A (a)........................
200,000 6,275,000
Snyder Communications, Inc. (a).............................
300,000 9,037,500
Tele-Communications, Inc., Class A (a)......................
800,000 26,150,000
Univision Communications, Inc., Class A (a).................
148,400 3,951,150
Viacom, Inc., Class B.......................................
500,000 24,812,500
--------------
434,719,031
--------------
ENERGY 0.3%
Marine Drilling Cos., Inc. (a)..............................
697,900 6,281,100
National Oilwell, Inc. (a)..................................
320,000 2,480,000
Stolt Comex Seaway S.A. (a).................................
210,000 1,732,500
Stolt Comex Seaway S.A. - ADR (United Kingdom) (a)..........
105,000 603,750
--------------
11,097,350
--------------
FINANCE 7.8%
AmeriCredit Corp. (a).......................................
200,000 4,987,500
AmSouth Bancorporation......................................
225,000 7,734,375
Associates First Capital Corp., Class A.....................
150,000 8,868,750
Capital One Financial Corp..................................
600,000 52,500,000
Dime Bancorp, Inc...........................................
292,000 5,548,000
Equitable Cos., Inc.........................................
113,800 6,507,937
Everest Reinsurance Holdings, Inc...........................
150,000 5,250,000
Fidelity National Financial, Inc............................
85,000 2,353,438
Fifth Third Bancorp.........................................
127,500 6,781,406
Finova Group, Inc...........................................
625,000 27,890,625
Hartford Life, Class A......................................
200,000 10,250,000
HealthCare Financial Partners, Inc..........................
260,000 7,930,000
Lehman Brothers Holdings, Inc...............................
296,600 11,678,625
National Commerce Bancorp...................................
188,000 3,149,000
Nationwide Financial Services, Class A......................
100,000 4,468,750
North Fork Bancorp, Inc.....................................
450,000 8,550,000
Northern Trust Corp.........................................
300,000 16,725,000
Protective Life Corp........................................
250,000 7,718,750
Providian Financial Corp....................................
625,000 40,117,188
Silicon Valley Bancshares (a)...............................
120,000 2,932,500
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 73
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Star Banc Corp..............................................
213,150 $ 11,696,606
State Street Corp...........................................
94,200 4,904,288
Transatlantic Holdings, Inc.................................
75,000 6,089,063
Zions Bancorporation........................................
225,000 8,634,375
--------------
273,266,176
--------------
HEALTHCARE 9.0%
Allegiance Corp.............................................
1,125,000 31,781,250
Arterial Vascular Engineering, Inc. (a).....................
600,000 21,000,000
Biogen, Inc. (a)............................................
650,000 30,062,500
Guidant Corp................................................
135,000 8,336,250
HBO & Co....................................................
2,700,000 57,375,000
Health Management Associates, Inc., Class A (a).............
1,321,875 23,876,367
Medquist, Inc. (a)..........................................
200,000 4,200,000
MiniMed, Inc. (a)...........................................
175,000 8,925,000
Mylan Laboratories, Inc.....................................
800,000 18,300,000
Omnicare, Inc...............................................
800,000 24,950,000
Quintiles Transnational Corp. (a)...........................
550,000 19,662,500
Steris Corp. (a)............................................
670,000 15,996,250
Universal Health Services, Inc., Class B (a)................
135,300 5,242,875
Warner-Lambert Co...........................................
350,000 22,837,500
Watson Pharmaceuticals, Inc. (a)............................
550,000 24,784,375
--------------
317,329,867
--------------
PRODUCER MANUFACTURING 4.1%
Allied Waste Industries, Inc. (a)...........................
1,000,000 19,000,000
American Power Conversion Corp. (a).........................
150,000 4,050,000
Century Business Services, Inc. (a).........................
100,000 1,912,500
Danaher Corp................................................
400,000 14,500,000
Eastern Environmental Services, Inc. (a)....................
200,000 5,150,000
Federal Mogul Corp..........................................
300,000 16,012,500
Metromedia Fiber Network, Class A (a).......................
400,000 8,400,000
Mueller Industries, Inc. (a)................................
200,000 5,112,500
Republic Services, Inc. Class A (a).........................
345,000 5,563,125
Tyco International Ltd......................................
800,000 44,400,000
United Rentals, Inc. (a)....................................
145,000 2,827,500
Waste Management, Inc. (a)..................................
350,000 15,443,750
--------------
142,371,875
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.1%
Safeskin Corp. (a)..........................................
1,050,000 35,437,500
Solutia, Inc................................................
150,000 3,365,625
--------------
38,803,125
--------------
TECHNOLOGY 34.5%
Affiliated Computer Services, Inc., Class A (a).............
225,000 7,354,688
America Online, Inc. (a)....................................
1,100,000 90,131,250
American Management Systems, Inc. (a).......................
350,000 9,362,500
Apple Computer, Inc. (a)....................................
750,000 23,390,625
Aspect Development, Inc. (a)................................
350,000 10,193,750
BMC Software, Inc. (a)......................................
1,750,000 74,046,875
Cambridge Technology Partners, Inc. (a).....................
400,000 13,000,000
CBT Group Public Ltd. Co. -- ADR (Ireland) (a)..............
950,000 44,650,000
Ciber, Inc. (a).............................................
630,000 15,828,750
Cisco Systems, Inc. (a).....................................
390,000 31,931,250
Citrix Systems, Inc. (a)....................................
675,000 38,896,875
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 74
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Compuware Corp. (a).........................................
2,125,000 $ 96,554,687
Concord EFS, Inc. (a).......................................
400,000 7,900,000
Dell Computer Corp. (a).....................................
2,025,000 202,500,000
DST Systems, Inc. (a).......................................
150,000 8,475,000
Electronic Arts, Inc. (a)...................................
250,000 9,531,250
EMC Corp. (a)...............................................
1,525,000 68,910,938
Engineering Animation, Inc. (a).............................
175,000 6,453,125
Gemstar International Group Ltd. (a)........................
125,000 4,335,938
General Instrument Corp. (a)................................
555,000 11,030,625
Gulfstream Aerospace Corp. (a)..............................
425,000 14,928,125
HNC Software, Inc. (a)......................................
250,000 9,078,125
IDX Systems Corp. (a).......................................
275,000 11,687,500
Information Management Resources, Inc. (a)..................
502,500 9,673,125
Intuit, Inc. (a)............................................
225,000 7,692,188
Keane, Inc. (a).............................................
675,000 28,350,000
Legato Systems, Inc. (a)....................................
900,000 31,612,500
Lernout & Hauspie Speech Products N.V. - ADR (Netherlands)
(a).......................................................
500,000 15,531,250
Lucent Technologies, Inc. (a)...............................
875,000 62,015,625
Mastech Corp. (a)...........................................
300,000 6,159,375
Mercury Interactive Corp. (a)...............................
250,000 8,406,250
Mindspring Enterprises, Inc. (a)............................
300,000 8,062,500
MMC Networks, Inc. (a)......................................
150,000 2,512,500
Network Appliance, Inc. (a).................................
250,000 10,421,875
Paychex, Inc................................................
375,000 14,250,000
Siebel Systems, Inc. (a)....................................
500,000 9,375,000
Sterling Software, Inc. (a).................................
450,000 9,253,125
SunGard Data Systems, Inc. (a)..............................
650,000 20,596,875
Symbol Technologies, Inc....................................
350,000 14,350,000
Tekelec, Inc. (a)...........................................
625,000 11,289,062
Tellabs, Inc................................................
148,000 6,253,000
Uniphase Corp. (a)..........................................
350,000 13,978,125
Veritas DGC, Inc. (a).......................................
300,000 4,500,000
Veritas Software Corp. (a)..................................
687,500 30,851,562
Visio Corp. (a).............................................
365,900 7,683,900
Vitesse Semiconductor Corp. (a).............................
850,000 23,056,250
Waters Corp. (a)............................................
150,000 8,081,250
Xircom, Inc. (a)............................................
250,000 3,906,250
Xylan Corp. (a).............................................
500,500 7,632,625
Yahoo!, Inc. (a)............................................
400,000 27,600,000
--------------
1,213,266,088
--------------
TRANSPORTATION 2.6%
Alaska Air Group, Inc. (a)..................................
390,000 15,185,625
America West Holdings Corp., Class B (a)....................
