<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1996.
REGISTRATION NOS. 2-31417
811-1792
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 46 /X/
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 31 /X/
</TABLE>
VAN KAMPEN AMERICAN CAPITAL PACE FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(630) 684-6000
(REGISTRANT'S TELEPHONE NUMBER)
Ronald A. Nyberg, Esq.
Executive Vice President, General Counsel and Secretary
Van Kampen American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Name and Address of Agent for Service)
Copies to:
Wayne W. Whalen, Esq.
Thomas A. Hale, Esq.
Skadden, Arps, Slate, Meagher & Flom
333 W. Wacker Drive
Chicago, IL 60606
(312) 407-0700
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/X/ on October 28, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24F-2
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES
ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 AND
INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A FORM 24F-2 FOR ITS
FISCAL YEAR ENDING JUNE 30, 1997 ON OR ABOUT AUGUST 31, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL PACE FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM
PART A PROSPECTUS CAPTION
-------------------------------------------
<C> <S> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... The Fund; Investment Objective and
Policies; Investment Practices; Description
of Shares of the Fund
5. Management of the Fund..................... The Fund; Investment Practices; Investment
Advisory Services; Inside Back Cover
6. Capital Stock and Other Securities......... Alternative Sales Arrangements; The Fund;
Shareholder Services; Distribution and
Service Plans; Redemption of Shares;
Distributions from the Fund; Tax Status;
Description of Shares of the Fund; Inside
Back Cover
7. Purchase of Securities Being Offered....... Alternative Sales Arrangements; Purchase of
Shares; Shareholder Services;
Distribution and Service Plans
8. Redemption or Repurchase................... Shareholder Services; Redemption of Shares
9. Pending Legal Proceedings.................. Inapplicable
</TABLE>
<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
-------------------------------------------
<C> <S> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Restrictions; Options, Futures
Contracts and Related Options
14. Management of the Fund..................... General Information; Trustees and Officers;
Investment Advisory Agreement
15. Control Persons and Principal Holders of
Securities............................... General Information; Trustees and Officers;
Investment Advisory Agreement
16. Investment Advisory and Other Services..... Investment Advisory Agreement; Distributor;
Distribution and Service Plans; Transfer
Agent; Portfolio Transactions and
Brokerage; Other Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; Alternative Sales
Arrangements; Exchange Privilege
20. Tax Status................................. Dividends, Distributions and Federal Taxes
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Fund Performance
23. Financial Statements....................... Report of Independent Accountants;
Financial Statements; Notes to Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item in Part C of this registration statement.
<PAGE> 3
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
PACE FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital Pace Fund (the "Fund") is a professionally
managed mutual fund. The investment objective of the Fund is growth of capital.
The Fund seeks to achieve its investment objective by investing in a portfolio
of securities consisting primarily of common stocks that the Fund's investment
adviser believes have an above average potential for capital growth. There is no
assurance that the Fund will achieve its investment objective.
The Fund's investment adviser is Van Kampen American Capital Asset
Management, Inc. This Prospectus sets forth certain information that a
prospective investor should know before investing in the Fund. Please read it
carefully and retain it for future reference. The address of the Fund is One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, and its telephone number is
(800) 421-5666.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR STATE REGULATORS NOR HAS THE COMMISSION OR ANY STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION AND ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated October 28, 1996, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this Prospectus. A copy of the Statement of Additional Information
may be obtained without charge by calling (800) 421-5666 or for
Telecommunications Device For the Deaf at (800) 772-8889. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related materials at the
SEC's internet web site (http://www.sec.gov).
------------------
VAN KAMPEN AMERICAN CAPITAL (SM)
------------------
THIS PROSPECTUS IS DATED OCTOBER 28, 1996.
<PAGE> 4
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary............................................... 3
Shareholder Transaction Expenses................................. 5
Annual Fund Operating Expenses and Example....................... 6
Financial Highlights............................................. 8
The Fund......................................................... 10
Investment Objective and Policies................................ 10
Investment Practices............................................. 11
Investment Advisory Services..................................... 16
Alternative Sales Arrangements................................... 18
Purchase of Shares............................................... 21
Shareholder Services............................................. 31
Redemption of Shares............................................. 35
Distribution and Service Plans................................... 39
Distributions from the Fund...................................... 41
Tax Status....................................................... 41
Fund Performance................................................. 44
Description of Shares of the Fund................................ 46
Additional Information........................................... 47
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 5
- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital Pace Fund (the "Fund") is a diversified
open-end management investment company organized as a Delaware business trust.
MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum subsequent investment for each class of shares (or less as described
under "Purchase of Shares").
INVESTMENT OBJECTIVE. The investment objective of the Fund is capital growth.
There is, however, no assurance that the Fund will be successful in achieving
its objective. See "Investment Objective and Policies."
INVESTMENT POLICY. The Fund invests primarily in common stocks of companies that
the Fund's investment adviser believes have an above average potential for
capital growth. The use of options, futures contracts and related options and
investments in foreign securities include risks other than those associated with
investment in common stocks. See "Investment Practices -- Using Options, Futures
Contracts and Related Options" and "Investment Practices -- Securities of
Foreign Issuers." The value of an investment in the Fund will vary based upon
fluctuations in the prices of common stocks and other securities in which the
Fund invests.
INVESTMENT RESULTS. The investment results of the Fund are shown in the table of
"Financial Highlights."
ALTERNATIVE SALES ARRANGEMENTS. The Fund offers three classes of shares to the
public, each with its own sales charge structure: Class A shares, Class B shares
and Class C shares. Each class has distinct advantages and disadvantages for
different investors, and investors may choose the class of shares that best
suits their circumstances and objectives. Each class of shares represents an
interest in the same portfolio of investments of the Fund. See "Alternative
Sales Arrangements." For information on redeeming shares see "Redemption of
Shares."
Class A Shares. Class A shares are offered at net asset value per share plus a
maximum initial sales charge of 5.75% of the offering price (6.10% of the net
amount invested), reduced on investments of $50,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a contingent deferred sales charge ("CDSC") of 1.00% may be imposed on
redemptions made within one year of the purchase. Class A shares are subject to
an annual service fee of up to 0.25% of its average daily net assets
attributable to such class of shares. See "Purchase of Shares -- Class A Shares"
and "Distribution and Service Plans."
3
<PAGE> 6
Class B Shares. Class B shares are offered at net asset value per share and
are subject to a maximum CDSC of 5.00% of redemption proceeds on redemptions
made within the first year after purchase and declining thereafter to 0.00%
after the fifth year. See "Redemption of Shares." Class B shares are subject to
a combined annual distribution fee and service fee of up to 1.00% of the Fund's
average daily net assets attributable to such class of shares. See "Purchase of
Shares -- Class B Shares" and "Distribution and Service Plans." Class B shares
convert automatically to Class A shares eight years after the end of the
calendar month in which the shareholder's order to purchase was accepted. See
"Alternative Sales Arrangements -- Conversion Feature."
Class C Shares. Class C shares are offered at net asset value per share and
are subject to a contingent deferred sales charge of 1.00% of redemption
proceeds on redemptions made within one year of purchase. See "Redemption of
Shares." Class C shares are subject to a combined annual distribution fee and
service fee of up to 1.00% of the Fund's average daily net assets attributable
to such class of shares. See "Purchase of Shares -- Class C Shares" and
"Distribution and Service Plans." Class C shares convert automatically to Class
A shares ten years after the end of the calendar month in which the
shareholder's order to purchase was accepted. See "Alternative Sales
Arrangements -- Conversion Feature."
INVESTMENT ADVISER. Van Kampen American Capital Asset Management, Inc. (the
"Adviser") is the Fund's investment adviser.
DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.
DISTRIBUTIONS FROM THE FUND. Dividends from net investment income and capital
gains, if any, are distributed annually. All dividends and distributions are
automatically reinvested in shares of the Fund at net asset value per share
(without sales charge), unless payment in cash is requested. See "Distributions
from the Fund."
The foregoing is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus.
4
<PAGE> 7
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
--------- ----------------- -------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price)............... 5.75%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of offering
price)........................ None None None
Deferred sales charge (as a
percentage of the lesser of
original purchase price or
redemption proceeds).......... None(2) Year 1--5.00% Year 1--1.00%
Year 2--4.00% After--None
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a percentage
of amount redeemed)........... None None None
Exchange fee.................... None None None
</TABLE>
- ------------------------------------------------------------------------------
(1) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on redemptions made
within one year of the purchase. See "Purchase of Shares -- Class Shares."
5
<PAGE> 8
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
--------- --------- ---------
<S> <C> <C> <C>
Management Fees (as a percentage of
average daily net assets)............. 0.46% 0.46% 0.46%
12b-1 Fees(1) (as a percentage of
average daily net assets)............. 0.21% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage of
average daily net assets)............. 0.27% 0.29% 0.29%
Total Expenses (as a percentage of
average daily net assets)............. 0.94% 1.75% 1.75%
</TABLE>
- ------------------------------------------------------------------------------
(1) Class A shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
shares and Class C shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Distribution and Service Plans."
(2) Individual long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales charges permitted as a Fund-level expense by
NASD Rules.
6
<PAGE> 9
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLE: YEAR YEARS YEARS YEARS
------ ------ ------ ------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an
operating expense ratio of 0.94% for
Class A shares, 1.75% for Class B shares
and 1.75% for Class C shares, (ii) a 5%
annual return and (iii) redemption at the
end of each time period:
Class A............................... $ 67 $ 86 $107 $166
Class B............................... $ 69 $ 88 $112 $185*
Class C............................... $ 28 $ 55 $ 95 $206
You would pay the following expenses on
the same $1,000 investment assuming no
redemption at the end of each time
period:
Class A............................... $ 67 $ 86 $107 $166
Class B............................... $ 18 $ 55 $ 95 $185*
Class C............................... $ 18 $ 55 $ 95 $206
</TABLE>
- ------------------------------------------------------------------------------
* Based on conversion to Class A shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5% annual return
assumption. Class B shares acquired through the exchange privilege are subject
to the deferred sales charge schedule relating to the Class B shares of the fund
from which the purchase of Class B shares was originally made. Accordingly,
future expenses as projected could be higher than those determined in the above
table if the investor's Class B shares were exchanged from a fund with a higher
CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. For a more complete description of such costs and
expenses, see "Purchase of Shares," "Investment Advisory Services," "Redemption
of Shares" and "Distribution and Service Plans."
7
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for a share of beneficial interest
outstanding throughout each of the periods indicated)
- --------------------------------------------------------------------------------
The following financial highlights have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified and is included in
the Statement of Additional Information, which may be obtained by shareholders
without charge by calling the telephone number on the cover of this Prospectus.
This information should be read in conjunction with the financial statements and
notes thereto included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A(1)
-----------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30
-----------------------------------------------------------------------------------------------------------
1996('(3) 1995(3) 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of
period............. $ 11.62 $ 11.05 $ 12.95 $ 13.21 $ 12.37 $ 12.69 $ 12.72 $ 11.19 $ 14.47 $ 12.19
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
OPERATIONS
Investment
income........... .23 .25 .26 .305 .335 .40 .465 .40 .36 .365
Expenses........... (.11) (.11) (.13) (.14) (.14) (.125) (.12) (.085) (.075) (.07)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment
income............. .12 .14 .13 .165 .195 .275 .345 .315 .285 .295
Net realized and
unrealized gain
(loss) on
securities......... 2.09 1.85 (.1475) 1.69 1.095 .1575 1.3188 1.55 (1.8787) 2.7275
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations......... 2.21 1.99 (.0175) 1.855 1.29 .4325 1.6638 1.865 (1.5937) 3.0225
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
FROM
Net investment
income........... (.15) (.1225) (.135) (.145) (.2375) (.29) (.3675) (.2875) (.4263) (.325)
Net realized gain
on securities.... (1.76) (1.2975) (1.7475) (1.97) (.2125) (.4625) (1.3263) (.0475) (1.26) (.4175)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions...... (1.91) (1.42) (1.8825) (2.115) (.45) (.7525) (1.6938) (.335) (1.6863) (.7425)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end
of period.......... $ 11.92 $ 11.62 $ 11.05 $ 12.95 $ 13.21 $ 12.37 $ 12.69 $ 12.72 $ 11.19 $ 14.47
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
TOTAL RETURN(4)..... 20.48% 20.62% (.64%) 15.20% 10.58% 4.31% 13.69% 17.32% (11.92%) 26.53%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of
period
(millions)....... $2,534.3 $2,279.4 $2,152.5 $2,446.2 $2,350.2 $2,348.7 $2,456.8 $2,405.6 $2,487.5 $3,001.4
Ratios to average
net assets
Expenses........... .94% 1.04% 1.02% 1.06% 1.00% 1.01% .88% .72% .66% .60%
Expenses, without
expense
reimbursement.... .94%
Net investment
income........... 1.02% 1.24% .99% 1.22% 1.38% 2.22% 2.55% 2.58% 2.42% 2.51%
Net investment
income, without
expense
reimbursement.... 1.02%
Portfolio turnover
rate............... 213% 248% 112% 113% 54% 40% 39% 45% 62% 36%
Average commission
rate per equity
stock traded....... $0.055 NA NA NA NA NA NA NA NA NA
</TABLE>
(Table continued on following page)
8
<PAGE> 11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B (3)
------------------------------------------------
YEAR ENDED JUNE 30
------------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............................... $ 11.53 $10.96 $12.86 $13.13
--------- --------- --------- ---------
INCOME FROM OPERATIONS
Investment income................................................. .23 .25 .25 .29
Expenses.......................................................... (.21) (.20) (.22) (.26)
--------- --------- --------- ---------
Net investment income.............................................. .02 .05 .03 .03
Net realized and unrealized gain (loss) on securities.............. 2.07 1.85 (.1575) 1.705
--------- --------- --------- ---------
Total from investment operations................................... 2.09 1.90 (.1275) 1.735
--------- --------- --------- ---------
LESS DISTRIBUTIONS FROM
Net investment income............................................. (.05) (.0325) (.025) (.035)
Net realized gain on securities................................... (1.76) (1.2975) (1.7475) (1.97)
--------- --------- --------- ---------
Total distributions................................................ (1.81) (1.33) (1.7725) (2.005)
--------- --------- --------- ---------
Net asset value, end of period..................................... $11.81 $11.53 $10.96 $12.86
========= ========= ========= =========
TOTAL RETURN(4).................................................... 19.44% 19.73% (1.46%) 12.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)............................... $72.1 $53.0 $35.8 $27.7
Ratios to average net assets (annualized)
Expenses.......................................................... 1.75% 1.84% 1.79% 1.98%
Expenses, without expense reimbursement........................... 1.75% NA NA NA
Net investment income............................................. .21% .44% .21% .25%
Net investment income, without expense reimbursement.............. .21% NA NA NA
Portfolio turnover rate............................................ 213% 248% 112% 113%
Average commission rate per equity stock traded.................... $0.055 NA NA NA
<CAPTION>
CLASS B (3) CLASS C (3)
------------- -------------------------------------
JANUARY 10, AUGUST 27,
1992 (2) YEAR 1993 (2)
THROUGH ENDED THROUGH
JUNE 30, JUNE 30, JUNE 30,
1992 1996 1995 1994
----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............................... $13.87 $11.52 $10.99 $13.25
----- ----------- -------- ----------
INCOME FROM OPERATIONS
Investment income................................................. .15 .23 .25 .17
Expenses.......................................................... (.10) (.21) (.20) (.15)
----- ----------- -------- ----------
Net investment income.............................................. .05 .02 .05 .02
Net realized and unrealized gain (loss) on securities.............. (.79) 2.10 1.81 (.4375)
----- ----------- -------- ----------
Total from investment operations................................... (.74) 2.12 1.86 (.4175)
----- ----------- -------- ----------
LESS DISTRIBUTIONS FROM
Net investment income............................................. -- (.05) (.0325) (.095)
Net realized gain on securities................................... -- (1.76) (1.2975) (1.7475)
----- ----------- -------- ----------
Total distributions................................................ -- (1.81) (1.33) (1.8425)
----- ----------- -------- ----------
Net asset value, end of period..................................... $13.13 $11.83 $11.52 $10.99
====== =========== ========= =========
TOTAL RETURN(4).................................................... (5.34%) 19.74% 19.27% (3.70%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)............................... $11.7 $4.5 $2.2 $1.2
Ratios to average net assets (annualized)
Expenses.......................................................... 1.82% 1.75% 1.84% 1.81%
Expenses, without expense reimbursement........................... NA 1.75% NA NA
Net investment income............................................. .56% .15% .44% .24%
Net investment income, without expense reimbursement.............. NA .15% NA NA
Portfolio turnover rate............................................ 54% 213% 248% 112%
Average commission rate per equity stock traded.................... NA $0.055 NA NA
</TABLE>
- ------------
(1) Per share information for the years 1990 through 1987 has been adjusted to
reflect a 2 for 1 stock split effective June 8, 1990.
(2) Commencement of offering of sales.
(3) Based on average shares outstanding.
(4) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
9
<PAGE> 12
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company, commonly
known as a mutual fund. A mutual fund provides, for those who have similar
investment goals, a practical and convenient way to invest in a diversified
portfolio of securities by combining their resources in an effort to achieve
such goals.
Van Kampen American Capital Asset Management, Inc. (the "Adviser") provides
investment advisory and administrative services to the Fund. The Adviser and its
affiliates also manage other mutual funds distributed by Van Kampen American
Capital Distributors, Inc. (the "Distributor"). To obtain prospectuses and other
information on any of these other funds, please call the telephone number on the
cover page of the Prospectus.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The investment objective of the Fund is capital growth. The Fund seeks to
achieve its investment objective by investing in a portfolio of securities
consisting primarily of common stocks believed by the Adviser to have an above
average potential for capital growth. Any income received on such securities is
incidental to achieving the Fund's investment objective of growth. The value of
an investment in the Fund will vary based upon fluctuations in the prices of the
common stocks and other securities in which the Fund invests. The Fund may
invest in securities that have above average volatility of price movement. 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 investment objective.
The Fund generally holds a portion of its assets in investment grade
short-term debt securities and investment grade corporate or government bonds in
order to provide liquidity. The Fund may invest up to 100% of its assets in high
quality debt securities for temporary defensive purposes. Short-term investments
may include repurchase agreements with domestic banks or broker-dealers. The
Fund also may invest up to 15% of its total assets in securities of foreign
issuers and may invest in investment companies.
10
<PAGE> 13
- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
domestic banks or broker-dealers in order to earn a return on temporarily
available cash. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. The Fund will not invest in
repurchase agreements maturing in more than seven days if any such investment,
together with any other illiquid securities held by the Fund, exceeds 10% of the
value of its net assets. The Fund may invest up to 25% of its assets in
repurchase agreements but will not invest in repurchase agreements maturing in
more than seven days if any such investment, together with any other illiquid
securities held by the Fund, would exceed 10% of the value of its net assets. In
the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses including: (a) a possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto; (b) a possible lack of access to income on the underlying security
during this period; and (c) expenses of enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that funds advised or subadvised by the Adviser would
otherwise invest separately into a joint account. The cash in the joint account
is then invested in repurchase agreements and the funds that contributed to the
joint account share pro rata in the net revenue generated. The Adviser believes
that the joint account produces efficiencies and economies of scale that may
contribute to reduced transaction costs, higher returns, higher quality
investments and greater diversity of investments for the Fund than would be
available to the Fund investing separately. The manner in which the joint
account is managed is subject to conditions set forth in an SEC exemptive order
authorizing this practice, which conditions are designed to ensure the fair
administration of the joint account and to protect the amounts in that account.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest up to 15% of the value of
its total assets in securities of foreign governments and companies. Such
investments may be subject to special risks, including changes in currency
exchange rates, future political and economic developments, the possible
imposition of additional withholding taxes on dividend or interest income
payable on the securities, or the seizure or nationalization of companies, or
establishment of exchange controls or adoption of other restrictions which might
adversely affect the investment.
The Fund may purchase foreign securities in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
representing underlying shares of foreign companies. ADRs are publicly traded
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<PAGE> 14
on exchanges or over-the-counter in the United States and are issued through
"sponsored" or "unsponsored" arrangements. In a sponsored ADR arrangement, the
foreign issuer assumes the obligation to pay some or all of the depositary's
transaction fees, whereas under an unsponsored arrangement, the foreign issuer
assumes no obligation and the depositary's transaction fees are paid by the ADR
holders. In addition, less information is available in the United States about
an unsponsored ADR than about a sponsored ADR and the financial information
about a company may not be as reliable for an unsponsored ADR as it is for a
sponsored ADR. The Fund may invest in ADRs through both sponsored and
unsponsored arrangements.
USING OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS. The Fund expects to
utilize futures contracts and options thereon in several different ways,
depending upon the status of the Fund's portfolio and the Adviser's expectations
concerning the securities markets.
In times of stable or rising stock prices, the Fund generally seeks to be
fully invested in the stock market. 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 also may have cash on hand that has not yet been invested. The portion
of the Fund's assets that is invested in cash equivalents does not fluctuate
with stock market prices, so that, in times of rising market prices, the Fund
may underperform the market in proportion to the amount of cash equivalents in
its portfolio. By purchasing stock index futures contracts, however, the Fund
can seek to "equitize" the cash portion of its assets and may obtain performance
equivalent to investing 100% of its assets in equity securities.
If the Adviser anticipates a market decline, the Fund may take a defensive
position, reducing its exposure to the stock market by increasing its cash
position. By selling stock index futures contracts instead of portfolio
securities, a similar result may be achieved to the extent that the performance
of the stock index 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 selling stock index futures contracts, the Fund can
purchase stock index puts, or stock index futures puts, to hedge the portfolio's
risk in a declining market. Since the value of a put increases as the index
declines below a specified level, the portfolio's value is protected against a
market decline to the degree the performance of the index correlates with the
performance of the Fund's investment portfolio. If the market remains stable or
advances, the Fund can refrain
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<PAGE> 15
from exercising the put and its portfolio will participate in the advance,
having incurred only the premium cost for the put.
In certain cases the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities.
Potential Risks of Options, Futures Contracts and Related Options. The
purchase and sale of options and futures contracts involve risks different from
those involved with direct investments in underlying securities. While
utilization of options, futures contracts and similar instruments may be
advantageous to the Fund, if the Adviser is not successful in employing such
instruments in managing the Fund's investments, the Fund's performance will be
worse than if the Fund did not make such investments. In addition, the Fund
would pay commissions and other costs in connection with such investments, which
may increase the Fund's expenses and reduce its return.
The Fund is authorized to purchase and sell over-the-counter options ("OTC
Options"). OTC Options are purchased from or sold to securities dealers,
financial institutions of other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. The Fund will sell only OTC Options
(other than OTC currency options) that are subject to a buy-back provision
permitting the Fund to require to the Counterparty to sell the option back to
the Fund at a formula price within seven days. The staff of the SEC currently
takes the position that, in general, OTC Options on securities other than U.S.
Government securities purchased by the Fund, and portfolio securities covering
OTC Options sold by the Fund, are illiquid securities subject to the Fund's
limitation on investing no more than 10% of its assets in illiquid securities.
In order to prevent leverage in connection with the purchase of futures
contracts or call options thereon by the Fund, an amount of cash, cash
equivalents or liquid high grade debt securities equal to the market value of
the obligation under the futures contracts or options (less any related margin
deposits) will be maintained in a segregated account with the Custodian. The
Fund may not invest more than 10% of its net assets in illiquid securities and
repurchase agreements which have a maturity of longer than seven days. A more
complete discussion of the potential risks involved in transactions in options
or futures contracts and related options is contained in the Statement of
Additional Information.
PORTFOLIO TURNOVER. The Fund purchases securities which are believed by the
Adviser to have above average potential for capital growth. Common stocks are
disposed of in situations where it is believed that potential for such
appreciation has lessened or that other common stocks have a greater potential
for capital growth. Therefore, the Fund may purchase and sell securities without
regard to the length of time the security is to be, or has been, held. The
Fund's annual portfolio turnover rate is shown in the table of "Financial
Highlights." The rate may exceed 100%,
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<PAGE> 16
which is higher than that of many other investment companies. A 100% turnover
rate occurs, for example, if all the Fund's portfolio securities are replaced
during one year. A high portfolio turnover rate increases the Fund's transaction
costs, including brokerage commissions. A high portfolio turnover rate may
result in the realization of more capital gains taxes than if the Fund had a
lower portfolio turnover rate.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES. The Adviser is responsible for
the placement of orders for the purchase and sale of portfolio securities for
the Fund and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution services rendered
on a continuing basis. The Adviser is authorized to place portfolio transactions
with brokerage firms participating in the distribution of shares of the Fund and
other Van Kampen American Capital mutual funds if it reasonably believes that
the quality of the execution and the commission are comparable to that available
from other qualified brokerage firms. The Adviser is authorized to pay higher
commissions to brokerage firms that provide it with investment and research
information than to firms which do not provide such services if the Adviser
determines that such commissions are reasonable in relation to the overall
services provided. The information received may be used by the Adviser in
managing the assets of other advisory accounts as well as in the management of
the assets of the Fund.
INVESTMENT IN INVESTMENT COMPANIES. The Fund may invest in one or more
investment companies advised by the Adviser and its affiliates, including Van
Kampen American Capital Small Capitalization Fund ("Small Cap Fund") and Van
Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund"). The
shares of the Small Cap Fund and Foreign Securities Fund are available only to
investment companies advised by the Adviser. The Adviser believes that the use
of the Small Cap Fund and Foreign Securities Fund may, from time to time,
provide the Fund with the most effective exposure to the performance of the
small capitalization sector of the stock market and to foreign securities while
at the same time minimizing costs. The Adviser charges no advisory fee for
managing the Small Cap Fund or the Foreign Securities Fund, nor are there any
sales load or other charges associated with distribution of their shares. Other
expenses incurred by the Small Cap Fund and Foreign Securities Fund are borne by
them, and thus indirectly by the Van Kampen American Capital funds that invest
in them. With respect to such other expenses, the Adviser anticipates that the
efficiencies resulting from use of the Small Cap Fund and Foreign Securities
Fund will result in cost savings for the Fund and other Van Kampen American
Capital funds that will fully or partially offset such expenses. In large part,
these savings are attributable to the fact that administrative actions that
would have to be performed multiple times if each Van Kampen American Capital
fund held its own portfolio of small capitalization or foreign stocks will need
to be performed only once. The Adviser expects that the Small Cap Fund and
Foreign Securities Fund will experience trading costs that will be substantially
less than the trading costs that
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<PAGE> 17
would be incurred if small capitalization or foreign stocks were purchased
separately for the Fund and other Van Kampen American Capital funds. The Fund's
investments in the Small Cap Fund and the Foreign Securities Fund are subject to
the terms and conditions set forth in SEC exemptive orders authorizing such
investments.
The securities of small and medium sized companies that the Small Cap Fund may
invest in may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, small capitalization companies typically are subject to a
greater degree of change in earnings and business prospects than are larger,
more established companies. In light of these characteristics of small
capitalization companies and their securities, the Small Cap Fund may be subject
to greater investment risk than that assumed through investment in the equity
securities of larger capitalization companies. Risks associated with investing
in foreign securities are described under "Investment Practices -- Securities of
Foreign Issuers."
The Fund will be deemed to own a pro rata portion of each investment of the
Small Cap Fund and the Foreign Securities Fund. For example, if the Fund's
investment in the Small Cap Fund were $10 million, and the Small Cap Fund had 5%
of its assets invested in the electronics industry, the Fund would be considered
to have an investment of $500,000 in the electronics industry.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which, like the investment objective, may not be changed without approval by a
majority vote (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the outstanding shares of the Fund. These restrictions provide,
among other things, that the Fund may not:
1. With respect to 75% of its assets, invest more than 5% of its assets in
the securities of any one issuer (except the United States government) or
purchase more than 10% of the outstanding voting securities of any one
issuer. Neither limitation shall apply to the acquisition of shares of
other open-ended investment companies to the extent permitted by rule or
order of the SEC exempting the Fund from the limitations imposed by
Section 12(d)(1) of the 1940 Act;
2. Pledge any of its assets, except that the Fund may pledge assets having a
value of not more than 10% of its total assets in order to secure
permitted borrowings from banks. Such borrowings may not exceed 5% of the
value of the Fund's assets and can be made only as a temporary measure for
extraordinary or emergency purposes. Notwithstanding the foregoing, the
Fund may engage in transactions in options, futures contracts or related
options, segregate or deposit assets to cover or secure options written
and make margin deposits and payments for futures contracts and related
options;
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<PAGE> 18
3. Invest more than 10% of its net assets (determined at the time of
investment) in illiquid securities, securities for which market quotations
are not readily available, and repurchase agreements which have a maturity
of longer than seven days; or
4. Invest in real estate (although the Fund may acquire securities of issuers
that invest in real estate), commodities or commodity contracts, except
that the Fund may enter into transactions in futures contracts or related
options.
In addition to the foregoing, the Fund has adopted additional investment
restrictions which may be changed by the Trustees without a vote of
shareholders. These restrictions provide that the Fund may not:
1. Invest more than 5% of its assets in the securities of any one issuer
other than the United States government except that it may acquire shares
of other open-end investment companies to the extent permitted by rule or
order of the SEC exempting the Fund from the limitations imposed by
Section 12(d)(1) of the 1940 Act;
2. Invest in the securities of a foreign issuer if, at the time of
acquisition, more than 15% of the value of the Fund's total assets would
be invested in such securities. Foreign investments may be subject to
special risks, including future political and economic developments, the
possible imposition of additional withholding taxes on dividend or
interest income payable on the securities, or the seizure or
nationalization of companies, or establishment of exchange controls or
adoption of other restrictions which might adversely affect the
investment; or
3. Invest more than 5% of its assets in companies having a record, together
with predecessors, of less than three years continuous operation and in
securities not having readily available market quotations provided,
however, that this limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of
the securities and other assets owned by any such company.
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INVESTMENT ADVISORY SERVICES
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THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $57 billion under management or supervision. Van Kampen American Capital's
more than 40 open-end and 38 closed-end funds and more than 2,800 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. Van Kampen American Capital Distributors, Inc., the distributor
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<PAGE> 19
of the Fund and the sponsor of the funds mentioned above, is also a wholly-owned
subsidiary of Van Kampen American Capital.
Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The General Partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital own, in the aggregate, not more than 6% of the common stock of
VK/AC Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 12% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of such options, no officer
or trustee of the Fund owns or would own 5% or more of the common stock of VK/AC
Holding, Inc.
ADVISORY AGREEMENTS. The Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed on average daily net assets of the Fund at the annual rate of 0.50% on
the first $1 billion of net assets; 0.45% on the next $1 billion of net assets;
0.40% on the next $1 billion of net assets and 0.35% on net assets in excess of
$3 billion. Under the Advisory Agreement, the Fund also reimburses the Adviser
for the cost of the Fund's accounting services, which include maintaining its
financial books and records and calculating its daily net asset value. Operating
expenses paid by the Fund include shareholder service agency fees, distribution
fees, service fees, custodian fees, legal and accounting fees, the costs of
reports and proxies to shareholders, trustees' fees, and all other business
expenses not specifically assumed by the Adviser. Advisory (management) fee and
total operating expense ratios are shown under the caption "Annual Fund
Operating Expenses and Example" herein.
From time to time, as the Adviser or the Distributor may deem appropriate,
they may voluntarily undertake to reduce the Fund's expenses by reducing the
fees payable to them to the extent of, or bearing expenses in excess of, such
limitations as they may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Investment Advisory Group.
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<PAGE> 20
PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit directors, trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to pre-clearance and other procedures designed to prevent conflicts of
interest.
PORTFOLIO MANAGEMENT. Stephen Boyd is primarily responsible for the day-to-day
management of the Fund's investment portfolio and has been since July 11, 1994.
Mr. Boyd is Vice President of the Fund and Senior Investment Vice
President -- Portfolio Manager of the Adviser. Mr. Boyd was formerly Investment
Vice President of the Adviser from May 1989 to July 1990.
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ALTERNATIVE SALES ARRANGEMENTS
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The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase and
the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
maximum sales charge of up to 5.75% of the offering price (6.10% of the net
amount invested), reduced on investments of $50,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a CDSC of 1.00% may be imposed on certain redemptions made within one year of
the purchase. Class A shares are subject to an ongoing service fee at an annual
rate of up to 0.25% of the Fund's aggregate average daily net assets
attributable to the Class A shares. Certain purchases of Class A shares qualify
for a reduced initial sales charge. See "Purchase of Shares -- Class A Shares."
CLASS B SHARES. Class B shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within five years of purchase. Class B
shares are subject to an ongoing service fee at an annual rate of up to 0.25% of
the Fund's aggregate average daily net assets attributable to the Class B shares
and an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class B shares. Class B
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
B shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. Class B shares automatically
convert to Class A shares eight years after the end of the calendar month in
which the shareholder's order to purchase was accepted. See "Purchase of
Shares -- Class B Shares."
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<PAGE> 21
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.25% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the Funds's
aggregate average daily net assets attributable to the Class C shares. Class C
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
C shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. Class C shares automatically
convert to Class A shares ten years after the end of the calendar month in which
the shareholder's order to purchase was accepted. See "Purchase of
Shares -- Class C Shares."
CONVERSION FEATURE. Class B shares and Class C shares automatically convert to
Class A shares eight years or ten years, respectively, after the end of the
calendar month in which the shares were purchased and thereafter are not subject
to the higher aggregate distribution and service fees applicable to Class B
shares and Class C shares. 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 purpose of the conversion feature is to relieve the holders of
the Class B shares and Class C shares that have been outstanding for a period of
time sufficient for the Distributor to have been substantially compensated for
distribution expenses related to the Class B shares or Class C shares as the
case may be from the burden of the ongoing distribution fee.
For purposes of conversion to Class A shares, Class B shares and Class C
shares purchased through the reinvestment of dividends and distributions are
considered to be held in a separate sub-account. Each time any Class B shares or
Class C shares in the shareholder's Fund account (other than those in the
sub-account) convert to Class A shares, an equal pro rata portion of the Class B
shares or Class C shares in the sub-account also will convert to Class A shares.
The conversion of Class B shares and Class C shares to Class A shares is
subject to the continuing availability of an opinion of counsel to the effect
that (i) the assessment of the distribution fee and higher transfer agency costs
with respect to Class B shares and Class C shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the conversion
of shares does not constitute a taxable event under federal income tax law. The
conversion of Class B shares and Class C shares may be suspended if such an
opinion is no longer available. In that event, no further conversions of Class B
shares or Class C shares would occur, and shares might continue to be subject to
the distribution fee for an indefinite period which may extend beyond the period
ending eight years or ten
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<PAGE> 22
years, respectively, after the end of the calendar month in which the
shareholder's order to purchase was accepted.
FACTORS FOR CONSIDERATION. In deciding which class of shares to purchase,
investors should take into consideration their investment goals, present and
anticipated purchase amounts, time horizons and temperaments. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated distribution fees and CDSC on Class B shares of Class C shares
prior to conversion would be less than the initial sales charge on Class A
shares purchased at the same time, and to what extent such differential would be
offset by the higher dividends per share on Class A shares. To assist investors
in making this determination, the table under the caption "Annual Fund Operating
Expenses and Example" sets forth examples of the charges applicable to each
class of shares. In this regard, Class A shares may be more beneficial to the
investor who qualifies for reduced initial sales charges or purchases at net
asset value. It is presently the policy of the Distributor not to accept any
order of $500,000 or more for Class B shares or any order of $1 million or more
for Class C shares as it ordinarily would be more beneficial for such an
investor to purchase Class A shares.
Class A shares are not subject to an ongoing distribution fee and,
accordingly, receive correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase for accounts
under $1 million, investors in Class A shares do not have all their funds
invested initially and, therefore, initially own fewer shares. Other investors
might determine that it is more advantageous to purchase either Class B shares
or Class C shares and have all their funds invested initially, although
remaining subject to a CDSC. Ongoing distribution fees on Class B shares and
Class C shares are offset to the extent of the additional funds originally
invested and any return realized on those funds. However, there can be no
assurance as to the return, if any, which will be realized on such additional
funds. For investments held for ten years or more, the relative value upon
liquidation of the three classes tends to favor Class A shares or Class B
shares, rather than Class C shares.
Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges or have a longer-term investment horizon.
Class B shares may be appropriate for investors who wish to avoid a front-end
sales charge, put 100% of their investment dollars to work immediately, or have
a longer-term investment horizon. Class C shares may be appropriate for
investors who wish to avoid a front-end sales charge, put 100% of their
investment dollars to work immediately, have a shorter-term investment horizon
or desire a short CDSC schedule.
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<PAGE> 23
The distribution expenses incurred by the Distributor in connection with the
sale of the shares will be reimbursed, in the case of Class A shares, from the
proceeds of the initial sales charge and, in the case of Class B shares and
Class C shares, from the proceeds of the ongoing distribution fee and any
contingent deferred sales charge incurred upon redemption within five years or
one year, respectively, of purchase. Sales personnel of broker-dealers
distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling such shares. INVESTORS SHOULD UNDERSTAND THAT THE PURPOSE AND FUNCTION
OF THE CONTINGENT DEFERRED SALES CHARGE AND ONGOING DISTRIBUTION FEE WITH
RESPECT TO THE CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE OF THE
INITIAL SALES CHARGE WITH RESPECT TO CLASS A SHARES. See "Distribution and
Service Plans."
GENERAL. Dividends paid by the Fund with respect to Class A shares, Class B
shares and Class C shares will be calculated in the same manner at the same time
on the same day, except that the distribution fees and any incremental transfer
agency costs relating to Class B shares or Class C shares will be borne by the
respective class. See "Distributions from the Fund." Shares of the Fund may be
exchanged, subject to certain limitations, for shares of the same class of
certain other mutual funds distributed by the Distributor. See "Shareholder
Services -- Exchange Privilege."
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PURCHASE OF SHARES
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GENERAL
The Fund offers three classes of shares to the public on a continuous basis
through the Distributor as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are acting as securities dealers ("dealers") and NASD members or eligible
non-NASD members who are acting as brokers or agents for investors ("brokers").
The term "dealers" and "brokers" are sometimes referred to herein as "authorized
dealers."
Initial investments must be at least $500 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments. Shares of the Fund may be sold in foreign countries where
permissible. The Fund and the Distributor reserve the right to refuse any order
for the purchase of shares. The Fund also reserves the right to suspend the sale
of the Fund's shares in response to conditions in the securities markets or for
other reasons.
Shares of the Fund may be purchased on any business day through authorized
dealers. Shares also may be purchased by completing the application accompanying
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<PAGE> 24
this Prospectus and forwarding the application, through the authorized dealer,
to the shareholder service agent, ACCESS Investor Services, Inc. ("ACCESS"), a
wholly-owned subsidiary of Van Kampen American Capital. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A shares,
Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or contingent deferred sales charge depending on the class of shares
chosen by the investor, as shown in the tables herein. Net asset value per share
is determined once daily as of the close of trading on the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m., New York time) each day the
Exchange is open. Net asset value per share for each class is determined by
dividing the value of the Fund's securities, cash and other assets (including
accrued interest) attributable to such class less all liabilities (including
accrued expenses) by the total number of shares of the class outstanding.
Securities listed or traded on a national securities exchange are valued at the
last sale price. Unlisted securities and listed securities for which the last
sale price is not available are valued at the most recent bid price. Options are
valued at the last sale price or if no sales are reported, at the mean between
the bid and asked prices. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined in good faith
by the Trustees of the Fund. Short-term securities are valued in the manner
described in the Notes to the Financial Statements included in the Statement of
Additional Information.
Generally, the net asset values per share of the Class A shares, Class B
shares and Class C shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class A
shares, Class B shares and Class C shares may differ from one another reflecting
the daily expense accruals of the distribution and the higher transfer agency
fees applicable with respect to the Class B shares and Class C shares and the
differential in the dividends paid on the classes of shares. The price paid for
shares purchased is based on the next calculation of net asset value (plus sales
charges, where applicable) after an order is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. Orders received by authorized dealers after the
close of the Exchange are priced based on the next close provided they are
received by the Distributor prior to the Distributor's close of business on such
day. It is the responsibility of authorized dealers to transmit orders received
by them to the Distributor so they will be received prior to such time. Orders
of less than $500 are mailed by the authorized dealer and processed at the
offering price next calculated after acceptance by ACCESS.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, has the same rights and is identical in all respects,
except that (i) Class B shares and Class C shares bear the expenses of the
deferred sales arrangement and
22
<PAGE> 25
any expenses (including the higher distribution fee and incremental transfer
agency costs) resulting from such sales arrangement, (ii) generally, each class
has exclusive voting rights with respect to approvals of the Rule 12b-1
distribution plan pursuant to which its distribution fee or service fee is paid
and (iii) Class B shares and Class C shares are subject to a conversion feature.
Each class has different exchange privileges and certain different shareholder
service options available. The net income attributable to Class B shares and
Class C shares and the dividends payable on Class B shares and Class C shares
will be reduced by the amount of the distribution fee and incremental transfer
agency expenses associated with such class of shares. Sales personnel of
authorized dealers distributing the Fund's shares and other persons entitled to
receive compensation for selling such shares may receive differing compensation
for selling Class A shares, Class B shares or Class C shares.
Agreements are in place which provide, among other things and subject to
certain conditions, for certain favorable distribution arrangements for shares
of the Fund with subsidiaries of The Travelers Inc.
The Distributor may from time to time implement programs under which an
authorized dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
authorized dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor, an amount not exceeding the total
applicable sales charges on the sales generated by the authorized dealer at the
public offering price during such programs. Other programs provide, among other
things and subject to certain conditions, for certain favorable distribution
arrangements for shares of the Fund. Also, the Distributor in its discretion may
from time to time, pursuant to objective criteria established by the
Distributor, pay fees to, and sponsor business seminars for, qualifying
authorized dealers for certain services or activities which are primarily
intended to result in sales of shares of the Fund. Fees may include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Such fees paid for such services and activities with respect to the Fund
will not exceed in the aggregate 1.25% of the average total daily net assets of
the Fund on an annual basis. The Distributor may provide additional compensation
to Edward D. Jones & Co. or an affiliate thereof based on a combination of its
sales of shares and increases in assets under management. All of the foregoing
payments are made by the Distributor out of its own assets. These programs will
not change the price an investor will pay for shares or the amount that a Fund
will receive from such sale.
23
<PAGE> 26
CLASS A SHARES
The public offering price of Class A shares is the net asset value plus a
sales charge, as set forth below.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED
TO DEALERS
AS % OF AS % OF (AS A % OF
SIZE OF OFFERING NET AMOUNT OFFERING
INVESTMENT PRICE INVESTED PRICE)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000........................ 5.75% 6.10% 5.00%
$50,000 but less than $100,000........... 4.75% 4.99% 4.00%
$100,000 but less than $250,000.......... 3.75% 3.90% 3.00%
$250,000 but less than $500,000.......... 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........ 2.00% 2.04% 1.75%
$1,000,000 or more*...................... * * *
- ------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC
of 1.00% on redemptions made within one year of the purchase. A
commission will be paid to authorized dealers who initiate and are
responsible for purchases of $1 million or more as follows: 1.00% on
sales to $2 million, plus 0.80% on the next million and 0.50% on the
excess over $3 million. See "Purchase of Shares--Deferred Sales Charge
Alternatives" for additional information with respect to CDSC.
In addition to the reallowances from the applicable public offering price
described above, the Distributor may, from time to time, pay or allow additional
reallowances or promotional incentives, in the form of cash or other
compensation, to dealers that sell shares of the Fund. Authorized dealers which
are reallowed all or substantially all of the sales commissions may be deemed to
be underwriters for purposes of the Securities Act of 1933, as amended.
The Distributor may also pay financial institutions (which may include banks)
and other industry professionals that provide services to facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the reallowance allowable to authorized dealers described herein. Such
financial institutions, other industry professionals and authorized dealers are
hereinafter referred to as "Service Organizations." Banks are currently
prohibited under the Glass-Steagall Act from providing certain underwriting or
distribution services. If banking firms were prohibited from acting in any
capacity or providing any of the described services, the Distributor would
consider what action, if any, would be appropriate. The Distributor does not
believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. State securities laws regarding
registration of banks and other financial institutions may differ from the
interpretation of federal law expressed herein and banks and other financial
institutions may be required to register as dealers pursuant to certain state
laws.
24
<PAGE> 27
QUANTITY DISCOUNTS
Investors purchasing Class A shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described below.
