<PAGE> 1
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 passed
upon on the accuracy or adequacy of this
prospectus. It is a criminal offense to state
otherwise.
This prospectus is dated DECEMBER 29, 1998,
AS SUPPLEMENTED ON FEBRUARY 22, 1999
AND APRIL 26, 1999
[VAN KAMPEN FUNDS LOGO]
<PAGE> 2
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.
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........................ 18
Shareholder Services............................... 18
Federal Income Taxation............................ 20
Financial Highlights............................... 21
</TABLE>
<PAGE> 3
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 that 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 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. An investment in the Fund is subject
to investment risks and you could lose money on your investment in the Fund.
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 managed 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
investment and the Fund should not be used as a trading vehicle.
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3
<PAGE> 4
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 supplemented. 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>
'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
'1998' 34.73
</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 two broad-based market
indices that the Fund's management believes are applicable benchmarks for the
Fund: Russell 2000 Stock Index and the Standard & Poor's Midcap 400 Index. The
Fund's performance figures include the maximum sales charges paid by investors.
The indices' performance figures do not include commissions or sales charges
that would be paid by investors. Average annual total returns are shown for the
periods ended December 31, 1998 (the most recently completed calendar year prior
to the date of this prospectus, as supplemented). 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, 1998 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen
Emerging Growth
Fund
.......................................................
Class A Shares 26.98% 19.53% 21.50%
.......................................................
Class B Shares 28.66% 19.85% 21.23%(1)
.......................................................
Class C Shares 32.65% 20.00% 20.08%(2)
.......................................................
Russell 2000
Stock Index -2.55% 11.87% 12.92%
13.86%(3)
12.96%(4)
.......................................................
Standard & Poor's
Midcap 400 Index 19.11% 18.84% 19.29%
18.62%(5)
18.80%(6)
.......................................................
</TABLE>
Inception dates: (1) 4/20/92, (2) 7/6/93, (3) 4/30/92, (4) 6/30/93,
(5) 4/23/92, (6) 7/8/93.
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<PAGE> 5
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 None(2) 5.00%(3) 1.00%(4)
proceeds)
..............................................................
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."
(3) The maximum deferred sales charge is 5.00% in the first year after purchase
and declining thereafter as follows:
Year 1-5.00%
Year 2-4.00%
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
See "Purchase of Shares -- Class B Shares."
(4) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
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.
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>
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<PAGE> 6
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $671 $875 $1,096 $1,729
......................................................................
Class B Shares $182 $563 $ 970 $1,897*
......................................................................
Class C Shares $182 $563 $ 970 $2,105
......................................................................
</TABLE>
* Based on conversion to Class A Shares after eight years.
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. The Fund's investment 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 are risks
inherent in all investments in securities; accordingly, there can be no
assurance that the Fund will achieve its 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. The Fund's investment adviser, under current market conditions,
generally defines small and medium sized companies by reference to the Standard
& Poor's Midcap 400 Index (which consists of companies in the capitalization
range of approximately $170 million to $14 billion as of March 31, 1999).
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.
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<PAGE> 7
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
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7
<PAGE> 8
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 securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information 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.
TEMPORARY DEFENSIVE STRATEGY. 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.
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<PAGE> 9
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 $75 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 independent accountant 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, Senior Portfolio Manager. Mr. Lewis has been Senior Vice President of the
Adviser since October 1995 and Advisory Corp. since June 1995. Prior to October
1995, Mr. Lewis was Vice President--Portfolio Manager of the Adviser. Portfolio
Managers Dudley Brickhouse, David Walker and Janet Luby are responsible as
co-managers for the day-to-day management of the Fund's investment portfolio.
Mr. Brickhouse, a Portfolio Manager and Vice President of the Adviser and
Advisory Corp. since January 1999, was an Associate Portfolio Manager of the
Adviser and Advisory Corp. since September 1997. Prior to September 1997, Mr.