186,700 3,628,980
ASA Holdings, Inc...........................................
300,000 10,275,000
Comair Holdings, Inc........................................
400,000 10,175,000
Royal Caribbean Cruises Ltd.................................
630,000 15,277,500
Southwest Airlines Co.......................................
675,000 12,023,438
U.S. Airways Group, Inc. (a)................................
400,000 23,300,000
--------------
89,865,543
--------------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 75
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 1.3%
AirTouch Communications, Inc. (a)...........................
825,000 $ 46,406,250
--------------
TOTAL COMMON STOCKS 94.7%............................................. 3,327,656,867
SUBSCRIPTION WARRANT 0.0%
BJ Services Co. (40,000 common stock warrants expiring 04/12/00)....... 235,000
--------------
TOTAL LONG-TERM INVESTMENTS 94.7%
(Cost $2,758,562,750)................................................ 3,327,891,867
--------------
SHORT-TERM INVESTMENTS 5.9%
COMMERCIAL PAPER 1.0%
General Electric Capital Corp. ($35,625,000 par, yielding 5.804%,
09/01/98 maturity)................................................... 35,619,258
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 4.9%
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.498%, 09/04/98 maturity)........................................... 24,988,583
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.496%, 09/24/98 maturity)........................................... 24,913,430
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.040%, 09/30/98 maturity)........................................... 24,890,444
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.486%, 10/02/98 maturity)........................................... 24,882,888
Federal National Mortgage Association Discount Notes ($20,000,000 par,
yielding 5.452%, 09/15/98 maturity).................................. 19,958,000
Federal National Mortgage Association Discount Notes ($25,000,000 par,
yielding 5.496%, 09/25/98 maturity).................................. 24,909,666
Federal National Mortgage Association Discount Notes ($25,000,000 par,
yielding 5.500%, 10/13/98 maturity).................................. 24,841,916
--------------
169,384,927
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $205,004,185).................................................. 205,004,185
--------------
TOTAL INVESTMENTS 100.6%
(Cost $2,963,566,935)................................................ 3,532,896,052
LIABILITIES IN EXCESS OF OTHER ASSETS (0.6%).......................... (19,806,965)
--------------
NET ASSETS 100.0%..................................................... $3,513,089,087
------------
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
F-6
<PAGE> 76
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,963,566,935)..................... $3,532,896,052
Cash........................................................ 5,702
Receivables:
Investments Sold.......................................... 28,963,372
Fund Shares Sold.......................................... 13,652,966
Dividends................................................. 696,634
Other....................................................... 78,594
--------------
Total Assets............................................ 3,576,293,320
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 34,955,286
Fund Shares Repurchased................................... 21,842,372
Distributor and Affiliates................................ 3,275,407
Investment Advisory Fee................................... 1,619,241
Income Distributions...................................... 40,892
Accrued Expenses............................................ 1,230,654
Trustees' Deferred Compensation and Retirement Plans........ 240,381
--------------
Total Liabilities....................................... 63,204,233
--------------
NET ASSETS.................................................. $3,513,089,087
==============
NET ASSETS CONSIST OF:
Capital..................................................... $2,707,848,829
Net Unrealized Appreciation................................. 569,329,117
Accumulated Net Realized Gain............................... 236,101,243
Accumulated Net Investment Loss............................. (190,102)
--------------
NET ASSETS.................................................. $3,513,089,087
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,990,809,424 and 55,102,606 shares of
beneficial interest issued and outstanding)............. $ 36.13
Maximum sales charge (5.75%* of offering price)......... 2.20
--------------
Maximum offering price to public........................ $ 38.33
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,357,592,499 and 40,117,476 shares of
beneficial interest issued and outstanding)............. $ 33.84
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $164,687,164 and 4,788,731 shares of
beneficial interest issued and outstanding)............. $ 34.39
==============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
F-7
<PAGE> 77
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 11,628,014
Dividends................................................... 7,760,392
--------------
Total Income............................................ 19,388,406
--------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Class
A, B and C of $4,936,075, $14,583,935 and $1,719,764,
respectively)............................................. 21,239,774
Investment Advisory Fee..................................... 17,650,513
Shareholder Services........................................ 10,754,412
Custody..................................................... 139,658
Legal....................................................... 108,150
Trustees' Fees and Expenses................................. 70,058
Other....................................................... 1,873,606
--------------
Total Expenses.......................................... 51,836,171
--------------
NET INVESTMENT LOSS......................................... $ (32,447,765)
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 413,038,336
Futures................................................... 3,459,261
--------------
Net Realized Gain........................................... 416,497,597
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,049,651,975
End of the Period:
Investments............................................. 569,329,117
--------------
Net Unrealized Depreciation During the Period............... (480,322,858)
--------------
NET REALIZED AND UNREALIZED LOSS............................ $ (63,825,261)
==============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (96,273,026)
==============
</TABLE>
See Notes to Financial Statements
F-8
<PAGE> 78
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended August 31, 1998 and August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 1998 August 31, 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss......................................... $ (32,447,765) $ (17,019,810)
Net Realized Gain........................................... 416,497,597 211,200,349
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (480,322,858) 427,587,305
--------------- --------------
Change in Net Assets from Operations........................ (96,273,026) 621,767,844
--------------- --------------
Distributions from Net Realized Gain:
Class A Shares............................................ (187,557,556) (68,724,698)
Class B Shares............................................ (124,329,647) (40,777,606)
Class C Shares............................................ (14,246,695) (4,475,920)
--------------- --------------
Total Distributions....................................... (326,133,898) (113,978,224)
--------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (422,406,924) 507,789,620
--------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 4,635,449,750 3,571,842,624
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 306,065,324 106,183,551
Cost of Shares Repurchased.................................. (4,337,043,496) (3,132,953,942)
--------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 604,471,578 545,072,233
--------------- --------------
TOTAL INCREASE IN NET ASSETS................................ 182,064,654 1,052,861,853
NET ASSETS:
Beginning of the Period..................................... 3,331,024,433 2,278,162,580
--------------- --------------
End of the Period (Including accumulated net investment loss
of $190,102 and $124,673, respectively)................... $ 3,513,089,087 $3,331,024,433
=============== ==============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE> 79
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------------------------------------
Class A Shares 1998(a) 1997 1996(a) 1995(a) 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................. $ 40.844 $ 34.347 $ 31.59 $ 24.37 $26.46
-------- -------- -------- -------- ------
Net Investment Income/Loss............................. (.212) (.127) (.096) .05 (.11)
Net Realized and Unrealized Gain/Loss.................. (.750) 8.177 6.043 7.79 (.32)
-------- -------- -------- -------- ------
Total from Investment Operations......................... (.962) 8.050 5.947 7.84 (.43)
Less Distributions from Net Realized Gain................ 3.753 1.553 3.190 .62 1.66
-------- -------- -------- -------- ------
Net Asset Value, End of the Period....................... $ 36.129 $ 40.844 $ 34.347 $ 31.59 $24.37
======== ======== ======== ======== ======
Total Return (b)......................................... (2.19%) 24.44% 20.54% 33.11% (1.67%)
Net Assets at End of the Period (In millions)............ $1,990.8 $1,970.7 $1,438.5 $1,029.2 $677.1
Ratio of Expenses to Average Net Assets (c).............. 1.00% 1.05% 1.10% 1.14% 1.18%
Ratio of Net Investment Income/Loss to Average Net Assets
(c).................................................... (.50%) (.30%) (.29%) .19% (.30%)
Portfolio Turnover....................................... 103% 92% 91% 101% 64%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
F-10
<PAGE> 80
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
------------------------------------------------------------
Class B Shares 1998(a) 1997 1996(a) 1995(a) 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................... $38.789 $ 32.938 $ 30.65 $23.86 $26.14
-------- -------- ------- ------ ------
Net Investment Loss...................................... (.515) (.270) (.349) (.16) (.27)
Net Realized and Unrealized Gain/Loss.................... (.681) 7.674 5.827 7.57 (.35)
-------- -------- ------- ------ ------
Total from Investment Operations........................... (1.196) 7.404 5.478 7.41 (.62)
Less Distributions from Net Realized Gain.................. 3.753 1.553 3.190 .62 1.66
-------- -------- ------- ------ ------
Net Asset Value, End of the Period......................... $33.840 $ 38.789 $32.938 $30.65 $23.86
======== ======== ======= ====== ======
Total Return (b)........................................... (2.98%) 23.51% 19.61% 32.01% (2.46%)
Net Assets at End of the Period (In millions).............. $1,357.6 $1,220.4 $ 757.3 $450.5 $252.9
Ratio of Expenses to Average Net Assets (c)................ 1.79% 1.85% 1.90% 1.97% 2.01%