Investors, or their authorized dealers, must notify the Fund whenever a
quantity discount is applicable to purchases. Upon such notification, an
investor will receive the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, their
spouse and minor children 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 fiduciary
account, or a "company" as defined in Section 2(a)(8) of the 1940 Act.
As used herein, "Participating Funds" refers to all open-end investment
companies distributed by the Distributor other than Van Kampen American Capital
Tax Free Money Fund ("Tax Free Money Fund"), Van Kampen American Capital Reserve
Fund ("Reserve Fund") and The Govett Funds, Inc.
Volume Discounts. The size of investment shown in the preceding 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 sales charge
table may also be determined by combining the amount being invested in shares of
the Participating Funds plus the current offering price of all shares of the
Participating Funds which have been previously purchased and are still owned.
Letter of Intent. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the preceding table. The
size of investment shown in the preceding table also includes purchases of
shares of the Participating Funds over a 13-month period based on the total
amount of intended purchases plus the value of all shares of the Participating
Funds previously purchased and still owned. An investor may elect to compute the
13-month period starting up to 90 days before the date of execution of a Letter
of Intent. Each investment made during the period receives the reduced sales
charge applicable to the total amount of the investment goal. If the goal is not
achieved within the period, the investor must pay the difference between the
sales charge applicable to the purchases made and the charges previously paid.
The initial purchase must be for an amount equal to at least 5% of the minimum
total purchase amount of the
25
<PAGE> 28
level selected. If trades not initially made under a Letter of Intent
subsequently qualify for a lower sales charge through the 90-day back-dating
provisions, an adjustment will be made at the expiration of the Letter of Intent
to give effect to the lower charge. Such adjustments in sales charge will be
used to purchase additional shares for the shareholder at the applicable
discount category. Additional information is contained in the application
accompanied by this Prospectus.
OTHER PURCHASE PROGRAMS
Purchasers of Class A shares may be entitled to reduced initial sales charges
in connection with unit trust reinvestment programs and purchases by registered
representatives of selling firms or purchases by persons affiliated with the
Fund or the Distributor. The Fund reserves the right to modify or terminate
these arrangements at any time.
Unit Investment Trust Reinvestment Programs. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
shares of the Fund, at net asset value and with no minimum initial or subsequent
investment requirement, if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the authorized dealer,
if any, through which such participation in the qualifying program was initiated
0.50% of the offering price as a dealer concession or agency commission. Persons
desiring more information with respect to this program, including the applicable
terms and conditions thereof, should contact their authorized dealer or the
Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide ACCESS with appropriate backup data
for each participating investor in a computerized format fully compatible with
ACCESS's processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
26
<PAGE> 29
NAV Purchase Options. Class A shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by the Fund,
by:
(1) Current or retired trustees/directors of funds advised by the Adviser,
Van Kampen American Capital Investment Advisory Corp. or John Govett &
Co. Limited and such persons' families and their beneficial accounts.
(2) Current or retired directors, officers and employees of VK/AC Holding,
Inc. and any of its subsidiaries, Clayton, Dubilier & Rice, Inc.,
employees of an investment subadviser to any fund described in (1) above,
or an affiliate of such subadviser; and such persons' families and their
beneficial accounts.
(3) Directors, officers, employees and registered representatives of
financial institutions that have a selling group agreement with the
Distributor and their spouses and minor children when purchasing for any
accounts they beneficially own, or, in the case of any such financial
institution, when purchasing for retirement plans for such institution's
employees.
(4) Registered investment advisers, trust companies and bank trust
departments investing on their own behalf or on behalf of their clients
provided that the aggregate amount invested in the Fund alone, or any
combination of shares of the Fund and shares of other Participating Funds
as described herein under "Purchase of Shares -- Class A Shares -- Volume
Discounts," during the 13-month period commencing with the first
investment pursuant hereto equals at least $1 million. The Distributor
may pay authorized dealers through which purchases are made an amount up
to 0.50% of the amount invested, over a 12-month period following such
transaction.
(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $10 million or more. The
Distributor may pay commissions of up to 1.00% for such purchases.
(6) Accounts as to which a bank or broker-dealer charges an account
management fee ("wrap accounts"), provided the bank or broker-dealer has
a separate agreement with the Distributor.
(7) Investors purchasing shares of the Fund with redemption proceeds from
other mutual fund complexes on which the investor has paid a front-end
sales charge or was subject to a deferred sales charge, whether or not
paid, if such redemption has occurred no more than 30 days prior to such
purchase.
27
<PAGE> 30
(8) Full service participant directed profit sharing and money purchase
plans, full service 401(k) plans, or similar full service recordkeeping
programs made available through Van Kampen American Capital Trust Company
with at least 50 eligible employees or investing at least $250,000 in
Participating Funds, Tax Free Money Fund or Reserve Fund. For such
investments the Fund imposes a CDSC of 1.00% in the event of redemptions
within one year of the purchase other than redemptions required to make
payments to participants under the terms of the plan. The CDSC incurred
upon certain redemptions is paid to the Distributor in reimbursement for
distribution-related expenses. A commission will be paid to dealers who
initiate and are responsible for such purchases 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.
(9) Participants in any 403(b)(7) program of a college or university system
which permits only net asset value mutual fund investments and for which
Van Kampen American Capital Trust Company serves as custodian. In
connection with such purchases, the Distributor may pay, out of its own
assets, a commission to brokers, dealers, or financial intermediaries as
follows: 1.00% on sales up to $5 million, plus 0.50% on the next $5
million, plus 0.25% on the excess over $10 million.
(10) Individuals who are members of a "qualified group" may purchase Class A
Shares of the Fund without the imposition of a front end sales charge.
For this purpose, a qualified group is one which (i) has been in
existence for more than six months, (ii) has a purpose other than to
acquire shares of the Fund or similar investments, (iii) has given and
continues to give its endorsement or authorization, on behalf of the
group, for purchase of shares of the Fund and other funds in the Van
Kampen American Capital Family of 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 CDSC of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to
each individual as follows: 1.00% on sales to $2 million, plus 0.80% on
the next million and 0.50% on the excess over $3 million.
28
<PAGE> 31
The term "families" includes a person's spouse, minor children and
grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with ACCESS by the investment
adviser, trust company or bank trust department, provided that ACCESS receives
federal funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized dealer may charge a transaction
fee for placing an order to purchase shares pursuant to this provision or for
placing a redemption order with respect to such shares. Authorized dealers will
be paid a service fee as described herein under "Distribution and Service Plans"
on purchases made as described in (3) through (10) above. The Fund may
terminate, or amend the terms of, offering shares of the Fund at net asset value
to such groups at any time.
CLASS B SHARES
Class B shares are offered at net asset value. Class B shares which are
redeemed within five years of purchase are subject to a CDSC at the rates set
forth in the following table, charged as a percentage of the dollar amount
subject thereto. The charge is assessed on an amount equal to the lesser of the
then current market value or the cost of the shares being redeemed. Accordingly,
no sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on shares derived from
reinvestment of dividends or capital gains distributions. It is presently the
policy of the Distributor not to accept any order for Class B shares in an
amount of $500,000 or more because it ordinarily will be more advantageous for
an investor making such an investment to purchase Class A shares.
The amount of the CDSC, if any, varies depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month are aggregated and deemed to have been made on the last day of
the month.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES
CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- -----------------------------------------------------------------------------
<S> <C>
First....................................... 5.00%
Second...................................... 4.00%
Third....................................... 3.00%
Fourth...................................... 2.50%
Fifth....................................... 1.50%
Sixth and After............................. None
- ------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 32
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC, second of shares held for over five years or
shares acquired pursuant to reinvestment of dividends or distributions and third
of shares held longest during the five-year period.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds is subject to a deferred sales charge at a
rate of 4.00% (the applicable rate in the second year after purchase).
A commission or transaction fee of 4.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Additionally, the Distributor
may, from time to time, pay additional promotional incentives, in the form of
cash or other compensation, to authorized dealers that sell Class B shares of
the Fund.
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the lower of the then current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. It is presently the policy of the Distributor
not to accept any order in an amount of $1 million or more for Class C shares
because it ordinarily will be more advantageous for an investor making such an
investment to purchase Class A Shares.
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC and second of shares held for more than one year
or shares acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of 1.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Authorized dealers also will be
paid ongoing commissions and transaction fees of up to 0.75% of the average
daily net assets of the Fund's Class C shares for the second through tenth year
after
30
<PAGE> 33
purchase. Additionally, the Distributor may, from time to time, pay additional
promotional incentives, in the form of cash or other compensation, to authorized
dealers that sell Class C shares of the Fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The CDSC is waived on redemptions of Class B shares and Class C shares (i)
following the death or disability (as defined in the Code) of a shareholder,
(ii) in connection with certain distributions from an IRA or other retirement
plan, (iii) pursuant to the Fund's systematic withdrawal plan but limited to 12%
annually of the initial value of the account, and (iv) effected pursuant to the
right of the Fund to liquidate a shareholder's account as described herein under
"Redemption of Shares." The CDSC also is waived on redemptions of Class C shares
as it relates to the reinvestment of redemption proceeds in shares of the same
class of the Fund within 120 days after redemption. See the Statement of
Additional Information for further discussion of waiver provisions.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investments in its shares at little or no extra cost to the investor. The
following is a description of such services.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares are held by ACCESS, the Fund's transfer agent. ACCESS performs
bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a report
showing the activity in the account. Each shareholder who has an account in
certain of the Participating Funds, Tax Free Money Fund or Reserve Fund, will
receive statements quarterly from ACCESS showing any reinvestments of dividends
and capital gains distributions and any other activity in the account since the
preceding statement. Such shareholders also will receive separate confirmations
for each purchase or sale transaction other than reinvestment of dividends and
capital gains distributions and systematic purchases or redemptions. Additions
to an investment account may be made at any time by purchasing shares through
authorized dealers or by mailing a check directly to ACCESS.
31
<PAGE> 34
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued, representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a
Surety Bond in a form acceptable to ACCESS. On the date the letter is received,
ACCESS will calculate no more than 2.00% of the net asset value of the issued
shares, and bill the party to whom the certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge), on
the record date. Unless the shareholder instructs otherwise, the reinvestment
plan is automatic. This instruction may be made by telephone by calling (800)
421-5666 ((800) 772-8889 for the hearing impaired). The investor may, on the
initial application or prior to any declaration, instruct that dividends be paid
in cash and capital gains distributions be reinvested at net asset value, or
that both dividends and capital gains distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize ACCESS to charge a bank account on a regular
basis to invest predetermined amounts in the Fund. Additional information is
available from the Distributor or authorized dealers.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; and pension and profit sharing plans; 401(k) plans; or
Section 403(b)(7) plans in the case of employees of public school systems and
certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
American Capital Trust Company serves as custodian under the IRA, 403(b)(7) and
Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of Automated Clearing House. In addition, the shareholder must fill out
the appropriate section of the account application. The shareholder must also
include a voided check or deposit slip from the bank account into which
redemptions are to be deposited together with the completed application. Once
ACCESS has received the application and the voided check or deposit slip, such
shareholder's designated
32
<PAGE> 35
bank account, following any redemption, will be credited with the proceeds of
such redemption. Once enrolled in the ACH plan, a shareholder may terminate
participation at any time by writing ACCESS.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus, or by calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired), elect to have all dividends and other distributions paid on a Class A
shares, Class B shares or Class C shares account in the Fund invested into a
pre-existing Class A shares, Class B shares or Class C shares account in any of
the Participating Funds, Tax Free Money Fund or Reserve Fund. Both accounts must
be of the same type and same class, either non-retirement or retirement. Any two
non-retirement accounts can be used. If the accounts are retirement accounts,
they must both be for the same class and of the same type of retirement plan
(e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the same individual.
If a qualified, pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the fund into which distributions would be invested. Distributions are invested
into the selected fund at its net asset value as of the payable date of the
distribution.
EXCHANGE PRIVILEGE. Shares of the Fund or of any Participating Fund, other
than Van Kampen American Capital Government Target Fund ("Government Target"),
may be exchanged for shares of the same class of shares of any other fund
without sales charge, provided that shares of certain Van Kampen American
Capital fixed-income funds are subject to a 30-day holding period requirement
before exchange. Shares of Government Target may be exchanged for Class A shares
of the Fund without sales charge. Class A shares of Tax Free Money Fund or
Reserve Fund that were not acquired in exchange for Class B shares or Class C
shares of a Participating Fund may be exchanged for Class A shares of the Fund
upon payment of the excess, if any, of the sales charge rate applicable to the
shares being acquired over the sales charge rate previously paid. Shares of Tax
Free Money Fund or Reserve Fund acquired through an exchange of Class B shares
or Class C shares may be exchanged only for the same class of shares of a
Participating Fund without incurring a contingent deferred sales charge. Shares
of any Participating Fund, Tax Free Money Fund or Reserve Fund may be exchanged
for shares of any other Participating Fund if shares of that Participating Fund
are available for sale; however, during periods of suspension of sales, shares
of a Participating Fund may be available for sale only to existing shareholders
of a Participating Fund.
Class B shareholders and Class C shareholders of the Fund have the ability to
exchange their shares ("original shares") for the same class of shares of any
other Van Kampen American Capital fund that offers such shares ("new shares") in
an amount equal to the aggregate net asset value of the original shares, without
the
33
<PAGE> 36
payment of any contingent deferred sales charge otherwise due upon redemption of
the original shares. For purposes of computing the CDSC payable upon a
disposition of the new shares, the holding period for the original shares is
added to the holding period of the new shares. Class B shareholders and Class C
shareholders would remain subject to the contingent deferred sales charge
imposed by the original Fund upon their redemption from the Van Kampen American
Capital complex of funds. The CDSC is based on the holding period requirements
of the original fund.
Shares of the fund to be acquired must be registered for sale in the
investor's state. Exchanges of shares are sales and may result in a gain or loss
for federal income tax purposes, although if the shares exchanged have been held
for less than 91 days, the sales charge paid on such shares is not included in
the tax basis of the exchanged shares, but is carried over and included in the
tax basis of the shares acquired. See the Statement of Additional Information.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
otherwise designated in the application form accompanying this Prospectus. Van
Kampen American Capital and its subsidiaries, including ACCESS (collectively,
"VKAC"), and the Fund employ procedures considered by them to be reasonable to
confirm that instructions communicated by telephone are genuine. Such procedures
include requiring certain personal identification information prior to acting
upon telephone instructions, tape recording telephone communications, and
providing written confirmation of instructions communicated by telephone. If
reasonable procedures are employed, neither VKAC nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine.
VKAC and the Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. Exchanges are effected
at the net asset value per share next calculated after the request is received
in good order with adjustment for any additional sales charge. If the exchanging
shareholder does not have an account in the fund whose shares are being
acquired, a new account will be established with the same registration, dividend
and capital gain options (except dividend diversification) and authorized dealer
of record as the account from which shares are exchanged, unless otherwise
specified by the shareholder. In order to establish a systematic withdrawal plan
for the new account or reinvest dividends from the new account into another
fund, however, an exchanging shareholder must file a specific written request.
The Fund reserves the right to reject any order to acquire its shares through
exchange. In addition, the Fund may modify, restrict or terminate the exchange
privilege at any time on 60 days' notice to its shareholders of any termination
or material amendment.
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A prospectus of any of these mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for information regarding such fund prior
to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. This plan provides for the orderly use of the entire account,
not only the income but also the capital, if necessary. Each withdrawal
constitutes a redemption of shares on which any capital gain or loss will be
recognized. The planholder may arrange for monthly, quarterly, semi-annual, or
annual checks in any amount not less than $25. Such a systematic withdrawal plan
may also be maintained by an investor purchasing shares for a retirement plan
established on a form made available by the Fund. See "Shareholder
Services -- Retirement Plans."
Class B shareholders and Class C shareholders who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under this plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with the purchase of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. Any taxable gain or loss will be recognized by the shareholder upon
redemption of shares.
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REDEMPTION OF SHARES
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REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their
shares of the Fund at any time. To do so, a written request in proper form must
be sent directly to ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256.
Shareholders may also place redemption requests through an authorized dealer.
Orders received from authorized dealers must be at least $500 unless transmitted
via the FUNDSERV network. The redemption price for such shares is the net asset
value next calculated after an order is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit redemption requests received by them to the Distributor so they will be
received prior to such time.
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<PAGE> 38
As described herein under "Purchase of Shares," redemptions of Class B shares
or Class C shares are subject to a contingent deferred sales charge. In
addition, a CDSC of 1.00% may be imposed on certain redemptions of Class A
shares made within one year of purchase for investments of $1 million or more
and for certain qualified 401(k) retirement plans. The CDSC incurred upon
redemption is paid to the Distributor in reimbursement for distribution-related
expenses. A custodian of a retirement plan account may charge fees based on the
custodian's fee schedule.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
record address has changed within the previous 30 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it will do so if a special request has been
made to ACCESS. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request. In the event the redemption is requested by a corporation, partnership,
trust, fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 60 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to ACCESS. Where Van Kampen American Capital Trust
Company serves as IRA custodian, special IRA, 403(b)(7), or Keogh redemption
forms must be obtained from and be forwarded to Van Kampen American Capital
Trust Company, P.O. Box 944, Houston, Texas 77001-0944. Contact the custodian
for information.
In the case of redemption requests sent directly to ACCESS, the redemption
price is the net asset value per share next determined after the request is
received in proper form. Payment for shares redeemed will be made by check
mailed within seven days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payment may be postponed or the right
of redemption suspended as provided by the rules of the SEC. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check until it confirms that the purchase check has cleared, usually
a period of up to 15 days. Any taxable gain or loss will be recognized by the
shareholder upon redemption of shares.
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<PAGE> 39
The Fund may redeem any shareholder account with a net asset value on the date
of the notice of redemption less than the minimum initial investment as
specified in this Prospectus. At least 60 days advance written notice of any
such involuntary redemption is required and the shareholder is given an
opportunity to purchase the required value of additional shares at the next
determined net asset value without sales charge. Any applicable CDSC will be
deducted from the proceeds of this redemption. Any involuntary redemption may
only occur if the shareholder account is less than the minimum initial
investment due to shareholder redemptions.
TELEPHONE REDEMPTIONS. In addition to the regular redemption procedures set
forth above, the Fund permits redemption of shares by telephone and for
redemption proceeds to be sent to the address of record for the account or to
the bank account of record as described below. To establish such privilege, a
shareholder must complete the appropriate section of the application
accompanying this Prospectus or call the Fund at (800) 421-5666 to request that
a copy of the Telephone Redemption Authorization form be sent to them for
completion. To redeem shares contact the telephone transaction line at (800)
421-5684. VKAC and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape recording telephone
communications, and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, neither VKAC nor the Fund
will be liable for following telephone instructions which it reasonably believes
to be genuine. VKAC and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed. Telephone redemptions may not be available if the shareholder cannot
reach ACCESS by telephone, whether because all telephone lines are busy or for
any other reason; in such case, a shareholder would have to use the Fund's
regular redemption procedure previously described. Requests received by ACCESS
prior to 4:00 p.m., New York time, on a regular business day will be processed
at the net asset value per share determined that day. These privileges are
available for all accounts other than retirement accounts. The telephone
redemption privilege is not available for shares represented by certificates. If
an account has multiple owners, ACCESS may rely on the instructions of any one
owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their pre-designated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions are expected to be wired on the next business day following the date
of redemption. This service is also not available with respect to shares held in
an individual
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<PAGE> 40
retirement account (IRA) for which Van Kampen American Capital Trust Company
acts as custodian. The Fund reserves the right at any time to terminate, limit
or otherwise modify this redemption privilege.
REDEMPTION UPON DISABILITY. The Fund will waive the contingent deferred sales
charge on redemptions following the disability of a Class B shareholder or Class
C shareholder. An individual will be considered disabled for this purpose if he
or she meets the definition thereof in Section 72(m)(7) of the Code, which in
pertinent part defines a person as disabled if such person "is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of disability before it determines to waive the
contingent deferred sales charge on Class B shares and Class C shares.
In cases of disability, the CDSC on Class B shares and Class C shares will be
waived where the disabled person is either an individual shareholder or owns the
shares as a joint tenant with right of survivorship or is the beneficial owner
of a custodial or fiduciary account, and where the redemption is made within one
year of the initial determination of disability. This waiver of the contingent
deferred sales charge on Class B shares and Class C shares applies to a total or
partial redemption, but only to redemptions of shares held at the time of the
initial determination of disability.
REINSTATEMENT PRIVILEGE. A Class A shareholder or Class B shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A shares of the Fund. A Class C shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the proceeds of
such redemption in Class C shares of the Fund with credit given for any
contingent deferred sales charge paid upon such redemption. Such reinstatement
is made at the net asset value (without sales charge except as described under
"Shareholder Services -- Exchange Privilege") next determined after the order is
received, which must be within 120 days after the date of the redemption.
Reinstatement at net asset value is also offered to participants in those
eligible retirement plans held or administered by Van Kampen American Capital
Trust Company for repayment of principal (and interest) on their borrowings on
such plans.
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DISTRIBUTION AND SERVICE PLANS
- ------------------------------------------------------------------------------
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may spend a portion of the Fund's average daily net assets
attributable to each class of shares in connection with distribution of the
respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Distribution Plan and the Service
Plan are being implemented through an agreement with the Distributor and
sub-agreements between the Distributor and brokers, dealers or financial
intermediaries (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance.
CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A shares of the Fund
pursuant to the Distribution Plan and Service Plan. From such amount, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class A shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts. The Fund pays
the Distributor the lesser of the balance of the 0.25% not paid to such brokers,
dealers or financial intermediaries or the amount of the Distributor's actual
distribution related expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C shares up to 0.75% of the Fund's average daily
net assets attributable to Class C shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution related expense attributable to the Class C shares. In
addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets attributable to the Class C shares
39
<PAGE> 42
pursuant to the Service Plan in connection with the ongoing provision of
services to holders of such shares by the Distributor and by brokers, dealers or
financial intermediaries and in connection with the maintenance of such
shareholders' accounts.
OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, with respect to the Class A shares, there is no
carryover of such reimbursement obligations to succeeding years.
The Distributor's actual expenses with respect to Class B shares or Class C
shares for any given year may exceed the amounts payable to the Distributor with
respect to such class of shares under the Distribution Plan, the Service Plan
and payments received pursuant to the CDSC. In such event, with respect to any
such class of shares, any unreimbursed expenses will be carried forward and paid
by the Fund (up to the amount of the actual expenses incurred) in future years
so long as such Distribution Plan is in effect. Except as mandated by applicable
law, the Fund does not impose any limit with respect to the number of years into
the future that such unreimbursed expenses may be carried forward (on a Fund
level basis). Because such expenses are accounted on a Fund level basis, in
periods of extreme net asset value fluctuation such amounts with respect to a
particular Class B share or Class C share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
June 30, 1996, there were $2.1 million and $7,700 of unreimbursed
distribution-related expenses with respect to Class B shares and Class C shares,
respectively, representing 2.91% and 0.17% of the Fund's net assets attributable
to Class B shares and Class C shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the Fund or
recovered through contingent deferred sales charges.
The Distributor will not use the proceeds from the contingent deferred sales
charge applicable to a particular class of shares to defray distribution related
expenses attributable to any other class of shares. Various federal and state
laws prohibit national banks and some state-chartered commercial banks from
underwriting or dealing in the Fund's shares. In addition, state securities laws
on this issue may differ from the interpretations of federal law, and banks and
financial institutions may be required to register as dealers pursuant to state
law. In the unlikely event that a court were to find that these laws prevent
such banks from providing such services described above, the Fund would seek
alternate providers and expects that shareholders would not experience any
disadvantage.
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DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS. Dividends from stocks and interest earned from other investments
are the Fund's main source of income. Substantially all of this income, less
expenses, is distributed at least annually as dividends to shareholders. Unless
the shareholder instructs otherwise, dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value.
The per share dividends on Class B shares and Class C shares will be lower than
the per share dividends on Class A shares as a result of the distribution fees
and incremental transfer agency fees applicable to such classes of shares.
CAPITAL GAINS. The Fund may realize capital gains or losses when it sells
securities, depending on whether the sales prices for the securities are higher
or lower than their purchase prices. The Fund distributes to shareholders at
least once a year the excess, if any, of its total profits on the sale of
securities during the year over its total losses on the sale of securities,
including capital losses carried forward from prior years in accordance with tax
laws. As in the case of income dividends, capital gains distributions are
automatically reinvested in additional shares of the Fund at net asset value
unless the shareholder instructs otherwise. See "Shareholder
Services -- Reinvestment Plan."
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TAX STATUS
- ------------------------------------------------------------------------------
The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom, and reflects applicable tax laws as of the date of
this Prospectus.
FEDERAL INCOME TAXATION. The Fund intends to qualify each year and to elect
to be treated as a regulated investment company under Subchapter M of the Code.
To qualify as a regulated investment company, the Fund must comply with certain
requirements of the Code relating to, among other things, the source of its
income and diversification of its assets.
If the Fund so qualifies and distributes each year to its Shareholders at
least 90% of its net investment income (including tax-exempt interest, taxable
income and net short-term capital gain, but not net capital gains, which are the
excess of net long-term capital gains over net short-term capital losses), it
will not be required to pay federal income taxes on any income distributed to
Shareholders. The Fund intends
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<PAGE> 44
to distribute at least the minimum amount of net investment income necessary to
satisfy the 90% distribution requirement. The Fund will not be subject to
federal income tax on any net capital gains distributed to Shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute, by
December 31 of each year, at least 98% of its ordinary income (not including
tax-exempt income) for such year and at least 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31 of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its Shareholders) and all distributions out of earnings and
profits would be taxed to Shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to Shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.
Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to mark-to-market some of the positions in its portfolio (i.e.,
treat them as if they were sold for fair market value at the end of the
tax-year), which may cause the Fund to recognize income without receiving cash
with which to make distributions in amounts necessary to satisfy the 90%
distribution requirement and the distribution requirements for avoiding income
and excise taxes. The Fund will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.
The Fund's ability to dispose of portfolio securities may be limited by the
requirement for qualification as a regulated investment company that less than
30%
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<PAGE> 45
of the Fund's annual gross income be derived from the disposition of securities
held for less than three months.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
Shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
DISTRIBUTIONS. Distributions of the Fund's net investment income are taxable
to Shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional Shares. Distributions
of the Fund's net capital gains ("capital gains dividends"), if any, are taxable
to Shareholders as long-term capital gains regardless of the length of time
Shares of the Fund have been held by such Shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's Shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such Shares are held as a
capital asset). Tax-exempt Shareholders not subject to federal income tax on
their income generally will not be taxed on distributions from the Fund.
Shareholders receiving distributions in the form of additional Shares issued
by the Fund will be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the Shares received,
determined as of the distribution date. The basis of such Shares will equal the
fair market value on the distribution date.
The Fund will inform Shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund will be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to Shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the Shareholders on
43
<PAGE> 46
the December 31 prior to the date of payment. In addition, certain other
distributions made after the close of a taxable year of the Fund may be "spilled
back" and treated as paid by the Fund (except for purposes of the 4% excise tax)
during such taxable year. In such case, Shareholders will be treated as having
received such dividends in the taxable year in which the distribution was
actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
Shareholders.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to Shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.
SALE OF SHARES. The sale of Shares (including transfers in connection with a
redemption or repurchase of Shares) will be a taxable transaction for federal
income tax purposes. Selling Shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
Shares and the amount received. If such Shares are held as a capital asset, the
gain or loss will be a capital gain or loss and will be long-term if such Shares
have been held for more than one year. Any loss realized upon a taxable
disposition of Shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gains dividends received with respect
to such Shares. For purposes of determining whether Shares have been held for
six months or less, the holding period is suspended for any periods during which
the Shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property or through certain
options or short sales.
GENERAL. The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal tax consequences of holding and disposing of Shares, as
well as the effects of state, local and foreign tax law and any proposed tax law
changes.
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FUND PERFORMANCE
- ------------------------------------------------------------------------------
From time to time, the Fund may advertise its total return for prior periods.
Any such advertisement would include at least average annual total return
quotations for one-year, five-year, and ten-year periods. Other total return
quotations, aggregate or average, over other time periods may also be included.
The total return of the Fund for a particular period represents the increase,
or decrease, in the value of a hypothetical investment in the Fund from the
beginning
44
<PAGE> 47
to the end of the period. Total return is calculated by subtracting the value of
the initial investment from the ending value and showing the difference as a
percentage of the initial investment; the calculation assumes the initial
investment is made at the current maximum public offering price (which includes
a maximum sales charge of 5.75% for Class A shares); that all income dividends
or capital gains distributions during the period are reinvested in Fund shares
at net asset value; and that any applicable CDSC has been paid. The Fund's total
return will vary depending on market conditions, the securities comprising the
Fund's portfolio, the Fund's operating expenses and unrealized net capital gains
or losses during the period. Since shares of the Fund were offered at a maximum
sales charge of 8.50% prior to June 12, 1989, actual Fund total return would
have been somewhat less than that computed on the basis of the current maximum
sales charge. Total return is based on historical earnings and asset value
fluctuations and is not intended to indicate future performance. No adjustments
are made to reflect any income taxes payable by shareholders on dividends and
distributions paid by the Fund or to reflect the fact no 12b-1 fees were
incurred prior to October 1, 1989.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
Total return is calculated separately for Class A shares, Class B shares and
Class C shares. Total return figures for Class A shares include the maximum
sales charge of 5.75%; total return figures for Class B shares and Class C
shares include any applicable CDSC. Because of the differences in sales charges
and distribution fees, the total returns for each of the classes will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return,
which is a measure of the income actually earned by, plus the effect of any
realized and unrealized appreciation or depreciation of such investments during
a stated period. Distribution rate is, therefore, not intended to be a complete
measure of the Fund's performance. Distribution rate may sometimes be greater
than yield since, for instance, it may not include the effect of amortization of
bond premiums, and may include non-recurring short-term capital gains and
premiums from futures transactions engaged in by the Fund. Distribution rates
will be computed separately for each class of the Fund's shares.
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the rankings or ratings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of
45
<PAGE> 48
mutual funds or with the Consumer Price Index, the Dow Jones Industrial Average
Index, Standard & Poor's, NASDAQ, other appropriate indices of investment
securities, or with investment or savings vehicles. The performance information
may also include evaluations of the Fund published by nationally recognized
ranking services and by nationally recognized financial publications. Such
comparative performance information will be stated in the same terms in which
the comparative data or indices are stated. Such advertisements and sales
material may also include a yield quotation as of a current period. In each
case, such total return and yield information, if any, will be calculated
pursuant to rules established by the SEC and will be computed separately for
each class of the Fund's Shares. For these purposes, the performance of the
Fund, as well as the performance of other mutual funds or indices, do not
reflect sales charges, the inclusion of which would reduce Fund performance. The
Fund will include performance data for each class of shares of the Fund in any
advertisement or information including performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
The Fund's Annual Report contains additional performance information. A copy
of the Annual Report may be obtained without charge by calling or writing the
Fund at the telephone number and address printed on the cover page of this
Prospectus.
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DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------
The Fund was originally incorporated in Delaware on December 2, 1968, and was
re-incorporated by merger into a Maryland corporation on December 30, 1982. The
Fund was reorganized as a business trust under the laws of the State of Delaware
on August 31, 1995.
The Fund is authorized to issue an unlimited number of Class A shares, Class B
shares and Class C shares of beneficial interest. Each class of shares
represents an interest in the same assets of the Fund and generally are
identical in all respects except that each class bears certain distribution
expenses and has exclusive voting rights with respect to its distribution fee.
The par value for each class of shares is $0.01 per share.
The Fund is permitted to issue an unlimited number of classes. Other classes
of shares may be established from time to time in accordance with the provisions
of the Fund's Declaration of Trust. Each class of shares is equal as to
earnings, assets and voting privileges, except as noted above, and each class
bears the expenses related to the distribution of its shares. Shares issued by
the Fund are fully paid and non-assessable and have no conversion, preemptive or
other subscription rights,
46
<PAGE> 49
except with respect to the conversion of Class B shares and Class C shares into
Class A shares as described above. In the event of liquidation, each of the
shares of the Fund is entitled to its portion of all of the Fund's net assets
after all debt and expenses of the Fund have been paid. Since Class B shares and
Class C shares pay higher distribution expenses, the liquidation proceeds to
Class B shareholders and Class C shareholders are likely to be lower than to
other shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. More detailed information concerning the Fund is
set forth in the Statement of Additional Information.
The Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
An investment in the Fund may not be appropriate for all investors. The Fund
is not intended to be a complete investment program, and investors should
consider their long-term investment goals and financial needs when making an
investment decision with respect to the Fund. An investment in the Fund is
intended to be a long-term investment, and should not be used as a trading
vehicle.
47
<PAGE> 50
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889
FOR TELEPHONE TRANSACTIONS
DIAL (800) 421-5684
VAN KAMPEN AMERICAN CAPITAL
PACE FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen American
Capital Pace Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American
Capital Pace Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICE WATERHOUSE LLP
1201 Louisiana
Suite 2900
Houston, TX 77002
<PAGE> 51
- ------------------------------------------------------------------------------
PACE FUND
------------------------------------------------------------------------------
P R O S P E C T U S
OCTOBER 28, 1996
------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 52
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL PACE FUND
Van Kampen American Capital Pace Fund (the "Fund") is a diversified
open-end management investment company. This Statement of Additional Information
is not a Prospectus and should be read in conjunction with the Prospectus for
the Fund (the "Prospectus") dated as of the date of this Statement of Additional
Information. This Statement of Additional Information does not include all the
information a prospective investor should consider before purchasing shares of
the Fund. Investors should obtain and read the Prospectus prior to purchasing
shares of the Fund. A Prospectus may be obtained without charge by writing or
calling Van Kampen American Capital Distributors, Inc. at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 at (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information........................................................... B-2
Repurchase Agreements......................................................... B-3
Foreign Securities............................................................ B-4
Options, Futures Contracts and Related Options................................ B-4
Investment Restrictions....................................................... B-9
Trustees and Officers......................................................... B-11
Legal Counsel................................................................. B-18
Investment Advisory Agreement................................................. B-18
Distributor................................................................... B-20
Distribution and Service Plans................................................ B-20
Transfer Agent................................................................ B-21
Portfolio Transactions and Brokerage.......................................... B-21
Determination of Net Asset Value.............................................. B-22
Purchase and Redemption of Shares............................................. B-23
Exchange Privilege............................................................ B-26
Tax Status.................................................................... B-27
Fund Performance.............................................................. B-27
Other Information............................................................. B-28
Report of Independent Accountants............................................. B-29
Financial Statements.......................................................... B-30
Notes to Financial Statements................................................. B-38
</TABLE>
This Statement of Additional Information is dated October 28, 1996.
<PAGE> 53
GENERAL INFORMATION
Van Kampen American Capital Pace Fund, formerly known as American Capital
Pace Fund, Inc. (the "Fund"), was originally incorporated in Delaware on
December 2, 1968, reincorporated by merger into a Maryland corporation on
December 30, 1982. As of August 31, 1995, the Fund was reorganized as a series
of Van Kampen American Capital Pace Fund (the "Trust"), a Delaware business
trust.
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor"), and ACCESS
Investor Services, Inc. ("ACCESS") are wholly-owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is controlled, through the ownership of a
substantial majority of its common stock, by The Clayton & Dubilier Private
Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut limited
partnership. C&D L.P. is managed by Clayton, Dubilier & Rice, Inc. a New York
based private investment firm. The General Partner of C&D L.P. is Clayton &
Dubilier Associates IV Limited Partnership ("C&D Associates L.P."). The General
Partners of C&D Associates L.P. are Joseph L. Rice, III, B. Charles Ames,
William A. Barbe, Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr.,
Hubbard C. Howe and Andrall E. Pearson, each of whom is a principal of Clayton,
Dubilier & Rice, Inc. In addition, certain officers, directors and employees of
VKAC own, in the aggregate, approximately 6% of the common stock of VK/AC
Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 12% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of such options, no officer
or trustee of the Fund owns or would own 5% or more of the common stock of VK/AC
Holding, Inc.
VKAC offers one of the industry's broadest lines of
investments -- encompassing mutual funds, closed-end funds and unit investment
trusts -- and is currently the nation's 5th largest broker-sold mutual fund
group according to Strategic Insight, July 1995. VKAC manages or supervises more
than $57 billion in mutual funds, closed-end funds and unit investment
trusts -- assets which have been entrusted to VKAC in more than 2 million
investor accounts. VKAC has one of the largest research teams (outside of the
rating agencies) in the country, with more than 80 analysts devoted to various
specializations.
VKAC uses a four-step investment process designed to attempt to produce
consistently good short-term results, which should help lead to superior
long-term performance.
Fully Invested: Money invested in a VKAC stock fund will normally be fully
invested in the market to attempt to maximize the potential for long-term
returns. The importance of being fully invested can be illustrated by the
following comparison. By missing fewer than 4% of the months during the past 69
years, the value of $1 invested in 1926 was $15.81 at the end of 1995, compared
to $1,113.92 for $1 that was invested for the entire period (Source: Micropal,
Inc.). During the most recent five-year period (1991-1995), the average annual
total return for stocks, as measured by the Standard and Poor's 500 Stock Index,
a broad-based, unmanaged index, was 11.75%. However, the average annual return
for the S&P 500 for the same period excluding the 20 best days for stock market
performance, was just 1.93%. Of course, past performance is no guarantee of
future results.
Widely Varied: A widely varied portfolio usually reduces risk and increases
relative stability. Since VKAC's goal is consistency, a widely varied portfolio
across industries is emphasized. VKAC stock funds are varied both in terms of
the number of industries and the number of stocks within each industry in which
they invest. Generally, the stock funds invest in 12 broad economic sectors, and
in many individual stocks within each sector.
Clearly Defined: The basic characteristics of VKAC funds are determined by
a pre-defined profile which remains constant over time.
Blended Investment Style: Market conditions are constantly changing, which
means the stocks that perform well should be expected to change. A rigid
investment style might cause an investor to suffer when certain types of stocks
lose favor with the market. The two most common investment styles are growth,
which emphasizes companies that are projected to experience rapid growth in
earnings, and value, which focuses on companies whose stock is selling for less
than the company's trust worth. At VKAC, our style is blended
B-2
<PAGE> 54
between growth and value on a fund-specific basis. The results of our approach
are constantly evaluated and compared to other similar funds. Although past
performance is no guarantee of future results, VKAC remains committed to our
belief that this approach should help maximize potential for long-term returns.
As of October 17, 1996, no person was known by the Fund to own beneficially
or to hold of record 5% or more of the outstanding Class A shares, Class B
shares or Class C shares of the Fund, except as follows:
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OWNERSHIP AT CLASS OF PERCENTAGE
OF HOLDER OCTOBER 17, 1996 SHARES OWNERSHIP
- --------------------------------------------------------- ---------------- --------- ----------
<S> <C> <C> <C>
Record Holders Only:
Van Kampen American Capital Trust Company................ 104,351,294 A 50.91%
2800 Post Oak Blvd. 2,310,775 B 37.52%
Houston, TX 77056 119,068 C 29.76%
Van Kampen American Capital Tr Cust...................... 20,650 C 5.16%
IRA R/O Phyllis Williams
11411 Carrollwood Dr.
Tampa, FL 33618-3705
Merrill Lynch Pierce Fenner & Smith Inc. ................ 22,064 C 5.52%
Mutual Fund Operations
Attn Book Entry
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246-6484
</TABLE>
Van Kampen American Capital Trust Company acts as custodian for certain employee
benefit plans and independent retirement accounts.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with domestic banks or
broker-dealers. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, usually not
more than seven days from the date of purchase, thereby determining the yield
during the purchaser's holding period. Repurchase agreements are collateralized
by the underlying debt securities and may be considered to be loans under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of a custodian or bank acting as agent. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities marked-to-market daily at not less than the repurchase
price. The underlying securities (securities of the U.S. Government, or its
agencies and instrumentalities) may have maturity dates exceeding one year. The
Fund does not bear the risk of a decline in value of the underlying security
unless the seller defaults under its repurchase obligation. As a matter of
operating policy, the Fund does not intend to invest more than 5% of its assets
in repurchase agreements. The Fund will not invest in repurchase agreements
maturing in more than seven days if any such investment, together with any other
illiquid securities owned by the Fund, exceeds 10% of the value of its net
assets.
B-3
<PAGE> 55
FOREIGN SECURITIES
The Fund may invest up to 15% of the value of its assets in securities of
foreign issuers. Such securities may be subject to foreign government taxes
which would reduce the income yield on such securities. Foreign investments
involve certain risks, such as political or economic instability of the issuer
or of the country of issue, changes in currency exchange rates, the difficulty
of predicting international trade patterns and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of domestic corporations or of the United States
Government. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and, with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Finally, in the
event of a default on any such foreign debt obligations, it may be more
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities.
The Fund may invest in the securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or
other securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally, ADRs in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS
WRITING CALL AND PUT OPTIONS
Purpose. The principal reason for writing options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. Such current return could be expected to fluctuate
because premiums earned from an option writing program and dividend or interest
income yields on portfolio securities vary as economic and market conditions
change. Writing options on portfolio securities is likely to result in a higher
portfolio turnover rate.
Writing Options. The purchaser of a call option pays a premium to the
writer (i.e., the seller) for the right to buy the underlying security from the
writer at a specified price during a certain period. The Fund would write call
options only on a covered basis, which means that, at all times during the
option period, the Fund would own or have the right to acquire securities of the
type that it would be obligated to deliver if any outstanding option were
exercised.
The purchaser of a put option pays a premium to the writer (i.e., the
seller) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would write put options only
on a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its Custodian cash, cash
equivalents or U.S. government securities in an amount of not less than the
exercise price of the option, or would hold a put on the same underlying
security at an equal or greater exercise price.
Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a writer of a call or put option, the Fund could enter
in to a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously written by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is less (greater) than the premium it received on the sale of the
option. The Fund would also realize a gain if an option it has written lapses
unexercised.
B-4
<PAGE> 56
The Fund could write options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. A Fund
could close out its position as a writer of an option only if a liquid secondary
market exists for options of that series, but there is no assurance that such a
market will exist, particularly in the case of over-the-counter options, since
they can be closed out only with the other party to the transaction.
Alternatively, the Fund could purchase an offsetting option, which would not
close out its position as a writer, but would provide an asset of equal value to
its obligation under the option written. If the Fund is not able to enter into a
closing purchase transaction or to purchase an offsetting option with respect to
an option it has written, it will be required to maintain the securities subject
to the call or the collateral underlying the put until a closing purchase
transaction can be entered into (or the option is exercised or expires), even
though it might not be advantageous to do so.
Risks of Writing Options. By writing a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by writing a put option a Fund might become obligated to
purchase the underlying security at an exercise price that exceeds the then
current market price.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security (whether or not
covered) that may be written by a single investor, whether acting alone or in
concert with others, regardless of whether such options are written on one or
more accounts or through one or more brokers. An exchange may order the
liquidation of positions found to be in violation of those limits, and it may
impose other sanctions or restrictions. These position limits may restrict the
number of options the Fund may be able to write.
PURCHASING CALL AND PUT OPTIONS
The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire.
Alternatively, call options could be purchased for capital appreciation. Since
the premium paid for a call option is typically a small fraction of the price of
the underlying security, a given amount of funds will purchase call options
covering a much larger quantity of such security than could be purchased
directly. By purchasing call options, the Fund could benefit from any
significant increase in the price of the underlying security to a greater extent
than had it invested the same amount in the security directly. However, because
of the very high volatility of option premiums, the Fund would bear a
significant risk of losing the entire premium if the price of the underlying
security did not rise sufficiently, or if it did not do so before the option
expired.
Put options may be purchased to protect (i.e., hedge) against anticipated
declines in the market value of either specific portfolio securities or of the
Fund's assets generally. Alternatively, put options may be purchased for capital
appreciation in anticipation of a price decline in the underlying security and a
corresponding increase in the value of the put option. The purchase of put
options for capital appreciation involves the same significant risk of loss as
described above for call options.
In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.
OPTIONS ON STOCK INDEXES
Options on stock indexes are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash upon exercise of the option. Receipt of this
cash amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received
will be the difference between the closing price of the index and the exercise
price of the option, multiplied by a specified dollar multiple. The writer of
the option is obligated, in return for the premium received, to make delivery of
this amount.
Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indexes
B-5
<PAGE> 57
are also based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. A stock index fluctuates
with changes in the market values of the stocks included in the index. Options
are currently traded on The Chicago Board Options Exchange, the American Stock
Exchange and other exchanges.
Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.
FUTURES CONTRACTS
The Fund may engage in transactions involving futures contracts and related
options in accordance with the rules and interpretations of the Commodity
Futures Trading Commission ("CFTC") under which the Fund is exempt from
registration as a "commodity pool."
A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of cash equal to a specified dollar amount
multiplied by the difference between the stock index value at a specified time
and the price at which the futures contract originally was struck. No physical
delivery of the underlying stocks in the index is made.
An interest rate futures contract is an agreement pursuant to which a party
agrees to take or make delivery of a specified debt security (such as U.S.
Treasury bonds or notes) at a specified future time and at a specified price.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its custodian in an
account in the broker's name an amount of cash, cash equivalents or liquid
securities equal to a percentage (which will normally range between 2% and 10%)
of the contract amount. This amount is known as initial margin. The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transaction. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract, which is returned to the Fund upon termination of the futures
contract and satisfaction of its contractual obligations. Subsequent payments to
and from the broker, called variation margin, are made on a daily basis as the
price of the underlying securities or index fluctuates, making the long and
short positions in the futures contract more or less valuable, a process known
as marking to market.
For example, when the Fund purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund receives from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund purchases a futures contract and
the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is not fully
invested ("anticipatory hedge"). Such purchase of a futures contract serves as a
temporary substitute for the purchase of individual securities, which may be
purchased in an orderly fashion once the market has stabilized. As individual
securities are purchased, an equivalent amount of futures contracts could be
terminated by offsetting sales. The Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
substantially reduces the risk to the Fund of a market
B-6
<PAGE> 58
decline and, by so doing, provides an alternative to the liquidation of
securities positions in the Fund with attendant transaction costs.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
Special Risks Associated with Futures Transactions. There are several risks
connected with the use of futures contracts as a hedging device. These include
the risk of imperfect correlation between movements in the price of the futures
contracts and of the underlying securities, the risk of market distortion, the
illiquidity risk and the risk of error in anticipating price movement.
There may be an imperfect correlation, or no correlation, between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for the imperfect correlation, the Fund could buy or sell futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the securities being hedged is greater than the
historical volatility of the securities underlying the futures contract.
Conversely, the Fund could buy or sell futures contracts in a lesser dollar
amount than the dollar amount of securities being hedged if the historical
volatility of the securities being hedged is less than the historical volatility
of the securities underlying the futures contract. It is also possible that the
value of futures contracts held by the Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.
There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities or index underlying the
futures contract due to certain market distortions. First, all participants in
the futures market are subject to margin depository and maintenance
requirements. Rather than meet additional margin depository requirements,
investors may close futures contracts through offsetting transactions, which
could distort the normal relationship between the futures market and the
securities or index underlying the futures contract. Second, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions. Due to the possibility of price distortion in the futures markets
and because of the imperfect correlation between movements in futures contracts
and movements in the securities underlying them, a correct forecast of general
market trends by the Adviser may still not result in a successful hedging
transaction.
There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
B-7
<PAGE> 59
CFTC regulations require, among other things, (i) that futures and related
options be used solely for bona fide hedging purposes (or meet certain
conditions as specified in CFTC regulations) and (ii) that the Fund not enter
into futures and related options for which the aggregate initial margin and
premiums exceed 5% of the fair market value of the Fund's assets. In order to
prevent leverage in connection with the purchase of futures contracts by the
Fund, an amount of cash, cash equivalents or liquid high grade debt securities
equal to the market value of the obligation under the futures contracts (less
any related margin deposits) will be maintained in a segregated account with the
custodian.
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purpose as, it could sell a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts would be intended to serve the same purpose as the actual
purchase of the futures contracts.
RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS
In addition to the risks described above which apply to all options
transactions, there are several special risks relating to options on futures.
The Adviser will not purchase options on futures on any exchange unless in the
Adviser's opinion, a liquid secondary exchange market for such options exists.
Compared to the use of futures, the purchase of options on futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances, such as when there is no movement in the level of the index or in
the price of the underlying security, when the use of an option on a future
would result in a loss to the Fund when the use of a future would not.
ADDITIONAL RISKS OF OPTIONS AND FUTURES TRANSACTIONS
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written on
one or more accounts or through one or more brokers). Option positions of all
investment companies advised by the Adviser are combined for purposes of these
limits. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the
B-8
<PAGE> 60
price of the securities being hedged will, in fact, correlate with the price
movements in a futures contract and thus provide an offset to losses on the
futures contract.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which cannot be changed
without approval by a majority vote of its outstanding shares. Such majority
vote is defined as the lesser of (i) 67% or more of the voting securities
present at the meeting, if the holders of more than 50% of the outstanding
voting securities are present or represented by proxy; or (ii) more than 50% of
the outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities. These restrictions provide that the Fund shall not:
1. Make loans, except that the Fund may purchase bonds, debentures or
other debt securities of the type commonly offered privately to, and
purchased by, financial institutions in an amount not exceeding 10% of
its total assets, and except that the Fund may invest in repurchase
agreements in an amount not exceeding 25% of its total assets. The
purchase of publicly distributed bonds and debentures shall not
constitute the making of loans;
2. Invest in securities of other investment companies in an amount in
excess of 5% of the value of the Fund's total assets except to acquire
shares of other open-end investment companies to the extent permitted
by rule or order of the Securities and Exchange Commission ("SEC")
exempting the Fund from the limitations imposed by Section 12(d)(1) of
the 1940 Act;
3. Invest in securities of any company if any officer or director/trustee
of the Fund or of the Adviser owns more than 1/2 of 1% of the
outstanding securities of such company, and such officers and
directors/trustees who own more than 1/2 of 1% in the aggregate own
more than 5% of the outstanding securities of such company;
4. Invest in real estate, (although the Fund may acquire securities of
issuers that invest in real estate,) commodities or commodity contracts
except that the Fund may enter into transactions in futures contracts
or related options;
5. Invest in securities of a company for the purpose of exercising control
of management, although the Fund retains the right to vote securities
held by it;
6. Engage in the underwriting of securities of other issuers, except that
in connection with the disposal of an investment position the Fund may
be deemed to be an "underwriter" as that term is defined under the
Securities Act of 1933 (the "1933 Act");
7. Make any investment which would cause more than 25% of its assets to be
invested in securities issued by companies principally engaged in any
one industry, provided, however, that this limitation excludes shares
of other open-end investment companies owned by the Fund but includes
the Fund's pro rata portion of the securities and other assets owned by
any such company;
8. With respect to 75% of its assets, invest more than 5% of its assets in
the securities of any one issuer (except the United States government)
or purchase more than 10% of the outstanding voting securities of any
one issuer. Neither limitation shall apply to the acquisition of shares
of other open-end investment companies to the extent permitted by rule
or order of the SEC exempting the Fund from the limitations imposed by
Section (d)(1) of the 1940 Act;
9. Pledge any of its assets, except that the Fund may pledge assets having
a value of not more than 10% of its total assets in order to secure
permitted borrowings from banks. Such borrowings may not exceed 5% of
the value of the Fund's assets and can be made only as a temporary
measure for extraordinary or emergency purposes. Notwithstanding the
foregoing, the Fund may engage in transactions in options, futures
contracts or related options, segregate or deposit assets to cover or
secure options written and make margin deposits and payments for
futures contracts and related options;
B-9
<PAGE> 61
10. Invest more than 10% of its net assets (determined at the time of
investment) in illiquid securities, securities for which market
quotations are not readily available, and repurchase agreements which
have a maturity of longer than seven days; or
11. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making
and collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities, or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts and other investment strategies and instruments that would be
considered "senior securities" but for the maintenance by the Fund of a
segregated account with its custodian or some other form of "cover."
The Fund is subject to the following policies, which may be amended by its
Trustees. In addition to such policies set forth in the Fund's Prospectus, the
Fund shall not:
1. Make short sales, unless at the time of the sale it owns an equal
amount of such securities;
2. Invest more than 5% of its net assets in warrants or rights valued at
the lower of cost or market, nor more than 2% of its net assets in
warrants or rights (valued on such basis) which are not listed on the
New York or American Stock Exchanges. Warrants or rights acquired in
units or attached to other securities are not subject to the foregoing
limitation;
3. Purchase securities on margin, but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities. Notwithstanding the foregoing, the Fund may engage in
transactions in options, futures and related options, segregate or
deposit assets to cover or secure options written on long futures
positions and make margin deposits and payments for futures contracts
and related options;
4. Invest in the securities of other open-end investment companies, or
invest in the securities of closed-end investment companies except
through purchase in the open market in a transaction involving no
commission or profit to a sponsor or dealer (other than the customary
broker's commission) or is part of a merger, consolidation or
acquisition except to acquire shares of other open-end investment
companies to the extent permitted by rule or order of the SEC exempting
the Fund from the limitations imposed by Section 12 (d)(1) of the 1940
Act;
5. Invest in interests in oil, gas, mineral exploration or development
programs, although the Fund may acquire securities of companies that
engage in these businesses;
6. Invest more than 5% of its assets in the securities of any one issuer
other than the United States government except to acquire shares of
other open-end investment companies to the extent permitted by rule or
order of the SEC exempting the Fund from the limitations imposed by
Section 12 (d)(1) of the 1940 Act;
7. Invest in the securities of a foreign issuer if, at the time of
acquisition, more than 15% of the value of the Fund's total assets
would be invested in such securities. Foreign investments may be
subject to special risks, including future political and economic
developments, the possible imposition of additional withholding taxes
on dividend or interest income payable on the securities, or the
seizure or nationalization of companies, or establishment of exchange
controls or adoption of other restrictions which might adversely affect
the investment; or
8. Invest more than 5% of the market value of its total assets in
companies having a record, together with predecessors, of less than
three years continuous operation and in securities not having readily
available market quotations provided, however, that this limitation
excludes shares of other open-end investment companies owned by the
Fund but includes the Fund's pro rata portion of the securities and
other assets owned by any such company.
In addition to the above restrictions, the Fund has also undertaken to a
certain state that it will not invest more than 10% of its net assets in Van
Kampen American Capital Small Capitalization Fund until it complies with the
NASAA Guidelines for Registration of Master Fund/Feeder Fund.
B-10
<PAGE> 62
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and their principal occupations for the last five
years and their affiliations, if any, with Van Kampen American Capital
Investment Advisory Corp. (the "VK Adviser"), Van Kampen American Capital Asset
Management, Inc. (the "AC Adviser"), Van Kampen American Capital Distributors,
Inc. (the "Distributor"), Van Kampen American Capital, Inc. ("Van Kampen
American Capital"), VK/AC Holding, Inc. or ACCESS Investor Services, Inc.
("ACCESS"). For purposes hereof, the terms "Van Kampen American Capital Funds"
or "Fund Complex" includes each of the open-end investment companies advised by
the VK Adviser (excluding The Explorer Institutional Trust) and each of the
open-end investment companies advised by the AC Adviser (excluding the Van
Kampen American Capital Exchange Fund and the Common Sense Trust).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
1632 Morning Mountain Road President of MDT Corporation, a company which develops
Raleigh, NC 27614 manufactures, markets and services medical and scientific
Date of Birth: 07/14/32 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Linda Hutton Heagy................. Managing Partner, Paul Ray Berndtson, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Date of Birth: 06/03/49 of La Salle National Bank. Trustee of each of the Van
Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of the Van
Lyme, CT 06371 Kampen American Capital Funds.
Date of Birth: 11/23/19
R. Craig Kennedy................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. Trustee of
each of the Van Kampen American Capital Funds.
Dennis J. McDonnell*............... President, Chief Operating Officer and a Director of the
One Parkview Plaza VK Adviser, the AC Adviser, Van Kampen American Capital
Oakbrook Terrace, IL 60181 Advisors, Inc. and Van Kampen American Capital
Date of Birth: 05/20/42 Management, Inc. Executive Vice President and a Director
of VK/AC Holding, Inc. and Van Kampen American Capital.
President and Director of Van Kampen Merritt Equity
Advisors Corp. Director of Van Kampen Merritt Equity
Holdings Corp. Director of McCarthy, Crisanti & Maffei,
Inc. Prior to September 1996, Chief Executive Officer
McCarthy, Crisanti & Maffei, Inc. and Chairman and
Director of MCM Asia Pacific Company, Limited. Prior to
July 1996, President, Chief Operating Officer and Trustee
of VSM Inc. and VCJ Inc. President, Chief Executive
Officer and Trustee of each of the Van Kampen American
Capital Funds. President, Chairman of the Board and
Trustee of other investment companies advised by the VK
Adviser. Executive Vice President of other investment
companies advised by the AC Adviser.
</TABLE>
B-11
<PAGE> 63
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Date of Birth: 03/31/20 Trust Company of Chicago and Continental Illinois
Corporation. Trustee and Co-Chairman of each of the Van
Kampen American Capital Funds.
Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Date of Birth: 02/13/36 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. ("SIPC"). Trustee of each of
the Van Kampen American Capital Funds.
Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Date of Birth: 10/10/22 software programming company specializing in white collar
productivity. Director of Panasia Bank. Trustee of each
of the Van Kampen American Capital Funds.
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995, Dean
155 Hickory Lane of Graduate School and Chairman, Department of Mechanical
Closter, NJ 07624-2322 Engineering, Stevens Institute of Technology. Director of
Date of Birth: 08/02/24 Dynalysis of Princeton, a firm engaged in engineering
research. Trustee and Co-Chairman of each of the Van
Kampen American Capital Funds.
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom, legal counsel to the Van Kampen American Capital
Chicago, IL 60606 Funds, The Explorer Institutional Trust and the
Date of Birth: 08/22/39 closed-end investment companies advised by the VK
Adviser. Trustee of each of the Van Kampen American
Capital Funds, The Explorer Institutional Trust and the
closed-end investment companies advised by the VK
Adviser.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Date of Birth: 01/31/22 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>
- ---------------
* Such trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. McDonnell is an interested person of the VK Adviser, the
AC Adviser and the Fund by reason of his positions with the VK Adviser and the
AC Adviser. Mr. Whalen is an interested person of the Fund by reason of his
firm acting as legal counsel to the Fund.
B-12
<PAGE> 64
OFFICERS
The address for William N. Brown, Curtis W. Morell, Robert C. Peck, Jr.,
Alan T. Sachtleben, Paul R. Wolkenberg, Tanya M. Loden, Huey P. Falgout, Jr. and
Robert Sullivan is 2800 Post Oak Blvd., Houston, TX 77056. The address for Peter
W. Hegel, Ronald A. Nyberg, Edward C. Wood III, John L. Sullivan, Nicholas
Dalmaso, Scott E. Martin, Weston B. Wetherell and Steven M. Hill is One Parkview
Plaza, Oakbrook Terrace, IL 60181.
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
William N. Brown........ Vice President Executive Vice President of the AC Adviser,
Date of Birth: VK/AC Holding, Inc., Van Kampen American
05/26/53 Capital, and American Capital Contractual
Services, Inc. Executive Vice President and
Director of Van Kampen American Capital
Trust Company, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital
Exchange Corporation, ACCESS and Van Kampen
American Capital Services, Inc. Prior to
September 1996, Director of American
Capital Shareholders Corporation. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and the
AC Adviser.
Peter W. Hegel.......... Vice President Executive Vice President of the VK Adviser,
Date of Birth: AC Adviser, Van Kampen American Capital
06/25/56 Management, Inc. and Van Kampen American
Capital Advisors, Inc. Prior to September
1996, Director of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Director
of VSM Inc. Vice President of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Curtis W. Morell........ Vice President and Senior Vice President of the VK Adviser and
Date of Birth: Chief Accounting the AC Adviser. Vice President and Chief
08/04/46 Officer Accounting Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
</TABLE>
B-13
<PAGE> 65
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Ronald A. Nyberg........ Vice President and Executive Vice President, General Counsel
Date of Birth: Secretary and Secretary of Van Kampen American
07/29/53 Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen Merritt Equity Advisors Corp. and
Van Kampen Merritt Equity Holdings Corp.
Executive Vice President, General Counsel
and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van
Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc. and ACCESS. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen
American Capital Trust Company. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to September 1996,
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Executive
Vice President and General Counsel of VSM
Inc. and VCJ Inc. Vice President and
Secretary of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Robert C. Peck, Jr...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
10/01/46 Inc. Executive Vice President and Director
of the AC Adviser and Van Kampen American
Capital Advisors, Inc. Vice President of
each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Alan T. Sachtleben...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
04/20/42 Inc. Executive Vice President and a
Director of the AC Adviser and Van Kampen
American Capital Advisors, Inc. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Paul R. Wolkenberg...... Vice President Executive Vice President of VK/AC Holding,
Date of Birth: Inc., Van Kampen American Capital, the
11/10/44 Distributor and the AC Adviser. President,
Chief Executive Officer and a Director of
Van Kampen American Capital Trust Company
and ACCESS. Director of American Capital
Contractual Services, Inc. Vice President
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Edward C. Wood III...... Vice President and Senior Vice President of the VK Adviser,
Date of Birth: Chief Financial Officer the AC Adviser and Van Kampen American
01/11/56 Capital Management, Inc. Vice President and
Chief Financial Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
</TABLE>
B-14
<PAGE> 66
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
John L. Sullivan........ Treasurer First Vice President of the VK Adviser and
Date of Birth: the AC Adviser. Treasurer of each of the
08/20/55 Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Tanya M. Loden.......... Controller Vice President of the VK Adviser and the AC
Date of Birth: Adviser. Controller of each of the Van
11/19/59 Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Nicholas Dalmaso........ Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
03/01/65 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser and Van Kampen
American Capital Management, Inc. Assistant
Vice President of Van Kampen American
Capital Advisors, Inc. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
Huey P. Falgout, Jr..... Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
11/15/63 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and ACCESS. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Scott E. Martin......... Assistant Secretary Senior Vice President, Deputy General
Date of Birth: Counsel and Assistant Secretary of Van
08/20/56 Kampen American Capital and VK/AC Holding,
Inc. Senior Vice President, Deputy General
Counsel and Secretary of the VK Adviser,
the AC Adviser, the Distributor, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc., ACCESS, Van Kampen Merritt
Equity Advisors Corp. and Van Kampen
Merritt Equity Holdings Corp. Prior to
September 1996, Deputy General Counsel and
Secretary of McCarthy, Crisanti & Maffei,
Inc. Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
</TABLE>
B-15
<PAGE> 67
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Weston B. Wetherell..... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: and Assistant Secretary of Van Kampen
06/15/56 American Capital, the VK Adviser, the AC
Adviser, the Distributor, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Steven M. Hill.......... Assistant Treasurer Assistant Vice President of the VK Adviser
Date of Birth: and AC Adviser. Assistant Treasurer of each
10/16/64 of the Van Kampen American Capital Funds
and other investment companies advised by
the VK Adviser and the AC Adviser.
Robert Sullivan......... Assistant Controller Assistant Vice President of the VK Adviser
Date of Birth: and the AC Adviser. Assistant Controller of
03/30/33 each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser.
</TABLE>
Each of the foregoing trustees and officers holds the same position with
each of the funds in the Fund Complex. As of December 31, 1995, there were 50
funds in the Fund Complex. Each trustee who is not an affiliated person of the
VK Adviser, the AC Adviser, the Distributor or Van Kampen American Capital (each
a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting
fees for services to the funds in the Fund Complex. Each fund in the Fund
Complex provides a deferred compensation plan to its Non-Affiliated Trustees
that allows trustees to defer receipt of his or her compensation and earn a
return on such deferred amounts based upon the return of the common shares of
the funds in the Fund Complex as more fully described below. Each fund in the
Fund Complex also provides a retirement plan to its Non-Affiliated Trustees that
provides Non-Affiliated Trustees with compensation after retirement, provided
that certain eligibility requirements are met as more fully described below.
The compensation of each Non-Affiliated Trustee includes a retainer by the
funds in the Fund Complex advised by the AC Adviser (the "AC Funds") in an
amount equal to $35,000 per calendar year, due in four quarterly installments on
the first business day of each calendar quarter. The AC Funds pay each Non-
Affiliated Trustee a per meeting fee in the amount of $2,000 per regular
quarterly meeting attended by the Non-Affiliated Trustee, due on the date of
such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in
connection with his or her services as a trustee. Payment of the annual retainer
and the regular meeting fee is allocated among the AC Funds (i) 50% on the basis
of the relative net assets of each AC Fund to the aggregate net assets of all
the AC Funds and (ii) 50% equally to each AC Fund, in each case as of the last
business day of the preceding calendar quarter. Each AC Fund participating in
any special meeting of the trustees generally pays each Non-Affiliated Trustee a
per meeting fee in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.
The trustees have approved an aggregate compensation cap with respect to
funds in the Fund Complex of $84,000 per Non-Affiliated Trustee per year
(excluding any retirement benefits) for the period July 22, 1995 through
December 31, 1996, subject to the net assets and the number of funds in the Fund
Complex as of July 21, 1995 and certain other exceptions. In addition, each of
the VK Adviser or the AC Adviser, as the case may be, has agreed to reimburse
each fund in the Fund Complex through December 31, 1996 for any increase in the
aggregate trustee's compensation over the aggregate compensation paid by such
fund in its 1994 fiscal year, provided that if a fund did not exist for the
entire 1994 fiscal year appropriate adjustments will be made.
Each Non-Affiliated Trustee can elect to defer receipt of all or a portion
of the compensation earned by such Non-Affiliated Trustee until retirement.
Amounts deferred are retained by the Fund and earn a rate of
B-16
<PAGE> 68
return determined by reference to the return on the common shares of the Fund or
other funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order to
match the deferred compensation obligation. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of the Fund.
The Fund adopted a retirement plan on January 25, 1996. Under the Fund's
retirement plan, a Non-Affiliated Trustee who is receiving trustee's fees from
the Fund prior to such Non-Affiliated Trustee's retirement, has at least ten
years of service and retires at or after attaining the age of 60, is eligible to
receive a retirement benefit equal to $2,500 per year for each of the ten years
following such trustee's retirement. Trustees retiring prior to the age of 60 or
with fewer than 10 years but more than 5 years of service may receive reduced
retirement benefits from a series. The retirement plan contains a Fund Complex
retirement benefit cap of $60,000 per year. The AC Adviser will reimburse the
Fund for expenses related to the retirement plan through December 31, 1996.
Additional information regarding compensation and benefits for trustees is
set forth below. The "Registrant" is the Trust, which currently consists of one
operating series. As indicated in the notes accompanying the table, the amounts
relate to either the Registrant's last fiscal year ended June 30, 1996 or the
Fund Complex' last calendar year ended December 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
ESTIMATED TOTAL
PENSION OR ANNUAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS BEFORE DEFERRAL
COMPENSATION BENEFITS ACCRUED FROM FROM REGISTRANT
BEFORE DEFERRAL AS PART OF REGISTRANT AND FUND
FROM REGISTRANT UPON COMPLEX PAID TO
NAME(1) REGISTRANT(2) EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
- --------------------------------------- ---------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan...................... $4,575 $-0- $ 2,500 $84,250
Dr. Richard E. Caruso.................. 1,020 -0- -0- 57,250
Philip P. Gaughan...................... 2,750 -0- -0- 76,500
Linda Hutton Heagy..................... 3,565 -0- 2,500 38,417
Dr. Roger Hilsman...................... 4,470 -0- 2,500 91,250
R. Craig Kennedy....................... 4,470 -0- 2,500 92,625
Donald C. Miller....................... 4,260 -0- -0- 94,625
Jack E. Nelson......................... 4,470 -0- 2,500 93,625
David Rees............................. 3,370 -0- 2,500 83,250
Jerome L. Robinson..................... 4,470 -0- -0- 89,375
Lawrence J. Sheehan.................... 3,370 -0- -0- 91,250
Dr. Fernando Sisto..................... 4,470 -0- 2,500 98,750
Wayne W. Whalen........................ 4,470 -0- 2,500 93,375
William S. Woodside.................... 4,470 -0- 2,500 79,125
</TABLE>
- ---------------
(1) Mr. McDonnell, a trustee of the Trust, is an affiliated person of the VK
Adviser and AC Adviser and is not eligible for compensation or retirement
benefits from the Registrant. Messrs. Gaughan, Kennedy, Miller, Nelson,
Robinson and Whalen were elected by shareholders to the Board of Trustees on
July 21, 1995. Ms. Heagy was appointed to the Board of Trustees on September
7, 1995. Mr. McDonnell was appointed to the Board of Trustees on January 30,
1996. Mr. Don G. Powell resigned from the Board of Trustees on August 15,
1996, and did not receive any compensation or benefits from the Fund while a
trustee because he was an affiliated person of the VK Adviser and AC
Adviser. Messrs. Gaughan and Rees retired from the Board of Trustees on
January 26, 1996 and January 29, 1996, respectively. Messrs. Caruso and
Sheehan were removed from the Board of Trustees effective September 7, 1995
and January 29, 1996, respectively.
(2) The amounts shown in this column are aggregated from the compensation paid
by each series in operation during the Registrant's fiscal year ended June
30, 1996 before deferral by the trustees under the deferred compensation
plan. The following trustees deferred all or a portion of their compensation
from the Registrant during the fiscal year ended June 30, 1996: Dr. Caruso,
$1,020; Mr. Gaughan, $930; Ms. Heagy, $2,940; Mr. Kennedy, $3,340; Mr.
Miller, $3,130; Mr. Nelson, $3,340; Mr. Rees, $1,100; Mr. Robinson,
B-17
<PAGE> 69
$3,340; Dr. Sisto, $920; and Mr. Whalen, $3,340. The cumulative deferred
compensation (including interest) accrued with respect to each trustee from the
Registrant as of June 30, 1996 is as follows: Dr. Caruso, $28,129; Mr. Gaughan,
$1,022; Ms. Heagy, $3,126; Mr. Kennedy, $3,543; Mr. Miller, $3,312; Mr.
Nelson, $3,543; Mr. Rees, $66,306; Mr. Robinson, $3,543; Dr. Sisto, $43,829;
and Mr. Whalen, $3,543. The deferred compensation plan is described above the
Compensation Table. Amounts deferred are retained by the Fund and earn a rate
of return determined by reference to either the return on the common shares
of the Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee. To the extent permitted by the 1940 Act, the Fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation.
(3) The amounts shown in this column are zero in the Fund's fiscal year ended
June 30, 1996 because the Adviser has agreed to reimburse the Fund for
expenses related to the retirement plan through December 31, 1996. Absent
such reimbursement, the aggregate expenses of the Fund for all trustees
would have been approximately $7,500 in its fiscal year ended June 30, 1996.
The Retirement Plan is described above the Compensation Table.
(4) The amounts shown in this column are the estimated annual benefits payable
by the Registrant in each year of the 10-year period commencing in the year
of such trustee's retirement from the Registrant (based on $2,500 per series
for each series of the Registrant in operation) assuming: the trustee has 10
or more years of service on the Board of the respective series and retires
at or after attaining the age of 60. The actual annual benefit may be less
if the trustee is subject to the Fund Complex retirement benefit cap or if
the trustee is not fully vested at the time of retirement.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1995, before
deferral by the trustees under the deferred compensation plan. The following
trustees deferred compensation paid by the Registrant and the Fund Complex
during the calendar year ended December 31, 1995; Dr. Caruso, $41,750; Mr.
Gaughan, $57,750; Ms. Heagy, $8,750; Mr. Kennedy, $65,875; Mr. Miller,
$65,875; Mr. Nelson, $65,875; Mr. Rees, $8,375; Mr. Robinson, $62,375; Dr.
Sisto, $30,260; and Mr. Whalen, $65,625. The deferred compensation earns a
rate of return determined by reference to the return on the common shares of
the Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee. To the extent permitted by the 1940 Act, the Fund
may invest in securities of those funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
trustees' Fund Complex compensation cap commenced on July 22, 1995 and
covered the period between July 22, 1995 and December 31, 1995. Compensation
received prior to July 22, 1995 was not subject to the cap. For the calendar
year ended December 31, 1995, while certain trustees received compensation
over $84,000 in the aggregate, no trustee received compensation in excess of
the pro rata amount of the Fund Complex cap for the period July 22, 1995
through December 31, 1995. In addition to the amounts set forth above,
certain trustees received lump sum retirement benefit distributions not
subject to the cap in 1995 related to three mutual funds that ceased
investment operations during 1995 as follows: Mr. Gaughan, $22,136; Mr.
Miller, $33,205; Mr. Nelson, $30,851; Mr. Robinson, $11,068; and Mr. Whalen,
$27,332. The VK Adviser, AC Adviser and their affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. McDonnell and Whalen, the trustees were not trustees of
such investment companies. Combining the Fund Complex with other investment
companies advised by the VK Adviser, AC Adviser and their affiliates, Mr.
Whalen received Total Compensation of $268,857 during the calendar year
ended December 31, 1995.
As of October 17, 1996, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund. As of October 17, 1996, no trustee
or officer of the Fund owns or would be able to acquire 5% or more of the common
stock of VK/AC Holding, Inc. Mr. McDonnell owns, or has the opportunity to
purchase, an equity interest in VK/AC Holding, Inc., the parent company of Van
Kampen American Capital, and has entered into an employment contract (for a term
until February 17, 1998) with Van Kampen American Capital.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom, Chicago, Illinois.
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The Adviser is responsible for
obtaining and
B-18
<PAGE> 70
evaluating economic, statistical, and financial data and for formulating and
implementing investment programs in furtherance of the Fund's investment
objectives. The Adviser also furnishes at no cost to the Fund (except as noted
herein) the services of sufficient executive and clerical personnel for the Fund
as are necessary to prepare registration statements, prospectuses, shareholder
reports, and notices and proxy solicitation materials. In addition, the Adviser
furnishes at no cost to the Fund the services of a President of the Fund, one or
more Vice Presidents as needed, and a Secretary.
Under the Advisory Agreement, the Fund bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of a Treasurer or other principal
financial officer and the personnel operating under his direction. Charges are
allocated among the investment companies advised or subadvised by the Adviser. A
portion of these amounts were paid to the Adviser or its parent in reimbursement
of personnel, office space, facilities and equipment costs attributable to the
provision of accounting services to the Fund. The services provided by the
Adviser are at cost. The Fund also pays shareholder service agency fees,
distribution fees, custodian fees, legal and auditing fees, the costs of reports
to shareholders and all other ordinary expenses not specifically assumed by the
Adviser.
Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Fund at an annual
rate of: 0.50% on the first $1 billion average daily net assets; 0.45% on the
next $1 billion of average daily net assets; 0.40% on the next $1 billion of
average daily net assets; and 0.35% on the excess over $3 billion of average
daily net assets.
The average net asset value for purposes of computing the advisory fee is
determined by taking the average of all of the determinations of net asset value
for each business day during a given calendar month. Such fee is payable for
each calendar month as soon as practicable after the end of that month. The fee
payable to the Adviser is reduced by any commissions, tender solicitation and
other fees, brokerage or similar payments received by the Adviser or any other
direct or indirect majority owned subsidiary of VK/AC Holding, Inc., in
connection with the purchase and sale of portfolio investments of the Fund, less
any direct expenses incurred by such subsidiary of VK/AC Holding, Inc. in
connection with obtaining such payments. The Adviser agrees to use its best
efforts to recapture tender solicitation fees and exchange offer fees for the
Fund's benefit, and to advise the Trustees of the Fund of any other commissions,
fees, brokerage or similar payments which may be possible under applicable laws
for the Adviser or any other direct or indirect majority-owned subsidiary of
VK/AC Holding, Inc., to receive in connection with the Fund's portfolio
transactions or other arrangements which may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed 1 1/2% of the first $30
million of the Fund's average net assets, plus 1% of any excess over $30
million, the compensation due the Adviser will be reduced by the amount of such
excess and that, if a reduction in and refund of the advisory fee is
insufficient, the Adviser will pay the Fund monthly an amount sufficient to make
up the deficiency, subject to readjustment during the year. Ordinary business
expenses include the investment advisory fee and other operating costs paid by
the Fund except (1) interest and taxes, (2) brokerage commissions, (3) certain
litigation and indemnification expenses as described in the Advisory Agreement
and (4) payments made by the Fund pursuant to the distribution plans, described
below. The Advisory Agreement also provides that the Adviser shall not be liable
to the Fund for any actions or omissions if it acted in good faith without
negligence or misconduct.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on not more than 60 days' nor less than 30 days' written notice.
During the fiscal years ended June 30, 1996, 1995 and 1994, the Adviser
received $11,589,844, $10,261,661 and $11,141,831, respectively, in advisory
fees from the Fund. For such periods, the Fund paid $351,270, $284,101 and
$306,171, respectively, for accounting services. A substantial portion of these
amounts
B-19
<PAGE> 71
was paid to the Adviser in reimbursement of personnel, facilities and equipment
costs attributable to the provision of accounting services to the Fund.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Underwriting Agreement"). The Distributor
has the exclusive right to distribute shares of the Fund through dealers. The
Distributor's obligation is an agency or "best efforts" arrangement under which
the Distributor is required to take and pay for only such shares of the Fund as
may be sold to the public. The Distributor is not obligated to sell any stated
number of shares. The Distributor bears the cost of printing (but not
typesetting) prospectuses used in connection with this offering and certain
other costs, including the cost of sales literature and advertising. The
Underwriting Agreement is renewable from year to year if approved (a) by the
Fund's Trustees or by a vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of Trustees who are not
parties to the Underwriting Agreement or interested persons of any party, by
votes cast in person at a meeting called for such purpose. The Underwriting
Agreement provides that it will terminate if assigned, and that it may be
terminated without penalty be either party on 60 days' written notice. Total
underwriting commissions on the sale of shares of the Fund for the last three
fiscal periods is shown in the chart below. Advantage Capital Corporation is a
former affiliated dealer of the Fund.
<TABLE>
<CAPTION>
DEALER REALLOWANCES
AMOUNTS RECEIVED BY
TOTAL UNDERWRITING RETAINED ADVANTAGE CAPITAL
COMMISSIONS BY DISTRIBUTOR CORPORATION
------------------ -------------- -------------------
<S> <C> <C> <C>
Fiscal Year Ended June 30, 1996................. $2,160,395 $789,307 $ 46,686
Fiscal Year Ended June 30, 1995................. $1,964,375 $230,879 $ 114,516
Fiscal Year Ended June 30, 1994................. $2,635,258 $348,004 $ 181,219
</TABLE>
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through an agreement (the "Distribution and Service Agreement") with the
Distributor of each class of the Fund's shares, sub-agreements between the
Distributor and members of the NASD who are acting as securities dealers and
NASD members or eligible non-members who are acting as brokers or agents and
similar agreements between the Fund and financial intermediaries who are acting
as brokers (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance, which may include, but not
be limited to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by
B-20
<PAGE> 72
the disinterested Trustees. Each of the Plans may be terminated with respect to
any class of shares at any time by a vote of a majority of the disinterested
Trustees or by a vote of a majority of the outstanding voting shares of such
class.
For the year ended June 30, 1996, the Fund has paid expenses under the
Distribution Plan of $0, $453,692 and $22,375 for the Class A shares, Class B
shares and Class C shares, respectively; and the Fund paid $5,084,251, $151,231
and $7,458 under the Service Plan for Class A shares, Class B shares and Class C
shares, respectively.
TRANSFER AGENT
During the fiscal years ended June 30, 1996, 1995 and 1994, ACCESS,
shareholder service agent and dividend disbursing agent for the Fund, received
fees aggregating $4,762,121, $6,091,417 and $6,531,269, respectively, for these
services. These services are provided at cost plus a profit.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the
Fund and for the placement of its portfolio business and the negotiation of the
commissions paid on such transactions. It is the policy of the Adviser to seek
the best security price available with respect to each transaction. In
over-the-counter transactions, orders are placed directly with a principal
market maker unless it is believed that a better price and execution can be
obtained by using a broker. Except to the extent that the Fund may pay higher
brokerage commissions for brokerage and research services (as described below)
on a portion of its transactions executed on securities exchanges, the Adviser
seeks the best security price at the most favorable commission rate. In
selecting broker-dealers and in negotiating commissions, the Adviser considers
the firm's reliability, the quality of its execution services on a continuing
basis and its financial condition. When more than one firm is believed to meet
these criteria, preference may be given to firms which also provide research
services to the Fund or the Adviser.
Consistent with the Rules of Fair Practice of the NASD and subject to
seeking best execution and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of the Fund and of the other Van Kampen
American Capital mutual funds as a factor in the selection of firms to execute
portfolio transactions for the Fund.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services, a
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting the
transaction. Brokerage and research services include (a) furnishing advice as to
the value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, (b) furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts, and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).
Pursuant to provisions of the investment advisory agreement, the Fund's
Trustees have authorized the Adviser to cause the Fund to incur brokerage
commissions in an amount higher than the lowest available rate in return for
research services provided to the Adviser. The Adviser is of the opinion that
the continued receipt of supplemental investment research services from dealers
is essential to its provision of high quality portfolio management services to
the Fund. The Adviser undertakes that such higher commissions will not be paid
by the Fund unless (a) the Adviser determines in good faith that the amount is
reasonable in relation to the services in terms of the particular transaction or
in terms of the Adviser's overall responsibilities with respect to the accounts
as to which it exercises investment discretion, (b) such payment is made in
compliance with the provisions of Section 28(e) and other applicable state and
federal laws, and (c) in the opinion of the Adviser, the total commissions paid
by the Fund are reasonable in relation to the expected benefits to the Fund over
the long term. The investment advisory fee paid by the Fund under the investment
advisory agreement is not reduced as a result of the Adviser's receipt of
research services.
B-21
<PAGE> 73
The Adviser places portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by firms
through which the Fund effects its securities transactions may be used by the
Adviser in servicing all of its accounts; not all of such services may be used
by the Adviser in connection with the Fund. In the opinion of the Adviser, the
benefits from research services to each of the accounts (including the Fund)
managed by the Adviser cannot be measured separately. Because the volume and
nature of the trading activities of the accounts are not uniform, the amount of
commissions in excess of the lowest available rate paid by each account for
brokerage and research services will vary. However, in the opinion of the
Adviser, such costs to the Fund will not be disproportionate to the benefits
received by the Fund on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations among the Fund and other advisory accounts, the main factors
considered by the Adviser are the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and opinions of the persons responsible for recommending the
investment.
The Adviser's brokerage practices are monitored by the Brokerage Review
Committee comprised of Fund Trustees who are not interested persons (as defined
in the 1940 Act) of the Adviser.
Brokerage commissions paid by the Fund on portfolio transactions for the
fiscal years ended June 30, 1996, 1995 and 1994 totalled $10,021,557,
$12,439,850 and $6,854,082, respectively. During the year ended June 30, 1996
the Fund paid $2,827,248 in brokerage commissions on transactions totalling
$2,441,569,786 to brokers selected primarily on the basis of research services
provided to the Adviser.
Prior to December 20, 1994 the Fund placed brokerage transactions with
brokers that were considered affiliated persons of the Adviser's former parent,
The Travelers Inc. Such affiliated persons included Smith Barney Inc. ("Smith
Barney") and Robinson Humphrey, Inc. ("Robinson Humphrey"). Effective December
20, 1994, Smith Barney and Robinson Humphrey ceased to be affiliates of the
Adviser. The negotiated commission paid to an affiliated broker on any
transaction would be comparable to that payable to a non-affiliated broker in a
similar transaction.
The Fund paid the following commissions to these brokers during the periods
shown:
Commissions Paid:
<TABLE>
<CAPTION>
ROBINSON
SMITH BARNEY HUMPHREY
------------ --------
<S> <C> <C>
Fiscal Year Ended
June 30, 1996 -0- -0-
Fiscal Year Ended
June 30, 1995 $182,327 $13,020
Fiscal Year Ended
June 30, 1994 -0- -0-
</TABLE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined as of the close of the New York
Stock Exchange (the "Exchange") (currently 4:00 p.m. New York time) on each
business day on which the Exchange is open.
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 last reported bid price, (ii) valuing options at the last sale price, or
if there has been no sale that day, at the mean between the bid and asked
prices, (iii) valuing over-the-counter securities for which the last sale price
is available from the National Association of Securities Dealers Automated
Quotations
B-22
<PAGE> 74
("NASDAQ") at that price, (iv) valuing all other over-the-counter securities for
which market quotations are available at the most recent bid quotation supplied
by NASDAQ or broker-dealers, and (v) valuing any securities for which market
quotations are not readily available, and any other assets as fair value as
determined in good faith by the Trustees of the Fund. Short-term investments are
valued in the manner described in Note 1 to the Financial Statements included in
this Statement of Additional Information.
The assets belonging to the Class A shares, the Class B shares and the
Class C shares will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting the expenses
and liabilities allocated to that class.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements the section in the Fund's Prospectus
captioned "Purchase of Shares."
PURCHASE OF SHARES
Shares of the Fund are sold in a continuous offering and may be purchased
on any business day through authorized dealers.
ALTERNATIVE SALES ARRANGEMENTS
The Fund issues three classes of shares: Class A shares, Class B shares and
Class C shares. The three classes of shares each represent interests in the same
portfolio of investments of the Fund, have the same rights and are identical in
all respects, except that Class B shares and Class C shares bear the expenses of
the deferred sales arrangements, distribution fees, and any expenses (including
higher transfer agency costs) resulting from such sales arrangements, and have
exclusive voting rights with respect to the Rule 12b-1 distribution plan
pursuant to which the distribution fee is paid.
During special promotions, the entire sales charge on Class A shares may be
reallowed to dealers, and at such times dealers may be deemed to be underwriters
for purposes of the 1933 Act.
INVESTMENTS BY MAIL
A shareholder investment account may be opened by completing the
application accompanying the Prospectus and forwarding the application, through
the authorized dealer, to ACCESS, at P.O. Box 419319, Kansas City, Missouri
64141-6319. The account is opened only upon acceptance of the application by
ACCESS. The minimum initial investment of at least $500 per class of shares, in
the form of a check payable to the Fund, must accompany the application. This
minimum may be waived by the Distributor for plans involving continuing
investments. Minimum subsequent investments of at least $25 per class of shares,
may be mailed directly to ACCESS. All such investments are made at the public
offering price of Fund shares next computed following receipt of payment by
ACCESS. Confirmations of the opening of an account and of all subsequent
transactions in the account are forwarded by ACCESS to the investor's authorized
dealer.
In processing applications and investments, ACCESS acts as agent for the
investor and for the dealer named thereon, and also as agent for the
Distributor, in accordance with the terms of the Prospectus. If ACCESS ceases to
act as such, a successor company named by the Fund will act in the same
capacities so long as the account remains open.
CUMULATIVE PURCHASE DISCOUNT
The reduced sales charges reflected in the sales charge table as shown in
the Prospectus apply to purchases of shares of the Fund shares where the
aggregate investment is $50,000 or more. For purposes of determining eligibility
for volume discounts, spouses and their minor children are treated as a single
purchaser, as is a fiduciary purchasing for a single fiduciary account. An
aggregate investment includes all shares of the Fund and all shares of certain
other participating Van Kampen American Capital mutual funds described in the
Prospectus (the "Participating Funds"), which have been previously purchased and
are still owned, plus
B-23
<PAGE> 75
the shares being purchased. The current offering price is used to determine the
value of all such shares. The same reduction is applicable to purchases under a
Letter of Intent as described in the next paragraph. THE DEALER MUST NOTIFY THE
DISTRIBUTOR AT THE TIME AN ORDER IS PLACED FOR A PURCHASE WHICH WOULD QUALIFY
FOR THE REDUCED CHARGE ON THE BASIS OF PREVIOUS PURCHASES. SIMILAR NOTIFICATION
MUST BE MADE IN WRITING WHEN SUCH AN ORDER IS PLACED BY MAIL. The reduced sales
charge will not be applied if such notification is not furnished at the time of
the order. The reduced sales charge will also not be applied should a review of
the records of the Distributor or the shareholder service agent fail to confirm
the representations concerning the investor's holdings.
LETTER OF INTENT
Purchases of Class A shares of the Participating Funds described above
under "Cumulative Purchase Discount," made pursuant to the Letter of Intent and
the value of all shares of such funds previously purchased and still owned are
also included in determining the applicable quantity discount. A Letter of
Intent permits an investor to establish a total investment goal to be achieved
by any number of investments over a 13-month period. Each investment made during
the period will receive the reduced sales charge applicable to the amount
represented by the goal as if it were a single investment. Escrowed shares
totaling 5% of the dollar amount of the Letter of Intent are held by ACCESS in
the name of the shareholder. The effective date of a Letter of Intent may be
back-dated up to 90 days in order that any investments made during this 90-day
period, valued at the investor's cost, can become subject to the Letter of
Intent. The Letter of Intent does not obligate the investor to purchase the
indicated amount. In the event the Letter of Intent goal is not achieved within
the 13-month period, the investor is required to pay the difference between
sales charges otherwise applicable to the purchases made during this period and
sales charges actually paid. Such payment may be made directly to the
Distributor or, if not paid, the Distributor will liquidate sufficient escrowed
shares to obtain such difference. If the goal is exceeded in an amount which
qualifies for a lower sales charge, a price adjustment is made by refunding to
the investor in shares of the Fund the amount of excess sales charges, if any,
paid during the 13-month period.