Brickhouse was with NationsBank Investment Management. Mr. Brickhouse has been
affiliated with the Fund since September 1997. Mr. Walker, a Portfolio Manager
and Vice President of the Adviser and Advisory Corp. since January 1999, was an
Assistant Vice President of the Adviser and Advisory Corp. since June 1995.
Prior to June 1995, Mr. Walker was a Quantitative Analyst of the Adviser. Mr.
Walker has
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<PAGE> 10
been affiliated with the Fund since June 1995. Ms. Luby, a Portfolio Manager and
Vice President of the Adviser and Advisory Corp. since January 1999, was an
Assistant Vice President of the Adviser and Advisory Corp. since January 1997.
Prior to January 1997, Ms. Luby was an Associate Portfolio Manager of the
Adviser. Prior to July 1995, Ms. Luby was with AIM Capital Management, Inc. Ms.
Luby has been affiliated with the Fund since January 1997.
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 offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.
The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading. 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. Long-term shareholders may pay more than the
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10
<PAGE> 11
economic equivalent of the maximum front-end sales charges permitted by National
Association of Securities Dealers, Inc. rules. 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, 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 offering price for shares 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
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11
<PAGE> 12
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. The rates in this paragraph are 0.15% per year of the
Fund's average daily net assets attributable to Class A Shares with respect to
accounts existing on or before September 30, 1989.
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
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12
<PAGE> 13
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. The aggregate
distribution and service fees are currently 1.00% per year of the average daily
net assets attributable to Class C Shares of the Fund. The aggregate
distribution and service fees are 0.90% per year of the average daily net assets
attributable to Class C Shares of the Fund with respect to accounts existing on
or before March 31, 1995.
CONVERSION FEATURE
Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment
plan shares received thereon, automatically convert to Class A Shares eight
years after the end of the calendar month in which the shares were purchased.
Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan
shares received thereon, automatically convert to Class A Shares six years after
the end of the calendar month in which the shares were purchased. Class C Shares
purchased before January 1, 1997, and any dividend reinvestment plan shares
received thereon, automatically convert to Class A Shares ten years after the
end of the calendar month in which 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.
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13
<PAGE> 14
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 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
-
14
<PAGE> 15
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 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
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15
<PAGE> 16
sales to $2 million, plus 0.80% on the next $1 million, plus 0.50% on the
next $47 million, plus 0.25% on the excess over $50 million.
(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the Fund
and Participating Funds, (iv) has a membership that the authorized dealer
can certify as to the group's members and (v) satisfies other uniform
criteria established by the Distributor for the purpose of realizing
economies of scale in distributing such shares. A qualified group does not
include one whose sole organizational nexus, for example, is that its
participants are credit card holders of the same institution, policy holders
of an insurance company, customers of a bank or broker-dealer, clients of an
investment adviser or other similar groups. Shares purchased in each group's
participants account in connection with this privilege will be subject to a
contingent deferred sales charge of 1.00% in the event of redemption within
one year of purchase, and a commission will be paid to authorized dealers
who initiate and are responsible for such sales to each individual as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million and
0.50% on the excess over $3 million.
The term "families" includes a person's spouse, children 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 Redemption 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
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16
<PAGE> 17
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 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
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17
<PAGE> 18
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.
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.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Sharehold-
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18
<PAGE> 19
ers seeking an exchange into a Participating Fund should obtain and read the
current prospectus for such fund.
To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at least 30 days. Shares of the Fund registered in a
shareholder's name for less than 30 days may only be exchanged upon receipt of
prior approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, not to approve such requests.
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 by them to be reasonable to
confirm that instructions
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19
<PAGE> 20
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.
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20
<PAGE> 21
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> 22
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> 23
VAN KAMPEN
EMERGING GROWTH FUND
PROSPECTUS
DECEMBER 29, 1998
AS SUPPLEMENTED ON FEBRUARY 22, 1999
AND APRIL 26, 1999
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 4/99