Ratio of Net Investment Loss to Average Net Assets (c)..... (1.29%) (1.10%) (1.10%) (.64%) (1.07%)
Portfolio Turnover......................................... 103% 92% 91% 101% 64%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
F-11
<PAGE> 81
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
----------------------------------------------------------
Class C Shares 1998(a) 1997 1996(a) 1995(a) 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $39.351 $33.384 $ 31.02 $24.14 $26.42
------- ------- ------- ------ ------
Net Investment Loss....................................... (.523) (.273) (.354) (.16) (.25)
Net Realized and Unrealized Gain/Loss..................... (.684) 7.793 5.908 7.66 (.37)
------- ------- ------- ------ ------
Total from Investment Operations............................ (1.207) 7.520 5.554 7.50 (.62)
Less Distributions from Net Realized Gain................... 3.753 1.553 3.190 .62 1.66
------- ------- ------- ------ ------
Net Asset Value, End of the Period.......................... $34.391 $39.351 $33.384 $31.02 $24.14
======= ======= ======= ====== ======
Total Return (b)............................................ (2.96%) 23.56% 19.60% 32.01% (2.46%)
Net Assets at End of the Period (In millions)............... $ 164.7 $ 139.9 $ 82.4 $ 41.8 $ 24.5
Ratio of Expenses to Average Net Assets (c)................. 1.79% 1.85% 1.89% 1.96% 2.02%
Ratio of Net Investment Loss to Average Net Assets (c)...... (1.29%) (1.10%) (1.10%) (.63%) (1.04%)
Portfolio Turnover.......................................... 103% 92% 91% 101% 64%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
F-12
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Emerging Growth Fund, (the "Fund") is organized as a Delaware
business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund seeks capital appreciation by principally investing in common stock of
small- and medium-sized companies that are considered to be emerging growth
companies. The Fund commenced investment operations on October 2, 1970. The
distribution of the Fund's Class B and Class C shares commenced on April 20,
1992 and July 6, 1993, respectively.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices or, if not
available, their fair value as determined using procedures established in good
faith by the Board of Trustees. Short-term securities with remaining maturities
of 60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discounts on
debt securities purchased are amortized over the expected life of each
applicable security. Premiums on debt securities are not amortized. Expenses of
the Fund are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Accumulated realized gain/loss differs for financial and tax reporting
purposes as a result of the deferral for tax purposes of losses resulting from
wash sales.
F-13
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
At August 31, 1998, for federal income tax purposes, cost of long- and
short-term investments is $2,964,656,562; the aggregate gross unrealized
appreciation is $895,637,216 and the aggregate gross unrealized depreciation is
$327,397,726, resulting in net unrealized appreciation of $568,239,490.
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and from net realized gains, if any.
Distributions from net realized gains for book purposes may include
short-term capital gains and gains on option and futures transactions. All
short-term capital gains and a portion of option and futures gains are included
in ordinary income for tax purposes.
Due to inherent differences in the recognition of income and expenses
under generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. A permanent
difference related to the recognition of certain expenses that are not
deductible for tax purposes totaling $54,255 has been reclassified from
accumulated net investment loss to capital. A permanent difference totaling
$32,328,081 related to a portion of the tax basis net operating loss which was
offset against short-term gains for tax purposes has been reclassified from
accumulated net investment loss to accumulated net realized gain.
For federal income tax purposes, the following information is furnished
with respect to the distributions paid by the Fund during its taxable year ended
August 31, 1998. The Fund designated and paid $103,222,867 as a 28% rate gain
distribution and $222,911,030 as a 20% rate gain distribution. These
distributions, where applicable, were included on 1997's Form 1099-DIV which was
mailed to shareholders in January of 1998. In January, 1999 the Trust will
provide tax information to shareholders for the 1998 calendar year.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- -------------------------------------------------------------------------
<S> <C>
First $350 million.......................................... .575 of 1%
Next $350 million........................................... .525 of 1%
Next $350 million........................................... .475 of 1%
Over $1.05 billion.......................................... .425 of 1%
</TABLE>
For the year ended August 31, 1998, the Fund recognized expenses of
approximately $107,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended August 31, 1998, the Fund recognized expenses of
approximately $761,100 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
August 31, 1998, the Fund recognized expenses of approximately $8,453,800.
Beginning in 1998, the transfer agency fees are determined through negotiations
with the Fund's Board of Trustees and are based on competitive benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
F-14
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At August 31, 1998, Van Kampen owned 90,822 Class A shares of the Fund.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At August 31, 1998, capital aggregated $1,333,338,505, $1,221,172,216 and
$153,338,108 for Classes A, B, and C, respectively. For the year ended August
31, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................... 95,621,832 $ 4,044,478,378
Class B................................................... 11,867,712 474,169,896
Class C................................................... 2,870,475 116,801,476
------------ ---------------
Total Sales................................................. 110,360,019 $ 4,635,449,750
============ ===============
Dividend Reinvestment:
Class A................................................... 4,998,669 $ 177,702,686
Class B................................................... 3,474,757 116,334,867
Class C................................................... 353,446 12,027,771
------------ ---------------
Total Dividend Reinvestment................................. 8,826,872 $ 306,065,324
============ ===============
Repurchases:
Class A................................................... (93,766,322) $(3,988,507,130)
Class B................................................... (6,687,281) (267,187,091)
Class C................................................... (1,991,360) (81,349,275)
------------ ---------------
Total Repurchases........................................... (102,444,963) $(4,337,043,496)
============ ===============
</TABLE>
F-15
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
At August 31, 1997, capital aggregated $1,099,695,317, $897,875,510 and
$105,860,679 for Classes A, B, and C, respectively. For the year ended August
31, 1997, transactions, were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................... 85,481,062 $ 3,061,226,475
Class B................................................... 12,632,143 435,521,886
Class C................................................... 2,148,596 75,094,263
----------- ---------------
Total Sales................................................. 100,261,801 $ 3,571,842,624
=========== ===============
Dividend Reinvestment:
Class A................................................... 1,934,861 $ 64,450,222
Class B................................................... 1,192,031 37,918,500
Class C................................................... 118,216 3,814,829
----------- ---------------
Total Dividend Reinvestment................................. 3,245,108 $ 106,183,551
=========== ===============
Repurchases:
Class A................................................... (81,049,033) $(2,912,887,498)
Class B................................................... (5,352,502) (178,981,485)
Class C................................................... (1,178,202) (41,084,959)
----------- ---------------
Total Repurchases........................................... (87,579,737) $(3,132,953,942)
=========== ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but
are subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC for Class B and C shares will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C>
First....................................................... 5.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and thereafter........................................ None None
</TABLE>
For the year ended August 31, 1998, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $2,517,100 and CDSC on redeemed shares of approximately
$3,848,900. Sales charges do not represent expenses to the Fund.
F-16
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $3,992,118,661 and $3,736,592,953,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as
to attempt to protect the Fund against possible changes in the market value of
its portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when taking delivery of
a security underlying a futures contract. In these instances, the recognition of
gain or loss is postponed until the disposal of the security underlying the
futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in exchange traded stock index futures. These contracts are
generally used to provide the return of an index without purchasing all of the
securities underlying the index or to manage the Fund's overall exposure to the
equity markets. Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin).
Transactions in futures contracts for the year ended August 31, 1998,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at August 31, 1997.............................. 144
Futures Opened.............................................. 0
Futures Closed.............................................. (144)
---
Outstanding at August 31, 1998.............................. 0
===
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended August 31, 1998, are payments retained by Van Kampen of
approximately $11,806,500.
7. YEAR 2000 COMPLIANCE (UNAUDITED)
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can
F-17
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1998
- --------------------------------------------------------------------------------
be no assurance that the steps taken will be sufficient to avoid any adverse
impact to the Fund, but Van Kampen does not anticipate that the move to Year
2000 will have a material impact on its ability to continue to provide the Fund
with service at current levels. In addition, it is possible that the securities
markets in which the Fund invests may be detrimentally affected by computer
failures throughout the financial services industry beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues.