REDEMPTION OF SHARES
Redemptions are not made on days during which the Exchange is closed. The
right of redemption may be suspended and the payment therefore may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
For certain full service participant directed profit sharing and money
purchase plans and qualified 401(k) retirement plans and for investments in the
amount of $1,000,000 or more of Class A shares of the Fund ("Qualified
Purchaser"), the front-end sales charge will be waived and a contingent deferred
sales charge ("CDSC -- Class A") of 1.00% is imposed in the event of certain
redemptions within one year of the purchase. If a CDSC -- Class A is imposed
upon redemption, the amount of the CDSC -- Class A will be equal to the lesser
of 1.00% of the net asset value of the shares at the time of purchase, or 1.00%
of the net asset value of the shares at the time redemption.
The CDSC -- Class A will only be imposed if a Qualified Purchaser redeems
an amount which causes the value of the account to fall below the total dollar
amount of purchase payments made by the Qualified Purchaser without an initial
sales charge during the one-year period prior to the redemption. The CDSC --
Class A will be waived in connection with redemptions by Qualified Purchasers
(e.g., in retirement plans qualified under Section 401(a) of the Internal
Revenue Code, as amended (the "Code") and deferred compensation plans under
Section 457 of the Code) required to obtain funds to pay distributions to
beneficiaries pursuant to the terms of the plans. Such payments include, but are
not limited to, death, disability, retirement, or separation from service. No
CDSC -- Class A will be imposed on exchanges between
B-24
<PAGE> 76
funds. For purposes of the CDSC -- Class A, when shares of one fund are
exchanged for shares of another fund, the purchase date for the shares of the
fund exchanged into will be assumed to be the date on which shares were
purchased in the fund from which the exchange was made. If the exchanged shares
themselves are acquired through an exchange, the purchase date is assumed to
carry over from the date of the original election to purchase shares subject to
a CDSC -- Class A rather than a front-end load sales charge. In determining
whether a CDSC -- Class A is payable, it is assumed that shares held the longest
are the first to be redeemed.
Cumulative Purchase Discounts and Letters of Intent apply to the net asset
value privilege. Also, in order to establish an amount of $1,000,000 or more, a
Qualified Purchaser may aggregate shares of Van Kampen American Capital Reserve
Fund and Van Kampen American Capital Tax Free Money Fund with shares of other
participating funds described as "Participating Funds" in the Prospectus.
As described in the Prospectus under "Redemption of Shares," redemptions of
Class B shares and Class C shares will be subject to a contingent deferred sales
charge.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B
AND C")
The CDSC -- Class B and C may be waived on redemptions of Class B and Class
C shares in the circumstances described below:
(a) Redemption Upon Disability or Death
The Fund will waive the CDSC -- Class B and C on redemptions following the
death or disability of a Class B and Class C shareholder. An individual will be
considered disabled for this purpose if he or she meets the definition thereof
in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"), which in pertinent part defines a person as disabled if such person "is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long-continued and indefinite duration." While the Fund does
not specifically adopt the balance of the Code's definition which pertains to
furnishing the Secretary of Treasury with such proof as he or she may require,
the Distributor will require satisfactory proof of death or disability before it
determines to waive the CDSC -- Class B and C.
In cases of disability or death, the CDSC -- Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC -- Class B and C applies to a total or partial
redemption, but only to redemptions of shares held at the time of the death or
initial determination of disability.
(b) Redemption in Connection with Certain Distributions from Retirement
Plans
The Fund will waive the CDSC -- Class B and C when a total or partial
redemption is made in connection with certain distributions from Retirement
Plans. The charge will be waived upon the tax-free rollover or transfer of
assets to another Retirement Plan invested in one or more of Van Kampen American
Capital funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held onto the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC -- Class B and C is applicable in the event that such acquired shares
are redeemed following the transfer or rollover. The charge also will be waived
on any redemption which results from the return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code, the return of excess deferral
amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
B-25
<PAGE> 77
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be specified by the shareholder upon his or her
election to participate in the Plan. The CDSC -- Class B and C will be waived on
redemptions made under the Plan.
The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from the Fund without the imposition of a CDSC -- Class
B and C may not exceed a maximum of 12% annually of the shareholder's initial
account balance. The Fund reserves the right to change the terms and conditions
of the Plan and the ability to offer the Plan.
(d) Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. Any involuntary redemption may only occur if
the shareholder account is less than the amount specified in the Prospectus due
to shareholder redemptions. The Fund will waive the CDSC -- Class B and Class C
upon such involuntary redemption.
(e) Reinvestment of Redemption Proceeds in Shares of the Same Fund Within
120 Days After Redemption
A shareholder who has redeemed Class C shares of a Fund may reinvest, with
credit for any CDSC -- Class C paid on the redeemed shares, any portion or all
of his or her redemption proceeds (plus that amount necessary to acquire a
fractional share to round off his or her purchase to the nearest full share) in
shares of the Fund, provided that the reinvestment is effected within 120 days
after such redemption and the shareholder has not previously exercised this
reinvestment privilege with respect to Class C shares of the Fund. Shares
acquired in this manner will be deemed to have the original cost and purchase
date of the redeemed shares for purposes of applying the CDSC -- Class C to
subsequent redemptions.
(f) Redemption by Adviser
The Fund may waive the CDSC -- Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
EXCHANGE PRIVILEGE
The following supplements the discussion of "Shareholder
Services -- Exchange Privilege" in the Prospectus:
By use of the exchange privilege, the investor authorizes ACCESS to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by ACCESS to be genuine. Van Kampen American Capital and its
subsidiaries, including ACCESS, and the Fund employ procedures considered by
them to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen American Capital, ACCESS nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Van Kampen
American Capital, ACCESS and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed.
B-26
<PAGE> 78
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 sale charge rate was previously paid is deemed exchanged
first.
Exchange requests received on a business day prior to the time shares of
the funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the Fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new Fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
A prospectus of any of these mutual funds may be obtained from any dealer
or the Distributor. An investor considering an exchange to one of such funds
should refer to the prospectus for additional information regarding such fund.
TAX STATUS OF THE FUND
The Trust and any of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund intends to
qualify each year and to elect to be treated as a regulated investment company
under the Code. If the Fund so qualifies and distributes each year to its
Shareholders at least 90% of its net investment income (including tax-exempt
interest, taxable income and net short-term capital gain, but not net capital
gains, which are the excess of net long-term capital gains over net short-term
capital losses) in each year, it will not be required to pay federal income
taxes on any income distributed to Shareholders. The Fund intends to distribute
at least the minimum amount of net investment income necessary to satisfy the
90% distribution requirement. The Fund will not be subject to federal income tax
on any net capital gains distributed to Shareholders.
FUND PERFORMANCE
The Fund's average annual total return (computed in the manner described in
the Prospectus) for Class A shares of the Fund for (i) the one year period ended
June 30, 1996 was 13.54%, (ii) the five year period ended June 30, 1996 was
11.64% and (iii) the ten year period ended June 30, 1996 was 10.39%. The Fund's
average annual total return (computed in the manner described in the Prospectus)
for Class B shares of the Fund for (i) the one year period ended June 30, 1996
was 14.44% and (ii) the four year, 5 1/2 month period ended June 30, 1996 was
9.65%. The Fund's average annual total return for Class C shares of the Fund for
(i) the one year period ended June 30, 1996 was 18.74% and (ii) the two year,
ten month period ended June 30, 1996 was 11.88%. These results are based on
historical earnings and asset value fluctuations and are not intended to
indicate future performance. Such information should be considered in light of
the Fund's investment objectives and policies as well as the risks incurred in
the Fund's investment practices. Future results will be affected by changes in
the general level of prices of securities available for purchase and sale by the
Fund. The past one-year, five-year and ten-year periods have been ones of rising
common stock prices, subject to interim fluctuations.
Total return is computed separately for Class A shares, Class B shares and
Class C shares.
The Fund may, from time to time: (1) illustrate the benefits of
tax-deferral by comparing taxable investments to investments made through
tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) in reports or other communications to shareholders or in advertising
material, illustrate the benefits of compounding at various assumed rates of
return; and (4) illustrate allocations among different types of mutual funds for
investors at different stages of
B-27
<PAGE> 79
their lives. Such illustrations may be in the form of charts or graphs and will
not be based on historical returns experienced by the Funds.
The Adviser seeks to purchase securities of companies which, in the
judgement of the Adviser, have an above average potential for capital growth,
which often includes those companies with innovative management and excellent
financial health. The Fund also attempts to remain fully invested and
diversified across many industries to achieve consistent long-term performance.
Since the commencement of investment operations on July 22, 1969, the world
has experienced a number of significant political and economic events. For
example, in 1971, there were wage and price freezes to attempt to control
inflation. In 1973 the dollar was devalued and the OPEC oil embargo was in
effect. 1976 saw sweeping tax law changes, and in 1979 the CPI rose over 13%,
it's largest rise in 33 years. In 1982, the country was in a recession, in 1985
the U.S. deficit became the largest in the world and the U.S. was now a debtor
nation. 1987 saw the stock market crash. The Persian Gulf War began in 1991, and
the Dow Jones Industrial Average hit a record high of 4000 in 1995.
From time to time marketing materials may provide a portfolio manager
update, an adviser update or discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sector holdings and ten largest holdings. Materials
may also mention how Van Kampen American Capital believes the Fund compares
relative to other Van Kampen American Capital funds. Materials may also discuss
the Dalbar Financial Services study from 1984 to 1994 which examined investor
cash flow into and out of all types of mutual funds. The ten year study found
that investors who bought mutual fund shares and held such shares outperformed
investors who bought and sold. The Dalbar study conclusions were consistent
regardless if shareholders purchased their funds in direct or sales force
distribution channels. The study showed that investors working with a
professional representative have tended over time to earn higher returns that
those who invested directly. The Fund will also be marketed on the Internet.
OTHER INFORMATION
CUSTODY OF ASSETS -- All securities owned by the Fund and all cash, including
proceeds from the sale of shares of the Fund and of securities in the Fund's
investment portfolio, are held by State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, as Custodian.
SHAREHOLDER REPORTS -- Semi-annual statements are furnished to shareholders, and
annually such statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 1201 Louisiana, Houston, Texas
77002, the independent accountants for the Fund, performs annual audits of the
Fund's financial statements.
B-28
<PAGE> 80
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL PACE FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Van Kampen
American Capital Pace Fund (the "Fund") at June 30, 1996, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at June 30, 1996 by
correspondence with the custodian and the application of alternative
procedures where confirmations were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
August 2, 1996
B-29
<PAGE> 81
PORTFOLIO OF INVESTMENTS
June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK 91.7%
CONSUMER DISTRIBUTION 7.4%
*170 AutoZone Inc........................................ $ 5,890,125
*335 Best Buy Inc........................................ 7,663,125
120 Cardinal Health Inc................................. 8,655,000
115 Dayton Hudson Corp.................................. 11,859,375
525 Dillard Department Stores Inc....................... 19,162,500
*871 Eckerd Corp......................................... 19,717,687
*400 Federated Department Stores Inc..................... 13,650,000
300 Gap Inc............................................. 9,637,500
*300 Gymboree Corp....................................... 9,150,000
*550 Kroger Co........................................... 21,725,000
190 Lear Corp........................................... 6,697,500
230 May Department Stores Co............................ 10,062,500
*300 Saks Holdings Inc................................... 10,237,500
180 Sears, Roebuck & Co................................. 8,752,500
550 TJX Companies Inc................................... 18,562,500
435 Wal Mart Stores Inc................................. 11,038,125
--------------
192,460,937
--------------
CONSUMER DURABLES 3.0%
150 Black & Decker Corp................................. 5,793,750
235 Chrysler Corp....................................... 14,570,000
*165 Daimler Benz Aktieng, ADS........................... 8,889,375
200 Eastman Kodak Co.................................... 15,550,000
450 Fiat Spa, ADR....................................... 7,650,000
315 General Motors Corp................................. 16,498,125
210 Harley Davidson Inc................................. 8,636,250
--------------
77,587,500
--------------
CONSUMER NON-DURABLES 9.5%
*275 Adidas, ADS......................................... 11,481,250
110 Anheuser Busch Companies Inc........................ 8,250,000
440 Avon Products Inc................................... 19,855,000
125 Campbell Soup Co.................................... 8,812,500
100 Colgate Palmolive Co................................ 8,475,000
170 CPC International Inc............................... 12,240,000
175 Gillette Co......................................... 10,915,625
190 Gucci Group......................................... 12,255,000
375 Liz Claiborne Inc................................... 12,984,375
635 Nabisco Holdings Corp, Class A...................... 22,463,125
640 PepsiCo Inc......................................... 22,640,000
650 Philip Morris Companies Inc......................... 67,600,000
100 Procter & Gamble Co................................. 9,062,500
135 Ralston Purina Group................................ 8,656,875
285 Tambrands Inc....................................... 11,649,375
--------------
247,340,625
--------------
CONSUMER SERVICES 6.0%
*120 Clear Channel Communications........................ 9,843,813
*500 Cox Communications Inc.............................. 10,812,500
175 Equifax Inc......................................... 4,593,750
*390 Grupo Televisa, SA, ADR............................. 11,992,500
320 Harcourt General Inc................................ 16,000,000
160 Hilton Hotels Corp.................................. 18,000,000
</TABLE>
See Notes to Financial Statements
B-30
<PAGE> 82
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of
Shares
(000) Description Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
*600 Host Marriott Corp................................. $ 7,875,000
300 Marriott International Inc......................... 16,125,000
*140 Mirage Resorts Inc................................. 7,560,000
350 News Corp Ltd, ADS................................. 8,225,000
375 Service Corp International......................... 21,562,500
*635 Tele Communications, Class A....................... 11,509,375
325 Time Warner Inc.................................... 12,756,250
--------------
156,855,688
--------------
ENERGY 9.0%
450 Apache Corp........................................ 14,793,750
265 Baker Hughes Inc................................... 8,711,875
95 British Petroleum, PLC, ADR........................ 10,153,125
500 Coastal Corp....................................... 20,875,000
*165 Diamond Offshore Drilling.......................... 9,446,250
250 Dresser Industries Inc............................. 7,375,000
112 Mobil Corp......................................... 12,558,000
425 Occidental Petroleum Corp.......................... 10,518,750
700 PanEnergy Corp..................................... 23,012,500
275 Phillips Petroleum Co.............................. 11,515,625
550 Repsol SA, ADR..................................... 19,112,500
475 Sonat Inc.......................................... 21,375,000
265 Texaco Inc......................................... 22,226,875
581 Williams Companies Inc............................. 28,759,500
700 YPF Sociedad Anonima, ADS.......................... 15,750,000
--------------
236,183,750
--------------
FINANCE 13.9%
275 Bank of Boston Corp................................ 13,612,500
235 BankAmerica Corp................................... 17,801,250
100 BayBanks Inc....................................... 10,775,000
225 Chase Manhattan Corp............................... 15,890,625
175 Citicorp........................................... 14,459,375
280 Corestates Financial Corp.......................... 10,780,000
9 Donaldson, Lufkin & Jenrette Co.................... 288,300
825 Federal National Mortage Association............... 27,637,500
280 First Bank System Inc.............................. 16,240,000
165 First Union Corp................................... 10,044,375
300 Green Tree Financial Corp.......................... 9,375,000
590 Greenpoint Financial Corp.......................... 16,667,500
120 Merrill Lynch & Co Inc............................. 7,815,000
270 MGIC Investment Corp............................... 15,153,750
65 Morgan Stanley Group Inc........................... 3,173,475
200 NationsBank Corp................................... 16,525,000
425 SunAmerica Inc..................................... 24,012,500
375 Travelers Group Inc................................ 17,109,375
Van Kampen American Capital Small Capitalization
7,957 Fund (Cost $87,703,537--see Note 2)................ 104,712,541
50 Wells Fargo & Co................................... 11,943,750
--------------
364,016,816
--------------
HEALTH CARE 8.0%
180 Abbott Laboratories................................ 7,830,000
230 American Home Products Corp........................ 13,828,750
*250 Amgen Inc.......................................... 13,500,000
</TABLE>
See Notes to Financial Statements
B-31
<PAGE> 83
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE (CONTINUED)
300 Astra, AB, Series A, ADR............................ $ 13,125,000
160 Becton Dickinson & Co............................... 12,840,000
290 Bristol Myers Squibb Co............................. 26,100,000
*120 Genzyme Corp........................................ 6,030,000
200 Guidant Corp........................................ 9,850,000
*475 Healthsouth Rehabilitation.......................... 17,100,000
210 Mallinckrodt Group Inc.............................. 8,163,750
240 Merck & Co Inc...................................... 15,510,000
250 Pfizer Inc.......................................... 17,843,750
365 Schering Plough Corp................................ 22,903,750
200 SmithKline Beecham, PLC, ADR........................ 10,875,000
240 Warner Lambert Co................................... 13,200,000
--------------
208,700,000
--------------
PRODUCER MANUFACTURING 8.3%
225 Allied Signal Inc................................... 12,853,125
500 Canadian Pacific Ltd................................ 11,000,000
360 Cooper Industries Inc............................... 14,940,000
525 Corning Inc......................................... 20,146,875
160 Fluor Corp.......................................... 10,460,000
250 General Electric Co................................. 21,625,000
375 Honeywell Inc....................................... 20,437,500
175 Illinois Tool Works Inc............................. 11,834,375
250 Ingersoll Rand Co................................... 10,937,500
*195 ITT Corp............................................ 12,918,750
*250 Litton Industries Inc............................... 10,875,000
145 TRW Inc............................................. 13,031,875
125 United Technologies Corp............................ 14,375,000
*290 USA Waste Services Inc.............................. 8,591,250
725 Westinghouse Electric Corp.......................... 13,593,750
300 WMX Technologies Inc................................ 9,825,000
--------------
217,445,000
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 4.2%
225 Air Products & Chemicals Inc........................ 12,993,750
100 AK Steel Holding Corp............................... 3,912,500
80 Dow Chemical Co..................................... 6,080,000
105 Kimberly Clark Corp................................. 8,111,250
150 Mead Corp........................................... 7,781,250
525 Morton International Inc............................ 19,556,250
200 Praxair Inc......................................... 8,450,000
105 Raychem Corp........................................ 7,546,875
190 Rohm & Haas Co...................................... 11,922,500
300 Union Carbide Corp.................................. 11,925,000
180 Willamette Industries Inc........................... 10,710,000
--------------
108,989,375
--------------
TECHNOLOGY 15.2%
*180 ADC Telecommunications Inc.......................... 8,100,000
*400 Analog Devices Inc.................................. 10,200,000
*140 Ascend Communications Inc........................... 7,875,000
*125 Aspect Telecommunications Corp...................... 6,187,500
*233 BMC Software Inc.................................... 13,891,875
185 Boeing Co........................................... 16,118,125
</TABLE>
See Notes to Financial Statements
B-32
<PAGE> 84
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
*385 Cadence Design Systems Inc.......................... $ 12,993,750
*160 Cascade Communications Corp......................... 10,880,000
*480 Cisco Systems Inc................................... 27,180,000
360 Computer Associates International Inc............... 25,650,000
575 Ericsson (L M), Class B, ADR........................ 12,362,500
135 First Data Corp..................................... 10,749,375
*230 General Instrument Corp............................. 6,641,250
100 Hewlett Packard Co.................................. 9,962,500
360 Intel Corp.......................................... 26,437,500
300 Linear Technology Corp.............................. 9,000,000
470 Loral Corp.......................................... 6,403,750
350 Lucent Technologies Inc............................. 13,256,250
*225 McAfee Associates Inc............................... 11,025,000
165 McDonnell Douglas Corp.............................. 8,002,500
*180 Microsoft Corp...................................... 21,622,500
400 Motorola Inc........................................ 25,150,000
*190 Newbridge Networks Corp............................. 12,445,000
*350 Oracle System Corp.................................. 13,803,125
*355 Sun Microsystems Inc................................ 20,900,625
*205 Tellabs Inc......................................... 13,709,375
*140 3Com Corp........................................... 6,405,000
*95 US Robotics Corp.................................... 8,122,500
435 Xerox Corp.......................................... 23,272,500
--------------
398,347,500
--------------
TRANSPORTATION 1.6%
*105 AMR Corp............................................ 9,555,000
450 Canadian National Railway........................... 8,268,750
175 Conrail Inc......................................... 11,615,625
180 Union Pacific Corp.................................. 12,577,500
--------------
42,016,875
--------------
UTILITIES 5.6%
160 DTE Energy Co....................................... 4,940,000
200 Empresa Nacional Electric, SA, ADR.................. 12,525,000
635 Frontier Corp....................................... 19,446,875
*400 LCI International Inc............................... 12,550,000
450 MCI Communications Corp............................. 11,531,250
250 Portugal Telecom, SA, ADR........................... 6,562,500
*131 PT Telekomuniskasi, ADR............................. 3,897,250
*330 PT Pasifik Satelite, ADR............................ 6,600,000
295 Sprint Corp......................................... 12,390,000
295 Telefonica de Espana, SA, ADR....................... 16,261,875
320 Texas Utilities Co.................................. 13,680,000
*450 WorldCom Inc........................................ 24,918,750
--------------
145,303,500
--------------
TOTAL COMMON STOCKS (Cost $2,076,596,361)........... 2,395,247,566
--------------
</TABLE>
See Notes to Financial Statements
B-33
<PAGE> 85
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT
OBLIGATIONS 3.4%
$ **40,000 United States Treasury Bonds.... 8.750% 05/15/17 $ 47,381,200
40,000 United States Treasury Notes.... 6.375 07/15/99 40,081,200
--------------
TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS (Cost $86,726,563).. 87,462,400
--------------
SHORT-TERM INVESTMENTS 4.9%
REPURCHASE AGREEMENTS+ 4.2%
57,595 BA Securities, repurchase
proceeds $57,621,158............ 5.450 07/01/96 57,595,000
4,445 Lehman Government Securities,
repurchase proceeds $4,446,982.. 5.350 07/01/96 4,445,000
46,855 SBC Capital Markets, Inc.
repurchase proceeds $46,876,163. 5.420 07/01/96 46,855,000
--------------
108,895,000
--------------
UNITED STATES AGENCIES AND
GOVERNMENT OBLIGATIONS 0.7%
**3,720 Federal Home Loan Banks......... 5.250 12/19/96 3,624,173
5,000 Tennessee Valley Authority...... 5.335 08/20/96 4,962,529
**5,000 Treasury Bills.................. 5.044 07/25/96 4,982,708
**5,000 Treasury Bills.................. 5.130 07/11/96 4,992,361
--------------
18,561,771
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost
$127,456,978).................................... 127,456,771
--------------
TOTAL INVESTMENTS (Cost $2,290,779,902) 100.0%............... 2,610,166,737
OTHER ASSETS AND LIABILITIES, NET 0.0%....................... 744,992
--------------
NET ASSETS 100%.............................................. $2,610,911,729
--------------
</TABLE>
*Non-income producing security
**Securities with a market value of $59.2 million were placed as collateral for
futures contracts (see Note 1B)
+Dated 6/28/96, collateralized by U.S. Government Obligations in a pooled cash
account
See Notes to Financial Statements
B-34
<PAGE> 86
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $2,290,779,902).............. $2,610,166,737
Cash............................................................ 1,073
Receivable for investments sold................................. 59,241,747
Receivable for Fund shares sold................................. 10,607,115
Dividends and interest receivable............................... 4,601,095
Other assets and receivables.................................... 128,931
--------------
Total Assets................................................... 2,684,746,698
--------------
LIABILITIES
Payable for investments purchased............................... 65,278,153
Payable for Fund shares redeemed................................ 5,778,302
Due to Adviser.................................................. 995,206
Due to Distributor.............................................. 768,024
Due to shareholder service agent................................ 452,512
Deferred trustees' compensation................................. 184,155
Due to broker-variation margin.................................. 3,500
Accrued expenses and liabilities................................ 375,117
--------------
Total Liabilities.............................................. 73,834,969
--------------
NET ASSETS, equivalent to $11.92 per share for Class A, $11.81
per share for Class B, and $11.83 per share for Class C shares. $2,610,911,729
--------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 212,622,907 Class A,
6,103,794 Class B, and 377,788 Class C shares outstanding...... $ 2,191,045
Capital surplus................................................. 2,076,215,544
Undistributed net realized gain on securities................... 200,704,405
Net unrealized appreciation of securities
Investments.................................................... 319,386,835
Futures contracts.............................................. 598,102
Undistributed net investment income............................. 11,815,798
--------------
NET ASSETS...................................................... $2,610,911,729
--------------
</TABLE>
B-35
See Notes to Financial Statements
<PAGE> 87
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends ($4,179,133 from an affiliate--see Note 2)............. $ 41,112,554
Interest......................................................... 8,213,613
------------
Investment income............................................... 49,326,167
------------
EXPENSES
Management fees.................................................. 11,589,844
Shareholder service agent's fees and expenses.................... 5,347,809
Accounting services.............................................. 351,270
Service fees--Class A............................................ 5,084,251
Distribution and service fees--Class B........................... 604,923
Distribution and service fees--Class C........................... 29,833
Trustees' fees and expenses...................................... 92,559
Audit fees....................................................... 55,163
Custodian fees................................................... 98,156
Legal fees....................................................... 14,487
Reports to shareholders.......................................... 410,793
Registration and filing fees..................................... 186,146
Insurance expense................................................ 30,905
Miscellaneous.................................................... 305,096
Retirement plan expense reimbursement (see Note 4)............... (7,500)
------------
Total expenses.................................................. 24,193,735
------------
NET INVESTMENT INCOME............................................ 25,132,432
------------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities
Investments..................................................... 379,086,590
Futures contracts............................................... 9,314,867
Options......................................................... 82,678
Net unrealized appreciation of securities during the period
Investments..................................................... 51,120,615
Futures contracts............................................... 598,102
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES................... 440,202,852
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $465,335,284
------------
</TABLE>
B-36
See Notes to Financial Statements
<PAGE> 88
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended June 30
------------------------------
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period............... $2,334,574,828 $2,189,514,914
-------------- --------------
OPERATIONS
Net investment income......................... 25,132,432 26,893,772
Net realized gain on securities............... 388,484,135 230,051,826
Net unrealized appreciation of securities
during the period............................. 51,718,717 160,102,867
-------------- --------------
Increase in net assets resulting from
operations................................... 465,335,284 417,048,465
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A...................................... (28,239,265) (22,916,396)
Class B...................................... (222,479) (141,014)
Class C...................................... (9,253) (5,920)
-------------- --------------
(28,470,997) (23,063,330)
-------------- --------------
Net realized gain on securities
Class A...................................... (331,334,720) (242,510,817)
Class B...................................... (7,831,468) (5,629,695)
Class C...................................... (325,710) (236,324)
-------------- --------------
(339,491,898) (248,376,836)
-------------- --------------
Total distributions.......................... (367,962,895) (271,440,166)
-------------- --------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A...................................... 1,289,182,633 800,964,139
Class B...................................... 270,611,054 152,874,778
Class C...................................... 47,285,828 14,211,717
-------------- --------------
1,607,079,515 968,050,634
-------------- --------------
Proceeds from shares issued for distributions
reinvested
Class A...................................... 332,438,649 242,657,855
Class B...................................... 7,437,204 4,892,097
Class C...................................... 294,778 176,726
-------------- --------------
340,170,631 247,726,678
-------------- --------------
Cost of shares redeemed
Class A...................................... (1,461,520,981) (1,059,520,324)
Class B...................................... (261,183,146) (143,264,491)
Class C...................................... (45,581,507) (13,540,882)
-------------- --------------
(1,768,285,634) (1,216,325,697)
-------------- --------------
Increase (decrease) in net assets resulting
from capital transactions.................... 178,964,512 (548,385)
-------------- --------------
INCREASE IN NET ASSETS........................ 276,336,901 145,059,914
-------------- --------------
NET ASSETS, end of period (including
undistributed net investment income of
$11,815,798 and $15,141,317, respectively)... $2,610,911,729 $2,334,574,828
-------------- --------------
</TABLE>
See Notes to Financial Statements
B-37
<PAGE> 89
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Pace Fund (the "Fund", formerly American Capital
Pace Fund, Inc.) is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company. The Fund
seeks growth of capital by investing principally in common stocks.
The following is a summary of significant accounting policies consistently fol-
lowed by the Fund in the preparation of its financial statements. The prepara-
tion of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS--Securities, including options, listed or traded on a
national securities exchange or NASDAQ, are valued at the last sale price. Un-
listed securities and listed securities for which the last sale price is not
available are valued at the most recent bid price. Options are valued at the
last sale price or, if no sales are reported, at the mean between the bid and
asked prices.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
B. OPTIONS AND FUTURES CONTRACTS--General--Transactions in options and futures
contracts are utilized in strategies to manage the market risk of the Fund's
investments. The purchase of a futures contract or call option (or the writing
of a put option) increases the impact on net asset value of changes in the mar-
ket price of investments. There is also a risk that the market movement of such
instruments may not be in the direction forecasted. Note 3-Investment Activity
contains additional information.
Call and Put Options--The Fund may write covered call options and collateral-
ized put options. Options written on futures contracts require initial margin
deposits. Options purchased are recorded as investments; options written (sold)
are accounted for as liabilities. When an option expires, the premium (original
option value) is realized as a gain if the option was written or realized as a
loss if the option was purchased. When the exercise of an option results in a
cash settlement, the difference between the premium and the settlement proceeds
is realized as a gain or loss. When securities are acquired or delivered upon
exercise of an option, the acquisition cost or sale proceeds are adjusted by
the amount of the premium. When an option is closed, the difference between the
premium and the cost to close the position is realized as a gain or loss.
Futures Contracts--Upon entering into futures contracts, the Fund maintains, in
a segregated account with its custodian, securities with a value equal to its
obligation under the futures contracts. A portion of these funds are held as
collateral in an account in the name of the broker, the Fund's agent in acquir-
ing the futures position. During the period the futures contract is open,
changes in the value of the contract ("variation margin") are recognized by
marking the contracts to market on a daily basis. As unrealized gains or losses
are incurred, variation margin payments are received from or made to the bro-
ker. Upon the closing or cash settlement of a contract, gains or losses are re-
alized. The cost of securities acquired through delivery under a contract is
adjusted by the unrealized gain or loss on the contract.
C. REPURCHASE AGREEMENTS--A repurchase agreement is a short-term investment in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is re-
quired to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
B-38
<PAGE> 90
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized gains on investments to its shareholders.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME--Investment transac-
tions are accounted for on the trade date. Realized gains and losses on invest-
ments are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
F. DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
G. DEBT DISCOUNT AND PREMIUM--The Fund accounts for discounts and premiums on
the same basis as is used for federal income tax reporting. Accordingly, origi-
nal issue discounts on debt securities purchased are amortized over the life of
the security. Premiums on debt securities are not amortized. Market discounts
are recognized at the time of sale as realized gains for book purposes and as
ordinary income for tax purposes.
NOTE 2-MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average daily net assets of the Fund at an annual rate of
.50% of the first $1 billion, .45% of the next $1 billion, .40% of the next $1
billion, and .35% of the amount in excess of $3 billion.
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. For
the period, these charges included $26,983 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of the account-
ing services expense was paid to the Adviser in reimbursement of personnel, fa-
cilities and equipment costs attributable to the provision of accounting
services to the Fund. The services provided by the Adviser are at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, the fees for such services were $4,762,121.
The Fund has been advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor") and Advantage Capital Corporation (the "Retail Dealer"),
both affiliates of the Adviser, received $789,307 and $46,686, respectively, as
their portion of the commissions charged on sales of Fund shares during the pe-
riod. As of January 2, 1996, the Retail Dealer was no longer an affiliate of
the Adviser.
Under the Distribution Plans, each class of shares pays up to .25% per annum of
its average net assets to reimburse the Distributor for expenses and service
fees incurred. Class B and C shares pay an additional fee of up to .75% per an-
num of their average net assets to reimburse the Distributor for its distribu-
tion expenses. Actual distribution expenses incurred by the Distributor for
Class B and C shares may exceed the amounts reimbursed to the Distributor by
the Fund. At the end of the period, the unreimbursed expenses incurred by the
Distributor under the Class B and C plans aggregated approximately $2.1 million
and $7,700, respectively, and may be carried forward and reimbursed through ei-
ther the collection of the contingent deferred sales charges from share repur-
chases or, subject to the annual renewal of the plans, future Fund
reimbursements of distribution fees.
Legal fees during the period were for services rendered by former counsel of
the Fund, O'Melveny & Myers. A former trustee was of counsel to that firm.
At the end of the period, certain officers and trustees of the Fund are offi-
cers and trustees of the Adviser, the Distributor, and the shareholder service
agent.
At the end of the period, the Fund owned approximately 47% of the Van Kampen
American Capital Small Capitalization Fund ("Small Cap"), an investment company
managed by the Adviser. Small Cap comprised approximately 4%
B-39
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
of the fund's total net assets. During the period, the Fund purchased and sold
shares of Small Cap. Cost of additional purchases aggregated $82,500,000 and
the proceeds from the sale were $38,768,477, resulting in a net realized loss
to the Fund of $1,269,049.
NOTE 3-INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $5,036,880,688 and
$5,226,210,286.
For federal income tax purposes, the identified cost of investments owned at
the end of the period was $2,297,214,688. Net unrealized appreciation of in-
vestments aggregated $312,952,049, gross unrealized appreciation of investments
aggregated $345,825,774 and gross unrealized depreciation of investments aggre-
gated $32,873,725.
At the end of the period, the Fund held the following long futures:
FUTURES CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF MARKET APPRECIATION
CONTRACTS DESCRIPTION VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------
<S> <C> <C>
250 Simex Nikkei 225 Index (Japan),
expiring 09/96................... $25,727,082 $601,602
80 Standard & Poor's 500 Index,
expiring 09/96................... 27,072,000 (3,500)
----------- --------
$52,799,082 $598,102
----------- --------
</TABLE>
During the period, the Fund had the following option activity:
OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
- --------------------------------------------------------------------------------
<S> <C> <C>
Beginning of the period balance............................ 0 $ 0
Written.................................................... 440 82,678
Expired.................................................... (440) (82,678)
---- --------
End of the period balance.................................. 0 $ 0
---- --------
</TABLE>
NOTE 4-TRUSTEE COMPENSATION
Fund trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $3,605 plus a fee of $206 per day for Board and Com-
mittee meetings attended. During the period, such fees aggregated $77,776.
The Fund has a deferred compensation plan and a defined benefits retirement
plan for its trustees not affiliated with the Adviser. These plans are not
funded, and obligations under the plans will be paid solely out of the Fund's
general accounts. The Fund will not reserve or set aside funds for the payment
of its obligations under the plans by any form of trust or escrow.
Under the deferred compensation plan, trustees may elect to defer all or a por-
tion of their compensation to a later date. Each trustee covered under the plan
elects to earn on the deferred balances an amount equal to the total return of
the Fund or equal to the income earned by the Fund on its short-term invest-
ments.
Under the retirement plan which became effective in January 1996, benefits
which are based on years of service will be received by the trustee for a ten-
year period. The maximum annual benefit for each trustee is $2,500. Retirement
plan expenses for the period aggregated $7,500. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
B-40
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5-CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(Class A) or at the time of redemption on a contingent deferred basis (Class B
and C). All classes of shares have the same rights, except that Class B and C
shares bear the cost of distribution fees and certain other class specific ex-
penses. Realized and unrealized gains or losses, investment income, and ex-
penses (other than class specific expenses) are allocated daily to each class
of shares based upon the relative proportion of net assets of each class. Class
B and C shares automatically convert to Class A shares six years and ten years
after purchase, respectively, subject to certain conditions.
The Fund has an unlimited number of shares of $.01 par value beneficial in-
terest authorized. Transactions in shares of beneficial interest were as fol-
lows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................ 107,853,497 73,542,303
Class B............................................ 22,765,160 14,291,211
Class C............................................ 3,991,112 1,350,739
------------ ------------
134,609,769 89,184,253
------------ ------------
Shares issued for distributions reinvested
Class A............................................ 30,359,648 25,119,379
Class B............................................ 682,294 507,973
Class C............................................ 27,055 18,312
------------ ------------
31,068,997 25,645,664
------------ ------------
Shares redeemed
Class A............................................ (121,801,653) (97,327,563)
Class B............................................ (21,936,339) (13,469,993)
Class C............................................ (3,834,141) (1,284,346)
------------ ------------
(147,572,133) (112,081,902)
------------ ------------
Increase in shares outstanding..................... 18,106,633 2,748,015
------------ ------------
</TABLE>
NOTE 6-FUND REORGANIZATION
On July 21, 1995, the shareholders approved the reorganization of the Fund to a
Delaware Business Trust and the election of fourteen trustees. On August 31,
1995, the reorganization became effective.
B-41
<PAGE> 93
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<C> <S>
1.1 -- First Amended and Restated Agreement and Declaration of Trust.
1.2 -- Certificate of Amendment to Declaration of Trust.
1.3 -- Certificate of Designation.
2 -- Amended and Restated Bylaws.
3 -- Inapplicable.
4.1 -- Specimen Class A Share Certificate.
4.2 -- Specimen Class B Share Certificate.
4.3 -- Specimen Class C Share Certificate.
5 -- Investment Advisory Agreement.
6.1 -- Distribution and Service Agreement.
6.2 -- Form of Dealer Agreement.
6.3 -- Form of Broker Fully Disclosed Selling Agreement.
6.4 -- Form of Bank Fully Disclosed Selling Agreement.
7 -- Inapplicable.
8.1 -- Custodian Contract dated December 2, 1993 incorporated herein by
reference (Exhibit 8 to Form N-1A of American Capital Global Managed
Assets Fund, Inc., Registration No. 33-74024, Pre-Effective Amendment
No. 2, filed on May 6, 1994).
8.2 -- Transfer Agency and Service Agreement.
9 -- Data Access Services Agreement dated December 2, 1993 incorporated
herein by reference (Exhibit 9.2 to Form N-1A of American Capital
Utilities Income Fund, Inc., Registration No. 33-68452,
Post-Effective Amendment No. 1, filed on May 19, 1994).
10 -- Opinion of Counsel.
11 -- Consent of Independent Accountants.
12 -- Inapplicable.
13 -- Inapplicable.
14.1 -- Individual Retirement Account Brochure with Application incorporated
herein by reference (Exhibit 14.1 to Form N-1A of Van Kampen American
Capital Reserve Fund, Registration No. 2-50870, Post-Effective
Amendment No. 31, filed on September 24, 1993).
14.2 -- 403(b)(7) Custodial Account incorporated herein by reference (Exhibit
14.2 to Form N-1A of Van Kampen American Capital Reserve Fund,
Registration No. 2-50870, Post-Effective Amendment No. 30, filed on
September 24, 1992).
</TABLE>
C-1
<PAGE> 94
<TABLE>
<C> <S>
14.3 -- ORP 403(b)(7) Custodial Account incorporated herein by reference
(Exhibit 14.3 to Form N-1A of Van Kampen American Capital Reserve
Fund, Registration No. 2-50870, Post-Effective Amendment No. 30,
filed on September 24, 1992).
14.4 -- Retirement Plans for the Small Business-Forms Package and Plan
Documents incorporated herein by reference (Exhibit 14.9 for Form
N-1A of Van Kampen American Capital Government Securities Fund,
Registration No. 2-90482, Post-Effective Amendment No. 18, filed on
February 25, 1994).
14.5 -- Prototype Profit Sharing/Money Purchase Plan and Trust incorporated
herein by reference (Exhibit 14.5 to Form N-1A of Van Kampen American
Capital Growth and Income Fund, Registration No. 2-21657,
Post-Effective Amendment No. 61, filed on March 27, 1991).
14.6 -- Prototype 401(k) Plan and Trust incorporated herein by reference
(Exhibit 14.6 to Form N-1A of Van Kampen American Capital Growth and
Income Fund, Registration No. 2-21657, Post-Effective Amendment No.
61, filed on March 27, 1991).
14.7 -- Salary Reduction Simplified Employee Pension Plan incorporated herein
by reference (Exhibit 14.7 to Form N-1A of Van Kampen American
Capital World Portfolio Series Trust, Registration No. 33-37879,
Post-Effective Amendment No. 9, filed on September 24, 1993).
15.1 -- Plan of Distribution Pursuant to Rule 12b-1.
15.2 -- Service Plan.
15.3 -- Form of Shareholder Assistance Agreement.
15.4 -- Form of Administrative Services Agreement.
16 -- Computation of Performance Information.
17.1 -- List of Certain Investment Companies in Response to Item 29(a).
17.2 -- List of Officers and Directors of Van Kampen American Capital
Distributors, Inc. in Response to Item 29(b).
18 -- Multiple Class Plan.
19 -- Power of Attorney.
27 -- Financial Data Schedules.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
AS OF OCTOBER 17, 1996
<TABLE>
<CAPTION>
(2)
NUMBER OF
(1) RECORD
TITLE OF CLASS HOLDERS
------------------------------------------------------------------ ---------
<S> <C>
Shares of Beneficial Interest, $0.01 par value
Class A Shares.................................................... 221,411
Class B Shares.................................................... 9,188
Class C Shares.................................................... 704
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the
C-2
<PAGE> 95
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, in which the officer or trustee may be or may have been involved by
reason of being or having been an officer or trustee, except that such indemnity
shall not protect any such person against a liability to the Registrant or any
shareholder thereof to which such person would otherwise be subject by reason of
(i) not acting in good faith in the reasonable belief that such person's actions
were not in the best interests of the Trust, (ii) willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office or (iii) for a criminal proceeding, not having a
reasonable cause to believe that such conduct was unlawful (collectively,
"Disabling Conduct"). Absent a court determination that an officer or trustee
seeking indemnification was not liable on the merits or guilty of Disabling
Conduct in the conduct of his or her office, the decision by the Registrant to
indemnify such person must be based upon the reasonable determination of
independent counsel or non-party independent trustees, after review of the
facts, that such officer or trustee is not guilty of Disabling Conduct in the
conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the Adviser. For information as to the business, profession,
vocation and employment of a substantial nature of directors and officers of the
Adviser, reference is made to the Adviser's current Form ADV (File No. 801-1669)
filed under the Investment Advisers Act of 1940, as amended, incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17.1 incorporated by
reference herein.
(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
C-3
<PAGE> 96
officers thereof are set forth in Exhibit 17.2. Except as disclosed under the
heading, "Trustees and Officers" in Part B of this Registration Statement, none
of such persons has any position or office with Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the Adviser, will
be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181; and (iii) by the Distributor, the principal underwriter, will be
maintained at its offices located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
There are no management related services contracts not discussed in Part A.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
C-4
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Van Kampen American Capital Pace
Fund, certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of Oakbrook
Terrace, and State of Illinois, on the 23rd day of October, 1996.
VAN KAMPEN AMERICAN CAPITAL PACE FUND
By * /s/ RONALD A. NYBERG
-------------------------------------------
Ronald A. Nyberg, Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on October 23, 1996 by the
following persons in the capacities indicated:
Principal Executive Officer:
<TABLE>
<C> <S>
/s/ DENNIS J. MCDONNELL* President and Trustee
----------------------------
(Dennis J. McDonnell)
Principal Financial Officer:
/s/ EDWARD C. WOOD III* Vice President and Chief
---------------------------- Financial Officer
(Edward C. Wood III)
Trustees:
/s/ J. MILES BRANAGAN* Trustee
----------------------------
(J. Miles Branagan)
/s/ LINDA H. HEAGY* Trustee
----------------------------
(Linda H. Heagy)
/s/ ROGER HILSMAN* Trustee
----------------------------
(Roger Hilsman)
/s/ R. CRAIG KENNEDY* Trustee
----------------------------
(R. Craig Kennedy)
/s/ DONALD C. MILLER* Trustee
----------------------------
(Donald C. Miller)
/s/ JACK E. NELSON* Trustee
----------------------------
(Jack E. Nelson)
/s/ JEROME L. ROBINSON* Trustee
----------------------------
(Jerome L. Robinson)
/s/ FERNANDO SISTO* Trustee
----------------------------
(Fernando Sisto)
/s/ WAYNE W. WHALEN* Trustee
----------------------------
(Wayne W. Whalen)
/s/ WILLIAM S. WOODSIDE* Trustee
----------------------------
(William S. Woodside)
* Signed by Ronald A. Nyberg pursuant to an October 23, 1996
power-of-attorney.