F-18
<PAGE> 88
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
<TABLE>
<S> <C>
(a)(1) -- First Amended and Restated Agreement and Declaration of
Trust (7)
(2) -- Second Certificate of Amendment (10)
(3) -- Second Amended and Restated Certificate of Designation
(10)
(b) -- Amended and Restated Bylaws (7)
(c)(1) -- Specimen Class A Share Certificate(9)
(2) -- Specimen Class B Share Certificate(9)
(3) -- Specimen Class C Share Certificate(9)
(d) -- Investment Advisory Agreement(9)
(e)(1) -- Distribution and Service Agreement(9)
(2) -- Form of Dealer Agreement (8)
(3) -- Form of Broker Fully Disclosed Selling Agreement (8)
(4) -- Form of Bank Fully Disclosed Selling Agreement (8)
(f)(1) -- Individual Retirement Account Brochure with Application
(4)
(2) -- 403(b)(7) Custodial Account (3)
(3) -- ORP 403(b)(7) Custodial Account (3)
(4) -- Retirement Plans for the Small Business-Forms Package and
Plan Documents (1)
(5) -- Prototype Profit Sharing/Money Purchase Plan and Trust
(2)
(6) -- Prototype 401(k) Plan and Trust (2)
(7) -- Salary Reduction Simplified Employee Pension Plan (5)
(g)(1) -- Custodian Contract(9)
(2) -- Transfer Agency and Service Agreement(9)
(h)(1) -- Data Access Services Agreement (8)
(2) -- Fund Accounting Agreement(9)
(i) -- Opinion and Consent of Skadden, Arps, Slate, Meagher &
Flom (Illinois) (8)
(j) -- Consent of PricewaterhouseCoopers LLP+
(k) -- Computation of Performance Quotations+
(l) -- Not applicable.
(m)(1) -- Plan of Distribution pursuant to Rule 12b-1 (8)
(2) -- Form of Shareholder Assistance Agreement (8)
(3) -- Form of Administrative Services Agreement (8)
(4) -- Service Plan (8)
(n) -- Financial Data Schedules+
(o) -- Amended Multi-Class Plan(9)
(p) -- Power of Attorney (10)
(z)(1) -- List of Investment Companies in response to Item 27(a)+
(2) -- List of Officers and Directors of Van Kampen Funds Inc.
in response to Item 27(b)+
</TABLE>
- -------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 44 to
Registrant's Registration Statement on Form N-1A, File No. 2-33214, filed
December 21, 1990.
(2) Incorporated herein by reference to Post-Effective Amendment No. 61 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File No. 2-21657, filed March 26, 1991.
C-1
<PAGE> 89
(3) Incorporated herein by reference to Post-Effective Amendment No. 30 to Van
Kampen American Capital Reserve Fund's Registration Statement on Form N-1A,
File No. 2-50870, filed September 24, 1992.
(4) Incorporated herein by reference to Post-Effective Amendment No. 31 to Van
Kampen American Capital Reserve Fund's Registration Statement on Form N-1A,
File No. 2-50870, filed September 24, 1993.
(5) Incorporated by reference to Post-Effective Amendment No. 9 to Van Kampen
American Capital World Portfolio Series Trust's Registration Statement on
Form N-1A, File No. 33-37879, filed September 24, 1993.
(6) Incorporated herein by reference to Post-Effective Amendment No. 52 to
Registrant's Registration Statement on Form N-1A, File No. 2-33214, filed
July 19, 1995.
(7) Incorporated herein by reference to Post-Effective Amendment No. 53 to
Registrant's Registration Statement on Form N-1A, File No. 2-33214, filed
December 22, 1995.
(8) Incorporated herein by reference to Post-Effective Amendment No. 55 to
Registrant's Registration Statement on Form N-1A, File No. 2-33214, filed
December 26, 1996.
(9) Incorporated herein by reference to Post-Effective Amendment No. 56 to
Registrant's Registration Statement on N-1A, File No. 2-33214, filed
December 24, 1997.
(10) Incorporated herein by reference to Post-Effective Amendment No. 57 to
Registrant's Registration Statement on Form N-1A, File No. 2-33214, filed
October 29, 1998.
+ Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
ITEM 25. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
thereof to which such person would otherwise be subject by reason of (i) not
acting in good faith in the reasonable belief that such person's actions were
not in the best interests of the Trust, (ii) willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office (iii) for a criminal proceeding, not having a reasonable cause
to believe that such conduct was unlawful (collectively, "Disabling Conduct").
Absent a court determination that an officer or trustee seeking indemnification
was not liable on the merits or guilty of Disabling Conduct in the conduct of
his or her office, the decision by the Registrant to indemnify such person must
be based upon the reasonable determination of independent counsel or non-party
independent trustees, after review of the facts, that such officer or trustee is
not guilty of Disabling Conduct in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
C-2
<PAGE> 90
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the Adviser. For information as to the business, profession,
vocation and employment of a substantial nature of directors and officers of Van
Kampen Asset Management Inc., reference is made to the Adviser's current Form
ADV (File No. 801-1669) filed under the Investment Advisers Act of 1940, as
amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen Funds Inc., which acts as
principal underwriter for certain investment companies and unit
investment trusts. See Exhibit (z)(1).
(b) Van Kampen Funds Inc., which is an affiliated person of an affiliated
person of Registrant, is the sole principal underwriter for Registrant.
The name, principal business address and positions and offices with Van
Kampen Funds Inc. of each of the directors and officers are disclosed in
Exhibit (z)(2). Except as disclosed under the heading, "Trustees and
Officers" in Part B of this Registration Statement, none of such persons
has any position or office with Registrant.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555. Van Kampen Investor Services
Inc., 7501 Tiffany Springs Parkway, Kansas City, Missouri 64153, or at the State
Street Bank and Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by
the Adviser, will be maintained at its offices, located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555; and (iii) by Van Kampen Funds
Inc., the principal underwriter, will be maintained at its offices located at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Registrant hereby undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-3
<PAGE> 91
Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
C-4
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN EMERGING GROWTH FUND,
certifies that it meets all of the requirements for effectiveness of this
Amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oakbrook Terrace and State of Illinois, on the 29th
day of December, 1998.
VAN KAMPEN
EMERGING GROWTH FUND
By: /s/ DENNIS J. McDONNELL
------------------------------------
Dennis J. McDonnell, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed on December 29, 1998 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<C> <S>
Principal Executive Officer:
/s/ DENNIS J. McDONNELL President
- -----------------------------------------------------
Dennis J. McDonnell
Principal Financial Officer:
/s/ JOHN L. SULLIVAN Vice President, Chief Financial Officer and Treasurer
- -----------------------------------------------------
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- -----------------------------------------------------
J. Miles Branagan
/s/ RICHARD M. DEMARTINI* Trustee
- -----------------------------------------------------
Richard M. DeMartini
/s/ LINDA H. HEAGY* Trustee
- -----------------------------------------------------
Linda H. Heagy
/s/ R. CRAIG KENNEDY* Trustee
- -----------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------
Jack E. Nelson
/s/ DON G. POWELL* Trustee
- -----------------------------------------------------
Don G. Powell
/s/ PHILLIP B. ROONEY* Trustee
- -----------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
- -----------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------
Wayne W. Whalen
Trustee
- -----------------------------------------------------
Paul G. Yovovich
- ---------------
* Signed by Dennis J. McDonnell pursuant to a power of attorney.
/s/ DENNIS J. McDONNELL
- -----------------------------------------------------
Dennis J. McDonnell
Attorney-in-Fact
</TABLE>
December 29, 1998
<PAGE> 93
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 58 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON DECEMBER 29, 1998
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C> <C>
(j) -- Consent of PricewaterhouseCoopers LLP
(k) -- Computation of Performance Quotations
(n) -- Financial Data Schedules
(z)(1) -- List of Investment Companies in response to Item 27(a)
(z)(2) -- List of Officers and Directors of Van Kampen Funds Inc. in
response to Item 27(b)
</TABLE>
<PAGE> 1
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 58 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
October 2, 1998, relating to the financial statements and financial highlights
of Van Kampen Emerging Growth Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" and
"Independent Accountants" in such Prospectus and to the reference to us under
the heading "Independent Accountants" in such Statement of Additional
Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
December 29, 1998
<PAGE> 1
EXHIBIT(k)
EMERGING GROWTH FUND - CLASS A SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $921.86 = ERV
One year period ended 08/31/98 1 = n
TOTAL RETURN FOR THE PERIOD -7.81% = T
Excluding Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $978.08 = ERV
One year period ended 08/31/98 1 = n
TOTAL RETURN FOR THE PERIOD -2.19% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED AUGUST 31, 1998
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,810.08 = ERV
Five years ended 08/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 12.60% = T
Excluding Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,920.16 = ERV
Five years ended 08/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 13.94% = T
</TABLE>
<PAGE> 2
EMERGING GROWTH FUND - CLASS A SHARES
TOTAL RETURN CALCULATION TEN YEARS ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $5,235.02 = ERV
Ten years ended 08/31/98 10 = n
TOTAL RETURN FOR THE PERIOD 18.00% = T
Excluding Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $5,554.81 = ERV
Ten years ended 08/31/98 10 = n
TOTAL RETURN FOR THE PERIOD 18.70% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1998
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $73,376.38 = ERV
Inception through 08/31/98 27.92 = n
TOTAL RETURN FOR THE PERIOD 16.63% = T
Excluding Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $77,855.45 = ERV
Inception through 08/31/98 27.92 = n
TOTAL RETURN FOR THE PERIOD 16.88% = T
</TABLE>
<PAGE> 3
EMERGING GROWTH FUND - CLASS A SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH AUGUST 31, 1998
<TABLE>
<CAPTION>
Formula ERV - P
----------
P = T
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $73,376.38 = ERV
TOTAL RETURN FOR THE PERIOD 7,237.64% = T
Excluding Payment of the Sales Charge
Net Asset Value $36.13
Initial Investment $1,000.00 = P
Ending Redeemable Value $77,855.45 = ERV
TOTAL RETURN FOR THE PERIOD 7,685.54% = T
</TABLE>
<PAGE> 4
EMERGING GROWTH FUND - CLASS B SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the CDSC
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $926.57 = ERV
One year period ended 08/31/98 1 = n
TOTAL RETURN FOR THE PERIOD -7.34% = T
Excluding Payment of the CDSC
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $970.19 = ERV
One year period ended 08/31/98 1 = n
TOTAL RETURN FOR THE PERIOD -2.98% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED AUGUST 31, 1998
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,830.50 = ERV
Five years ended 08/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 12.85% = T
Excluding Payment of the Sales Charge
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,845.50 = ERV
Five years ended 08/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 13.04% = T
</TABLE>
<PAGE> 5
EMERGING GROWTH FUND - CLASS B SHARES
TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1998
<TABLE>
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the CDSC
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,589.44 = ERV
Inception through 08/31/98 6.37 = n
TOTAL RETURN FOR THE PERIOD 16.11% = T
Excluding Payment of the CDSC
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,589.44 = ERV
Inception through 08/31/98 6.37 = n
TOTAL RETURN FOR THE PERIOD 16.11% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH AUGUST 31, 1998
<CAPTION>
Formula ERV - P
-------
P = T
<S> <C> <C> <C>
Including Payment of the CDSC
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,589.44 = ERV
TOTAL RETURN FOR THE PERIOD 158.94% = T
Excluding Payment of the CDSC
Net Asset Value $33.84
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,589.44 = ERV
TOTAL RETURN FOR THE PERIOD 158.94%
</TABLE>
<PAGE> 6
EMERGING GROWTH FUND - CLASS C SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the CDSC
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $961.61 = ERV
One year period ended 08/31/98 1 = n
TOTAL RETURN FOR THE PERIOD -3.84% = T
Excluding Payment of the CDSC
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $970.35 = ERV
One year period ended 08/31/98 1 = n
TOTAL RETURN FOR THE PERIOD -2.96% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED AUGUST 31, 1998
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the Sales Charge
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,846.23 = ERV
Five years ended 08/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 13.05% = T
Excluding Payment of the Sales Charge
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,846.23 = ERV
Five years ended 08/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 13.05% = T
</TABLE>
<PAGE> 7
EMERGING GROWTH FUND - CLASS C SHARES
TOTAL RETURN CALCULATION INCEPTION THROUGH AUGUST 31, 1998
<TABLE>
<CAPTION>
n
Formula P(1+T) = ERV
<S> <C> <C> <C>
Including Payment of the CDSC
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $1946.41 = ERV
Inception through 08/31/98 5.16 = n
TOTAL RETURN FOR THE PERIOD 13.78% = T
Excluding Payment of the CDSC
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,946.41 = ERV
Inception through 08/31/98 5.16 = n
TOTAL RETURN FOR THE PERIOD 13.78% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH AUGUST 31, 1998
<CAPTION>
Formula ERV - P
-------
P = T
<S> <C> <C> <C>
Including Payment of the CDSC
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,946.41 = ERV
TOTAL RETURN FOR THE PERIOD 94.64% = T
Excluding Payment of the CDSC
Net Asset Value $34.39
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,946.41 = ERV
TOTAL RETURN FOR THE PERIOD 94.64% = T
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 11
[NAME] EMG GROWTH A
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] AUG-31-1998
[PERIOD-START] SEP-01-1997
[PERIOD-END] AUG-31-1998
[INVESTMENTS-AT-COST] 2,963,566,935<F1>
[INVESTMENTS-AT-VALUE] 3,532,896,052<F1>
[RECEIVABLES] 43,312,972<F1>
[ASSETS-OTHER] 78,594<F1>
[OTHER-ITEMS-ASSETS] 5,702<F1>
[TOTAL-ASSETS] 3,576,293,320<F1>
[PAYABLE-FOR-SECURITIES] 34,955,286<F1>
[SENIOR-LONG-TERM-DEBT] 0<F1>
[OTHER-ITEMS-LIABILITIES] 28,248,947<F1>
[TOTAL-LIABILITIES] 63,204,233<F1>