/s/ RONALD A. NYBERG
----------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
<PAGE> 98
VAN KAMPEN AMERICAN CAPITAL PACE FUND
INDEX TO EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 46 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON OCTOBER 25, 1996
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------------------------------------------------------------------------------------------
<C> <S>
</TABLE>
<TABLE>
<C> <S>
1.1 -- First Amended and Restated Agreement and Declaration of Trust.
1.2 -- Certificate of Amendment to Declaration of Trust.
1.3 -- Certificate of Designation.
2 -- Amended and Restated Bylaws.
4.1 -- Specimen Class A Share Certificate.
4.2 -- Specimen Class B Share Certificate.
4.3 -- Specimen Class C Share Certificate.
5 -- Investment Advisory Agreement.
6.1 -- Distribution and Service Agreement.
6.2 -- Form of Dealer Agreement.
6.3 -- Form of Broker Fully Disclosed Selling Agreement.
6.4 -- Form of Bank Fully Disclosed Selling Agreement.
8.2 -- Transfer Agency and Service Agreement.
10 -- Opinion of Counsel.
11 -- Consent of Independent Accountants.
15.1 -- Plan of Distribution Pursuant to Rule 12b-1.
15.2 -- Service Plan.
15.3 -- Form of Shareholder Assistance Agreement
15.4 -- Form of Administrative Services Agreement
16 -- Computation of Performance Information.
17.1 -- List of Certain Investment Companies in Response to Item 29(a).
17.2 -- List of Officers and Directors of Van Kampen American Capital
Distributors, Inc. in Response to Item 29(b).
18 -- Multiple Class Plan.
19 -- Power of Attorney.
27 -- Financial Data Schedules.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
VAN KAMPEN
AMERICAN CAPITAL
PACE FUND
Dated: June 21, 1995
<PAGE> 2
FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
Index
RECITALS ........................................................... 1
ARTICLE I THE TRUST ................................................. 2
SECTION 1.1 Name ...................................................... 2
SECTION 1.2. Location .................................................. 2
SECTION 1.3. Nature of Trust ........................................... 2
SECTION 1.4. Definitions ............................................... 2
SECTION 1.5. Real Property to be Converted into Personal Property ...... 5
ARTICLE 2 PURPOSE OF THE TRUST ...................................... 5
ARTICLE 3 POWERS OF THE TRUSTEES .................................... 6
SECTION 3.1. Powers in General ......................................... 6
(a) Investments ....................................................... 7
(b) Disposition of Assets ............................................. 7
(c) Ownership Powers .................................................. 7
(d) Form of Holding ................................................... 7
(e) Reorganization, etc. .............................................. 7
(f) Voting Trusts, etc. ............................................... 7
(g) Contracts, etc. ................................................... 8
(h) Guarantees, etc. .................................................. 8
(i) Partnerships, etc. ................................................ 8
(j) Insurance ......................................................... 8
(k) Pensions, etc. .................................................... 8
(I) Power of Collection and Litigation ................................ 8
(m) Issuance and Repurchase of Shares ................................. 9
(n) Offices ........................................................... 9
(o) Expenses .......................................................... 9
(p) Agents, etc. ...................................................... 9
(q) Accounts .......................................................... 9
(r) Valuation ......................................................... 9
(s) Indemnification ................................................... 9
(t) General ........................................................... 9
SECTION 3.2. Borrowings; Financings; Issuance of Securities ............ 10
i
<PAGE> 3
SECTION 3.3. Deposits ................................................... 10
SECTION 3.4. Allocations ................................................ 10
SECTION 3.5. Further Powers; Limitations ................................ 10
ARTICLE 4 TRUSTEES AND OFFICERS ...................................... 11
SECTION 4.1. Number, Designation, Election, Term, etc. .................. 11
(a) Initial Trustee .................................................... 11
(b) Number ............................................................. 11
(c) Election and Term .................................................. 11
(d) Resignation and Retirement ......................................... 12
(e) Removal ............................................................ 12
(f) Vacancies .......................................................... 12
(g) Acceptance of Trusts ............................................... 12
(h) Effect of Death, Resignation, etc. ................................. 12
(i) Conveyance ......................................................... 12
(j) No Accounting ...................................................... 13
SECTION 4.2. Trustees' Meetings; Participation by Telephone, etc. ....... 13
SECTION 4.3. Committees; Delegation ..................................... 13
SECTION 4.4. Officers ................................................... 13
SECTION 4.5. Compensation of Trustees and Officers ...................... 13
SECTION 4.6. Ownership of Shares and Securities of the Trust ............ 14
SECTION 4.7. Right of Trustees and Officers to Own Property or to Engage
in Business; Authority of Trustees to Permit Others to Do
Likewise ................................................... 14
SECTION 4.8. Reliance on Experts ........................................ 14
SECTION 4.9. Surety Bonds ............................................... 15
SECTION 4.10. Apparent Authority of Trustees and Officers ................ 15
SECTION 4.11. Other Relationships Not Prohibited ......................... 15
SECTION 4.12. Payment of Trust Expenses .................................. 15
SECTION 4.13. 0wnership of the Trust Property ............................ 16
ii
<PAGE> 4
SECTION 4.14. By-Laws .................................................... 16
ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES .................. 16
SECTION 5.1. Appointment; Action by Less than All Trustees .............. 16
SECTION 5.2. Certain Contracts .......................................... 16
(a) Advisory ........................................................... 17
(b) Administration ..................................................... 17
(c) Underwriting ....................................................... 17
(d) Custodian .......................................................... 17
(e) Transfer and Dividend Disbursing Agent ............................. 18
(f) Shareholder Servicing .............................................. 18
(g) Accounting ......................................................... 18
Section 5.3. Distribution Arrangements .................................. 18
Section 5.4. Service Arrangements ....................................... 18
ARTICLE 6 SERIES AND SHARES .......................................... 18
SECTION 6.1. Description of Series and Shares ........................... 18
(a) General ............................................................ 18
(b) Establishment, etc. of Series; Authorization of Shares ............. 19
(c) Character of Separate Series and Shares Thereof .................... 19
(d) Consideration for Shares ........................................... 19
(e) Assets Belonging to Series ......................................... 20
(f) Liabilities of Series .............................................. 20
(g) Dividends .......................................................... 20
(h) Liquidation ........................................................ 21
(i) Voting ............................................................. 21
(j) Redemption by Shareholder .......................................... 21
(k) Redemption at the Option of the Trust .............................. 22
(I) Net Asset Value .................................................... 22
(m) Transfer ........................................................... 22
(n) Equality ........................................................... 23
(o) Rights of Fractional Shares ........................................ 23
(p) Conversion Rights .................................................. 23
SECTION 6.2. Ownership of Shares .......................................... 24
SECTION 6.3. Investments in the Trust ..................................... 24
SECTION 6.4. No Pre-emptive Rights ........................................ 24
iii
<PAGE> 5
SECTION 6.5. Status of Shares ........................................... 24
ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS ................... 24
SECTION 7.1. Voting Powers .............................................. 24
SECTION 7.2. Number of Votes and Manner of Voting; Proxies .............. 25
SECTION 7.3. Meetings ................................................... 25
SECTION 7.4. Record Dates ............................................... 26
SECTION 7.5. Quorum and Required Vote ................................... 26
SECTION 7.6. Action by Written Consent .................................. 26
SECTION 7.7. Inspection of Records ...................................... 27
SECTION 7.8. Additional Provisions ...................................... 27
ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION ................... 27
SECTION 8.1. Trustees, Shareholders, etc. Not Personally Liable; Notice.. 27
SECTION 8.2. Trustees' Good Faith Action; Expert Advice; No Bond
or Surety ................................................. 27
SECTION 8.3. Indemnification of Shareholders ............................ 28
SECTION 8.4. Indemnification of Trustees, Officers, etc. ................ 28
SECTION 8.5. Compromise Payment ......................................... 29
SECTION 8.6. Indemnification Not Exclusive, etc. ........................ 29
SECTION 8.7. Liability of Third Persons Dealing with Trustees ........... 29
ARTICLE 9 DURATION; REORGANIZATION; INCORPORATION; AMENDMENTS ........ 30
SECTION 9.1. Duration of Trust .......................................... 30
SECTION 9.2. Termination of Trust ....................................... 30
SECTION 9.3. Reorganization ............................................. 30
SECTION 9.4. Incorporation ............................................. 31
iv
<PAGE> 6
SECTION 9.5. Amendments; etc. ............................................. 31
SECTION 9.6. Filing of Copies of Declaration and Amendments ............... 31
ARTICLE 10 MISCELLANEOUS ................................................ 32
SECTION 10.1. Notices ...................................................... 32
SECTION 10.2. Governing Law ................................................ 32
SECTION 10.3. Counterparts ................................................ 32
SECTION 10.4. Reliance by Third Parties .................................... 32
SECTION 10.5. References; Headings ......................................... 32
SECTION 10.6. Provisions in Conflict With Law or Regulation ................ 32
SECTION 10.7. Use of the Name "Van Kampen American Capital" ................ 33
Signature ................................................................. 34
Acknowledgments ........................................................... 35
v
<PAGE> 7
AGREEMENT AND DECLARATION OF TRUST
OF
VAN KAMPEN AMERICAN CAPITAL PACE FUND
As amended and restated as of June 21, 1995
This CONSENT TO AMENDMENT AND RESTATEMENT, made as of this 21st day of
June, 1995, by the Trustees whose signatures are set forth below:
W I T N E S S E T H T H A T:
WHEREAS, the AGREEMENT AND DECLARATION OF TRUST of Van Kampen American
Capital Pace Fund, a trust organized as a business trust under Delaware law (the
"Trust"), was signed and delivered on May 10, 1995, by Van Kampen American
Capital, Inc. as Settlor (the "Settlor"), and Ronald A. Nyberg as trustee (the
"Initial Trustee"), in the city of Oakbrook Terrace, Illinois; and
WHEREAS, a Certificate of Trust relating to the Trust was thereafter
filed in the offices of the Secretary of State of the State of Delaware; and
WHEREAS, Article IX, Sections 9.5 and 9.6 of the Declaration provide
certain procedures for the amendment and restatement thereof; and
WHEREAS, the Trustees have determined that it is desirable and in the
best interests of the Trust and the Shareholders that the Declaration be
amended and restated as herein provided.
NOW, THEREFORE, the undersigned, being at least a Majority of the
Trustees, do hereby consent, pursuant to Section 9.5 of the Declaration, to the
first amendment and restatement of the Agreement and Declaration of Trust, and
hereby declare, for the benefit of all Persons who shall hereafter become
holders of Shares of the Trust (or of any Series thereof), that the Trustees
will hold the sum delivered to the Initial Trustee upon his execution of the
Declaration, and all other and further cash, securities and other property of
every type and description which they may in any way acquire in their capacity
as such Trustees, together with the income therefrom and the proceeds thereof,
IN TRUST NEVERTHELESS, to manage and dispose of the same for the benefit of the
holders from time to time of the Shares being issued and to be issued hereunder
and in the manner and subject to the provisions hereof, to wit:
1
<PAGE> 8
ARTICLE I
THE TRUST
SECTION 1.1 Name. The name of the Trust shall be
"VAN KAMPEN AMERICAN CAPITAL PACE FUND"
and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued under that name,
which name (and the word "Trust" wherever used in this Agreement and
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees in their capacity as Trustees, and not individually or
personally, and shall not refer to the officers, agents or employees of the
Trust or of such Trustees, or to the holders of the Shares of the Trust or any
Series. If the Trustees determine that the use of such name is not practicable,
legal or convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section 10.7 hereof,
then subject to that Section, the Trustees may use such other designation, or
they may adopt such other name for the Trust as they deem proper, and the Trust
may hold property and conduct its activities under such designation or name.
SECTION 1.2. Location. The Trust shall maintain a registered office in
the State of Delaware and may have such other offices or places of business as
the Trustees may from time to time determine to be necessary or expedient.
SECTION 1.3. Nature of Trust. The Trust shall be a trust with
transferable shares under the laws of The State of Delaware, of the type
defined in Title 12, Chapter 38, Section 3801 of the Delaware Code as a
business trust. The Trust is not intended to be, shall not be deemed to be, and
shall not be treated as, a general partnership, limited partnership, joint
venture, corporation or joint stock company. The Shareholders shall be
beneficiaries and their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them hereunder.
SECTION 1.4. Definitions. As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in Section 5.2(g)
hereof.
"Administrator" shall have the meaning designated in Section 5.2(b)
hereof.
"Affiliated Person" shall have the meaning assigned to it in the 1940
Act.
"By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time.
"Certificate of Designation" shall have the meaning designated in
Section 6.1 hereof.
"Certificate of Termination" shall have the meaning designated in
Section 6.1 hereof.
"Class" or "Classes" shall mean, with respect to the Trust (of any
Series thereof), any unissued Shares of the Trust (or such Series) in respect
of which the Trustees shall from time to time fix and determine any special
provisions relating to sales charges, any rights of redemption and the price,
terms and manner of redemption, special and relative rights as to dividends and
other distributions and on
2
<PAGE> 9
liquidation, sinking or purchase fund provisions, conversion rights,
and conditions under which the Shareholders of such Class shall have separate
voting rights or no voting rights.
"Commission" shall have the same meaning as in the 1940 Act.
"Contracting Party" shall have the meaning designated in the preamble
to Section 5.2 hereof.
"Conversion Date" shall mean with respect to Shares of any Class that
are convertible automatically into Shares of any other Class of the Trust (or
Series thereof) the date fixed by the Trustees for such conversion.
"Covered Person" shall have the meaning designated in Section 8.4
hereof.
"Custodian" shall have the meaning designated in Section 5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time
to time in effect. This Agreement and Declaration of Trust is the "governing
instrument" of the Trust within the meaning of the laws of the State of
Delaware with respect to Delaware Business Trusts. References in this
Agreement and Declaration of Trust to "hereof", "herein" and "hereunder" shall
be deemed to refer to the Declaration of Trust generally, and shall not be
limited to the particular text, Article or Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in Section 8.4
hereof.
"Distributor" shall have the meaning designated in Section 5.2(c)
hereof.
"Dividend Disbursing Agent" shall have the meaning designated in
Section 5.2(e) hereof.
"General Items" shall have the meaning defined in Section 6.2(a)
hereof.
"Initial Trustee" shall have the meaning defined in the preamble
hereto.
"Investment Advisor" shall have the meaning defined in Section 5.2(a)
hereof.
"Majority of the Trustees" shall mean a majority of the Trustees in
office at the time in question. At any time at which there shall be only one
(1) Trustee in office, such term shall mean such Trustee.
"Majority Shareholder Vote," as used with respect to (a) the election
of any Trustee at a meeting of Shareholders, shall mean the vote for the
election of such Trustee of a plurality of all outstanding Shares of the Trust,
without regard to Series, represented in person or by proxy and entitled to
vote thereon, provided that a quorum (as determined in accordance with the
By-Laws) is present, (b) any other action required or permitted to be taken by
Shareholders, shall mean the vote for such action of the holders of that
majority of all outstanding Shares (or, where a separate vote of Shares of any
particular Series is to be taken, the affirmative vote of that majority of the
outstanding Shares of that Series) of the Trust which consists of: (i) a
majority of all Shares (or of Shares of the particular Series) represented in
person or by proxy and entitled to vote on such action at the meeting of
Shareholders at which such action is to be taken, provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if such action
is to be taken by written consent of Shareholders, a majority of all Shares (or
of Shares of the particular Series) issued and outstanding and entitled to vote
on such action; provided that (iii) as used
3
<PAGE> 10
with respect to any action requiring the affirmative vote of "a
majority of the outstanding voting securities," as the quoted phrase is defined
in the 1940 Act, of the Trust or of any Series, "Majority Shareholder Vote"
means the vote for such action at a meeting of Shareholders of the smallest
majority of all outstanding Shares of the Trust (or of Shares of the particular
Series) entitled to vote on such action which satisfies such 1940 Act voting
requirement.
"1940 Act" shall mean the provisions of the Investment Company Act of
1940 and the rules and regulations thereunder, both as amended from time to
time, and any order or orders thereunder which may from time to time be
applicable to the Trust.
"Person" shall mean and include individuals, as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, land trusts, business trusts or
other organizations established under the laws of any jurisdiction, whether or
not considered to be legal entities, and governments and agencies and political
subdivisions thereof.
"Principal Underwriter" shall have the meaning designated in Section
5.2(c) hereof.
"Prospectus," as used with respect to the Trust (or the Shares of a
particular Series), shall mean the prospectus relating to the Trust (or such
Series) which constitutes part of the currently effective Registration
Statement of the Trust under the Securities Act of 1933, as such prospectus may
be amended or supplemented from time to time.
"Securities" shall have the same meaning ascribed to that term in the
Securities Act of 1993.
"Series" shall mean one or more of the series of Shares authorized by
the Trustees to represent the beneficial interest in one or more separate
components of the assets of the Trust which are now or hereafter established
and designated under or in accordance with the provisions of Article 6 hereof.
"Settlor" shall have the meaning defined in the preamble hereto.
"Shareholder" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding Shares
of any Series, and shall include a pledgee into whose name any such Shares are
transferred in pledge.
"Shareholder Servicing Agent" shall have the meaning designated in
Section 5.2(f) hereof.
"Shares" shall mean the transferable units into which the beneficial
interest in the Trust and each Series of the Trust (as the context may require)
shall be divided from time to time, and includes fractions of Shares as well as
whole Shares. All references herein to "Shares" which are not accompanied by a
reference to any particular Series or Class shall be deemed to apply to
outstanding Shares without regard to Series or Class.
"Single Class Voting," as used with respect to any matter to be acted
upon at a meeting or by written consent of Shareholders, shall mean a style of
voting in which each holder of one or more Shares shall be entitled to one vote
on the matter in question for each Share standing in his name on the records of
the Trust, irrespective of Series or Class of a Series, and all outstanding
Shares of all Series vote as a single class.
4
<PAGE> 11
"Statement of Additional Information," as used with respect to the
Trust (or any Series), shall mean the statement of additional information
relating to the Trust (or such Series) which constitutes part of the currently
effective Registration Statement of the Trust under the Securities Act of 1933,
as such statement of additional information may be amended or supplemented from
time to time.
"Transfer Agent" shall have the meaning defined in Section 5.2(e)
hereof.
"Trust" shall mean the trust named in Section 1.1 hereof.
"Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or
the Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the
Trustees, without regard to the Series to which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee, so long as he
shall continue in office, and all other individuals who at the time in question
have been duly elected or appointed as Trustees of the Trust in accordance with
the provisions hereof and who have qualified and are then in office. At any
time at which there shall be only one (I) Trustee in office, such term shall
mean such single Trustee.
SECTION 1.5. Real Property to be Converted into Personal Property.
Notwithstanding any other provision hereof, any real property at any time
forming part of the Trust Property shall be held in trust for sale and
conversion into personal property at such time or times and in such manner and
upon such terms as the Trustees shall approve, but the Trustees shall have
power until the termination of this Trust to postpone such conversion as long
as they in their uncontrolled discretion shall think fit, and for the purpose
of determining the nature of the interest of the Shareholders therein, all such
real property shall at all times be considered as personal property.
ARTICLE 2
PURPOSE OF THE TRUST
The purpose of the Trust shall be to (a) manage, conduct, operate and
carry on the business of an investment company; (b) subscribe for, invest in,
reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, exchange, distribute or otherwise deal in or dispose of any and all
sorts of property, tangible or intangible, including but not limited to
Securities of any type whatsoever, whether equity or nonequity, of any issuer,
evidences of indebtedness of any person and any other rights, interest,
instruments or property of any sort to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investment
of every kind and description, including without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect
of any of said investments. The Trustees shall not be limited by any law
limiting the investments which may be made by fiduciaries.
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ARTICLE 3
POWERS OF THE TRUSTEES
SECTION 3.1. Powers in General. The Trustees shall have, without other
or further authorization, full, entire, exclusive and absolute power, control
and authority over, and management of, the business of the Trust and over the
Trust Property, to the same extent as if the Trustees were the sole owners of
the business and property of the Trust in their own right, and with such powers
of delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declaration of Trust or by
applicable law. The enumeration of any specific power or authority herein shall
not be construed as limiting the aforesaid power or authority or any specific
power or authority. Without limiting the foregoing; they may select, and from
time to time change, the fiscal year of the Trust; they may adopt and use a
seal for the Trust, provided that unless otherwise required by the Trustees, it
shall not be necessary to place the seal upon, and its absence shall not impair
the validity of, any document, instrument or other paper executed and delivered
by or on behalf of the Trust; they may from time to time in accordance with the
provisions of Section 6.1 hereof establish one or more Series to which they may
allocate such of the Trust Property, subject to such liabilities, as they shall
deem appropriate, each such Series to be operated by the Trustees as a separate
and distinct investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as established by
the Trustees, or from time to time changed by them; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee; they may appoint from their own number, and
terminate, any one or more committees consisting of one or more Trustees,
including without implied limitation an Executive Committee, which may, when
the Trustees are not in session and subject to the 1940 Act, exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
in accordance with Section 5.2 they may employ one or more Investment Advisers,
Administrators and Custodians and may authorize any such service provider to
employ one or more other or service providers and to deposit all or any part of
such assets in a system or systems for the central handling of Securities,
retain Transfer, Dividend Disbursing, Accounting or Shareholder Servicing
Agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more Distributors, Principal Underwriters or otherwise,
set record dates or times for the determination of Shareholders entitled to
participate in, benefit from or act with respect to various matters; and in
general they may delegate to any officer of the Trust, to any Committee of the
Trustees and to any employee, Investment Adviser, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any other agent or
consultant of the Trust, such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs
of the Trust, including without implied limitation the power and authority to
act in the name of the Trust and of the Trustees, to sign documents and to act
as attorney-in-fact for the Trustees. Without limiting the foregoing and to the
extent not inconsistent with the 1940 Act or other applicable law, the Trustees
shall have power and authority:
(a) Investments. To subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to Securities of any type whatsoever,
whether equity or nonequity, of any issuer, evidences of indebtedness of any
person and any other rights, interest, instruments or property of any sort, to
exercise any and all rights, powers and privileges of ownership or
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interest in respect of any and all such investments of every kind and
description, including without limitation the right to consent and otherwise
act with respect thereto, with power to designate one or more Persons to
exercise any of said rights, powers and privileges in respect of any of said
investments, in every case without being limited by any law limiting the
investments which may be made by fiduciaries;
(b) Disposition of Assets. Upon such terms and conditions as they deem
best, to lend, sell, exchange, mortgage, pledge, hypothecate, grant security
interests in, encumber, negotiate, convey, transfer or otherwise dispose of,
and to trade in, any and all of the Trust Property, free and clear of all
trusts, for cash or on terms, with or without advertisement, and on such terms
as to payment, security or otherwise, all as they shall deem necessary or
expedient;
(c) Ownership Powers. To vote or give assent, or exercise any and all
other rights, powers and privileges of ownership with respect to, and to
perform any and all duties and obligations as owners of, any Securities or
other property forming part of the Trust Property, the same as any individual
might do; to exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of Securities, and to receive powers of
attorney from, and to execute and deliver proxies or powers of attorney to,
such Person or Persons as the Trustees shall deem proper, receiving from or
granting to such Person or Persons such power and discretion with relation to
Securities or other property of the Trust, all as the Trustees shall deem
proper;
(d) Form of Holding. To hold any Security or other property in a form
not indicating any trust, whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Trust, or of the Series to which
such Securities or property belong, or in the name of a Custodian, subcustodian
or other nominee or nominees, or otherwise, upon such terms, in such manner or
with such powers, as the Trustees may determine, and with or without indicating
any trust or the interest of the Trustees therein;
(e) Reorganizations etc. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer, any
Security of which is or was held in the Trust or any Series; to consent to any
contract, lease, mortgage, purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any Security forming
part of the Trust Property;
(f) Voting Trusts, etc. To join with other holders of any Securities in
acting through a committee, depository, voting trustee or otherwise, and in
that connection to deposit any Security with, or transfer any Security to, any
such committee, depository or trustee, and to delegate to them such power and
authority with relation to any Security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depository or trustee as the Trustees shall deem proper;
(g) Contracts. etc. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business of the Trust, for such
terms as they shall see fit, whether or not extending beyond the term of office
of the Trustees, or beyond the possible expiration of the Trust; to amend,
extend, release or cancel any such obligations, contracts, agreements or
understandings; and to execute, acknowledge, deliver and record all written
instruments which they may deem necessary or expedient in the exercise of their
powers;
(h) Guarantees. etc. To endorse or guarantee the payment of any notes
or other obligations of any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
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and to mortgage and pledge the Trust Property or any part thereof to secure any
of or all such obligations;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or association;
(j) Insurance. To purchase and pay for entirely out of Trust Property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, Investment Advisers, managers,
Administrators, Distributors, Principal Underwriters, or other independent
contractors, or any thereof (or any Person connected therewith), of the Trust,
individually, against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such Person
in any such capacity, whether or not the Trust would have the power to
indemnify such Person against such liability;
(k) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit sharing, share bonus, share purchase, savings, thrift, deferred
compensation and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust;
(I) Power of Collection and Litigation. To collect, sue for and receive
all sums of money coming due to the Trust, to employ counsel, and to commence,
engage in, prosecute, intervene in, join, defend, compound, compromise, adjust
or abandon, in the name of the Trust, any and all actions, suits, proceedings,
disputes, claims, controversies, demands or other litigation or legal
proceedings relating to the Trust, the business of the Trust, the Trust
Property, or the Trustees, officers, employees, agents and other independent
contractors of the Trust, in their capacity as such, at law or in equity, or
before any other bodies or tribunals, and to compromise, arbitrate or otherwise
adjust any dispute to which the Trust may be a party, whether or not any suit
is commenced or any claim shall have been made or asserted. Except to the
extent required for a Delaware Business Trust, the Shareholders shall have no
power to vote as to whether or not a court action, legal proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders.
(m) Issuance and Repurchase of Shares. To authorize, issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and, subject to Article 6
hereof, to apply to any such repurchase, redemption, retirement, cancellation
or acquisition of Shares of any Series, any of the assets belonging to the
Series to which such Shares relate, whether constituting capital or surplus or
otherwise, to the full extent now or hereafter permitted by applicable law;
provided that any Shares belonging to the Trust shall not be voted, directly or
indirectly;
(n) Offices. To have one or more offices, and to carry on all or any of
the operations and business of the Trust, in any of the States, Districts or
Territories of the United States, and in any and all foreign countries, subject
to the laws of such State, District, Territory or country;
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(o) Expenses. To incur and pay any and all such expenses and charges as
they may deem advisable (including without limitation appropriate fees to
themselves as Trustees), and to pay all such sums of money for which they may
be held liable by way of damages, penalty, fine or otherwise;
(p) Agents, etc. To retain and employ any and all such servants,
agents, employees, attorneys, brokers, Investment Advisers, accountants,
architects, engineers, builders, escrow agents, depositories, consultants,
ancillary trustees, custodians, agents for collection, insurers, banks and
officers, as they think best for the business of the Trust or any Series, to
supervise and direct the acts of any of the same, and to fix and pay their
compensation and define their duties;
(q) Accounts. To determine, and from time to time change, the method or
form in which the accounts of the Trust or any Series shall be kept;
(r) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust Property
and of any services, Securities, property or other consideration to be
furnished to or acquired by the Trust, and from time to time to revalue all or
any part of the Trust Property in accordance with such appraisals or other
information as is, in the Trustees' sole judgment, necessary and satisfactory;
(s) Indemnification. In addition to the mandatory indemnification
provided for in Article 8 hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to indemnification with any
Person with whom this Trust has dealings, including, without limitation, any
independent contractor, to such extent as the Trustees shall determine; and
(t) General. Subject to the fundamental policies in effect from time to
time with respect to the Trust, to do all such other acts and things and to
conduct, operate, carry on and engage in such other lawful businesses or
business activities as they shall in their sole and absolute discretion
consider to be incidental to the business of the Trust or any Series as an
investment company, and to exercise all powers which they shall in their
discretion consider necessary, useful or appropriate to carry on the business
of the Trust or any Series, to promote any of the purposes for which the Trust
is formed, whether or not such things are specifically mentioned herein, in
order to protect or promote the interests of the Trust or any Series, or
otherwise to carry out the provisions of this Declaration.
SECTION 3.2. Borrowings; Financings: Issuance of Securities. The
Trustees have power, subject to the fundamental policies in effect from time to
time with respect to the Trust, to borrow or in any other manner raise such sum
or sums of money, and to incur such other indebtedness for goods or services,
or for or in connection with the purchase or other acquisition of property, as
they shall deem advisable for the purposes of the Trust, in any manner and on
any terms, and to evidence the same by negotiable or nonnegotiable Securities
which may mature at any time or times, even beyond the possible date of
termination of the Trust; to issue Securities of any type for such cash,
property, services or other considerations, and at such time or times and upon
such terms, as they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the Trustees, be
made convertible into Shares of any Series, or may evidence the right to
purchase, subscribe for or otherwise acquire Shares of any Series, at such
times and on such terms as the Trustees may prescribe.
SECTION 3.3. Deposits. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits
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are to be subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any loss which may
occur by reason of the failure of the bank, trust company or other banking
institution with which any such moneys or Securities have been deposited,
except as provided in Section 8.2 hereof.
SECTION 3.4. Allocations. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all of any
premium or discount, to treat any part or all of the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a discount,
as income or capital, or to apportion the same between income and capital, to
apportion the sale price of any asset between income and capital, and to
determine in what manner any expenses or disbursements are to be borne as
between income and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be regarded as income
or as capital or such expense or disbursement would be charged to income or to
capital; to treat any dividend or other distribution on any investment as
income or capital, or to apportion the same between income and capital; to
provide or fail to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in such amounts
and by such methods as they shall determine; to allocate less than all of the
consideration paid for Shares of any Series to surplus with respect to the
Series to which such Shares relate and to allocate the balance thereof to
paid-in capital of that Series, and to reallocate such amounts from time to
time; all as the Trustees may reasonably deem proper.
SECTION 3.5. Further Powers: Limitations. The Trustees shall have power
to do all such other matters and things, and to execute all such instruments,
as they deem necessary, proper or desirable in order to carry out, promote or
advance the interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration of Trust, the presumption shall
be in favor of a grant of power to the Trustees. The Trustees shall not be
required to obtain any court order to deal with the Trust Property. The
Trustees may limit their right to exercise any of their powers through express
restrictive provisions in the instruments evidencing or providing the terms for
any Securities of the Trust or in other contractual instruments adopted on
behalf of the Trust.
ARTICLE 4
TRUSTEES AND OFFICERS
SECTION 4.1. Number. Designation, Election. Term, etc.
(a) Initial Trustee. Upon his execution of this Agreement and
Declaration of Trust dated May 10, 1995 or a counterpart hereof or some other
writing in which he accepted such Trusteeship and agreed to the provisions
hereof, the individual whose signature is affixed thereto as Initial Trustee
became the Initial Trustee thereof.
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase (to not more than fourteen (14)) or
decrease the number of Trustees to a number other than the number theretofore
determined by a written instrument signed by a Majority
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(or a supermajority if required by the By-Laws) of the Trustees). No
decrease in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 4.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders immediately
prior to the initial issuance of shares of the Trust in a public offering and
the term of office of any Trustees in office before such election shall
terminate at the time of such election. Subject to Section 16(a) of the 1940
Act and to the preceding sentence of this subsection (c) and to any
requirements specified in the By-Laws, the Trustees shall have the power to set
and alter the terms of office of the Trustees, and at any time to lengthen or
shorten their own terms or make their terms of unlimited duration, to elect
their own successors and, pursuant to subsection (f) of this Section 4.1, to
appoint Trustees to fill vacancies; provided that Trustees shall be elected by
a Majority Shareholder Vote at any such time or times as the Trustees shall
determine that such action is required under Section 16(a) of the 1940 Act or,
if not so required, that such action is advisable; and further provided that,
after the initial election of Trustees by the Shareholders, the term of office
of any incumbent Trustee shall continue until the termination of this Trust or
his earlier death, resignation, retirement, bankruptcy, adjudicated
incompetency or other incapacity or removal, or if not so terminated, until the
election of such Trustee's successor in office has become effective in
accordance with this subsection (c).
(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by a written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later date as is
specified in such instrument.
(e) Removal. Any Trustee may be removed: (i) with cause at any time by
written instrument, signed by at least two thirds (2/3) of the number of
Trustees prior to such removal, specifying the date upon which such removal
shall become effective; or (ii) by vote of Shareholders holding a majority of
the Shares of the Trust then outstanding, cast in person or by proxy at any
meeting called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than a majority of the Shares of the Trust then
outstanding. Notwithstanding any other provisions set forth in this Declaration
of Trust, this Section 4.1(e) may not be amended (either directly or indirectly
through a reorganization) without the approval of (i) 80% of the Trustees then
in office or (ii) by vote of Shareholders holding a majority of the Shares of
the Trust then outstanding.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including an increase in the number of Trustees, may (but need not
unless required by the 1940 Act) be filled by a Majority (or a supermajority if
required by the By-Laws) of the Trustees, subject to the provisions of Section
16(a) of the 1940 Act, through the appointment in writing of such other
individual as such remaining Trustees in their discretion shall determine;
provided that if there shall be no Trustees in office, such vacancy or
vacancies shall be filled by Majority Shareholders Vote. Any such appointment
or election shall be effective upon such individual's written acceptance of his
appointment as a Trustee and his agreement to be bound by the provisions of
this Declaration of Trust, except that any such appointment in anticipation of
a vacancy to occur by reason of retirement, resignation or increase in the
number of Trustees to be effective at a later date shall become effective only
at or after the effective date of said retirement, resignation or increase in
the number of Trustees.
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(g) Acceptance of Trusts. Whenever any conditions to the appointment or
election of any individual as a Trustee hereunder who was not, immediately
prior to such appointment or election, acting as a Trustee shall have been
satisfied, such individual shall become a Trustee and the Trust estate shall
vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance. Such new Trustee shall accept such appointment or
election in writing and agree in such writing to be bound by the provisions
hereof, but the execution of such writing shall not be requisite to the
effectiveness of the appointment or election of a new Trustee.
(h) Effect of Death. Resignation, etc. No vacancy, whether resulting
from the death, resignation, retirement, bankruptcy, adjudicated incompetency,
incapacity, or removal of any Trustee, an increase in the number of Trustees or
otherwise, shall operate to annul or terminate the Trust hereunder or to revoke
or terminate any existing agency or contract created or entered into pursuant
to the terms of this Declaration of Trust. Until such vacancy is filled as
provided in this Section 4.1, the Trustees in office (if any), regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration. Upon
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require in
order to effect the purpose of this Paragraph.
(i) Convevance. In the event of the resignation or removal of a
Trustee or his otherwise ceasing to be a Trustee, such former Trustee or his
legal representative shall, upon request of the continuing Trustees, execute
and deliver such documents as may be required for the purpose of consummating
or evidencing the conveyance to the Trust or the remaining Trustees of any
Trust Property held in such former Trustee's name, but the execution and
delivery of such documents shall not be requisite to the vesting of title to
the Trust Property in the remaining Trustees, as provided in subsection (g) of
this Section 4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no Person
ceasing to be a Trustee (nor the estate of any such Person) shall be required
to make an accounting to the Shareholders or remaining Trustees upon such
cessation.
SECTION 4.2. Trustees' Meetings: Participation by Telephone. etc.
Annual and special meetings may be held from time to time, in each case, upon
the call of such officers as may be thereunto authorized by the By-Laws or vote
of the Trustees, or by any three (3) Trustees, or pursuant to a vote of the
Trustees adopted at a duly constituted meeting of the Trustees, and upon such
notice as shall be provided in the By-Laws. Any such meeting may be held within
or without the state of Delaware. The Trustees may act with or without a
meeting, and a written consent to any matter, signed by all of the Trustees,
shall be equivalent to action duly taken at a meeting of the Trustees, duly
called and held. Except as otherwise provided by the 1940 Act or other
applicable law, or by this Declaration of Trust or the By-Laws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present at
a meeting of Trustees (a quorum, consisting of at least a Majority of the
Trustees, being present), within or without Delaware. If authorized by the
By-Laws, all or any one or more Trustees may participate in a meeting of the
Trustees or any Committee thereof by means of conference telephone or similar
means of communication by means of which all Persons participating in the
meeting can hear each other, and participation in a meeting pursuant to such
means of communication shall constitute presence in person at such meeting. The
minutes of any meeting thus held shall be prepared in the same manner as a
meeting at which all participants were present in person.
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SECTION 4.3. Committees; Delegation. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to one or more other Committees, or to any
single Trustee, the doing of such things and the execution of such deeds or
other instruments, either in the name of the Trust or the names of the Trustees
or as their attorney or attorneys in fact, or otherwise as the Trustees may
from time to time deem expedient, and any agreement, deed, mortgage, lease or
other instrument or writing executed by the Trustee or Trustees or other Person
to whom such delegation was made shall be valid and binding upon the Trustees
and upon the Trust.
SECTION 4.4. Officers. The Trustees shall annually elect such officers
or agents, who shall have such powers, duties and responsibilities as the
Trustees may deem to be advisable, and as they shall specify by resolution or
in the By-Laws. Except as may be provided in the By-Laws, any officer elected
by the Trustees may be removed at any time with or without cause. Any two (2)
or more offices may be held by the same individual.
SECTION 4.5. Compensation of Trustees and Officers. The Trustees shall
fix the compensation of all officers and Trustees. Without limiting the
generality of any of the provisions hereof, the Trustees shall be entitled to
receive reasonable compensation for their general services as such, and to fix
the amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal, accounting,
or other professional services, as they in good faith may deem reasonable. No
Trustee or officer resigning (except where a right to receive compensation for
a definite future period shall be expressly provided in a written agreement
with the Trust, duly approved by the Trustees) and no Trustee or officer
removed shall have any right to any compensation as such Trustee or officer for
any period following his resignation or removal, or any right to damages on
account of his removal, whether his compensation be by the month, or the year
or otherwise.
SECTION 4.6. Ownership of Shares and Securities of the Trust. Any
Trustee, and any officer, employee or agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of any Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of such Shares or
Securities to the same extent and in the same manner as if such Person were not
such a Trustee, officer, employee or agent of the Trust; subject, in the case
of Trustees and officers, to the same limitations as directors or officers (as
the case may be) of a Delaware business corporation; and the Trust may issue
and sell or cause to be issued and sold and may purchase any such Shares or
other Securities from any such Person or any such organization, subject only to
the general limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series or other Securities of the Trust
generally.
SECTION 4.7. Right of Trustees and Officers to Own Property or to
Engage in Business; Authority of Trustees to Permit Others to Do Likewise. The
Trustees, in their capacity as Trustees, and (unless otherwise specifically
directed by vote of the Trustees) the officers of the Trust in their capacity
as such, shall not be required to devote their entire time to the business and
affairs of the Trust. Except as otherwise specifically provided by vote of the
Trustees, or by agreement in any particular case, any Trustee or officer of the
Trust may acquire, own, hold and dispose of, for his own individual account,
any property, and acquire, own, hold, carry on and dispose of, for his own
individual account, any business entity or business activity, whether similar
or dissimilar to any property or business entity or business activity invested
in or carried on by the Trust, and without first offering the same as an
investment opportunity to the Trust, and may exercise all rights in respect
thereof as if he were not a Trustee or officer of the Trust. The Trustees shall
also have power, generally or in specific cases, to permit
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employees or agents of the Trust to have the same rights (or lesser
rights) to acquire, hold, own and dispose of property and businesses, to carry
on businesses, and to accept investment opportunities without offering them to
the Trust, as the Trustees have by virtue of this Section 4.7.
SECTION 4.8. Reliance on Experts. The Trustees and officers may consult
with counsel, engineers, brokers, appraisers, auctioneers, accountants,
investment bankers, securities analysts or other Persons (any of which may be a
firm in which one or more of the Trustees or officers is or are members or
otherwise interested) whose profession gives authority to a statement made by
them on the subject in question, and who are reasonably deemed by the Trustees
or officers in question to be competent, and the advice or opinion of such
Persons shall be full and complete personal protection to all of the Trustees
and officers in respect of any action taken or suffered by them in good faith
and in reliance on or in accordance with such advice or opinion. In discharging
their duties, Trustees and officers, when acting in good faith, may rely upon
financial statements of the Trust represented to them to be correct by any
officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position of the Trust. The Trustees and officers may rely, and
shall be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
SECTION 4.9. Surety Bonds. No Trustee, officer, employee or agent of
the Trust shall, as such, be obligated to give any bond or surety or other
security for the performance of any of his duties, unless required by
applicable law or regulation, or unless the Trustees shall otherwise determine
in any particular case.
SECTION 4.10. Apparent Authority of Trustees and Officers. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by such
officer, or to make inquiry concerning or be liable for the application of
money or property paid, loaned or delivered to or on the order of the Trustees
or of such officer.
SECTION 4.11. Other Relationships Not Prohibited. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party (as defined in Section 5.2 hereof), or of or
for any parent or affiliate of any Contracting Party, or that the
Contracting Party or any parent or affiliate thereof is a Shareholder
or has an interest in the Trust or any Series, or that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
and/or the Trustees or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any liability or
accountability to the Trust or to the holders of Shares of any Series; provided
that, in the case of any relationship or interest referred to in the preceding
clause (i) on the part of any Trustee or officer of the Trust, either (x) the
material facts as to such relationship or interest have been disclosed to or
are known by the Trustees not having any such relationship or interest and the
contract involved is approved in good faith by a majority
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of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all
of the Trustees), (y) the material facts as to such relationship or interest
and as to the contract have been disclosed to or are known by the Shareholders
entitled to vote thereon and the contract involved is specifically approved in
good faith by vote of the Shareholders, or (z) the specific contract involved
is fair to the Trust as of the time it is authorized, approved or ratified by
the Trustees or by the Shareholders.
SECTION 4.12. Payment of Trust Expenses. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, and according to any
allocation to a particular Series and Class made by them pursuant to Section
6.1(f) hereof, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the business and affairs of the Trust or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, Investment Adviser, Administrator, Distributor,
Principal Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend
Disbursing Agent, Accounting Agent, Shareholder Servicing Agent, and such other
agents, consultants, and independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.
SECTION 4.13. Ownership of the Trust Property. Legal title to all the
Trust Property shall be vested in the Trustees as joint tenants, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust, or of any particular Series, or in the name of any other Person as
nominee, on such terms as the Trustees may determine; provided that the
interest of the Trust and of the respective Series therein is appropriately
protected. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office of a Trustee as provided in Section
4.1(c), (d) or (e) hereof, such Trustee shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to Section 4.1(i) hereof.
SECTION 4.14. By-Laws. The Trustees may adopt and from time to time
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE 5
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1. Appointment; Action by Less than All Trustees. The
Trustees shall be responsible for the general operating policy of the Trust and
for the general supervision of the business of the Trust conducted by officers,
agents, employees or advisers of the Trust or by independent contractors, but
the Trustees shall not be required personally to conduct all the business of
the Trust and, consistent with their ultimate responsibility as stated herein,
the Trustees may appoint, employ or contract with one or more officers,
employees and agents to conduct, manage and/or supervise the operations of the
Trust, and may grant or delegate such authority to such officers, employees
and/or agents as the Trustees may, in their sole discretion, deem to be
necessary or desirable, without regard to whether such authority is normally
granted or delegated by trustees. With respect to those matters of the
operation and business of
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the Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the By-Laws, if any, the Trustees may
authorize any single Trustee or defined group of Trustees, or any committee
consisting of a number of Trustees less than the whole number of Trustees then
in office without specification of the particular Trustees required to be
included therein, to act for and to bind the Trust, to the same extent as the
whole number of Trustees could do, either with respect to one or more
particular matters or classes of matters, or generally.
SECTION 5.2. Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time in their discretion and
without limiting the generality of their powers and authority otherwise set
forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships or other
types of organizations, or individuals ("Contracting Party"), to provide for
the performance and assumption of some or all of the following services, duties
and responsibilities to, for or on behalf of the Trust and/or any Series,
and/or the Trustees, and to provide for the performance and assumption of such
other services, duties and responsibilities in addition to those set forth
below, as the Trustees may deem appropriate:
(a) Advisory. An investment advisory or management agreement whereby
the agent shall undertake to furnish the Trust (or any Series thereof) such
management, investment advisory or supervisory, statistical and research
facilities and services, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all upon such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
or any applicable provisions of the By-Laws (any such agent being herein
referred to as an "Investment Adviser"). To the extent required by the 1940
Act, any such advisory or management agreement and any amendment thereto shall
be subject to approval by a Majority Shareholder Vote at a meeting of the
Shareholders of the Trust (or applicable Series). Notwithstanding any
provisions of this Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
securities of the Trust on behalf of the Trustees or may authorize any officer
or employee of the Trust or any Trustee to effect such purchases, sales, loans
or exchanges pursuant to recommendations of the Investment Adviser (and all
without further action by the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the Trustees. The
Trustees may, in their sole discretion, call a meeting of Shareholders in order
to submit to a vote of Shareholders of the Trust (or applicable Series) at such
meeting the approval of continuance of any such investment advisory or
management agreement.
(b) Administration. An agreement whereby the agent, subject to the
general supervision of the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust and each Series thereof,
will supervise all or any part of the operations of the Trust (or any Series
thereof), and will provide all or any part of the administrative and clerical
personnel, office space and office equipment and services appropriate for the
efficient administration and operations of the Trust (or any Series thereof)
(any such agent being herein referred to as an "Administrator").
(c) Underwriting. An agreement providing for the sale of Shares of the
Trust (or any Series thereof) to net the Trust not less than the net asset
value per Share (as described in Section 6.1(l) hereof) and pursuant to which
the Trust may appoint the other party to such agreement as its principal
underwriter or sales agent for the distribution of such Shares. The agreement
shall contain such terms and
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conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
and any applicable provisions of the By-Laws (any such agent being herein
referred to as a "Distributor" or a "Principal Underwriter," as the case may
be).
(d) Custodian. The appointment of an agent meeting the requirements for
a custodian for the assets of Investment Companies contained in the 1940 Act
as custodian of the Securities and cash of the Trust (or any Series thereof)
and of the accounting records in connection therewith (any such agent being
herein referred to as a "Custodian").
(e) Transfer and Dividend Disbursing Agent. An agreement with an agent
to maintain records of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof (any such agent being herein referred to
as a "Transfer Agent"), and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such dividends
(any such agent being herein referred to as a "Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with an agent to provide
service with respect to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares, and similar matters
(any such agent being herein referred to as a "Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to handle all or any part of
the accounting responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise (any such agent being herein referred
to as an "Accounting Agent").
In addition, the Trustees may from time to time cause the Trust (or any
Series thereof) to enter into agreements with respect to such other services
and upon such other terms and conditions as they may deem necessary,
appropriate or desirable. The same Person may be the Contracting Party for
some or all of the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto may contain
such terms interpretive of or in addition to the delineation of the services,
duties and responsibilities provided for, including provisions that are not
inconsistent with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others, as the Trustees
may determine. Nothing herein shall preclude, prevent or limit the Trust or a
Contracting Party from entering into subcontractual arrangements relative to
any of the matters referred to in subsections (a) through (g) of this Section
5.2.
Section 5.3. Distribution Arrangements. Subject to compliance with the
1940 Act, the Trustees may adopt and amend or repeal from time to time and
implement one or more plans of distribution pursuant to Rule 12b-1 of the 1940
Act which plan(s) will provide for the payment of specified marketing,
distribution and shareholder relations expenses of the Trust and any or all
Series and their agents and the agents of such agents.
Section 5.4. Service Arrangements. Subject to compliance with the
1940 Act, the Trustees may adopt and amend or repeal from time to time and
implement one or more service plans which plans will provide for the payment of
ongoing services to holders of the shares of such Trust (or any Series thereof)
and in connection with the maintenance of such shareholders' accounts.
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ARTICLE 6
SERIES AND SHARES
SECTION 6.1. Description of Series and Shares.
(a) General. The beneficial interest in the Trust shall be divided into
Shares (either full or fractional) with $.01 par value per Share, of which an
unlimited number may be issued. The Trustees shall have the authority from time
to time to establish and designate one or more separate, distinct and
independent Series of Shares (each of which Series shall represent interests
only in the asset attributed by the Trustees to such Series), and to authorize
separate Classes of Shares of the Trust (or any such Series), as they deem
necessary or desirable. All Shares shall be of one class, provided that the
Trustees shall have the power to classify or reclassify any unissued Shares of
any Series into any number of additional Classes of such Series.
(b) Establishment. etc. of Series and Classes; Authorization of Shares.
The establishment and designation of any Series and the authorization of the
Shares thereof shall be effective upon the execution by a Majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a Majority of
the Trustees) of an instrument setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series or Class
and the manner in which the same may be amended (a "Certificate of
Designation"), and may provide that the number of Shares of such Series or
Class which may be issued is unlimited, or may limit the number issuable. At
any time that there are no Shares outstanding of any particular Series or Class
previously established and designated, the Trustees may by an instrument
executed by a Majority of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees) terminate such Series or Class and
the establishment and designation thereof and the authorization of its Shares
(a "Certificate of Termination"). Each Certificate of Designation, Certificate
of Termination and any instrument amending a Certificate of Designation shall
have the status of an amendment to this Declaration of Trust.
(c) Character of Separate Series and Shares Thereof. Each Series
established hereunder shall represent beneficial interests in a separate
component of the assets of the Trust. Holders of Shares of a Series shall be
considered Shareholders of such Series, but such Shareholders shall also be
considered Shareholders of the Trust for purposes of receiving reports and
notices and, except as otherwise provided herein or in the Certificate of
Designation of a particular Series, or as required by the 1940 Act or other
applicable law, the right to vote, all without distinction by Series. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to establish and designate such separate and distinct Series, and to
fix and determine the relative rights and preferences as between the shares of
the respective Series, and as between the Classes of the Trust (or any Series
thereof), as to rights of redemption and the price, terms and manner of
redemption, special and relative rights as to dividends and other distributions
and on liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the Shareholders of the several Series or the several
Classes of any Series of Shares shall have separate voting rights or no voting
rights. Except as otherwise provided as to a particular Series herein, or in
the Certificate of Designation therefor, the Trustees shall have all the rights
and powers, and be subject to all the duties and obligations, with respect to
each such Series and the assets and affairs thereof as they have under this
Declaration with respect to the Trust and the Trust Property in general.
Separate and distinct records shall be maintained for each Series of Shares and
the assets and liabilities attributable thereto.
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(d) Consideration for Shares. The Trustees may issue Shares of the
Trust (or any Series thereof) for such consideration (which may include
property subject to, or acquired in connection with the assumption of,
liabilities) and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split-up), all without action or approval of
the Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and nonassessable (but may be subject to mandatory
contribution back to the Trust (or applicable Series) as provided in Section
6.1(l) hereof. The Trustees may classify or reclassify any unissued Shares, or
any Shares of the Trust (or any Series thereof) previously issued and
reacquired by the Trust, into Shares of the Trust or one or more other Series
that may be established and designated from time to time.
(e) Assets Belonging to Series. Any portion of the Trust Property
allocated to a particular Series, and all consideration received by the Trust
for the issue or sale of Shares of such Series, together with all assets in
which such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series and shall irrevocably belong to
that Series for all purposes, and shall be so recorded upon the books of
account of the Trust, and the Shareholders of such Series shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of any
Series of which they are not Shareholders. Such consideration, assets,
interest, dividends, income, earnings, profits, gains and proceeds, together
with any General Items allocated to that Series as provided in the following
sentence, are herein referred to collectively as assets "belonging to" that
Series. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively, "General Items"), the
Trustees shall allocate such General Items to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Series shall belong to and be part
of the assets belonging to that Series. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes.
(f) Liabilities of Series. The assets belonging to each particular
Series shall be charged with the liabilities in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as pertaining to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
indebtedness, expenses, costs, charges and reserves allocated and so charged to
a particular Series are herein referred to as "liabilities of" that Series.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series
for all purposes. Any creditor of any Series may look only to the assets
belonging to that Series to satisfy such creditor's debt.
(g) Dividends. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine, which may
be daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the
Shareholders of that Series, from such of the income, accrued or realized, and
capital gains,
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realized or unrealized, and out of the assets belonging to that Series,
as the Trustees may determine, after providing for actual and accrued
liabilities of that Series. All dividends and distributions on Shares of a
particular Series shall be distributed pro rata to the Shareholders of that
Series in proportion to the number of such Shares held by such holders at the
date and time of record established for the payment of such dividends or
distributions, except that the dividends and distributions of investment income
and capital gains with respect to each Class of Shares of a particular Series
shall be in such amount as may be declared from time to time by the Trustees,
and such dividends and distributions may vary as between such Classes to
reflect differing allocations of the expenses of the Series between the
Shareholders of such several Classes and any resultant differences between the
net asset value of such several Classes to such extent and for such purposes as
the Trustees may deem appropriate and further except that, in connection with
any dividend or distribution program or procedure, the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the time
or times established by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have been tendered
by the holder thereof for redemption or repurchase, but the redemption or
repurchase proceeds of which have not yet been paid to such Shareholder. Such
dividends and distributions may be made in cash, property or Shares of any
Class of that Series or a combination thereof as determined by the Trustees, or
pursuant to any program that the Trustees may have in effect at the time for
the election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as determined in accordance
with subsection (l) of this Section 6.1.
(h) Liquidation. In the event of the liquidation or dissolution of the
Trust (or any particular Series), the Shareholders of the Trust (or that
Series) shall be entitled to receive, when and as declared by the Trustees, the
excess of the assets belonging to the Trust (or that Series) over the
liabilities of such Series. The assets so distributable to the Shareholders of
the Trust (or that Series) shall be distributed among such Shareholders in
proportion to the number of Shares of the Trust (or that Series) held by them
and recorded on the books of the Trust. The liquidation of the Trust (or any
particular Series) may be authorized by vote of a Majority of the Trustees,
subject to the affirmative vote of "a majority of the outstanding voting
securities" of that Series, as the quoted phrase is defined in the 1940 Act,
determined in accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 hereof.
(i) Voting. The Shareholders shall have the voting rights set forth in
or determined under Article 7 hereof.
(j) Redemption by Shareholder. Each holder of Shares of the Trust (or a
particular Series thereof) shall have the right at such times as may be
permitted by the Trust, but no less frequently than required by the 1940 Act,
to require the Trust (or such Series) to redeem all or any part of his Shares of
the Trust (or such Series) at a redemption price equal to the net asset value
per Share of the Trust (or Series) next determined in accordance with
subsection (l) of this Section 6.1 after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption and that the
proceeds of the redemption of Shares (including a fractional Share) of any
Class of the Trust (or any Series thereof) shall be reduced by the amount of
any applicable contingent deferred sales charge or other sales charge, if any,
payable on such redemption to the distributor of Shares of such Class pursuant
to the terms of
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the initial issuance of the Shares of such Class (to the extent
consistent with the 1940 Act or regulations or exemptions thereunder) and the
Trust shall promptly pay to such distributor the amount of such deferred sales
charge. Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable, the
Trust may make payment wholly or partly in Securities or other assets belonging
to such Series at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the right of the
holders of Shares of the Trust (or any Series thereof) to require the Trust to
redeem Shares of the Trust (or such Series) during any period or at any time
when and to the extent permissible under the 1940 Act.
(k) Redemption at the Option of the Trust. The Trustees shall have the
power to redeem Shares of the Trust (or any Series thereof) at a redemption
price determined in accordance with Section 6.1(j), if at any time (i) the
total investment in such account does not have a value of at least such minimum
amount as may be specified in the Prospectus for the Trust (or such Series)
from time to time (ii) the number of Shares held in such account is equal to or
in excess of a specified percentage of Shares of the Trust or any Series as set
forth from time to time in the applicable Prospectus. In the event the Trustees
determine to exercise their power to redeem Shares provided in this Section
6.1(k), the Shareholder shall be notified that the value of his account is less
than the applicable minimum amount and shall be allowed 30 days to make an
appropriate investment before redemption is processed.
(l) Net Asset Value. The net asset value per Share of the Trust (or any
Series or Class) at any time shall be the quotient obtained by dividing the
value of the net assets of the Trust (or such Series or Class) at such time
(being the current value of the assets belonging to the Trust (or such Series
or Class), less its then existing liabilities) by the total number of Shares of
the Trust (or such Series) then outstanding, all determined in accordance with
the methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time in accordance with the
requirements of the 1940 Act. The net asset value of the several Classes of the
Trust (or a particular Series) shall be separately computed, and may vary from
one another. The Trustees shall establish procedures for the allocation of
investment income or capital gains and expenses and liabilities of a particular
Series between the several Classes of the Trust (or such Series). The Trustees
may determine to maintain the net asset value per Share of the Trust or any
Series or Class at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Trust or such Series or
Class as dividends payable in additional Shares of the Trust or such Series or
Class at the designated constant dollar amount and for the handling of any
losses attributable to the Trust or such Series or Class. Such procedures may
provide that in the event of any loss each Shareholder shall be deemed to have
contributed to the shares of beneficial interest account of the Trust or such
Series or Class his pro rata portion of the total number of Shares required to
be canceled in order to permit the net asset value per Share of the Trust or
such Series or Class to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have expressly agreed, by his investment in the Trust (or any Series
thereof) with respect to which the Trustees shall have adopted any such
procedure, to make the contribution referred to in the preceding sentence in
the event of any such loss.
(m) Transfer. All Shares of the Trust and each Series shall be
transferable, but transfers of Shares of the Trust or a particular Series will
be recorded on the Share transfer records of the Trust
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applicable to the Trust or such Series only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of the
Trust or such Series and at such other times as may be permitted by the
Trustees.
(n) Equality. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities of that Series), and each Share of any particular Series shall
be equal to each other Share thereof; but the provisions of this sentence shall
not restrict any distinctions between the several Classes of a Series
permissible under this Section 6.1 or under Section 7. 1 hereof nor any
distinctions permissible under subsection (g) of this Section 6.1 that may
exist with respect to dividends and distributions on Shares of the same Series.
The Trustees may from time to time divide or combine the Shares of any class of
particular Series into a greater or lesser number of Shares of that class of a
Series without thereby changing the proportionate beneficial interest in the
assets belonging to that Series or in any way affecting the rights of the
holders of Shares of any other Series.
(o) Rights of Fractional Shares. Any fractional Share of the Trust (or
any Series thereof) shall carry proportionately all the rights and obligations
of a whole Share of the Trust (or such Series), including rights and
obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust or of the Series to which
they pertain.
(p) Conversion Rights. (i) Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that holders
of Shares of any Series shall have the right to convert said Shares into Shares
of one or more other Series, that holders of any Class of the Trust or a Series
of Shares shall have the right to convert said Shares of such Class into Shares
of one or more other Classes of the Trust or such Series, and that Shares of
any Class of the Trust or a Series shall be automatically converted into Shares
of another Class of the Trust or such Series, in each case in accordance with
such requirements and procedures as the Trustees may establish.
(ii) The number of Shares of into which a convertible Share shall
convert shall equal the number (including for this purpose fractions of a
Share) obtained by dividing the net asset value per Share for purposes of sales
and redemptions of the converting Share on the Conversion Date by the net asset
value per Share for purposes of sales and redemptions of the Class of Shares
into which it is converting on the Conversion Date.
(iii) On the Conversion Date, the Share converting into another
share will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to receive
the number of target Shares into which the converting Shares have been
converted and declared but unpaid dividends to the Conversion Date) will cease.
Certificates representing Shares resulting from the conversion need not be
issued until certificates representing Shares converted, if issued, have been
received by the Trust or its agent duly endorsed for transfer.
(vi) The Trust will appropriately reflect the conversion of Shares
of one Class of the Trust (or a Series thereof) into Shares of another
Class of the Trust (or such Series) on the first periodic statements of account
sent to Shareholders of record affected which provide account information with
respect to a reporting period which includes the date such conversion occurred.
SECTION 6.2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a Transfer Agent or similar agent for
the Trust, which books shall be maintained
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separately for the Shares of each Series that has been authorized.
Certificates evidencing the ownership of Shares need not be issued except as
the Trustees may otherwise determine from time to time, and the Trustees shall
have power to call outstanding Share certificates and to replace them with book
entries. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the transfer
of Shares and similar matters. The record books of the Trust as kept by the
Trust or any Transfer Agent or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders and as to the number of Shares of the
Trust and, if designated, each Series thereof held from time to time by each
such Shareholder.
The holders of Shares of the Trust and, if designated, each Series
thereof shall upon demand disclose to the Trustees in writing such information
with respect to their direct and indirect ownership of Shares of the Trust or,
if designated, such Series as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the requirements of
any other authority.
SECTION 6.3. Investments in the Trust. The Trustees may accept
investments in any Series of the Trust from such Persons and on such terms and
for such consideration, not inconsistent with the provisions of the 1940 Act,
as they from time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or other Person
to accept orders for the purchase of Shares that conform to such authorized
terms and to reject any purchase orders for Shares, whether or not conforming
to such authorized terms.
SECTION 6.4. No Preemptive Rights. No Shareholder, by virtue of holding
Shares of the Trust or, if designated, any Series thereof, shall have any
preemptive or other right to subscribe to any additional Shares of the Trust or
such Series, or to any shares of any other Series, or any other Securities
issued by the Trust.
SECTION 6.5. Status of Shares. Every Shareholder, by virtue of having
become a Shareholder, shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. Shares shall be deemed to
be personal property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust Property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Series, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
ARTICLE 7
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Sections 4.1(c)
and (e) hereof, (ii) with respect to the approval or termination in accordance
with the 1940 Act of any contract with a Contracting Party as provided in
Section 5.2 hereof as to which Shareholder approval is required by the 1940
Act, (iii) with respect to any termination or reorganization of the Trust or
any Series to the extent and as provided in Sections 9.2, 9.3 and 9.4 hereof,
(iv) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Section 9.5 hereof, (v) to the same extent as the
stockholders of a Delaware business
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corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or any Series, or the Shareholders of any of them
(provided. however, that a Shareholder of a particular Series shall not in any
event be entitled to maintain a derivative or class action on behalf of any
other Series or the Shareholders thereof), and (vi) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
this Declaration of Trust, the By-Laws or any registration of the Trust with
the Commission (or any successor agency) or any State, or as the Trustees may
consider necessary or desirable. If and to the extent that the Trustees shall
determine that such action is required by law or by this Declaration, they
shall cause each matter required or permitted to be voted upon at a meeting or
by written consent of Shareholders to be submitted to a separate vote of the
outstanding Shares of each Series entitled to vote thereon; provided, that (i)
when expressly required by the 1940 Act or by other law, actions of
Shareholders shall be taken by Single Class Voting of all outstanding Shares
whose holders are entitled to vote thereon; and (ii) when the Trustees
determine that any matter to be submitted to a vote of Shareholders affects
only the rights or interests of Shareholders of one or more but not all Series
or of one or more but not all Classes of the Trust or a single Series
(including without limitation any distribution plan pursuant to Rule 12b-1 of
the 1940 Act applicable to such Class), then only the Shareholders of the
Series or Classes so affected shall be entitled to vote thereon. Any matter
required to be submitted to shareholders and affecting one or more Series shall
require separate approval by the required vote of Shareholders of the Trust or
each affected Series; provided, however, that to the extent required by the
1940 Act, there shall be no separate Series votes on the election or removal of
Trustees, the selection of auditors for the Trust and its Series or approval of
any agreement or contract entered into by the Trust or any Series. Shareholders
of a particular Series shall not be entitled to vote on any matter that affects
only one or more other Series.
SECTION 7.2. Number of Votes and Manner of Voting: Proxies. On each
matter submitted to a vote of the Shareholders, each holder of Shares of the
Trust or, if applicable, any Series shall be entitled to a number of votes
equal to the number of Shares of the Trust or such Series standing in his name
on the books of the Trust. There shall be no cumulative voting in the election
or removal of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two (2) or more Persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
SECTION 7.3. Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or upon
any other matter deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven (7) days before such
meeting, postage prepaid, stating the time, place and purpose of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records
of the Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than ten
percent (10%) of the Shares then outstanding. If the Trustees shall fail to
call or give notice of any meeting of Shareholders for a period of thirty (30)
days after written application by Shareholders holding at least ten percent
(10%) of the Shares then outstanding requesting that a
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meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws, then Shareholders holding at
least ten percent (10%) of the Shares then outstanding may call and give notice
of such meeting, and thereupon the meeting shall be held in the manner provided
for herein in case of call thereof by the Trustees. Any meetings may be held
within or without The State of Delaware. Shareholders may only act with
respect to matters set forth in the notice to Shareholders.
SECTION 7.4. Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding thirty (30) days (except at
or in connection with the termination of the Trust), as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
and time not more than ninety (90) days prior to the date of any meeting of
Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes of
such other action, and any Shareholder who was a Shareholder at the date and
time so fixed shall be entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes of such other
action, even though he has since that date and time disposed of his Shares, and
no Shareholder becoming such after that date and time shall be so entitled to
vote at such meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action.
SECTION 7.5. Quorum and Required Vote. A majority of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice. A Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote is required or
permitted by any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws, or when the Trustees shall in their
discretion require a larger vote or the vote of a majority or larger fraction
of the Shares of one or more particular Series.
SECTION 7.6. Action By Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof or of the Shares of any particular
Series as shall be required by the 1940 Act or by any express provision of this
Declaration of Trust or the By-Laws or as shall be permitted by the Trustees)
consent to the action in writing and if the writings in which such consent is
given are filed with the records of the meetings of Shareholders, to the same
extent and for the same period as proxies given in connection with a
Shareholders' meeting. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
SECTION 7.7. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Delaware business corporation under the Delaware business
corporation law.
SECTION 7.8. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
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ARTICLE 8
LIMITATION OF LIABILITY: INDEMNIFICATION
SECTION 8.1. Trustees. Shareholders. etc. Not Personally Liable;
Notice. The Trustees, officers, employees and agents of the Trust, in incurring
any debts, liabilities or obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or shall be deemed to be
acting as Trustees, officers, employees or agents of the Trust and not in their
own capacities. No Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other Person or Persons in
connection with the assets or the affairs of the Trust or of any Series, and
subject to Section 8.4 hereof, no Trustee, officer, employee or agent of the
Trust shall be subject to any personal liability whatsoever in tort, contract,
or otherwise, to any other Person or Persons in connection with the assets or
affairs of the Trust or of any Series, save only that arising from his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the discharge of his functions.
The Trust (or if the matter relates only to a particular Series, that Series)
shall be solely liable for any and all debts, claims, demands, judgments,
decrees, liabilities or obligations of any and every kind, against or with
respect to the Trust or such Series in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or such Series, and all
Persons dealing with the Trust or any Series shall be deemed to have agreed
that resort shall be had solely to the Trust Property of the Trust or the
Series Assets of such Series, as the case may be, for the payment or
performance thereof.
The Trustees shall use their best efforts to ensure that every note,
bond, contract, instrument, certificate or undertaking made or issued by the
Trustees or by any officers or officer shall give notice that a Certificate of
Trust in respect of the Trust is on file with the Secretary of the state of
Delaware and shall recite to the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer, and not individually, and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, or the particular Series in
question, as the case may be, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the Series Assets of any Series to the
obligations of any other Series.
SECTION 8.2. Trustees' Good Faith Action; Expert Advice: No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to Section 8.4 hereof, a
Trustee shall be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting Agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written
reports made to the Trustees by any officer appointed by them, any independent
public accountant, and (with respect to the subject matter of the contract
involved) any officer, partner or
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responsible employee of a Contracting Party appointed by the Trustees
pursuant to Section 5.2 hereof. The Trustees as such shall not be required to
give any bond or surety or any other security for the performance of their
duties.
SECTION 8.3. Indemnification of Shareholders. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason of being
or having been a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and timely request
by the Shareholder) may assume the defense against such charge and satisfy any
judgment thereon or may reimburse the Shareholders for expenses, and the
Shareholder or former Shareholder (or the heirs, executors, administrators or
other legal representatives thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall be entitled (but solely
out of the assets of the Series of which such Shareholder or former Shareholder
is or was the holder of Shares) to be held harmless from and indemnified
against all loss and expense arising from such liability.
SECTION 8.4. Indemnification of Trustees. Officers, etc. Subject to the
limitations, if applicable, hereinafter set forth in this Section 8.4, the
Trust shall indemnify (from the assets of one or more Series to which the
conduct in question relates) each of its Trustees, officers, employees and
agents (including Persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise (hereinafter, together with
such Person's heirs, executors, administrators or personal representative,
referred to as a "Covered Person")) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such Covered Person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Trustee or officer,
director or trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to
the best interests of the Trust; (ii) had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (iii) for a criminal proceeding, had
reasonable cause to believe that his conduct was unlawful (the conduct
described in (i), (ii) and (iii) being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by a court or
other body before whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a
court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum
of Trustees who are neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to the proceeding (the
"Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments,
in compromise or as fines or penalties), may be paid from time to time by one
or more Series to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided that the Covered
Person shall have undertaken to repay the amounts so paid to such Series if it
is ultimately determined that indemnification of such expenses is not
authorized under this Article 8 and (i) the Covered Person shall
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have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the Disinterested Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial type inquiry), that there
is reason to believe that the Covered Person ultimately will be found entitled
to indemnification.
SECTION 8.5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4
hereof, pursuant to a consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent
legal counsel pursuant to clause (ii) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in accordance with
either of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust or to have been liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office.
SECTION 8.6. Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article 8 shall not be exclusive of or affect
any other rights to which any such Covered Person or shareholder may be
entitled. As used in this Article 8, a "disinterested" Person is one against
whom none of the actions, suits or other proceedings in question, and no other
action, suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article 8 shall affect
any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other Persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.
ARTICLE 9
DURATION: REORGANIZATION: INCORPORATION; AMENDMENTS
SECTION 9.1. Duration of Trust. Unless terminated as provided herein,
the Trust shall have perpetual existence.
SECTION 9.2. Termination of Trust. The Trust may be terminated at any
time by a Majority of the Trustees, subject to the favorable vote of the
holders of not less than a majority of the Shares outstanding and entitled to
vote of each Series of the Trust, or by an instrument or instruments in writing
without a meeting, consented to by the holders of not less than a majority of
such Shares, or by such greater or different vote of Shareholders of any Series
as may be established by the Certificate of Designation by which such Series
was authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated
as may be
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determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with
the provisions of Section 6.1(h) hereof. After termination of the Trust or any
Series and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination. Upon
termination of the Trust, the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease. Upon termination of any Series, the
Trustees shall thereupon be discharged from all further liabilities and duties
with respect to such Series, and the rights and interests of all Shareholders
of such Series shall thereupon cease.
SECTION 9.3. Reorganization. The Trustees may sell, convey and transfer
all or substantially all of the assets of the Trust, or the assets belonging to
any one or more Series, to another trust, partnership, association, corporation
or other entity organized under the laws of any state of the United States, or
may transfer such assets to another Series of the Trust, in exchange for cash,
Shares or other Securities (including, in the case of a transfer to another
Series of the Trust, Shares of such other Series), or to the extent permitted
by law then in effect may merge or consolidate the Trust or any Series with any
other Trust or any corporation, partnership, or association organized under the
laws of any state of the United States, all upon such terms and conditions and
for such consideration when and as authorized by vote or written consent of a
Majority of the Trustees and approved by the affirmative vote of the holders of
not less than a majority of the Shares outstanding and entitled to vote of each
Series whose assets are affected by such transaction, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than a majority of such Shares, and/or by such other vote of any Series as
may be established by the Certificate of Designation with respect to such
Series. Following such transfer, the Trustees shall distribute the cash, Shares
or other Securities or other consideration received in such transaction (giving
due effect to the assets belonging to and indebtedness of, and any other
differences among, the various Series of which the assets have so been
transferred) among the Shareholders of the Series of which the assets have been
so transferred; and if all of the assets of the Trust have been so transferred,
the Trust shall be terminated. Nothing in this Section 9.3 shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or
other organizations, and to sell, convey or transfer less than substantially
all of the Trust Property or the assets belonging to any Series to such
organizations or entities.
SECTION 9.4. Incorporation. Upon approval by Majority Shareholder
Vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization, in
exchange for the shares or securities thereof, or otherwise, and to lend money
to, subscribe for the shares of securities of, and enter into any contracts
with any such corporation, trust, partnership, association or organization in
which the Trust holds or is about to acquire shares or any other interests. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporation, trusts,
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partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.
SECTION 9.5. Amendments; etc. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.1(l)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all Shareholders may
be adopted at any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a Majority of the
Trustees) when authorized to do so by the vote in accordance with Section 7.I
hereof of Shareholders holding a majority of all the Shares outstanding and
entitled to vote, without regard to Series, or if said amendment adversely
affects the rights of the Shareholders of less than all of the Series, by the
vote of the holders of a majority of all the Shares entitled to vote of each
Series so affected. Notwithstanding any other provisions set forth in this
Declaration of Trust, a provision in this Declaration of Trust requiring
shareholder approval of any action may be amended only with like shareholder
approval.
SECTION 9.6. Filing of Copies of Declaration and Amendments. The
original or a copy of this Declaration and of each amendment hereto (including
each Certificate of Designation and Certificate of Termination) shall be kept
at the office of the Trust where it may be inspected by any Shareholder. A
restated Declaration, integrating into a single instrument all of the
provisions of this Declaration which are then in effect and operative, may be
executed from time to time by a Majority of the Trustees and shall, upon
execution, be conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and the various
amendments thereto. A Certificate of Trust shall be filed in the office of the
Secretary of State of the State of Delaware.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the applicable register of the
Trust.
SECTION 10.2. Governing Law. This Declaration of Trust is, with
reference to the laws thereof, and the rights of all parties and the
construction and effect of every provision hereof shall be, subject to and
construed according to the laws of said The State of Delaware.
SECTION 10.3. Counterparts. This Declaration of Trust and any amendment
thereto may be simultaneously executed in several counterparts, each of which
so executed shall be deemed to be an
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original, and such counterparts, together, shall constitute but one and
the same instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust is a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing, (c) the form
of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration of Trust, (e)
the form of any By-Law adopted, or the identity of any officers elected, by the
Trustees, (f) the existence or nonexistence of any fact or facts which in any
manner relate to the affairs of the Trust, or (g) the name of the Trust or the
establishment of a Series shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees, or any of them, and
the successors of such Person.
SECTION 10.5. References; Headings. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.
SECTION 10.6. Provisions in Conflict With Law or Regulation. (a)
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration; provided, however, that such determination shall not affect
any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
SECTION 10.7. Use of the Name "Van Kampen American Capital". Van Kampen
American Capital, Inc. ("Van Kampen American Capital") has consented to the use
by the Trust and by each Series and each Series thereof to the identifying
words "Van Kampen" or "Van Kampen Merritt" or any combination thereof in the
name of the Trust and of each Series and Series thereof. Such consent is
conditioned upon the Trust's employment of Van Kampen American Capital, its
successors or a subsidiary or affiliate thereof as investment adviser to the
Trust and to each Series and each Series thereof. As between Van Kampen
American Capital and the Trust, Van Kampen American Capital shall control the
use of such name insofar as such name contains the identifying words "Van
Kampen" or "Van Kampen Merritt". Van Kampen American Capital may from time to
time use the identifying words "American Capital," "Van Kampen" or "Van Kampen
Merritt" in other connections and for other purposes, including without
limitation in the names of other investment companies, corporations or
businesses that it may manage, advise, sponsor or own or in which it may have a
financial interest. Van Kampen American Capital may require the Trust or any
Series or Series thereof to cease using the identifying words "Van Kampen" or
"Van Kampen Merritt" in the name of the Trust or any Series or any Series
thereof if the Trust or any Series or Series thereof ceases to employ Van
Kampen American Capital, its successors or a subsidiary or affiliate thereof as
investment adviser.
31
<PAGE> 38
IN WITNESS WHEREOF, the undersigned, being at least a majority of the
Trustees of the Trust, have set their hands and seal, for themselves and their
assigns, unto this First Amended and Restated Agreement and Declaration of Trust
of Van Kampen American Capital Pace Fund, as of the day and year first above
written.
/s/ J. MILES BRANAGAN /s/ RICHARD E. CARUSO
___________________________________ ___________________________________
J. Miles Branagan Richard E. Caruso
/s/ ROGER HILSMAN /s/ DON G. POWELL
___________________________________ ___________________________________
Roger Hilsman Don G. Powell
/s/ DAVID REES /s/ LAWRENCE J. SHEEHAN
___________________________________ ___________________________________
David Rees Lawrence J. Sheehan
/s/ FERNANDO SISTO /s/ WILLIAM S. WOODSIDE
___________________________________ ___________________________________
Fernando Sisto William S. Woodside
32
<PAGE> 39
A C K N O W L E D G M E N T
STATE OF TEXAS )
) ss
COUNTY OF HARRIS )
June 21, 1995
______________________
(Date)
Then personally appeared the above named individuals and each one
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ PAMELA J. McLEMORE
_______________________________
(Notary Public)
My commission expires: 9-3-97
33
<PAGE> 1
EXHIBIT 1.2
CERTIFICATE OF AMENDMENT DATED SEPTEMBER 7, 1995
TO
FIRST AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST DATED JUNE 21, 1995
WHEREAS, the Trustees of Van Kampen American Capital Pace Fund, a Delaware
business trust (the "Trust") have approved the amendment of the Trust's First
Amended and Restated Agreement and Declaration of Trust dated June 21, 1995
("Declaration of Trust") in accordance with Section 9.5 thereof;
WHEREAS, the Trustees have authorized the proper officers of the
Trust, including the officer whose name appears below, to effect such
amendment;
NOW, THEREFORE, the Declaration of Trust is amended as follows:
1. The first sentence of Section 4.1(b) is amended and restated in its
entirety to read as follows:
(b) Number. The Trustees serving as such, whether named above
or hereafter becoming Trustees, may increase (to not more than
fifteen (15)) or decrease the number of Trustees to a number
other than the number theretofore determined by a written
instrument signed by a Majority (or a supermajority if
required by the By-Laws) of the Trustees (or by an officer of
the Trust pursuant to the vote of a Majority (or a
supermajority if required by the By-Laws) of the Trustees).
2. Section 4.1(e) is amended and restated in its entirety to read as
follows:
(e) Removal. Any Trustee may be removed: (i) with cause at
any time by written instrument, signed by at least two-thirds
(2/3) of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective; or (ii) without cause at any time by written
instrument, signed by at least two-thirds (2/3) of the number
of Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (iii) by vote of
shareholders holding a majority of the Shares of the Trust
then outstanding, cast in person or by proxy at any meeting
called for the purpose; or (iv) by a written declaration
signed by Shareholders holding not less than a majority of the
Shares of the Trust then outstanding. Notwithstanding any
other provisions set forth in this Declaration of Trust, this
Section 4.1(e)
<PAGE> 2
may not be amended (either directly or indirectly through a
reorganization) without the approval of (i) two-thirds (2/3) of the
Trustees then in office or (ii) by vote of Shareholders holding a
majority of the Shares of the Trust then outstanding.
EXECUTED, to be effective as of September 7, 1995
/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary
<PAGE> 1
EXHIBIT 1.3
VAN KAMPEN AMERICAN CAPITAL PACE FUND
Certificate of Designation
of
Van Kampen American Capital Pace Fund
The undersigned, being the Secretary of Van Kampen American Capital Pace Fund,
a Delaware business trust (the "Trust"), pursuant to the authority conferred
upon the Trustees of the Trust by Section 6.1 of the Trust's First Amended and
Related Agreement and Declaration of Trust ("Declaration"), and by the
affirmative vote of a Majority of the Trustees does hereby establish and
designate the following classes of Shares of the Trust with following the
rights, preferences and characteristics:
1. Classes of Shares. The Shares of the Trust shall be initially divided into
three classes--Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Trust.
2. Sales Charges. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Trust's prospectus.
3. Conversion. Each Class B and Class C Share of the Trust shall be converted
automatically, and without any action or choice on the part of the Shareholder
thereof, into Class A Shares of the Trust at such times and pursuant to such
terms, conditions and restrictions as may be established by the Trustees and as
set forth in the Trust's Prospectus.
4. Allocation of Expenses Among Classes. Expenses related solely to a
particular Class (including, without limitation, distribution expenses under an
administrative or service agreement, plan or other arrangement, however
designated) shall be borne by that Class and shall be appropriately reflected
(in a manner determined by the Trustees) in the net asset value, dividends,
distribution and liquidation rights of the Shares of that Class.
5. Special Meetings. A special meeting of Shareholders of a Class of the
Trust may be called with respect to the Rule 12b-1 distribution plan applicable
to such Class or with respect to any other proper purpose affecting only
holders of shares of such Class at any time by a Majority of the Trustees.
6. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust, or with respect to any Class of Shares set forth in the
Declaration shall apply to
1
<PAGE> 2
Shares of the Trust unless otherwise specified in this Certificate of
Designation, in which case this Certificate of Designation shall govern.
7. Amendments, etc. Subject to the provisions and limitations of Section 9.5
of the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
and officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Trust outstanding and entitled
to vote or, if such amendment affects the Shares of one or more but not all of
the Classes of the Trust, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.
8. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.
June 21, 1995
/s/ NORI L. GABERTY
Nori L. Gabert,
Secretary
2
<PAGE> 1
EXHIBIT 2
VAN KAMPEN AMERICAN CAPITAL
PACE FUND
AMENDED AND RESTATED BYLAWS
(AS AMENDED NOVEMBER 17, 1995)
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL PACE FUND
Amended and Restated Bylaws
(As Amended November 17, 1995)
Index
<TABLE>
<S> <C> <C>
ARTICLE 1 SHAREHOLDERS AND SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Presiding Officer; Secretary . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Authority of Chairman of Meeting to Interpret Declaration and Bylaws . . 1
Section 1.4. Voting; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Records at Shareholder Meetings . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Shareholders Action in Writing . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 TRUSTEES AND TRUSTEES' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1. Number of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2. Regular Meetings of Trustees . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3. Special Meetings of Trustees . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.5. Quorum; Presiding Trustee . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.6. Participation by Telephone . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.7. Location of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.8. Actions by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.9. Rulings of Presiding Trustee . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.10. Trustees' Action in Writing . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.11. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.12. Tenure of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 3 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Officers of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2. Time and Terms of Election . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3. Resignation and Removal . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.5. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.6. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.7. Treasurer and Assistant Treasurers . . . . . . . . . . . . . . . . . . . 5
Section 3.8. Controller and Assistant Controllers . . . . . . . . . . . . . . . . . . 6
Section 3.9. Secretary and Assistant Secretaries . . . . . . . . . . . . . . . . . . 6
Section 3.10. Substitutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.11. Execution of Deeds, etc. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.12. Power to Vote Securities . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1. Power of Trustees to Designate Committees . . . . . . . . . . . . . . . 7
Section 4.2. Rules for Conduct of Committee Affairs . . . . . . . . . . . . . . . . 7
Section 4.3. Trustees May Alter, Abolish, etc., Committees . . . . . . . . . . . . . 7
Section 4.4. Minutes; Review by Trustees . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6 SHARES .......................................... . . . . . . . . . . . . . . . . . 8
Section 6.1. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.2. Uncertificated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.3. Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.4. Lost, Stolen, etc., Certificates . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 7 STOCK TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.1. Transfer Agents, Registrars, etc. . . . . . . . . . . . . . . . . . . . 9
Section 7.2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.3. Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 8 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.1. Bylaws Subject to Amendment . . . . . . . . . . . . . . . . . . . . . 9
Section 8.2. Notice of Proposal to Amend Bylaws Required . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 5
VAN KAMPEN AMERICAN CAPITAL PACE FUND
AMENDED AND RESTATED BYLAWS
(AS AMENDED NOVEMBER 17, 1995)
These are the Bylaws of Van Kampen American Capital Pace Fund, a trust with
transferable shares established under the laws of The State of Delaware (the
"Trust"), pursuant to an Agreement and Declaration of Trust of the Trust (the
"Declaration") made the 10th day of May, 1995, as amended, and a Certificate of
Trust filed in the office of the Secretary of State pursuant to Section 3810 of
The Delaware Business Trust Act, Title 12, Chapter 38 of the Delaware Code.
These Bylaws have been adopted by the Trustees pursuant to the authority granted
by Section 4.14 of the Declaration.
All words and terms capitalized in these Bylaws, unless
otherwise defined herein, shall have the same meanings as they have in the
Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Shareholders of the Trust
shall be held whenever called by the Chairman, the President or a majority of
the Trustees and whenever election of a Trustee or Trustees by Shareholders is
required by the provisions of the 1940 Act. Meetings of Shareholders shall
also be called by the Trustees when requested in writing by Shareholders
holding at least ten percent (10%) of the Shares then outstanding for the
purpose of voting upon removal of any Trustee, or if the Trustees shall fail to
call or give notice of any such meeting of Shareholders for a period of thirty
(30) days after such application, then Shareholders holding at least ten
percent (10%) of the Shares then outstanding may call and give notice of such
meeting. Notice of Shareholders' meetings shall be given as provided in the
Declaration.
SECTION 1.2. Presiding Officer; Secretary. The President shall
preside at each Shareholders' meeting as chairman of the meeting, or in the
absence of the President, the Trustees present at the meeting shall elect one
of their number as chairman of the meeting. Unless otherwise provided for by
the Trustees, the Secretary of the Trust shall be the secretary of all meetings
of Shareholders and shall record the minutes thereof.
SECTION 1.3. Authority of Chairman of Meeting to Interpret
Declaration and Bylaws. At any Shareholders' meeting the chairman of the
meeting shall be empowered to determine the construction or interpretation
of the Declaration or these Bylaws, or any part thereof or hereof, and their
ruling shall be final.
SECTION 1.4. Voting; Quorum. At each meeting of Shareholders, except
as otherwise provided by the Declaration, every holder of record of Shares
entitled to vote shall be entitled to a number of votes equal to the number of
Shares standing in his name on the Share register of the Trust on the record
date of the meeting. Shareholders may vote by proxy and the form of any such
proxy may be prescribed from time to time by the Trustees. A quorum shall
exist if the holders of a majority of the outstanding Shares of the Trust
entitled to vote are present in person or by proxy, but any lesser
1
<PAGE> 6
number shall be sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters which may be
binding upon the Trustees pursuant to Section 7.1 of the Declaration. On other
matters, votes of Shareholders need not be taken by ballot unless otherwise
provided for by the Declaration or by vote of the Trustees, or as required by
the 1940 Act, but the chairman of the meeting may in his discretion authorize
any matter to be voted upon by ballot.
SECTION 1.5. Inspectors. At any meeting of Shareholders, the chairman
of the meeting may appoint one or more Inspectors of Election or Balloting to
supervise the voting at such meeting or any adjournment thereof. If Inspectors
are not so appointed, the chairman of the meeting may, and on the request of
any Shareholder present or represented and entitled to vote shall, appoint one
or more Inspectors for such purpose. Each Inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of Inspector of Election or Balloting, as the case may be, at such
meeting with strict impartiality and according to the best of his
ability. If appointed, Inspectors shall take charge of the polls and, when the
vote is completed, shall make a certificate of the result of the vote taken and
of such other facts as may be required by law.
SECTION 1.6. Records at Shareholder Meetings. At each meeting of the
Shareholders there shall be open for inspection the minutes of the last
previous Meeting of Shareholders of the Trust and a list of the Shareholders of
the Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting or the date of closing
of transfer books, as the case may be. Such list of Shareholders shall contain
the name of each Shareholder. Shareholders shall have such other rights and
procedures of inspection of the books and records of the Trust as are granted
to shareholders of a Delaware corporation.
SECTION 1.7. Shareholders' Action in Writing. Nothing in this Article
1 shall limit the power of the Shareholders to take any action by means of
written instruments without a meeting, as permitted by Section 7.6 of the
Declaration.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. The number of Trustees shall be
fifteen (15), provided that such number shall be reduced upon the death,
resignation or retirement of any Trustee until the number of Trustees is eight
(8), unless the Trustees shall find by a majority vote that such reduction is
not in the best interest of the Fund's shareholders, in which case the number
of Trustees shall not be reduced and a vacancy shall be created upon such
death, resignation or retirement of such Trustees.
SECTION 2.2. Regular Meetings of Trustees. Regular meetings of the
Trustees may be held without call or notice at such places and at such times as
the Trustees may from time to time determine; provided, that notice of such
determination, and of the time and place of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance with Section
2.4 hereof.