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1,333,338,505
[SHARES-COMMON-STOCK] 5,102,606
[SHARES-COMMON-PRIOR] 48,248,427
[ACCUMULATED-NII-CURRENT] (190,102)<F1>
[OVERDISTRIBUTION-NII] 0<F1>
[ACCUMULATED-NET-GAINS] 236,101,243<F1>
[OVERDISTRIBUTION-GAINS] 0<F1>
[ACCUM-APPREC-OR-DEPREC] 569,329,117<F1>
[NET-ASSETS] 1,990,809,424
[DIVIDEND-INCOME] 7,760,392<F1>
[INTEREST-INCOME] 11,628,014<F1>
[OTHER-INCOME] 0<F1>
[EXPENSES-NET] (51,836,171)<F1>
[NET-INVESTMENT-INCOME] (32,447,765)<F1>
[REALIZED-GAINS-CURRENT] 416,497,597<F1>
[APPREC-INCREASE-CURRENT] (480,322,858)<F1>
[NET-CHANGE-FROM-OPS] (96,273,026)<F1>
[EQUALIZATION] 0<F1>
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (187,557,556)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 95,621,832
[NUMBER-OF-SHARES-REDEEMED] (93,766,322)
[SHARES-REINVESTED] 4,998,669
[NET-CHANGE-IN-ASSETS] (313,206,593)
[ACCUMULATED-NII-PRIOR] (124,673)<F1>
[ACCUMULATED-GAINS-PRIOR] 178,065,625<F1>
[OVERDISTRIB-NII-PRIOR] 0<F1>
[OVERDIST-NET-GAINS-PRIOR] 0<F1>
[GROSS-ADVISORY-FEES] 17,650,513<F1>
[INTEREST-EXPENSE] 0<F1>
[GROSS-EXPENSE] 51,836,171<F1>
[AVERAGE-NET-ASSETS] 2,273,779,271
[PER-SHARE-NAV-BEGIN] 40.844
[PER-SHARE-NII] (0.236)
[PER-SHARE-GAIN-APPREC] (0.726)
[PER-SHARE-DIVIDEND] 0.000
[PER-SHARE-DISTRIBUTIONS] (3.753)
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 36.129
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<PAGE> 2
[ARTICLE] 6
[SERIES]
[NUMBER] 12
[NAME] EMG GROWTH B
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] AUG-31-1998
[PERIOD-START] SEP-01-1997
[PERIOD-END] AUG-31-1998
[INVESTMENTS-AT-COST] 2,963,566,935<F1>
[INVESTMENTS-AT-VALUE] 3,532,896,052<F1>
[RECEIVABLES] 43,312,972<F1>
[ASSETS-OTHER] 78,594<F1>
[OTHER-ITEMS-ASSETS] 5,702<F1>
[TOTAL-ASSETS] 3,576,293,320<F1>
[PAYABLE-FOR-SECURITIES] 34,955,286<F1>
[SENIOR-LONG-TERM-DEBT] 0<F1>
[OTHER-ITEMS-LIABILITIES] 28,248,947<F1>
[TOTAL-LIABILITIES] 63,204,233<F1>
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1,221,172,216
[SHARES-COMMON-STOCK] 40,117,476
[SHARES-COMMON-PRIOR] 31,462,288
[ACCUMULATED-NII-CURRENT] (190,102)<F1>
[OVERDISTRIBUTION-NII] 0<F1>
[ACCUMULATED-NET-GAINS] 236,101,243<F1>
[OVERDISTRIBUTION-GAINS] 0<F1>
[ACCUM-APPREC-OR-DEPREC] 569,329,117<F1>
[NET-ASSETS] 1,357,592,499
[DIVIDEND-INCOME] 7,760,392<F1>
[INTEREST-INCOME] 11,628,014<F1>
[OTHER-INCOME] 0<F1>
[EXPENSES-NET] (51,836,171)<F1>
[NET-INVESTMENT-INCOME] (32,447,765)<F1>
[REALIZED-GAINS-CURRENT] 416,497,597<F1>
[APPREC-INCREASE-CURRENT] (480,322,858)<F1>
[NET-CHANGE-FROM-OPS] (96,273,026)<F1>
[EQUALIZATION] 0<F1>
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (124,329,647)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 11,867,712
[NUMBER-OF-SHARES-REDEEMED] (6,687,281)
[SHARES-REINVESTED] 3,474,757
[NET-CHANGE-IN-ASSETS] (106,573,977)
[ACCUMULATED-NII-PRIOR] (124,673)<F1>
[ACCUMULATED-GAINS-PRIOR] 178,065,625<F1>
[OVERDISTRIB-NII-PRIOR] 0<F1>
[OVERDIST-NET-GAINS-PRIOR] 0<F1>
[GROSS-ADVISORY-FEES] 17,650,513<F1>
[INTEREST-EXPENSE] 0<F1>
[GROSS-EXPENSE] 51,836,171<F1>
[AVERAGE-NET-ASSETS] 1,457,580,893
[PER-SHARE-NAV-BEGIN] 38.789
[PER-SHARE-NII] (0.399)
[PER-SHARE-GAIN-APPREC] (0.797)
[PER-SHARE-DIVIDEND] 0.000
[PER-SHARE-DISTRIBUTIONS] (3.753)
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 33.840
[EXPENSE-RATIO] 1.79
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<PAGE> 3
[ARTICLE] 6
[SERIES]
[NUMBER] 13
[NAME] EMG GROWTH C
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] AUG-31-1998
[PERIOD-START] SEP-01-1997
[PERIOD-END] AUG-31-1998
[INVESTMENTS-AT-COST] 2,963,566,935<F1>
[INVESTMENTS-AT-VALUE] 3,532,896,052<F1>
[RECEIVABLES] 43,312,972<F1>
[ASSETS-OTHER] 78,594<F1>
[OTHER-ITEMS-ASSETS] 5,702<F1>
[TOTAL-ASSETS] 3,576,293,320<F1>
[PAYABLE-FOR-SECURITIES] 34,955,286<F1>
[SENIOR-LONG-TERM-DEBT] 0<F1>
[OTHER-ITEMS-LIABILITIES] 28,248,947<F1>
[TOTAL-LIABILITIES] 63,204,233<F1>
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 153,338,108
[SHARES-COMMON-STOCK] 4,788,731
[SHARES-COMMON-PRIOR] 3,556,170
[ACCUMULATED-NII-CURRENT] (190,102)<F1>
[OVERDISTRIBUTION-NII] 0<F1>
[ACCUMULATED-NET-GAINS] 236,101,243<F1>
[OVERDISTRIBUTION-GAINS] 0<F1>
[ACCUM-APPREC-OR-DEPREC] 569,329,117<F1>
[NET-ASSETS] 164,687,164
[DIVIDEND-INCOME] 7,760,392<F1>
[INTEREST-INCOME] 11,628,014<F1>
[OTHER-INCOME] 0<F1>
[EXPENSES-NET] (51,836,171)<F1>
[NET-INVESTMENT-INCOME] (32,447,765)<F1>
[REALIZED-GAINS-CURRENT] 416,497,597<F1>
[APPREC-INCREASE-CURRENT] (480,322,858)<F1>
[NET-CHANGE-FROM-OPS] (96,273,026)<F1>
[EQUALIZATION] 0<F1>
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (14,246,695)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,870,475
[NUMBER-OF-SHARES-REDEEMED] (1,991,360)
[SHARES-REINVESTED] 353,446
[NET-CHANGE-IN-ASSETS] (6,208,453)
[ACCUMULATED-NII-PRIOR] (124,673)<F1>
[ACCUMULATED-GAINS-PRIOR] 178,065,625<F1>
[OVERDISTRIB-NII-PRIOR] 0<F1>
[OVERDIST-NET-GAINS-PRIOR] 0<F1>
[GROSS-ADVISORY-FEES] 17,650,513<F1>
[INTEREST-EXPENSE] 0<F1>
[GROSS-EXPENSE] 51,836,171<F1>
[AVERAGE-NET-ASSETS] 171,876,613
[PER-SHARE-NAV-BEGIN] 39.351
[PER-SHARE-NII] (0.388)
[PER-SHARE-GAIN-APPREC] (0.819)
[PER-SHARE-DIVIDEND] 0.000
[PER-SHARE-DISTRIBUTIONS] (3.753)
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 34.391
[EXPENSE-RATIO] 1.79
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<PAGE> 1
EXHIBIT(z)(1)
Item 27(a)
- ----------
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
VAN KAMPEN BOND FUND
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CONVERTIBLE SECURITIES FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY TRUST
VAN KAMPEN AGGRESSIVE GROWTH FUND
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
VAN KAMPEN GROWTH FUND
VAN KAMPEN MID CAP VALUE FUND
VAN KAMPEN PROSPECTOR FUND
VAN KAMPEN UTILITY FUND
VAN KAMPEN EQUITY INCOME FUND
THE EXPLORER INSTITUTIONAL TRUST
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
VAN KAMPEN FLORIDA MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN FLORIDA QUALITY MUNICIPAL TRUST
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN HIGH INCOME TRUST
VAN KAMPEN HIGH INCOME TRUST II
VAN KAMPEN INCOME TRUST
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
VAN KAMPEN LIFE INVESTMENT TRUST
on behalf of its Series
ASSET ALLOCATION PORTFOLIO
COMSTOCK PORTFOLIO
DOMESTIC INCOME PORTFOLIO
EMERGING GROWTH PORTFOLIO
ENTERPRISE PORTFOLIO
GLOBAL EQUITY PORTFOLIO
GOVERNMENT PORTFOLIO
GROWTH AND INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
STRATEGIC STOCK PORTFOLIO
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
<PAGE> 2
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
VAN KAMPEN MUNICIPAL TRUST
VAN KAMPEN NEW JERSEY VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN NEW YORK QUALITY MUNICIPAL TRUST
VAN KAMPEN NEW YORK VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN OHIO QUALITY MUNICIPAL TRUST
VAN KAMPEN OHIO VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PACE FUND
VAN KAMPEN PENNSYLVANIA QUALITY MUNICIPAL TRUST
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PRIME RATE INCOME TRUST
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
VAN KAMPEN SENIOR FLOATING RATE FUND
VAN KAMPEN SENIOR INCOME TRUST
VAN KAMPEN SERIES FUND, INC.