SECTION 2.3. Special Meetings of Trustees. Special meetings of the
Trustees may be held at any time and at any place when called by the President
or the Treasurer or by three (3) or more
2
<PAGE> 7
Trustees, or if there shall be less than three (3) Trustees, by any Trustee;
provided, that notice of the time and place thereof is given to each Trustee
in accordance with Section 2.4 hereof by the Secretary or an Assistant
Secretary or by the officer or the Trustees calling the meeting.
SECTION 2.4. Notice of Meetings. Notice of any regular or special
meeting of the Trustees shall be sufficient if given in writing to each
Trustee, and if sent by mail at least five (5) days, by a nationally recognized
overnight delivery service at least two (2) days or by facsimile at least
twenty-four (24) hours, before the meeting, addressed to his usual or last
known business or residence address, or if delivered to him in person at least
twenty-four (24) hours before the meeting. Notice of a special meeting need
not be given to any Trustee who was present at an earlier meeting, not more
than thirty-one (31) days prior to the subsequent meeting, at which the
subsequent meeting was called. Unless statute, these bylaws or a resolution of
the Trustees might otherwise dictate, notice need not state the business to be
transacted at or the purpose of any meeting of the Board of Trustees. Notice
of a meeting may be waived by any Trustee by written waiver of notice, executed
by him or her before or after the meeting, and such waiver shall be filed with
the records of the meeting. Attendance by a Trustee at a meeting shall
constitute a waiver of notice, except where a Trustee attends a meeting for the
purpose of protesting prior thereto or at its commencement the lack of notice.
No notice need be given of action proposed to be taken by unanimous written
consent.
SECTION 2.5. Quorum: Presiding Trustee. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum. Any meeting may
be adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice. Unless the Trustees shall otherwise elect,
generally or in a particular case, the Chairman shall be the presiding Trustee
at each meeting of the Trustees or in the absence of the Chairman, the
President shall preside over the meeting. In the absence of both the Chairman
and the President, the Trustees present at the meeting shall elect one of their
number as presiding Trustee of the meeting.
SECTION 2.6. Participation by Telephone. One or more of the Trustees
may participate in a meeting thereof or of any Committee of the Trustees by
means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
SECTION 2.7. Location of Meetings. Trustees' meetings may be held at
any place, within or without the State of Delaware.
SECTION 2.8. Actions by Trustees. Unless statute, the charter or
By-laws requires a greater proportion, action of a majority of the Trustees
present at a meeting at which a quorum is present is action of the Board of
Trustees. The results of all voting shall be recorded by the Secretary in the
minute book.
3
<PAGE> 8
SECTION 2.9. Rulings of Presiding Trustee. All other rules of conduct
adopted and used at any Trustees' meeting shall be determined by the presiding
Trustee of such meeting, whose ruling on all procedural matters shall be
final.
SECTION 2.10. Trustees' Action in Writing. Nothing in this Article 2
shall limit the power of the Trustees to take action by means of a written
instrument without a meeting, as provided in Section 4.2 of the Declaration.
SECTION 2.11. Resignations. Any Trustee may resign at any time by
written instrument signed by him and delivered to the Chairman, the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
SECTION 2.12. Tenure of Trustees. Notwithstanding any other provision
herein to the contrary, the term of office of each Trustee shall end on December
31st of the year such Trustee reaches the age of seventy-two (72); provided that
the term of office of each Trustee shall end on December 31, 1996 for each
Trustee who had been elected before January 1, 1987 as a trustee or director of
any open-end investment company managed by Van Kampen American Capital Asset
Management, Inc. (formerly American Capital Asset Management, Inc. and, prior
thereto, American General Capital Management, Inc.) if such Trustee reaches the
age of seventy-two (72) or more by December 31, 1995; provided the term of
office of each Trustee shall end on December 31st of the year such Trustee
reaches the age of seventy-six (76) for each Trustee who had been elected before
January 1, 1987 as a trustee or director of any open-end investment company
managed by Van Kampen American Capital Asset Management, Inc. if such Trustee is
less than the age of seventy-two (72) by December 31, 1995; provided that the
term of office of each Trustee shall end on December 31st of the year such
Trustee reaches the age of seventy-five (75) for each Trustee first elected on
or after July 1, 1995 and prior to December 1, 1995 who was over the age of
seventy-two and one-half (72 1/2) and under the age of seventy-five (75) at the
time of such election; and further provided that the term of office of each
Trustee shall end on December 31st of the year such Trustee reaches the age of
seventy-six (76) for each Trustee first elected on or after July 1, 1995 and
prior to December 1, 1995 who was the age of seventy-five (75) or older at the
time of such election.
SECTION 2.13. Chairman of the Board. The Trustees shall from time to
time elect one of the Trustees to serve as Chairman of the Board of Trustees,
provided that the chairman shall be a Trustee who is not an "interested person"
of the Trust or the Trust's investment adviser, within the meaning of the 1940
Act.
ARTICLE 3
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of the Trust shall
consist of a President, a Treasurer and a Secretary, and may include a
Controller and one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries, and such other officers as the Trustees may designate. Any person
may hold more than one office.
SECTION 3.2. Time and Terms of Election. The President, the Treasurer
and the Secretary shall be elected by the Trustees at their first meeting and
thereafter at the annual meeting of the Trustees, as provided in Section 4.2 of
the Declaration. Such officers shall hold office until the next
4
<PAGE> 9
annual meeting of the Trustees and until their successors shall have been duly
elected and qualified, and may be removed at any meeting by the affirmative
vote of a Majority of the Trustees. All other officers of the Trust may be
elected or appointed at any meeting of the Trustees. Such officers shall hold
office for any term, or indefinitely, as determined by the Trustees, and shall
be subject to removal, with or without cause, at any time by the Trustees.
SECTION 3.3. Resignation and Removal. Any officer may resign at any
time by giving written notice to the Trustees. Such resignation shall take
effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
it effective. If the office of any officer or agent becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold office for the
unexpired term in respect of which such vacancy occurred. Except to the extent
expressly provided in a written agreement with the Trust, no officer resigning
or removed shall have any right to any compensation for any period following
such resignation or removal, or any right to damage on account of such removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their discretion,
direct any officer appointed by them to furnish at the expense of the Trust a
fidelity bond approved by the Trustees, in such amount as the Trustees may
prescribe.
SECTION 3.5. President. The President shall be the chief executive
officer of the Trust and, subject to the supervision of the Trustees, shall
have general charge and supervision of the business, property and affairs of
the Trust and such other powers and duties as the Trustees may prescribe.
SECTION 3.6. Vice Presidents. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority or as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The
Vice Presidents shall have the power to execute bonds, notes, mortgages and
other contracts, agreements and instruments in the name of the Trust, and shall
do and perform such other duties as the Trustees or the President shall direct.
SECTION 3.7. Treasurer and Assistant Treasurers. The Treasurer shall
be the chief financial officer of the Trust, and shall have the custody of the
Trust's funds and Securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the credit of the
Trust, in such depositories as may be designated by the Trustees, taking
proper vouchers for such disbursements, shall have such other duties and
powers as may be prescribed from time to time by the Trustees, and shall
render to the Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Trust. If no
Controller is elected, the Treasurer shall also have the duties and powers
of the Controller, as provided in these Bylaws. Any Assistant Treasurer shall
have such duties and powers as shall be prescribed from time to time by the
Trustees or the Treasurer, and shall be responsible to and shall report to the
Treasurer. In the absence or disability of the Treasurer, the Controller shall
have the powers and duties of the Treasurer. If no Controller is elected, the
Assistant Treasurer or, if there shall be more than one, the Assistant
Treasurers in the order of their seniority or as otherwise designated by the
Trustees or the Chairman, shall have the powers and duties of the Treasurer.
5
<PAGE> 10
SECTION 3.8. Controller and Assistant Controllers. If a Controller
is elected, the Controller shall be the chief accounting officer of the Trust
and shall be in charge of its books of account and accounting records and of
its accounting procedures, and shall have such duties and powers as are
commonly incident to the office of a controller, and such other duties and
powers as may be prescribed from time to time by the Trustees. The Controller
shall be responsible to and shall report to the Trustees, but in the
ordinary conduct of the Trust's business, shall be under the supervision of
the Treasurer. Any Assistant Controller shall have such duties and powers as
shall be prescribed from time to time by the Trustees or the Controller, and
shall be responsible to and shall report to the Controller. In the absence or
disability of the Controller, the Assistant Controller or, if there shall be
more than one, the Assistant Controllers in the order of their seniority or as
otherwise designated by the Trustees, shall have the powers and duties of the
Controller.
SECTION 3.9. Secretary and Assistant Secretaries. The
Secretary shall, if and to the extent requested by the Trustees, attend all
meetings of the Trustees, any Committee of the Trustees and/or the Shareholders
and record all votes and the minutes of proceedings in a book to be kept for
that purpose, shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the Shareholders and shall
perform such other duties as may be prescribed by the Trustees. The Secretary,
or in his absence any Assistant Secretary, shall affix the Trust's seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary. The Secretary shall be
the custodian of the Share records and all other books, records and papers of
the Trust (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed. In the absence or disability of the Secretary, the
Assistant Secretary or, if there shall be more than one, the Assistant
Secretaries in the order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Secretary.
SECTION 3.10. Substitutions. In case of the absence or disability
of any officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate, for the time being, the powers or
duties, or any of them, of such officer to any other officer, or to any
Trustee.
SECTION 3.11. Execution of Deeds, etc. Except as the Trustees may
generally or in particular cases otherwise authorize or direct, all deeds,
leases, transfers, contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by its properly authorized officers or agents as
provided in the Declaration.
SECTION 3.12. Power to Vote Securities. Unless otherwise ordered by
the Trustees, the Treasurer shall have full power and authority on behalf of
the Trust to give proxies for, and/or to attend and to act and to vote at, any
meeting of stockholders of any corporation in which the Trust may hold stock,
and at any such meeting the Treasurer or his proxy shall possess and may
exercise any and all rights and powers incident to the ownership of such stock
which, as the owner thereof, the Trust might have possessed and exercised if
present. The Trustees, by resolution from time to time, or, in the absence
thereof, the Treasurer, may confer like powers upon any other person or persons
as attorneys and proxies of the Trust.
6
<PAGE> 11
ARTICLE 4
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees. The Trustees,
by vote of a Majority of the Trustees, may elect from their number an Executive
Committee and any other Committees and may delegate thereto some or all of
their powers except those which by law, by the Declaration or by these
Bylaws may not be delegated; provided, that an Executive Committee shall not
be empowered to elect the President, the Treasurer or the Secretary, to amend
the Bylaws, to exercise the powers of the Trustees under this Section 4.1 or
under Section 4.3 hereof, or to perform any act for which the action of a
Majority of the Trustees is required by law, by the Declaration or by these
Bylaws. The members of any such Committee shall serve at the pleasure of the
Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs. Except as
otherwise provided by the Trustees, each Committee elected or appointed
pursuant to this Article 4 may adopt such standing rules and regulations for
the conduct of its affairs as it may deem desirable, subject to review and
approval of such rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action or any contrary
provisions by the Trustees, the business of each Committee shall be conducted,
so far as practicable, in the same manner as provided herein and in the
Declaration for the Trustees.
SECTION 4.3. Trustees May Alter, Abolish, etc., Committees Trustees
may at any time alter or abolish any Committee, change membership of any
Committee, or revoke, rescind, waive or modify action of any Committee or the
authority of any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any third parties.
SECTION 4.4. Minutes: Review by Trustees. Any Committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.
ARTICLE 5
SEAL
The seal of the Trust, if any, may be affixed to any instrument, and
the seal and its attestation may be lithographed, engraved or otherwise printed
on any document with the same force and effect as if had been imprinted and
affixed manually in the same manner and with the same force and effect as if
done by a Delaware corporation. Unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence shall not
impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1. Issuance of Shares. The Trustees may issue an unlimited
number of Classes of Shares of any or all Series either in certificated or
uncertificated form, they may issue certificates to the
7
<PAGE> 12
holders of a Class of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series require the surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership
of Shares for such Series.
SECTION 6.2. Uncertificated Shares. For any Class of Shares for which
the Trustees issue Shares without certificates, the Trust or the Transfer Agent
may either issue receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such Shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of such Shares as if they
had received certificates therefor and shall be held to have expressly assented
and agreed to the terms hereof and of the Declaration.
SECTION 6.3. Share Certificates. For any Class of Shares for which
the Trustees shall issue Share certificates, each Shareholder of such Class
shall be entitled to a certificate stating the number of Shares owned by him in
such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Trust. Such signatures may be facsimiles if the certificate
is countersigned by a Transfer Agent, or by a Registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he were such officer at the time of its issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost, stolen, destroyed or
mutilated, the Trustees may authorize the issuance of a new certificate of the
same tenor and for the same number of Shares in lieu thereof. The Trustees
shall require the surrender of any mutilated certificate in respect of which a
new certificate is issued, and may, in their discretion, before the issuance of
a new certificate, require the owner of a lost, stolen or destroyed
certificate, or the owner's legal representative, to make an affidavit or
affirmation setting forth such facts as to the loss, theft or destruction as
they deem necessary, and to give the Trust a bond in such reasonable sum as the
Trustees direct, in order to indemnify the Trust.
ARTICLE 7
TRANSFER OF SHARES
SECTION 7.1. Transfer Agents, Registrars, etc. As approved in Section
5.2(e) of the Declaration, the Trustees shall have the authority to employ and
compensate such transfer agents and registrars with respect to the Shares of
the Trust as the Trustees shall deem necessary or desirable. In addition, the
Trustees shall have the power to employ and compensate such dividend dispersing
agents, warrant agents and agents for reinvestment of dividends as they shall
deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.
SECTION 7.2 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section
6.1(m) of the Declaration. The Trust, or its transfer agents, shall be
authorized to
8
<PAGE> 13
refuse any transfer unless and until presentation of such evidence as may be
reasonably required to show that the requested transfer is proper.
SECTION 7.3 Registered Shareholders. The Trust may deem and treat
the holder of record of any Shares the absolute owner thereof for all purposes
and shall not be required to take any notice of any right or claim of right of
any other person.
ARTICLE 8
AMENDMENTS
SECTION 8.1. Bylaws Subject to Amendment. These Bylaws may be
altered, amended or repealed, in whole or in part, at any time by vote of the
holders of a majority of the Shares issued, outstanding and entitled to vote.
The Trustees, by vote of a Majority of the Trustees (unless a greater vote is
required by Section 2.8 hereof), may alter, amend or repeal these Bylaws, in
whole or in part, including Bylaws adopted by the Shareholders, except with
respect to any provision hereof which by law, the Declaration or these Bylaws
requires action by the Shareholders. Bylaws adopted by the Trustees may be
altered, amended or repealed by the Shareholders.
SECTION 8.2. Notice of Proposal to Amend Bylaws Required. No proposal
to amend or repeal these Bylaws or to adopt new Bylaws shall be acted upon at a
meeting unless either (i) such proposal is stated in the notice or in the
waiver of notice, as the case may be, of the meeting of the Trustees or
Shareholders at which such action is taken, or (ii) all of the Trustees or
Shareholders, as the case may be, are present at such meeting and all agree to
consider such proposal without protesting the lack of notice.
9
<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL PACE FUND
CLASS A
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 92113N100
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen American Capital Pace Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
PACE FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL PACE FUND
NUMBER CLASS A SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE 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.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 4.2
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL PACE FUND
CLASS B
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 92113N209
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen American Capital Pace Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
PACE FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL PACE FUND
NUMBER CLASS B SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE 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.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 4.3
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL PACE FUND
CLASS C
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 92113N308
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen American Capital Pace Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
PACE FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL PACE FUND
NUMBER CLASS C SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE 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.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this 31st day of August, 1995, by
and between VAN KAMPEN AMERICAN CAPITAL PACE FUND, a Delaware business trust
(hereinafter referred to as the "FUND"), and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC., a Delaware corporation (hereinafter referred to as the
"ADVISER").
The FUND and the ADVISER agree as follows:
(1) Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of the FUND's
Trustees and in conformity with applicable laws, the FUND's Agreement and
Declaration of Trust ("Declaration of Trust"), By-laws, registration
statements, prospectus and stated investment objectives, policies and
restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing
of routine legal services except for services provided by outside counsel to
the FUND selected by the Trustees, and the supervision of the FUND's Treasurer
and the personnel working under his direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND trustee and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Trustees of appropriate policies and procedures, the ADVISER may, to the extent
authorized by law, cause the FUND to pay a broker or dealer that provides
brokerage and research services to the ADVISER an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such
<PAGE> 2
authorization and to the extent authorized by law, the ADVISER shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its trustees and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office
space, facilities, and equipment used by the Treasurer and such personnel in
the performance of their normal duties for the FUND which consist of
maintenance of the accounts, books and other documents which constitute the
record forming the basis for the FUND's financial statements, preparation of
such financial statements and other FUND documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the FUND's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the FUND selected by the Trustees; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the FUND and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the FUND; (xi) all other expenses incidental to holding meetings of the FUND's
shareholders including proxy solicitations therefor; (xii) expenses for
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the FUND's membership in
trade associations approved by the Trustees; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits or
proceedings to which the FUND is a party and the legal obligation which the
FUND may have to indemnify its officers and trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the FUND
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.
(2) Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
2
<PAGE> 3
Except as otherwise required by the Investment Company Act of 1940 (the "1940
Act"), any of the shareholders, trustees, officers and employees of the FUND
may be a shareholder, trustee, director, officer or employee of, or be
otherwise interested in, the ADVISER, and in any person controlled by or under
common control with the ADVISER, and the ADVISER, and any person controlled by
or under common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or
to any shareholder of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
(3) Compensation Payable to ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed
at the following annual rates:
.50% on the first $1 billion of the FUND's average daily net assets; .45% on
the next $1 billion of the FUND's average daily net assets; .40% on the next $1
billion of the FUND's average daily net assets; and .35% of any excess over $3
billion.
Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month calculated in the
manner provided in the FUND's Declaration of Trust. Such fee shall be payable
for each calendar month as soon as practicable after the end of that month.
The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall be
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the FUND, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with the FUND's portfolio transactions and
shall advise the Trustees of any other commissions, fees, brokerage or similar
payments which may be possible for the ADVISER or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc. to receive in connection with
the FUND's portfolio transactions or other arrangements which may benefit the
FUND.
In the event that the ordinary business expenses of the FUND for any fiscal
year should exceed 1.5% of the first $30 million of the FUND's average daily
net assets plus 1% of any excess over $30 million, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess. The
ADVISER's
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compensation shall be so reduced by a reduction or a refund thereof, at the
time such compensation is payable after the end of each calendar month during
such fiscal year of the FUND, and if such amount should exceed such monthly
compensation, the ADVISER shall pay the FUND an amount sufficient to make up
the deficiency, subject to readjustment during the FUND's fiscal year. For
purposes of this paragraph, all ordinary business expenses of the FUND shall
include the investment advisory fee and other operating expenses paid by the
FUND except (i) for interest and taxes; (ii) brokerage commissions; (iii) as a
result of litigation in connection with a suit involving a claim for recovery
by the FUND; (iv) as a result of litigation involving a defense against a
liability asserted against the FUND, provided that, if the ADVISER made the
decision or took the actions which resulted in such claim, it acted in good
faith without negligence or misconduct; (v) any indemnification paid by the
FUND to its officers and trustees and the ADVISER in accordance with applicable
state and federal laws as a result of such litigation; and (vi) amounts paid to
Van Kampen American Capital Distributors, Inc., the distributor of the FUND's
shares, in connection with a distribution plan adopted by the FUND's Trustees
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4) Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any
of such records upon the FUND's request. The ADVISER further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the Act.
(5) Duration of Agreement
This Agreement shall have an initial term of 2 years from the date hereof, and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved at least annually by the vote of a majority of the
FUND's Trustees who are not parties to this Agreement or interested persons of
any such parties, cast in person at a meeting called for the purpose of voting
on such approval, and by a vote of a majority of the FUND's Trustees or a
majority of the FUND's outstanding voting securities.
This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the FUND's Trustees, by vote of
a majority of the FUND's outstanding voting securities, or by the ADVISER, on
60 days' written notice, or upon such shorter notice as may be mutually agreed
upon. Such termination shall be without payment of any penalty.
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(6) Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the 1940 Act and
the Rules and Regulations thereunder, subject, however, to such exemptions as
may be granted to either the ADVISER or the FUND by the Securities and Exchange
Commission (the "Commission"), or such interpretive positions as may be taken
by the Commission or its staff, under the 1940 Act, and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the Rules and Regulations thereunder.
The execution of this Agreement has been authorized by the FUND's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Fund or
the Trustees of the FUND as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the FUND individually but are binding only upon the
assets and property of the FUND. A Certificate of Trust in respect of the Fund
is on file with the Secretary of State of Delaware.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
VAN KAMPEN AMERICAN CAPITAL PACE FUND
By: /s/ NORI L. GABERT
Name: Nori L. Gabert
Its: Vice President
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ HUEY P. FALGOUT, JR.
Name: Huey P. Falgout, Jr.
Its: Vice President
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<PAGE> 1
EXHIBIT 6.1
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of July 26, 1996 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL PACE FUND (the
"Fund"), and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations
of front-end sales charges, distribution fees, service fees and contingent
deferred sales charges. Classes of shares, if any, subject to a front-end
sales charge and a distribution and/or service fee are referred to herein as
"FESC Classes" and the Shares of such classes are referred to herein as "FESC
Shares." Classes of shares, if any, subject to a contingent-deferred sales
charge and a distribution and/or a service fee are referred to herein as "CDSC
Classes" and Shares of such classes are referred to herein as "CDSC Shares."
Classes of shares, if any, subject to a front-end sales charge, a
contingent-deferred sales charge and a distribution and/or service fee are
referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares." The Fund reserves the right to
refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.
The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.
The Distributor agrees that it will not take any long or short
positions in the Shares, except for long positions in those Shares purchased by
the Distributor in accordance with any systematic sales plan described in the
then current Prospectus of the Fund and except as permitted by Section 2
hereof, and that so far as it can control the situation, it will prevent any of
its trustees, officers or shareholders from taking any long or short positions
in the Shares, except for legitimate investment purposes.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of
Trustees; (c) upon the exercise of purchase or subscription rights granted to
the holders of Shares on a pro rata basis; (d) in connection with the automatic
reinvestment of dividends and distributions from the Fund; or (e) in connection
with the issue and sale of Shares to trustees, officers and employees of the
Fund; to directors, officers and employees of the investment adviser of the
Fund or any principal underwriter (including the Distributor) of the Fund; to
retirees of the Distributor that purchased shares of any mutual fund
distributed by the Distributor prior to retirement; to directors, officers and
employees of Van Kampen American Capital, Inc. (formerly The Van Kampen Merritt
Companies, Inc.) (the parent of the Distributor), VK/AC Holding, Inc. (formerly
VKM Holdings, Inc.)(the parent of The Van Kampen Merritt Companies, Inc.) and
to the subsidiaries of VK/AC Holding, Inc.; and to any trust, pension,
profit-sharing or other benefit plan for any of the aforesaid persons as
permitted by Rule 22d-1 under the Investment Company Act of 1940 (the "1940
Act").
The Distributor shall have the right to buy from the Fund the Shares needed,
but not more than the Shares needed (except for reasonable allowances for
clerical errors, delays and errors of transmission and cancellation of orders)
to fill unconditional orders for Shares received by the Distributor from
dealers, agents and investors during each period when particular net asset
values and public offering prices are in
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effect as provided in Section 3 hereof; and the price which the Distributor
shall pay for the Shares so purchased shall be the respective net asset
value used in determining the public offering price on which such orders were
based. The Distributor shall notify the Fund at the end of each such period,
or as soon thereafter on that business day as the orders received in such
period have been compiled, of the number of Shares of each class that the
Distributor elects to purchase hereunder.
3. Public Offering Price. The public offering price per Share shall
be determined in accordance with the then current Prospectus of the Fund. In
no event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess
of the applicable maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as in effect
from time to time. The net asset value per share for each class of Shares,
respectively, shall be determined in the manner provided in the Declaration of
Trust and By-Laws of the Trust as then amended, the Certificate of Designation
with respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the
exemptive order with respect to the Fund (Release No. IC-19600) issued by the
Securities and Exchange Commission on July 28, 1993, as it may be amended from
time to time or succeeded by other exemptive orders or rules promulgated by the
Securities and Exchange Commission under the 1940 Act. The Fund will cause
immediate notice to be given to the Distributor of each change in net asset
value as soon as it is determined. Discounts to dealers purchasing FESC Shares
from the Distributor for resale and to brokers and other eligible agents making
sales of FESC Shares to investors and compensation payable from the Distributor
to dealers, brokers and other eligible agents making sales of CDSC Shares and
Combination Shares shall be set forth in the selling agreements between the
Distributor and such dealers or agents, respectively, as from time to time
amended, and, if such discounts and compensation are described in the then
current Prospectus for the Fund, shall be as so set forth.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund
Shares, the Distributor will in all respects duly comply with all state and
federal laws relating to the sale of such securities and with all applicable
rules and regulations of all regulatory bodies, including without limitation
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and all applicable rules and regulations of the Securities and Exchange
Commission under the 1940 Act, and will indemnify and save the Fund harmless
from any damage or expense on account of any unlawful act by the Distributor or
its agents or employees. The Distributor is not, however, to be responsible
for the acts of other dealers or agents, except to the extent that they shall
be acting for the Distributor or under its direction or authority. None of the
Distributor, any dealer, any agent or any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus heretofore or hereafter
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") (as any such Registration Statement and
Prospectus may have been or may be amended from time to time), covering the
Shares, and in any supplemental information to any such Prospectus approved by
the Fund in connection with the offer or sale of Shares. None of the
Distributor, any dealer, any broker or any other person is authorized to act as
agent for the Fund in connection with the offering or sale of Shares to the
public or otherwise. All such sales shall be made by the Distributor as
principal for its own account.
In selling Shares to investors, the Distributor will adopt and comply
with certain standards, as set forth in Exhibit III attached hereto as to when
each respective class of Shares may appropriately be sold to particular
investors. The Distributor will require every broker, dealer and other
eligible agent participating in the offering of the Shares to agree to adopt
and comply with such standards as a condition precedent to their participation
in the offering.
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<PAGE> 3
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of
Shares under the federal securities laws, and the Fund
will exercise its best efforts to obtain said
registration and qualification;
(ii) all expenses in connection with the printing of any
notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any
other notice or communication sent to shareholders
in connection with any meeting of the shareholders or
otherwise, any annual, semiannual or other reports or
communications sent to the shareholders, and the
expenses of sending prospectuses relating to the Shares
to existing shareholders;
(iii) all expenses of any federal or state original-issue tax
or transfer tax payable upon the issuance, transfer or
delivery of Shares from the Fund to the Distributor;
and
(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent Shares.
(b) The Distributor will also permit its officers and employees
to serve without compensation as trustees and officers of the Fund if duly
elected to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket
costs and expenses actually incurred by it in connection with distribution of
each class of Shares respectively in accordance with the terms of a plan (the
"12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as
such 12b-1 Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder with respect to a
class of Shares unless and until this Agreement shall have been approved for
each such class by a majority of the Board of Trustees of the Fund and by a
majority of the "Disinterested Trustees" (as such term is defined in such 12b-1
Plan) by vote cast in person at a meeting called for the purpose of voting on
this Agreement. A copy of such 12b-1 Plan as in effect on the date of this
Agreement is attached as Exhibit I hereto. The Fund reserves the right to
terminate such 12b-1 Plan with respect to a class of Shares at any time, as
specified in the Plan. The persons authorized to direct the payment of funds
pursuant to this Agreement and the 12b-1 Plan shall provide to the Fund's Board
of Trustees, and the Trustees shall review, at least quarterly, a written
report with respect to each of the classes of Shares of the amounts so paid and
the purposes for which such expenditures were made for each such class of
Shares.
(d) The Fund shall compensate the Distributor for providing
services to, and the maintenance of, shareholder accounts in the Fund
(including prepaying service fees to eligible brokers, dealers and financial
intermediaries and expenses incurred in connection therewith) and the
Distributor may pay as agent for and on behalf of the Fund a service fee with
respect to each class of Shares to brokers, dealers and financial
intermediaries for the provision of shareholder services and the maintenance of
shareholder accounts in the Fund in the amount with respect to each class of
Shares set forth from time to time in the Fund's prospectus. The Fund shall
compensate the Distributor for such expenses in accordance with the terms of a
service plan (the "Service Plan"), as such Service Plan may be in effect from
time to time; provided, however, that no service fee payments shall be due or
paid to the Distributor hereunder with respect to a class of Shares unless and
until this Agreement shall have been approved for each such class by a majority
of the Board of Trustees of the Fund and by a majority of the Disinterested
Trustees by vote cast in person at a meeting called for the purpose of voting
on this Agreement. A copy of such Service Plan as in effect on the date of
this Agreement is attached as Exhibit II hereto. The Fund reserves the right
to terminate such Service Plan with respect to a class of Shares at any time,
as specified in the Plan. The persons authorized to direct the payment of
funds pursuant to this Agreement and the Service Plan shall provide to the
Fund's Board of Trustees, and the Trustees shall
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<PAGE> 4
review, at least quarterly, a written report with respect to each of the
classes of Shares of the amounts paid as service fees for each such class of
Shares.
6. Redemption of Shares. In connection with the Fund's redemption of
its Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal
and state legislation, any applicable rules of the National Association of
Securities Dealers, Inc., and any applicable rules and regulations of the
Securities and Exchange Commission under the 1940 Act, the Distributor may
accept offers of holders of Shares to resell such Shares to the Fund on such
terms and conditions and at such prices as described and provided for in the
then current Prospectus of the Fund.
(b) The Distributor agrees to notify the Fund at such times as
the Fund may specify of the number of each class of Shares, respectively,
repurchased for the Fund's account and the time or times of such repurchases,
and the Fund shall notify the Distributor of the prices and, in the case of a
class of CDSC Shares or Combination Shares, of the deferred sales charge as
described below, if any, applicable to repurchases of Shares of such class.
(c) The Fund shall have the right to suspend or revoke the
foregoing authorization at any time; unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by telegraph or by written instrument from any of the Fund's officers.
In the event that the Distributor's authorization is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of
the Board of Trustees of the Fund.
(d) The Distributor agrees that all repurchases of Shares made
by the Distributor shall be made only as agent for the Fund's account and
pursuant to the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to
pay, for the Fund's account, the repurchase price (together with any applicable
contingent deferred sales charge) of any Shares so repurchased for the Fund
against the authorized transfer of book shares from an open account and against
delivery of any other documentation required by the Board of Trustees of the
Fund or, in the case of certificated Shares, against delivery of the
certificates representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other
compensation in respect of any repurchases of FESC Shares for the Fund under
the foregoing authorization and appointment as agent. With respect to any
repurchase of CDSC Shares or Combination Shares, the Distributor shall receive
the deferred sales charge, if any, applicable to the respective class of Shares
that have been held for less than a specified period of time with respect to
such class as set forth from time to time in the Fund's Prospectus. The
Distributor shall receive no other commission or other compensation in respect
of any repurchases of CDSC Shares or Combination Shares for the Fund under the
foregoing authorization and appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms
of this Agreement are redeemed or repurchased by the Fund or by the Distributor
as agent or are tendered for redemption within seven business days after the
date of the Distributor's confirmation of the original purchase by the
Distributor, the Distributor shall forfeit the amount above the net asset value
received by it in respect of such Shares, provided that the portion, if any, of
such amount re-allowed by the Distributor to dealers or agents shall be
repayable to the Fund only to the extent recovered by the Distributor from the
dealer or agent concerned. The Distributor shall include in agreements with
such dealers and agents a corresponding provision for the forfeiture by them of
their concession with respect to FESC Shares
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<PAGE> 5
purchased by them or their principals and redeemed or repurchased by the Fund
or by the Distributor as agent within seven business days after the date of the
Distributor's confirmation of such initial purchases.
7. Indemnification. The Fund agrees to indemnify and hold harmless
the Distributor and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground
that the registration statement, Prospectus, shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading under the 1933 Act or any other statute or the common law. However,
the Fund does not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund by or on behalf of the
Distributor. In no case (i) is the indemnity of the Fund in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its securityholders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this Section with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or any such person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any such
person (or after the Distributor or the person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund shall
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them.
If the Fund does not elect to assume the defense of any suit, it will reimburse
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of the
Shares.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of its trustees and officers and each person,
if any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the 1933 Act
or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor. In no
case (i) is the indemnity of the Distributor in favor of the Fund or any person
indemnified to be deemed to protect the Fund or any such person against any
liability to which the Fund or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligation and duties
under this Amended Agreement, or (ii) is the Distributor to be liable under its
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indemnity agreement contained in this paragraph with respect to any claim made
against the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the Fund or
person (or after the Fund or such person shall have received notice of service
on any designated agent). However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and trustees and to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
Fund or controlling persons, defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the Distributor does
not elect to assume the defense of any suit, it will reimburse the Fund,
officers and trustees or controlling person or persons, defendant or defendants
in the suit, for the reasonable fees and expenses of any counsel retained by
them. The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Shares.
8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.
9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
10. Notice. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party or at such other address as such party shall have
designated in writing.
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11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN AMERICAN CAPITAL PACE FUND
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Secretary
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
7
<PAGE> 1
EXHIBIT 6.2
-------------------------------------------------------
DEALER AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
-------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to sell to you shares
of any of the Van Kampen American Capital open-end investment companies (the
"Open-End Funds" or, individually, an "Open-End Fund") and Van Kampen American
Capital closed-end investment companies (the "Closed-End Funds" or,
individually, a "Closed-End Fund") distributed by Van Kampen American Capital
Distributors, Inc. ("VKAC") pursuant to the terms and conditions contained
herein. Collectively, the Open-End Funds and Closed-End Funds sometimes are
referred to herein as the "Funds" or, individually, as a "Fund".
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to sell to you
shares of each Open-End Fund and each Closed-End Fund prior to the Effective
Date (as defined herein) of each Fund's Registration Statement (as defined
herein) (the "Initial Offering Period") and after the Effective Date of each
Fund's Registration Statement (the "Continuous Offering Period") (if any) as
described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the registration statement for the fund on the effective date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any preliminary Statement of Additional Information included at
any time as a part of the registration statement for any Fund prior to the
effective date and which is authorized by VKAC for use in connection with the
offering of shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a broker-dealer registered with the Securities and
Exchange Commission (the "SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or, in the alternative,
that you are a foreign dealer or bank, not required to be registered as a
broker-dealer with the SEC and not required or eligible for membership in the
NASD. If you are such an NASD member, you agree that in making sales of shares
of the one or more classes of shares of each Fund you will comply with all
applicable rules of the NASD, including without limitation rules pertaining to
the opening, approval, supervision and monitoring of customer accounts, the
NASD's Interpretation with Respect to Free-Riding and Withholding and Sections
8, 24 and 36 of Article III of the NASD's Rules of Fair Practice. If you are
such an unregistered foreign dealer or bank, you agree not to offer or sell, or
to agree to offer or sell, directly or indirectly, except through VKAC, any
shares to any party to whom such shares may not be sold unless you are so
registered and a member of the NASD, and in making sales of such shares you
agree to comply with the NASD's Interpretation with Respect to Free-Riding and
Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules of
Fair Practice as though you were a member in
1
<PAGE> 2
good standing of the NASD and to comply with Section 25 of such Article III as
it applies to a nonmember broker or dealer in a foreign country. You and we
agree to abide by all other Rules and Regulations of the NASD, including
Section 26 of its Rules of Fair Practice, and all applicable state and Federal
laws, rules and regulations. Your acceptance also constitutes a representation
that you have been duly authorized by proper corporate or partnership action to
enter into this Agreement and to perform your obligations hereunder. You will
not accept any orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. In all sales of shares of the Funds to the public you
shall act as dealer for your own account, and you shall have no authority in
any transaction to act as agent for the Fund or for VKAC.
3. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the "Registration
Statement") on the SEC Form applicable to the respective Fund. The date on
which the Registration Statement is declared effective by the SEC is referred
to herein as the "Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you expressly
acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) in any state prior to the Effective Date of the
Registration Statement with respect thereto or (ii) in any state in which such
offer or sale would be unlawful prior to registration or qualification under
the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus. You agree that you will distribute to the
public only (a) the Preliminary Prospectus, the Prospectus and any amendment or
supplement thereto and (b) sales literature or other documents expressly
authorized for such distribution by VKAC.
(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, you will be
responsible for confirming such indications of interest with your customers
following the Effective Date. Indications of interest with respect to shares
of a class of a Fund's shares transmitted to VKAC prior to the Effective Date
will be conditioned upon the occurrence of the Effective Date and the
registration or qualification of the respective class of shares in the
respective state.
(d) Indications of interest with respect to shares
of a class of a Fund's shares which are not canceled by you prior to the latter
of the Effective Date and the registration or qualification of the respective
class of the Fund's shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for shares of such class of shares of the Fund.
(e) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Prospectus
and this Agreement.
4. After the Effective Date, you will not offer shares of a
class of the Fund's shares for sale in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state or where you
are not qualified to act as a dealer, except for states in which they are
exempt from qualification.
5. In the event that you offer shares of the Fund for sale
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
2
<PAGE> 3
6. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to sell the shares in such jurisdiction shall be solely your responsibility.
7. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
8. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion.
9. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance or transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the sale or, at its option, to sell the shares
ordered back to the Fund, and in either case, VKAC may hold you responsible for
any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
10. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
11. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
12. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done
so, (ii) notify the Fund of the request so that the Fund can fulfill the
request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VKAC, to bring all subsequent changes to
such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus (and not the Statement of Additional Information) for such Fund
filed pursuant to Rule 497 under the Securities Act of 1933, as amended.
3
<PAGE> 4
13. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares of Funds sold to you shall be issued only if
specifically requested.
14. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
15. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
16. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
17. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
18. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
19. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE ONLY TO OPEN-END FUNDS
20. Each of the Open-End Fund's is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
21.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. The dealer discount
applicable to any sale of shares of a class of FESC Shares of an Open-End Fund
shall be a percentage of the applicable public offering price for such shares
as provided for in the then-current Prospectus of such Open-End Fund or, if not
so provided, as provided to you from time to time in writing by VKAC.
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. The dealer
sales compensation payable by VKAC applicable to any sale of shares of a class
of CDSC Shares of an Open-End Fund shall be the percentage of the applicable
public offering price for such shares as provided for in the then-current
Prospectus of such Open-End Fund or, if not so provided, as provided to you
from time to time in writing by VKAC.
22. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.
4
<PAGE> 5
23. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately sell the various classes of shares
of the Open-End Funds to investors and that you will sell such shares only in
accordance therewith.
24.(a) You agree to purchase shares of an Open-End Fund only
from VKAC or from your customers. If you purchase shares of an Open-End Fund
from VKAC, you agree that all such purchases shall be made only: (i) to cover
orders already received by you from your customers or (ii) for your own bona
fide investment. If you purchase shares of an Open-End Fund from your
customers, you agree to pay such customers not less than the applicable
repurchase price for such shares as established by the then-current Prospectus
for such Open-End Fund. VKAC in turn agrees that it will not purchase any
shares from an Open-End Fund except for the purpose of covering purchase orders
that it has already received.
(b) With respect to shares of a class of CDSC Shares
of an Open-End Fund purchased from your customers, you additionally agree to
resell such shares only to VKAC as agent for the Fund at the repurchase price
for such shares as established by the then-current Prospectus of such Open-End
Fund. You acknowledge and understand that shares of a class of CDSC Shares of
an Open-End Fund may be subject to a CDSC payable to VKAC as set forth in the
Prospectus for such Open-End Fund in effect at the time of the original
purchase of such shares from the Open-End Fund and that the repurchase price
for such shares that will be paid by VKAC will reflect the imposition of any
applicable CDSC.
25.(a) You shall sell shares of a class of shares of an
Open-End Fund only: (i) to customers at the applicable public offering price
or (ii) to VKAC as agent for the Open-End Fund at the repurchase price in the
then-current Prospectus of such Open-End Fund. In such a sale to VKAC, you may
act either as principal for your own account or as agent for your customer. If
you act as principal for your own account in purchasing shares of a class of
shares of an Open-End Fund for resale to VKAC, you agree to pay your customer
not less than the price that you receive from VKAC. If you act as agent for
your customer in selling shares of a class of shares of an Open-End Fund to
VKAC, you agree not to charge your customer more than a fair commission for
handling the transaction. You acknowledge and understand that CDSC Shares of
an Open-End Fund may be subject to a CDSC payable to VKAC as set forth in the
Prospectus of such Open-End Fund in effect at the time of the original purchase
of such CDSC Shares and that the repurchase price that will be paid by VKAC for
such CDSC Shares will reflect the imposition of any such CDSC.
26. If any shares of a class of FESC Shares of an Open-End
Fund sold to or by you under the terms of this Agreement are repurchased by the
Fund or by VKAC as agent for the Fund or are tendered for redemption within
seven business days after the date of VKAC's confirmation of the original
purchase, it is agreed that you shall forfeit your right to any dealer discount
received by you on such FESC Shares. VKAC will notify you of any such
repurchase or redemption within ten business days from the date on which the
repurchase or redemption order in proper form is delivered to VKAC or to the
Fund, and you shall forthwith refund to VKAC the full dealer discount allowed
to you on such sale. VKAC agrees, in the event of any such repurchase or
redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the discount allowed to you, to pay
such refund forthwith to the Fund.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
27. No Closed-End Fund will issue fractional shares.
28. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers and dealers participating in the Initial Offering
Period or among brokers, dealers and banks in the Continuous Offering Period,
as the case may be, on other than a pro rata basis, which may result in
5
<PAGE> 6
certain brokers, dealers and banks not being allocated the full amount of
shares of such fund sold by them while certain other brokers, dealers and banks
may receive their full allocation.
29. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during the Initial
Offering Period to VKAC within the time period as specified in such Closed-End
Fund's Prospectus (or in the time period as extended by VKAC in writing). You
also agree to transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public offering price for
such Closed-End Fund is next determined after your receipt of such order as set
forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
30. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VKAC for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VKAC will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later that
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you in the Initial Offering Period or the Continuous
Offering Period are resold in the open market or otherwise during the
Forfeiture Period, VKAC reserves the right to require you to forfeit any sales
concessions and other additional compensation with respect to such shares. In
the event of a forfeiture, VKAC may withhold any forfeited sales concessions
and other additional compensation that has not yet been paid or from other
amounts yet to be paid to you (whether or not payable with respect to such
shares) and you agree to repay to VKAC, promptly upon demand, any forfeited
sales concessions and other compensation that has been paid. Determinations of
the amounts to be paid to you or by you to VKAC shall be made by VKAC and shall
be conclusive.
31. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time), and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
32. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
33. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
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<PAGE> 7
34. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
sell shares of the Prime Rate Fund is subject to further terms and conditions
in addition to those set forth above as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC, and
that no secondary market for the shares of the Prime Rate Fund exists
currently, or is expected to develop. You also expressly acknowledge and agree
that, in the event your customer cancels their order for shares after
confirmation, such shares may not be repurchased, remarketed or otherwise
disposed of by or through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund which have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Dealer Agreement,
keeping a copy for your files and returning the original to us.
Accepted and Agreed to:
(PRINT OR TYPE)
Dated: ________________________________________ By:
Its:
________________________________________
Broker-Dealer Name
________________________________________
Broker-Dealer Taxpayer ID Number
VAN KAMPEN AMERICAN CAPITAL
________________________________________ DISTRIBUTORS, INC.
Address
________________________________________
City, State, Zip
By: ________________________________________
Signature
________________________________________
Name
________________________________________
Title
_________________________________________
Phone
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<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
8
<PAGE> 1
EXHIBIT 6.3
---------------------------------------------------------
BROKER FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
---------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to
you shares of any of the Van Kampen American Capital open-end investment
companies (the "Open-End Funds" or, individually, an "Open-End Fund") and Van
Kampen American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen American
Capital Distributors, Inc. ("VKAC") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a broker-dealer that desires to make available shares of such Funds to
your customers on a fully disclosed basis wherein VKAC would confirm
transactions of your customers in a Fund directly to them.