VAN KAMPEN AGGRESSIVE EQUITY FUND
VAN KAMPEN AMERICAN VALUE FUND
VAN KAMPEN ASIAN GROWTH FUND
VAN KAMPEN EMERGING MARKETS DEBT FUND*
VAN KAMPEN EMERGING MARKETS FUND
VAN KAMPEN EQUITY GROWTH FUND*
VAN KAMPEN EUROPEAN EQUITY FUND*
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
VAN KAMPEN GLOBAL EQUITY FUND
VAN KAMPEN GLOBAL FIXED INCOME FUND
VAN KAMPEN GLOBAL FRANCHISE FUND*
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
VAN KAMPEN GROWTH AND INCOME FUND II*
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
VAN KAMPEN INTERNATIONAL MAGNUM FUND
VAN KAMPEN JAPANESE EQUITY FUND*
VAN KAMPEN LATIN AMERICAN FUND
VAN KAMPEN MID CAP GROWTH FUND*
MORGAN STANLEY MONEY MARKET FUND
MORGAN STANLEY TAX-FREE MONEY MARKET FUND*
VAN KAMPEN U.S. REAL ESTATE FUND
VAN KAMPEN VALUE FUND
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
VAN KAMPEN SMALL CAPITALIZATION FUND
VAN KAMPEN STRATEGIC SECTOR MUNICIPAL TRUST
VAN KAMPEN TAX-EXEMPT TRUST
on behalf of its Series
HIGH YIELD MUNICIPAL FUND
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
VAN KAMPEN CALIFORNIA TAX FREE INCOME FUND*
VAN KAMPEN FLORIDA INSURED TAX FREE INCOME FUND
VAN KAMPEN INSURED TAX FREE INCOME FUND
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
<PAGE> 3
VAN KAMPEN MICHIGAN TAX FREE INCOME FUND*
VAN KAMPEN MISSOURI TAX FREE INCOME FUND*
VAN KAMPEN MUNICIPAL INCOME FUND
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
VAN KAMPEN OHIO TAX FREE INCOME FUND*
VAN KAMPEN TAX FREE HIGH INCOME FUND
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN TRUST
VAN KAMPEN HIGH YIELD FUND
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
VAN KAMPEN STRATEGIC INCOME FUND
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN U.S. GOVERNMENT FUND
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
on behalf of its Series
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
* Funds have not commenced investment operations.
<PAGE> 4
<TABLE>
<S> <C>
Insured Municipals Income Trust Series 404
California Insured Municipals Income Trust Series 177
Colorado Insured Municipals Income Trust Series 87
Connecticut Insured Municipals Income Trust Series 38
Florida Insured Municipals Income Trust Series 123
Georgia Insured Municipals Income Trust Series 88
Maryland Investors' Quality Tax-Exempt Trust Series 87
Michigan Insured Municipals Income Trust Series 152
Minnesota Insured Municipals Income Trust Series 62
Missouri Insured Municipals Income Trust Series 108
New Jersey Insured Municipals Income Trust Series 124
New York Insured Municipals Income Trust Series 147
North Carolina Investors' Quality Tax-Exempt Trust Series 96
Ohio Insured Municipals Income Trust Series 110
Pennsylvania Insured Municipals Income Trust Series 239
South Carolina Investors' Quality Tax-Exempt Trust Series 86
Tennessee Insured Municipals Income Trust Series 41
Virginia Investors' Quality Tax-Exempt Trust Series 82
Van Kampen American Capital Insured Income Trust Series 72
Internet Trust Series 12
The Dow SM Strategic 10 Trust November 1998
Series
The Dow SM Strategic 10 Trust November 1998
Traditional
Series
The Dow SM Strategic 5 Trust November 1998
Series
The Dow SM Strategic 5 Trust November 1998
Traditional
Series
EAFE Strategic 20 Trust November 1998
Series
EURO Strategic 20 Trust November 1998
Series
Strategic Picks Opportunity Trust November 1998
Series
Great International Firms Trust Series 5
Dow 30 Index Trust Series 5
Dow 30 Index and Treasury Trust Series 7
Baby Boomer Opportunity Trust Series 5
Global Energy Trust Series 7
Brand Name Equity Trust Series 7
Edward Jones Select Growth Trust July 1998
Series
Banking Trust Series 4
Morgan Stanley High-Technology 35 Index Trust Series 4
Health Care Trust Series 4
Telecommunications Trust Series 4
Utility Trust Series 4
Financial Services Trust Series 4
Morgan Stanley Euro Tec Trust Series 1
Natcity Investments, Inc. Great American Equities Trust Series 1
Gruntal Global Transport Trust Series 1
Josepthal Financial Institutions Growth & Consolidation Trust Series 2001
Northern Illinois Equity Value Trust Series
Euro/Pacific Strategy Series 1
</TABLE>
<PAGE> 1
EXHIBIT (z)(2)
Item 27(b)
- ----------
<TABLE>
<S> <C> <C>
Powell, Don G. Chairman Houston, TX
Powers, Richard F. III Chief Executive Officer Oakbrook Terrace, IL
Zimmermann, III, John H. President Oakbrook Terrace, IL
Gehman, Douglas B. Executive Vice President Houston, TX
Nyberg, Ronald A. Executive Vice President, Gen. Coun., Asst. Sec. Oakbrook Terrace, IL
Rybak, William R. Executive Vice President & Chief Financial Officer Oakbrook Terrace, IL
Wolkenberg, Paul R. Executive Vice President Oakbrook Terrace, IL
Althoff, Laurence Joseph Senior Vice President & Controller Oakbrook Terrace, IL
DeMoss, Gary R. Senior Vice President Oakbrook Terrace, IL
Doyle, John E. Senior Vice President Oakbrook Terrace, IL
Golod, Richard G. Senior Vice President Annapolis, MD
Martin, Scott Evan Sen. V.P., Deputy Gen. Coun. and Sec. Oakbrook Terrace, IL
McGannon, Mark T. Senior Vice President Oakbrook Terrace, IL
Millington, Charles G. Senior Vice President and Treasurer Oakbrook Terrace, IL
Rein, Walter E. Senior Vice President Oakbrook Terrace, IL
Saucedo, Colette M. Senior Vice President Houston, TX
Shepherd, Frederick Senior Vice President Houston, TX
Sorenson, Steven P. Senior Vice President Oakbrook Terrace, IL
Stallard, Michael L. Senior Vice President Oakbrook Terrace, IL
West, Robert Scott Senior Vice President Oakbrook Terrace, IL
Wood, Edward C, III Senior Vice President & Chief Operating Officer Oakbrook Terrace, IL
Cackovic, Glenn M. First Vice President Laguna Nigel, CA
Hargens, Eric J. First Vice President Orlando, FL
Hogaboom, David S. First Vice President Oakbrook Terrace, IL
Martellaro, Dominic C. First Vice President Danville, CA
Mayfield, Carl First Vice President Lakewood, CO
McClure, Mark R. First Vice President Oakbrook Terrace, IL
Ryan, James J. First Vice President Oakbrook Terrace, IL
Vogel, George J. First Vice President Oakbrook Terrace, IL
Woelfel, Patrick J. First Vice President Oakbrook Terrace, IL
Abreu, Robert J. Vice President New York, NY
Ambrosio, James K. Vice President Massapequa, NY
Arcara, Brian P. Vice President Buffalo, NY
Bart, Louis P Vice President
Bettlach, Patricia A. Vice President Chesterfield, Mo
Biegel, Carol S. Vice President Oakbrook Terrace, IL
Bisaillon, Chistopher M. Vice President Oakbrook Terrace, IL
Boos, Michal P. Vice President Oakbrook Terrace, IL
Boyne, James Joseph V.P., Associate Gen. Coun. & Asst. Sec. Oakbrook Terrace, IL
Brooks, Robert C. Vice President Oakbrook Terrace, IL
Burke, Jr., William F. Vice President Mendham, NJ
Burket, Loren Vice President Plymouth, MN
Byrum, Christine Cleary Vice President Tampa, FL
Caggiano, Joseph N. Vice President New York, NY
Chambers, Daniel R. Vice President Austin, TX
</TABLE>
<PAGE> 2
[CAPTION]
<TABLE>
<S> <C> <C>
Charlino, Richard J. Vice President Houston, TX
Chiaro, Deanne Margaret Vice President Oakbrook Terrace, IL
Chriske, Scott A. Vice President Plano, TX
Clavijo, German Vice President Atlanta, GA
Cloud, Eleanor M. Vice President Oakbrook Terrace, IL
Cogliandro, Dominick Vice President and Assistant Treasurer New York, NY
Colston, Michael Vice President Louisville, KY
Cummings, Suzanne Vice President Oakbrook Terrace, IL
Dalmaso, Nicholas V.P., Associate Gen. Coun. & Asst. Sec. Oakbrook Terrace, IL
Eccleston, Michael E. Vice President Oakbrook Terrace, IL
Eckhard, Jonathan Vice President Tampa, FL
Falgout, Huey P. Jr. V.P., Asst. Secretary and Sr. Attorney Houston, TX
Fisher, Charles Edward Vice President Naperville, IL
Fow, William J. Vice President Redding, CT
Foxhoven, Nicholas J. Vice President Englewood, CO
Friday, Charles Vice President Gibsonia, PA
Griffith, Timothy D. Vice President Kirkland, WA
Haas, Kyle D. Vice President Oakbrook Terrace, IL
Hamilton, Daniel Vice President Austin, TX
Hansen, John G. Vice President Oakbrook Terrace, IL
Hays, Joseph Vice President Cherry Hill, NJ
Heffington, Gregory Vice President Ft. Collins, CO
Hill, Susan Jean Vice President and Senior Attorney Oakbrook Terrace, IL
Hindelang, Thomas R. Vice President Gilbert, AZ
Hoggard, Bryn M. Vice President Houston, TX
Hughes, Michael B. Vice President Oakbrook Terrace, IL
Hunt, Robert S. Vice President Phoenix, MD
Jackson, Lowell Vice President Norcross, GA
Jajuga, Kevin G. Vice President Baltimore, MD
Johnson, Steven T. Vice President Oakbrook Terrace, IL
Klein, Dana R. Vice President Oakbrook Terrace, IL
Kohly, Frederick Vice President Miami, FL
Kowalski, David Richard Vice President & Director of Compliance Oakbrook Terrace, IL
Kozlowski, Richard D. Vice President Atlanta, GA
Langs, Bradford N. Vice President Oakbrook Terrace, IL
Lathrop, Patricia D. Vice President Tampa, FL
Laux, Brian Vice President Staten Island, NY
Leal, Tony E. Vice President Daphne, AL
Lehew III, S. William Vice President Charlotte, NC
Levinson, Eric Vice President San Francisco, CA
Linstra, Jonathan Vice President Oakbrook Terrace, IL
Lundgren, Richard M. Vice President Oakbrook Terrace, IL
Lynn, Walter Vice President Flower Mound, TX
MacAyeal, Linda S. Vice President and Senior Attorney Oakbrook Terrace, IL
Marsh, Kevin S. Vice President Bellevue, WA
</TABLE>
<PAGE> 3
[CAPTION]
<TABLE>
<S> <C> <C>
McCartney, Brooks D. Vice President Puyallup, WA
McGrath, Anne Therese Vice President Los Gatos, CA
McGrath, Maura A. Vice President New York, NY
Mills, John Vice President Kenner, LA
Morrow, Ted Vice President Dallas, TX
Muller, Jr. Robert F. Vice President Cypress, TX
Nicolas, Peter Vice President Beverly, MA
Page, Todd W. Vice President Oakbrook Terrace, IL
Parker, Gregory S. Vice President Houston, TX
Petrungaro, Christopher Vice President Oakbrook Terrace, IL
Poli, Richard J. Vice President Philadelphia, PA
Pratt, Ronald E. Vice President Marletta, GA
Prichard, Craig S. Vice President Fairlawn, OH
Reams, Daniel D. Vice President Royal Oak, MI
Rohr, Michael W. Vice President Oakbrook Terrace, IL
Rose, Jeffrey L. Vice President Houston, TX
Rothberg, Suzette N. Vice President Plymouth, MN
Rourke, Jeffrey Vice President Oakbrook Terrace, IL
Rowley, Thomas Vice President St. Louis, MO
Sabo, Heather R. Vice President Richmond, VA
Scarlata, Stephanie Vice President Bedford Corners, NY
Scherer, Andrew J. Vice President Oakbrook Terrace, IL
Schuster, Ronald J. Vice President Tampa, FL
Shaneyfelt, Gwen L. Vice President Oakbrook Terrace, IL
Shirk, Jefferey C. Vice President Swampscott, MA
Sorensen, Traci T. Vice President Oakbrook Terrace, IL
Spangler, Kimberly M. Vice President Fairfax, VA
Stabler, Darren D. Vice President Phoenix, AZ
Staniforth, Christopher Vice President Leawood, KS
Stefanec, Richard Vice President Los Angeles, CA
Stevens, James D. Vice President North Andover, MA
Strafford, William C. Vice President Granger, IN
Syswerda, Mark A. Vice President Oakbrook Terrace, IL
Tabone, David A. Vice President Scottsdale, AZ
Tierney, John F. Vice President Oakbrook Terrace, IL
Ulvestad, Curtis L. Vice President Red Wing, MN
Volkman, Todd A. Vice President Austin, TX
Waldron, Daniel B. Vice President Oakbrook Terrace, IL
Warland, Jeff Vice President Oakbrook Terrace, IL
Wetherell, Weston B. V.P., Associate Gen. Coun. & Asst. Sec Oakbrook Terrace, IL
Whitworth III, Harold Vice President Oakbrook Terrace, IL
Wilson, Thomas M. Vice President Oakbrook Terrace, IL
Withers, Barbara A. Vice President Oakbrook Terrace, IL
Wynn, David M. Vice President Phoenix, AZ
Yount, James R. Vice President Mercer Island, WA
</TABLE>
<PAGE> 4
[CAPTION]
<TABLE>
<S> <C> <C>
Zacchea, Patrick M. Vice President Oakbrook Terrace, IL
Becker, Scott F. Assistant Vice President Oakbrook Terrace, IL
Binder, Brian E. Assistant Vice President Oakbrook Terrace, IL
Blackwood, Joan E. Assistant Vice President Oakbrook Terrace, IL
Bronaugh, Billie J. Assistant Vice President Houston, TX
Brunk, Gregory T. Assistant Vice President Oakbrook Terrace, IL
Costello, Gina Assistant Vice President & Assistant Secretary Oakbrook Terrace, IL
Gieser, Sarah K. Assistant Vice President Oakbrook Terrace, IL
Gray, Walter C. Assistant Vice President Houston, TX
Jones, Laurie L. Assistant Vice President Houston, TX
Jordan, Robin R. Assistant Vice President Oakbrook Terrace, IL
Lowe, Ivan R. Assistant Vice President Houston, TX
Moehlman, Stuart R. Assistant Vice President Houston, TX
Norvid, Steven R. Assistant Vice President Oakbrook Terrace, IL
Putong, Christine K. Assistant Vice President & Assistant Secretary Oakbrook Terrace, IL
Robbins, David P. Assistant Vice President Oakbrook Terrace, IL
Rosen, Regina Assistant Vice President Oakbrook Terrace, IL
Salley, Pamela S. Assistant Vice President Houston, TX
Sanchez, Vanessa M. Assistant Vice President Oakbrook Terrace, IL
Sauerborn, Thomas J. Assistant Vice President New York, NY
Saxon, Bruce Assistant Vice President Oakbrook Terrace, IL
Saylor, David T. Assistant Vice President Oakbrook Terrace, IL
Schmieder, Christina L. Assistant Vice President Oakbrook Terrace, IL
Sinai, Lauren B. Assistant Vice President Oakbrook Terrace, IL
Transier, Kristen L. Assistant Vice President Houston, TX
Villarreal, David H. Assistant Vice President Oakbrook Terrace, IL
Wells, Sharon M.C. Assistant Vice President Oakbrook Terrace, IL
Napoli, Cathy Assistant Secretary Oakbrook Terrace, IL
Brown, Elizabeth M. Officer Houston, TX
Browning, John Officer Oakbrook Terrace, IL
George, Leticia Officer Houston, TX
McLaughlin, William D. Officer Houston, TX
Newman, Rebecca Officer Houston, TX
Renn, Theresa M. Officer Oakbrook Terrace, IL
Vickrey, Larry Officer Houston, TX
Yovanovic, John Officer Houston, TX
Powell, Don G. Director
Powers, Richard F. III Director
Nyberg, Ronald A. Director
Rybak, William R. Director
Zimmermann, III, John H. Director
</TABLE>