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to make available
to you shares of each Open-End Fund and each Closed-End Fund, prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (the
"Initial Offering Period") and after the Effective Date of each Fund's
Registration Statement (as defined herein) (the "Continuous Offering Period")
(if any) as described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the registration statement for the fund on the effective date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any preliminary Statement of Additional Information included at
any time as a part of the registration statement for any Fund prior to the
effective date and that is authorized by VKAC for use in connection with the
offering of shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a securities broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"). You agree
to abide by the laws, rules and regulations of the SEC and NASD, including
without limitation rules pertaining to the opening, approval, supervision and
monitoring of customer accounts, the NASD's Interpretation with Respect to
Free-Riding and Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice. You and we agree to abide by all other Rules
and Regulations of the NASD, including Section 26 of its Rules of Fair
Practice. Your acceptance also constitutes a representation that you have been
duly authorized by proper corporate or partnership action to enter into this
Agreement and to perform your obligations hereunder. You will not accept any
orders from any broker, dealer or financial institution who is purchasing from
you with a view toward distribution unless you have obtained such person's or
entity's written consent to be bound by the terms of this Agreement.
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2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities Investor's
Protection Act, your customers will be considered customers of VKAC and not of
your firm. VKAC has been granted an exemption from the NASD rules of Fair
Practice, Article III Section 45 requirements to send customer statements and
thus will not due so. Customer statements showing account activity and
balances will be mailed to the customer by the Funds each time a financial
transaction occurs in their account and on a monthly basis. Nothing herein
shall cause your firm's customers to be interpreted as customers of VKAC for
any other purpose, or to negate the intent of any other section of this
agreement, including, but not limited to, the delineation of responsibilities
as set forth elsewhere in this agreement.
3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent for the Fund
or for VKAC.
4. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the "Registration
Statement") on the SEC form applicable to the respective Fund. The date on
which the Registration Statement is declared effective by the SEC is referred
to herein as the "Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you expressly
acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the Registration
Statement or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus.
(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, upon your
instruction VKAC will send confirmation of such indications of interest
directly to your customers in writing, together with copies of the Preliminary
Prospectus for the Fund, and send copies of the confirmations to you.
Indications of interest with respect to shares of a class of a Fund's shares
transmitted to VKAC prior to the Effective Date are subject to acceptance or
rejection by VKAC in its sole discretion and are conditioned upon the
occurrence of (i) the Effective Date and (ii) the registration or qualification
of the respective class of shares in the respective state.
(d) Indications of interest with respect to shares
of a class of a Fund's shares not cancelled by you prior to or on the later of
(i) the Effective Date and (ii) the registration or qualification of the
respective class of shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for Shares.
(e) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together with copies of
the Prospectus for the Fund, and send copies of the confirmations to you.
(f) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies that
you discover and will promptly bring to VKAC's attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(g) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or rejection by
VKAC in its sole discretion.
5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state, except for
states in which they are exempt from qualification.
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6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to make the shares available in such jurisdiction shall be solely your
responsibility.
8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (a)
the Preliminary Prospectus, the Prospectus and any amendment or supplement
thereto and (b) sales literature or other documents expressly authorized for
such distribution by VKAC.
10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VKAC of any errors
or discrepancies that you discover and shall promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance of transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VKAC may hold you responsible
for any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done
so, (ii) notify the Fund of the request so that the Fund can fulfill the
request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates,
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<PAGE> 4
number of copies and persons to whom sent) of copies of any Preliminary
Prospectus (and any Statement of Additional Information) and/or Prospectus (and
any Statement of Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VKAC, to bring all
subsequent changes to such Preliminary Prospectus or Prospectus to the
attention of anyone to whom such material shall have been distributed. You
further agree to furnish to persons who receive a confirmation of sale of
shares of any Fund a copy of the Prospectus for such Fund filed pursuant to
Rule 497 under the Securities Act of 1933, as amended. Upon your request, VKAC
will furnish to such persons a copy of the Prospectus for such Fund filed
pursuant to Rule 497 under the Securities Act of 1993, as amended.
15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except for servicing and
informational mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers only if
specifically requested.
17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
22. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
24.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. On each order for shares of
a class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. You will remit
payment of the aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to receive the
applicable selling compensation for such shares as
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<PAGE> 5
provided for in the then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by VKAC.
25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.
26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately make available the various classes
of shares of the Open-End Funds to investors and that you will make available
such shares only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering price, (ii) from
VKAC and (iii) to cover orders already received by you from your customers.
VKAC in turn agrees that it will not purchase any shares from an Open-End Fund
except for the purpose of covering purchase orders that it has already
received.
28.(a) If any shares of a class of FESC Shares of an Open-End
Fund sold to your customers under the terms of this Agreement are repurchased
by the Fund or by VKAC as agent for the Fund or are tendered for redemption
within seven business days after the date of VKAC's confirmation of the
original purchase, it is agreed that you shall forfeit your right to any agency
commission received by you on such FESC Shares. VKAC will notify you of any
such repurchase or redemption within ten business days from the date on which
the repurchase or redemption order in proper form is delivered to VKAC or to
the Fund, and you shall forthwith refund to VKAC the full agency commission
allowed to you on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the agency commission allowed to
you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by the Fund or
by VKAC as agent for the Fund or are tendered for redemption within seven
business days after the date of VKAC's confirmation of the original purchase,
it is agreed that you shall forfeit your right to any sales compensation
received by you on such CDSC Shares. We will notify you of any such repurchase
or redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the Fund, and you
shall forthwith refund to VKAC the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, if permitted by applicable laws,
banks participating in the Initial Offering Period or among brokers, dealers
and banks in the Continuous Offering Period, as the case may be, on other than
a pro rata basis, which may result in certain brokers, dealers and banks not
being allocated the full amount of shares of such Fund sold by them while
certain other brokers, dealers and banks may receive their full allocation.
31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during the Initial
Offering Period to VKAC within the time period as specified in such Closed-End
Fund's Prospectus (or in the time period as extended by VKAC in writing). You
also agree to transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public offering price for
such Closed-End Fund is next determined after your receipt of such order, as
set forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements
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<PAGE> 6
of such programs are satisfied). In no event will any Closed-End Fund
reimburse VKAC for any such sales concessions or other additional compensation
or pay any such concession or other additional compensation or allowance
directly to you. VKAC will specify for each Closed-End Fund a period after the
date that the shares of such Closed-End Fund are listed on the New York Stock
Exchange, the American Stock Exchange or another national securities market
system (which period will end no later than the first dividend payment date
with respect to such Closed-End Fund) during which sales concessions and other
additional compensation are subject to forfeiture as provided in the following
sentence (the "Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing shares will be
required to transfer ownership of such shares. In the event that any shares of
a Closed-End Fund sold through an order received from you in the Initial
Offering Period or the Continuous Offering Period are resold in the open market
or otherwise during the Forfeiture Period, VKAC reserves the right to require
you to forfeit any sales concessions and other additional compensation with
respect to such shares. In the event of a forfeiture, VKAC may withhold any
forfeited sales concessions and other additional compensation that has not yet
been paid or from other amounts yet to be paid to you (whether or not payable
with respect to such shares), and you agree to repay to VKAC, promptly upon
demand, any forfeited sales concessions and other compensation that has been
paid. Determinations of the amounts to be paid to you or by you to VKAC shall
be made by VKAC and shall be conclusive.
33. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time) and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and, (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
make available to you shares of the Prime Rate Fund is subject to further terms
and conditions in addition to those set out above, as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC and
that no secondary market for the shares of the Prime Rate Fund exists currently
or is expected to develop. You also expressly acknowledge and agree that, in
the event your customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed of by or
through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund that have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
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<PAGE> 7
THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE
FUND'S CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Broker Fully
Disclosed Clearing Agreement, keeping a copy for your files and returning the
original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated: ___________________________________________ By:
___________________________________________ Its:
VAN KAMPEN AMERICAN CAPITAL
__________________________________________ DISTRIBUTORS, INC.
Broker-Dealer Name
________________________________________
Broker-Dealer Taxpayer ID Number
________________________________________
Address
________________________________________
City, State, Zip
By: ________________________________________
Signature
________________________________________
Name
________________________________________
Title
________________________________________
Phone
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<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
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EXHIBIT 6.4
----------------------------------------------------------------------
BANK FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
-----------------------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to
you shares of any of the Van Kampen American Capital open-end investment
companies (the "Open-End Funds" or, individually, an "Open-End Fund") and Van
Kampen American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen American
Capital Distributors, Inc. ("VKAC") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a bank that desires to make available shares of such Funds to your
customers on a fully disclosed basis wherein VKAC would confirm transactions of
your customers in a Fund directly to them. You agree not to make available
shares of such Funds during any fixed price offering of such shares.
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to make available
to you shares of each Open-End Fund and each Closed-End Fund prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (as
defined herein) (the "Initial Offering Period"), to the extent permitted by
applicable law, and after the Effective Date of each Fund's Registration
Statement (the "Continuous Offering Period") (if any) as described in such
Closed-End Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the Registration Statement for the Fund on the Effective Date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any Statement of Additional Information included at any time as
a part of the Registration Statement for any Fund prior to the Effective Date
and that is authorized by VKAC for use in connection with the offering of
shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, and have been duly authorized to
enter into this Agreement and perform your obligations hereunder. This
Agreement as well as your authority to make shares available to your customers
will automatically terminate if you shall cease to be a bank as defined above.
You agree not to offer or sell shares of any Fund except through VKAC. You
will not accept any orders from any broker, dealer or financial institution who
is purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities Investor's
Protection Act, your customers will be considered customers of VKAC and not of
your firm. VKAC has been granted an exemption from the NASD rules of Fair
Practice, Article III Section 45 requirements to send customer statements and
thus will not due so. Customer statements showing account activity and
balances will be mailed to the customer by the Funds each time a financial
transaction occurs in their account and on a monthly basis. Nothing herein
shall cause your firm's customers to be interpreted as customers of VKAC for
any other purpose, or to negate
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<PAGE> 2
the intent of any other section of this agreement, including, but not limited
to, the delineation of responsibilities as set forth elsewhere in this
agreement.
3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent for the Fund
or for VKAC. The customers in question are for all purposes your customers and
not customers of VKAC. We will clear transactions for each of your customers
only upon your authorization, it being understood in all cases that (a) you are
acting as the agent for the customer; (b) the transactions are without recourse
against you by the customer except to the extent that your failure to transmit
orders in a timely fashion results in a loss to your customer; (c) as between
you and the customer, the customer will have full beneficial ownership of the
Fund shares; (d) each transaction is initiated solely upon the order of the
customer; and (e) each transaction is for the account of the customer and not
for your account.
4. Each Fund has filed with the Securities and Exchange
Commission (the "SEC") and the securities commissions of one or more states a
Registration Statement (the "Registration Statement") on the SEC form
applicable to the respective Fund. The date on which the Registration
Statement is declared effective by the SEC is hereinafter referred to as the
"Effective Date". Prior to the Effective Date of the Registration Statement
with respect to a particular Fund, you expressly acknowledge and understand
that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the Registration
Statement or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
(b) Except to the extent permitted by law, you will
not solicit or transmit to VKAC any indications of interest to purchase shares
during any fixed-price offering.
(c) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus.
(d) In the event and to the extent permitted by
applicable law you transmit indications of interest to VKAC for accumulation
prior to the Effective Date, upon your instruction VKAC will send confirmation
of such indications of interest directly to your customers in writing, together
with copies of the Preliminary Prospectus for the Fund, and send copies of the
confirmations to you. Indications of interest with respect to shares of a
class of a Fund's shares transmitted to VKAC prior to the Effective Date are
subject to acceptance or rejection by VKAC in its sole discretion and are
conditioned upon the occurrence of (i) the Effective Date and (ii) the
registration or qualification of the respective class of shares in the
respective state.
(e) Indications of interest with respect to shares
of a class of a Fund's shares not canceled by you prior to or on the later of
(i) the Effective Date and (ii) the registration or qualification of the
respective class of shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for Shares solely to the extent permitted by
applicable law.
(f) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together with copies of
the Prospectus for the Fund, and send copies of the confirmations to you.
(g) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies that
you discover and will promptly bring to VKAC's attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(h) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or rejection by
VKAC in its sole discretion.
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<PAGE> 3
5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state, except for
states in which they are exempt from qualification.
6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to make the shares available in such jurisdiction shall be solely your
responsibility.
8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (i)
the Prospectus and any amendment or supplement thereto and (ii) sales
literature or other documents expressly authorized for such distribution by
VKAC.
10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VKAC of any errors
or discrepancies that you discover and shall promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance or transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VKAC may hold you responsible
for any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive
3
<PAGE> 4
a Statement of Additional Information, you will (i) provide such person with a
Statement of Additional Information without charge and notify the Fund that you
have done so, (ii) notify the Fund of the request so that the Fund can fulfill
the request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VKAC, to bring all subsequent changes to
such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus for such Fund filed pursuant to Rule 497 under the Securities Act of
1933, as amended. Upon your request, VKAC will furnish to such persons a copy
of the Prospectus for such Fund filed pursuant to Rule 497 Under the Securities
Act of 1993, as amended.
15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except for servicing and
informational mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers only if
specifically requested.
17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
22. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
24. (a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. On each order for shares of
a class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
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<PAGE> 5
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. You will remit
payment of the aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to receive the
applicable selling compensation for such shares as provided for in the
then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute an Administrative Service Agreement.
26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately make available the various classes
of shares of the Open-End Funds to investors and that you will make available
such shares only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering price, (ii) from
VKAC and (iii) to cover orders already received by you from your customers.
VKAC in turn agrees that it will not purchase any shares from an Open-End Fund
except for the purpose of covering purchase orders that it has already
received.
28. (a) If any shares of a class of FESC Shares of an
Open-End Fund sold to your customers under the terms of this Agreement are
repurchased by the Fund or by VKAC as agent for the Fund or are tendered for
redemption within seven business days after the date of VKAC's confirmation of
the original purchase, it is agreed that you shall forfeit your right to any
agency commission received by you on such FESC Shares. VKAC will notify you of
any such repurchase or redemption within ten business days from the date on
which the repurchase or redemption order in proper form is delivered to VKAC or
to the Fund, and you shall forthwith refund to VKAC the full agency commission
allowed to you on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the agency commission allowed to
you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by the Fund or
by VKAC as agent for the Fund or are tendered for redemption within seven
business days after the date of VKAC's confirmation of the original purchase,
it is agreed that you shall forfeit your right to any sales compensation
received by you on such CDSC Shares. We will notify you of any such repurchase
or redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the Fund, and you
shall forthwith refund to VKAC the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, to the extent permitted by
applicable law, banks participating in the Initial Offering Period or among
brokers, dealers and banks participating in the Continuous Offering Period, as
the case may be, on other than a pro rata basis, which may result in certain
brokers, dealers and banks not being allocated the full amount of shares of
such Fund sold by them while certain other brokers, dealers and banks may
receive their full allocation.
31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received, to the extent
permitted by applicable law, during the Initial Offering Period to VKAC within
the time period as specified in such Closed-End Fund's Prospectus (or in the
time period as extended by VKAC in writing). You also agree to transmit any
customer order received during the
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<PAGE> 6
Continuous Offering Period to VKAC prior to the time that the public offering
price for such Closed-End Fund is next determined after your receipt of such
order, as set forth in the Closed-End Fund's Prospectus. There is no assurance
that each Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VKAC for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VKAC will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later than
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you, to the extent permitted by applicable law, in the
Initial Offering Period or the Continuous Offering Period are resold in the
open market or otherwise during the Forfeiture Period, VKAC reserves the right
to require you to forfeit any sales concessions and other additional
compensation with respect to such shares. In the event of a forfeiture, VKAC
may withhold any forfeited sales concessions and other additional compensation
that has not yet been paid or from other amounts yet to be paid to you (whether
or not payable with respect to such shares), and you agree to repay to VKAC,
promptly upon demand, any forfeited sales concessions and other compensation
that has been paid. Determinations of the amounts to be paid to you or by you
to VKAC shall be made by VKAC and shall be conclusive.
33. During the Initial Offering Period or any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time) and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and, (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
make available to you shares of the Prime Rate Fund is subject to further terms
and conditions in addition to those set out above, as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC and
that no secondary market for the shares of the Prime Rate Fund exists currently
or is expected to develop. You also expressly acknowledge and agree that, in
the event your
6
<PAGE> 7
customer cancels their order for shares after confirmation, such shares may not
be repurchased, remarketed or otherwise disposed of by or through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund that have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Bank Fully
Disclosed Clearing Agreement, keeping a copy for your files and returning the
original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated: ________________________________________ By:
Its:
________________________________________
Bank Name VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
________________________________________
Bank Taxpayer ID Number
________________________________________
Address
________________________________________
City, State, Zip
________________________________________
Phone
________________________________________
Signature
________________________________________
Name
________________________________________
Title
7
<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
8
<PAGE> 1
EXHIBIT 8.2
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 31st day of July, 1995 by and between each of
the VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A" hereto,
which are organized under the laws of the state and as the entities set forth in
Schedule "A" hereto, having their principal office and place of business at
Houston, Texas (collectively, the "Funds"), and ACCESS INVESTOR SERVICES, INC.,
a Delaware corporation, having its principal office at Houston, Texas, and its
principal place of business at Kansas City, Missouri ("ACCESS").
R E C I T A L:
WHEREAS, each of the Funds desires to appoint ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent, and ACCESS
desires to accept such appointments;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF ACCESS.
1.01 Subject to the terms and conditions set forth in this
Agreement, each of the Funds hereby employs and appoints ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent.
1.02 ACCESS hereby accepts such employment and appointments and
agrees that on and after the effective date of this Agreement it will act as
the transfer agent, dividend disbursing agent and shareholder service agent for
each of the Funds on the terms and conditions set forth herein.
1.03 ACCESS agrees that its duties and obligations hereunder
will be performed in a competent, efficient and workmanlike manner with due
diligence in accordance with reasonable industry practice, and that the
necessary facilities, equipment and personnel for such performance will be
provided.
1.04 In order to assure compliance with section 1.03 and to
implement a cooperative effort to improve the quality of transfer agency and
shareholder services received by each of the Funds and its shareholders,
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<PAGE> 2
ACCESS agrees to provide and maintain quantitative performance objectives,
including maximum target turn-around times and maximum target error rates, for
the various services provided hereunder. ACCESS also agrees to provide a
reporting system designed to provide the Board of Trustees or Board of
Directors of each of the Funds (the "Board") on a quarterly basis with
quantitative data comparing actual performance for the period with the
performance objectives. The foregoing procedures are designed to provide a
basis for continuing monitoring by the Board of the quality of services
rendered hereunder.
ARTICLE 2. FEES AND EXPENSES.
2.01 For the services to be performed by ACCESS pursuant to this
Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee
schedules agreed upon from time to time by each of the Funds and ACCESS.
2.02 In addition to the amounts paid under section 2.01 above,
each of the Funds agrees to reimburse ACCESS promptly for such Fund's
reasonable out-of-pocket expenses or advances paid on its behalf by ACCESS in
connection with its performance under this Agreement for postage, freight,
envelopes, checks, drafts, continuous forms, reports and statements, telephone,
telegraph, costs of outside mailing firms, necessary outside record storage
costs, media for storage of records (e.g., microfilm, microfiche and computer
tapes) and printing costs incurred due to special requirements of such Fund.
In addition, any other special out-of-pocket expenses paid by ACCESS at the
specific request of any of the Funds will be promptly reimbursed by the
requesting Fund. Postage for mailings of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to ACCESS by the
concerned Fund three business days prior to the mailing date of such materials.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ACCESS.
ACCESS represents and warrants to each of the Funds that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
3.02 It is duly qualified to carry on its business in the states
of Texas and Missouri.
3.03 It is empowered under applicable laws and by its charter
and bylaws to enter into and perform this Agreement.
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<PAGE> 3
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have during the term of this
Agreement access to the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder.
3.06 It will maintain a system regarding "as of" transactions as
follows:
(a) Each "as of" transaction effected at a price other
than that in effect on the day of processing for which an estimate has
not been given to any of the affected Funds and which is necessitated
by ACCESS' error, or delay for which ACCESS is responsible or which
could have been avoided through the exercise of reasonable care, will
be identified, and the net effect of such transactions determined, on
a daily basis for each such Fund.
(b) The cumulative net effect of the transactions
included in paragraph (a) above will be determined each day throughout
each month. If, on any day during the month, the cumulative net
effect upon any Fund is negative and exceeds an amount equivalent to
1/2 of 1 cent per share of such Fund, ACCESS shall promptly make a
payment to such Fund (in cash or through use of a credit as described
in paragraph (c) below) in such amount as necessary to reduce the
negative cumulative net effect to less than 1/2 of 1 cent per share of
such Fund. If on the last business day of the month the cumulative
net effect (adjusted by the amount of any payments pursuant to the
preceding sentence) upon any Fund is negative, such Fund shall be
entitled to a reduction in the monthly transfer agency fee next
payable by an equivalent amount, except as provided in paragraph (c)
below. If on the last business day of the month the cumulative net
effect (similarly adjusted) upon any Fund is positive, ACCESS shall be
entitled to recover certain past payments and reductions in fees, and
to a credit against all future payments and fee reductions made under
this paragraph to such Fund, as described in paragraph (c) below.
(c) At the end of each month, any positive cumulative
net effect upon any Fund shall be deemed to be a credit to ACCESS
which shall first be applied to recover any payments and fee
reductions made by ACCESS to such Fund under paragraph (b) above
during the calendar year by increasing the amount of the monthly
transfer agency fee next payable in an amount equal to prior payments
and fee
3
<PAGE> 4
of the monthly transfer agency fee next payable in an amount equal to
prior payments and fee reductions made during such year, but not
exceeding the sum of that month's credit and credits arising in prior
months during such year to the extent such prior credits have not
previously been utilized as contemplated by this paragraph (c). Any
portion of a credit to ACCESS not so used shall remain as a credit to
be used as payment against the amount of any future negative
cumulative net effects that would otherwise require a payment or fee
reduction to such Fund pursuant to paragraph (b) above.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE FUNDS.
Each of the Funds hereby represents and warrants on behalf
of itself only and not any other Funds that are a party to this Agreement that:
4.01 It is duly organized and existing and in good standing under
the laws of the Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and regulations and by
its Declaration of Trust or Articles of Incorporation and by-laws to enter into
and perform this Agreement.
4.03 All requisite proceedings have been taken by its Board to
authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified, management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933,
as amended, is currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue to be made, with
respect to all of its shares being offered for sale.
ARTICLE 5. INDEMNIFICATION.
5.01 ACCESS shall not be responsible for and each of the Funds
shall indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities arising out of or attributable to:
4
<PAGE> 5
(a) All actions of ACCESS required to be taken by
ACCESS for the benefit of such Fund pursuant to this Agreement,
provided ACCESS has acted in good faith with due diligence and without
negligence or willful misconduct.
(b) The reasonable reliance by ACCESS on, or
reasonable use by ACCESS of, information, records and documents which
have been prepared or maintained by or on behalf of such Fund or have
been furnished to ACCESS by or on behalf of such Fund.
(c) The reasonable reliance by ACCESS on, or the
carrying out by ACCESS of, any instructions or requests of such Fund.
(d) The offer or sale of such Fund's shares in
violation of any requirement under the federal securities laws or
regulations or the securities laws or regulations of any state or in
violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer or sale of such
shares in such state unless such violation results from any failure by
ACCESS to comply with written instructions of such Fund that no offers
or sales of such Fund's shares be made in general or to the residents
of a particular state.
(e) Such Fund's refusal or failure to comply with the
terms of this Agreement, or such Fund's lack of good faith, negligence
or willful misconduct or the breach of any representation or warranty
of such Fund hereunder.
5.02 ACCESS shall indemnify and hold each of the Funds harmless
from and against any and all losses, damages, costs, charges, reasonable
counsel fees, payments, expenses and liability arising out of or attributable
to ACCESS' refusal or failure to comply with the terms of this Agreement, or
ACCESS' lack of good faith, negligence or willful misconduct, or the breach of
any representation or warranty of ACCESS hereunder.
5.03 At any time ACCESS may apply to any authorized officer of
any of the Funds for instructions, and may consult with any of the Funds' legal
counsel, at the expense of such concerned Fund, with respect to any matter
arising in connection with the services to be performed by ACCESS under this
Agreement, and ACCESS shall not be liable and shall be indemnified by such
concerned Fund for any action taken or omitted by it in good faith in
reasonable reliance upon such instructions or upon the opinion of such counsel.
ACCESS shall be protected and
5
<PAGE> 6
indemnified in acting upon any paper or document reasonably believed by ACCESS
to be genuine and to have been signed by the proper person or persons and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the concerned Fund. ACCESS shall also
be protected and indemnified in recognizing stock certificates which ACCESS
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the concerned Fund, and the proper countersignature of any former
transfer agent or registrar, or of a co-transfer agent or co-registrar.
5.04 In the event any party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage, or other causes reasonably beyond
its control, such party shall not be liable for damages to the other for any
damages resulting from such failure to perform or otherwise from such causes.
5.05 In no event and under no circumstances shall any party to
this Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which one party
may be required to indemnify another, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
ARTICLE 6. COVENANTS OF EACH OF THE FUNDS AND ACCESS.
6.01 Each of the Funds shall promptly furnish to ACCESS the
following:
(a) Certified copies of the resolution of its Board
authorizing the appointment of ACCESS and the execution and delivery
of this Agreement.
(b) Certified copies of its Declaration of Trust or
Articles of Incorporation and by-laws and all amendments thereto.
6
<PAGE> 7
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to each of the Funds for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 ACCESS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of each of the Funds
(hereinafter referred to as "Fund Records") prepared or maintained by ACCESS
hereunder shall be maintained and kept current in compliance with Section 31 of
the Investment Company Act of 1940 and the Rules thereunder (such Section and
Rules being hereinafter referred to as the "1940 Act Requirements"). To the
extent required by the 1940 Act Requirements, ACCESS agrees that all Fund
Records prepared or maintained by ACCESS hereunder are the property of the
concerned Fund and shall be preserved and made available in accordance with the
1940 Act Requirements, and shall be surrendered promptly to the concerned Fund
on its request. ACCESS agrees at such reasonable times as may be requested by
the Board and at least quarterly to provide (i) written confirmation to the
Board that all Fund Records are maintained and kept current in accordance with
the 1940 Act Requirements, and (ii) such other reports regarding its
performance hereunder as may be reasonably requested by the Board.
6.04 ACCESS and each of the Funds agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of
any of the Fund Records, ACCESS will endeavor to notify each of the concerned
Funds and to secure instructions from an authorized officer of each
of the concerned Funds as to such inspection. ACCESS reserves the right,
however, to exhibit such Fund Records to any person whenever it is advised by
its counsel that it may be held liable for the failure to exhibit such Fund
Records to such person.
ARTICLE 7. TERM AND TERMINATION OF AGREEMENT.
7.01 This Agreement shall remain in effect from the date hereof
through December 31, 1996; provided, however, that this Agreement may be
terminated by any party with respect to that party for good and reasonable
7
<PAGE> 8
cause at any time by giving written notice to the other party at least 120 days
prior to the date on which such termination is to be effective. Any unpaid fees
or reimbursable expenses payable to ACCESS shall be due on any such termination
date. ACCESS agrees to use its best efforts to cooperate with each of the
Funds and the successor transfer agent or agents in accomplishing an orderly
transition.
7.02 Subject to the prior approval of the Board, this Agreement shall
be renewed and extended for periods of not more than one year each, unless and
until this Agreement is terminated in accordance with section 7.01 above.
ARTICLE 8. MISCELLANEOUS.
8.01 Except as provided in section 8.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by any party without
the written consent of ACCESS or the concerned Fund, as the case may be;
provided, however, that no consent shall be required for any merger of any of
the Funds with, or any sale of all or substantially all the assets of any of
the Funds to, another investment company.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
8.03 ACCESS may, without further consent on the part of any of the
Funds, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to each of the
Funds for the acts and omissions of DST, Inc., or other qualified servicer as
it is for its own acts and omissions.
8.04 ACCESS may, without further consent on the part of any of the
Fund, provide services to its affiliated companies. Such services may be
provided at cost.
8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any
prior agreement with respect thereto, whether oral or written, and this
Agreement may not be modified except be written instrument executed by the
affected parties.
8.06 The execution of this Agreement has been authorized by the
Funds' Trustees. This Plan is executed on behalf of the Funds or the Trustees
of the Funds as Trustees and not individually and that the obligations of this
Agreement are not binding upon any of
8
<PAGE> 9
the Trustees, officers or shareholders of the Funds individually but are
binding only upon the assets and property of the Funds. A Certificate of Trust
in respect of each of the Funds is on file with the Secretary of the State of
Delaware.
8.07 For each of those Funds that have one or more portfolios as
set forth in Schedule "A" hereto, all obligations of those Funds under this
Agreement shall apply only on a portfolio-by-portfolio basis and the assets of
one portfolio shall not be liable for the obligations of any other.
8.08 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties hereto
agree to renegotiate such affected portions in good faith.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf and through their duly
authorized officers, as of the date first above written.
EACH OF THE VAN KAMPEN AMERICAN CAPITAL
OPEN END FUNDS LISTED ON SCHEDULE "A"
HERETO
BY: /s/ Nori L. Gabert
------------------------------------
Vice President
ATTEST:
/s/ Huey Falgout
- ------------------------------------
Assistant Secretary
ACCESS INVESTOR SERVICES, INC.
BY: /s/ Nori L. Gabert
------------------------------------
Vice President
ATTEST:
/s/ Huey Falgout
- ------------------------------------
Assistant Secretary
10
<PAGE> 11
SCHEDULE "A"
VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS
NOTE: All of the entities listed below are organized as Delaware business
trusts
FUND NAME
(INCLUDING PORTFOLIOS)
===============================================================================
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Common Stock Fund
Domestic Strategic Income Fund
Emerging Growth Fund
Global Equity Fund
Government Fund
Money Market Fund
Multiple Strategy Fund
Real Estate Securities Fund
Van Kampen American Capital Municipal Bond Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Insured Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust For Income
Van Kampen American Capital Utilities Income Fund
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
11
<PAGE> 1
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM]
EXHIBIT 10
October 25, 1996
Van Kampen American Capital
Pace Fund
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Pace Fund --
Registration Statement on Form N-1A
(File Nos. 2-31417 and 811-01792)
Ladies and Gentlemen:
We have acted as counsel to Van Kampen American Capital Pace Fund
(the "Trust"), a Delaware business trust, in connection with the preparation of
Post-Effective Amendment No. 46 to the Trust's Registration Statement on Form
N-1A (as amended, the "Registration Statement") to be filed under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act"), with the Securities and Exchange
Commission (the "Commission") on October 25, 1996. The Registration Statement
relates to the registration under the 1933 Act and 1940 Act of an indefinite
number of each of Class A Shares of beneficial interest, par value $.01 per
share, Class B Shares of beneficial interest, par value $.01 per share, and
Class C Shares of beneficial interest, par value $.01 per share, of the Trust
(collectively, the "Shares").
This opinion is delivered in accordance with the requirements of Item
24(b)(10) of Form N-1A under the 1933 Act and the 1940 Act.
In connection with this opinion, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Certificate of Trust filed with the Secretary of State of Delaware, (ii)
<PAGE> 2
Van Kampen American Capital
Pace Fund
October 25, 1996
Page 2
the Agreement and Declaration of Trust and By-Laws of the Trust, each as
amended to date (the "Declaration of Trust" and "By-Laws", respectively), (iii)
the Certificate of Designation establishing the classes of the Trust,
(iv) the resolutions adopted by the Board of Trustees of the Trust relating to
the authorization, issuance and sale of the Shares, the filing of the
Registration Statement and any amendments or supplements thereto and related
matters and (v) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In such examination we have assumed the legal capacity of natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed, photostatic, or other copies
and the authenticity of the originals of such latter documents. As to any
facts material to such opinion which were not independently established, we
have relied on statements or representations of officers and other
representatives of the Trust or others.
Members of this firm are admitted to the practice of law in the State
of Delaware and we express no opinion as to the law of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that the
issuance and sale of Shares by the Trust have been validly authorized and,
assuming certificates therefor have been duly executed, countersigned,
registered and delivered or the shareholders' accounts have been duly credited
and the Shares represented thereby have been fully paid for, such Shares will
be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 10 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Counsel" in the Registration Statement. In
giving this consent, we do not hereby
<PAGE> 3
Van Kampen American Capital
Pace Fund
October 25, 1996
Page 3
admit that we are in the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 46, Amendment No. 31, to
the registration statement on Form N-1A (the "Registration Statement") of our
report dated August 2, 1996, relating to the financial statements and financial
highlights of Van Kampen American Capital Pace Fund, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in such Prospectus and to the
reference to us under the heading "Independent Accountants" in such Statement of
Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
October 24, 1996
<PAGE> 1
Exhibit 15.1
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
VAN KAMPEN AMERICAN CAPITAL PACE FUND
The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL PACE
FUND (the "Fund"). This Distribution Plan describes the material terms and
conditions under which assets of the Fund may be used in connection with
financing distribution related activities with respect to each of its classes
of shares of beneficial interest (the "Shares"), each of which is offered and
sold subject to a different combination of front-end sales charges,
distribution fees, service fees and contingent deferred sales charges.1
Classes of shares, if any, subject to a front-end sales charge and a
distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End Shares."
Classes of shares, if any, subject to a contingent-deferred sales charge and a
distribution and/or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred
sales charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares."
The Fund has adopted a service plan (the "Service Plan") pursuant to
which the Fund is authorized to expend on an annual basis a portion of its
average net assets attributable to any or each class of Shares in connection
with the provision by the principal underwriter (within the meaning of the 1940
Act) of the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has
entered into a distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Inc. (the "Distributor"),
pursuant to which the Distributor acts as the principal underwriter with
respect to each class of Shares and provides services to the Fund and acts as
agent on behalf of the Fund in connection with the implementation of the
Service Plan. The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement the
Distribution and Services Agreement, the Service Plan and this Distribution
Plan.
1. The Fund hereby is authorized to pay the Distributor a distribution
fee with respect to each class of its Shares to compensate the Distributor for
activities which are primarily intended to result in the sale of such Shares
("distribution related activities") performed by the Distributor with respect
to the respective class of Shares of the Fund. Such distribution related
activities include without limitation: (a) printing and distributing copies of
any prospectuses and annual and interim reports of the Fund (after the Fund has
prepared and set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing or otherwise
manufacturing and distributing any other literature or materials of any nature
used by such Distributor in connection with promoting, distributing or offering
the Shares; (c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the provision of
information programs and shareholder services intended to enhance the
attractiveness of investing in the Fund; (e) incurring initial outlay expenses
in connection with compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal services to
shareholders and the maintenance of
____________________
1 The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
shareholder accounts of all classes of Shares, including paying interest on and
incurring other carrying costs on funds borrowed to pay such initial outlays;
and (f) acting as agent for the Fund in connection with implementing this
Distribution Plan pursuant to the Selling Agreements.
2. The amount of the distribution fee hereby authorized with respect to
each class of Shares of the Fund shall be as follows:
a. With respect to Class A Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.15% of the Fund's average daily net
assets attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The
Fund may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.15% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by
the Fund pursuant to the Service Plan and (ii) the actual amount of
distribution related expenses incurred by the Distributor with respect to Class
A Shares.
b. With respect to Class B Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.90% of the Fund's average daily net
assets attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class B
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.
c. With respect to Class C Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.90% of the Fund's average daily net
assets attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class C Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class C
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class C Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class C Shares.
3. Payments pursuant to this Distribution Plan shall not be made more
often than monthly upon receipt by the Fund of a separate written expense
report with respect to each class of Shares setting forth the expenses
qualifying for such reimbursement allocated to each class of Shares and the
purposes thereof.
4. In the event that amounts payable hereunder with respect to shares of
a Front-End Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of such class, there
is no carryforward of reimbursement obligations to succeeding years. In the
event the amounts payable hereunder with respect to shares of a CDSC Class or a
Combination Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of the respective
class, such unreimbursed distribution expenses will be carried forward and paid
by the Fund hereunder in future years so long as this Distribution Plan remains
in effect, subject to applicable laws
2
<PAGE> 3
and regulations. Reimbursements for distribution related expenses payable
hereunder with respect to a particular class of Shares may not be used to
subsidize the sale of Shares of any other class of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect
to such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Trust and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries as
compensation for the above-mentioned activities and services. Such
reallocation shall be in an amount as set forth from time to time in the Fund's
prospectus. Such Selling Agreements shall provide that the Financial
Intermediaries shall provide the Distributor with such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be
paid only pursuant to written agreements between the Fund and such other person
the terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
8. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Distribution Plan, the Service
Plan and the agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Trustees or the
Disinterested Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.
9. This Distribution Plan shall become effective upon its approval by (a)
a majority of the Board of Trustees and a majority of the Disinterested
Trustees by vote cast separately with respect to each class of Shares cast in
person at a meeting called for the purpose of voting on this Distribution Plan,
and (b) with respect to each class of Shares, a "majority of the outstanding
voting securities" (as such phrase is defined in the 1940 Act) of such class of
Shares voting separately as a class.
10. This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
11. This Distribution Plan may be terminated with respect to a class of
Shares without penalty at any time by a majority of the Disinterested Trustees
or by a "majority of the outstanding voting securities" of the respective
class of Shares of the Fund.
12. This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material
3
<PAGE> 4
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Distribution Plan to changes in the Rule or
to other changes in the 1940 Act or the rules and regulations thereunder shall
not be deemed to be material amendments.
13. To the extent any service fees paid by the Fund pursuant to the
Service Plan are deemed to be payments for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the meaning of the Rule, the terms and provisions of such plan and any payments
made pursuant to such plan hereby are authorized pursuant to this Distribution
Plan in the amounts and for the purposes authorized in the Service Plan without
any further action by the Board of Trustees or the shareholders of the Fund.
To the extent the terms and provisions of the Service Plan conflict with the
terms and provisions of this Distribution Plan, the terms and provisions of the
Service Plan shall prevail with respect to amounts payable pursuant thereto.
This paragraph 13 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued
by the Fund within the meaning of the Rule.
14. The Trustees of the Trust have adopted this Distribution Plan as
trustees under the Declaration of Trust of the Fund and the policies of the
Fund adopted hereby are not binding upon any of the Trustees or shareholders
of the Fund individually, but bind only the trust estate.
4
<PAGE> 1
Exhibit 15.2
VAN KAMPEN AMERICAN CAPITAL PACE FUND
SERVICE PLAN
The plan set forth below (the "Service Plan") for the VAN KAMPEN
AMERICAN CAPITAL PACE FUND (the "Fund") describes the material terms and
conditions under which assets of the Fund may be used to compensate the Fund's
principal underwriter, within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act"), brokers, dealers and other financial
intermediaries (collectively "Financial Intermediaries") for providing personal
services to shareholders and/or the maintenance of shareholder accounts with
respect to each of its Class A Shares of beneficial interest (the "Class A
Shares"), its Class B Shares of beneficial interest (the "Class B Shares"), and
its Class C Shares of beneficial interest (the "Class C Shares") The Class A
Shares, Class B Shares and Class C Shares sometimes are referred to herein
collectively as the "Shares." Each class of Shares is offered and sold subject
to a different combination of front-end sales charges, distribution fees,
service fees and contingent deferred sales charges.1 Classes of shares, if any,
subject to a front-end sales charge and a distribution and/or service fee are
referred to herein as "Front-End Classes" and the Shares of such classes are
referred to herein as "Front-End Shares." Classes of shares, if any, subject to
a contingent-deferred sales charge and a distribution and or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and Shares of such
class are referred to herein as "Combination Shares."
The Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to which the Fund is authorized to expend on an annual basis a portion
of its average net assets attributable to each class of Shares in connection
with financing distribution related activities. The Fund also has entered into
a distribution and services agreement (the "Distribution and Services
Agreement") with Van Kampen American Capital Distributors, Inc. (the
"Distributor"), pursuant to which the Distributor acts as agent on behalf of
the Fund in connection with the implementation of the Service Plan and acts as
the principal underwriter with respect to each class of Shares. The
Distributor may enter into selling agreements (the "Selling Agreements") with
brokers, dealers and other financial intermediaries ("Financial
Intermediaries") in order to implement the Distribution Agreement, the
Distribution Plan and this Service Plan.
1. The Fund hereby is authorized to pay a service fee with respect to its
Class A Shares, Class B Shares and Class C Shares to any person who sells such
Shares and provides personal services to shareholders and/or maintains
shareholder accounts in an annual amount not to exceed 0.15% of the average
annual net asset value of the Shares maintained in the Fund by such person that
were sold on or after the date on which this Service Plan was first
implemented. The aggregate annual amount of all such payments with respect to
each such class of Shares may not exceed 0.15% of the Fund's average annual net
assets attributable to the respective class of Shares sold on or after the date
on which this Service Plan was first implemented and maintained in the Fund
more than one year.
2. Payments pursuant to this Service Plan may be paid or prepaid on
behalf of the Fund by the Distributor acting as the Fund's agent.
____________________
1 The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
3. Payments by the Fund to the Distributor pursuant to this Service Plan
shall not be made more often than monthly upon receipt by the Fund of a
separate written expense report with respect to each class of Shares setting
forth the expenses qualifying for such reimbursement allocated to each class of
Shares and the purposes thereof.
4. In the event that amounts payable hereunder with respect to a class of
Shares do not fully reimburse the Distributor for pre-paid service fees, such
unreimbursed service fee expenses will be carried forward and paid by the Fund
hereunder in future years so long as this Service Plan remains in effect,
subject to applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular class of Shares
may not be used to subsidize services provided with respect to any other class
of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
service related expenses incurred with respect to a class of Shares prior to
the later of (a) the implementation of this Service Plan with respect to such
class of Shares or (b) the date that such Financial Intermediary enters into a
Selling Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Fund and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. Such Selling Agreements shall provide that
the Financial Intermediaries shall provide the Distributor with such
information as is reasonably necessary to permit the Distributor to comply with
the reporting requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Service Agreement, the Fund is
hereby authorized to pay a service fee to any person that is not an "affiliated
person" or "interested person" of the Fund or its "investment adviser" or
"principal underwriter" (as such terms are defined in the 1940 Act) who
provides any of the foregoing services for the Fund. Such fee shall be paid
only pursuant to written agreements between the Fund and such other person the
terms of which permit payments to such person only in accordance with the
provisions of this Service Agreement and which have the approval of a majority
of the Disinterested Trustees by vote cast separately with respect to each
class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
8. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Service Plan and the
agreements contemplated hereby, the purposes for which such payments were made
and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.
9. This Service Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.
10. This Service Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at
a meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.
2
<PAGE> 3
11. This Service Plan and any agreement contemplated hereby shall continue
in effect beyond the first anniversary of its adoption by the Board of Trustees
of the Fund only so long as (a) its continuation is approved at least annually
in the manner set forth in clause (a) of paragraph 10 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
12. This Service Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund. This Service Plan may not be amended in any material
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Service Plan to changes in Rule 12b-1 under
the 1940 Act, the rules and regulations thereunder or the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. shall not be
deemed to be material amendments.
13. The Trustees of the Fund have adopted this Service Plan as trustees
under the Declaration of Fund of the Fund and the policies of the Fund
adopted hereby are not binding upon any of the Trustees or shareholders of the
Fund individually, but bind only the trust estate.
3
<PAGE> 1
EXHIBIT 15.3
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
SHAREHOLDER ASSISTANCE AGREEMENT
This Agreement is entered into as of the 7th day of April, 1995, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
Merritt, Inc.) (the "Company") and the undersigned (the "Broker-Dealer").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, the Broker-Dealer is registered as a broker-dealer with the
National Association of Securities Dealers, Inc.; and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") and a service plan (the "Service Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), relating to such Fund, the Distribution Plans being described in
the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution assistance agreements such as this Agreement with
broker-dealers selected by the Company, and the Broker-Dealer has been so
selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such broker-dealer on or after the effective date
of this Agreement, as determined pursuant to Section 4 hereof, and held at the
close of each day in accounts of clients or customers of a particular
broker-dealer, such amount being referred to herein as the "Holding Level"; for
purposes of calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing prior to such
effective date shall be deemed to have been shares sold prior to such effective
date to the extent of the number of shares held in such account immediately
after the close of business on the day prior to such effective date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Broker-Dealer agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Broker-Dealer shall be entitled distribution fee and
service fee to payments, if any, to be paid by the Company at the annual
percentage rate of the Holding Level set forth from time to time in the then
current Prospectus of the Fund on a quarterly basis (prorated for any portion
of such period during which this Agreement is in effect for less than the full
amount of such period); it is understood and agreed that the Company may make
final and binding determinations as to whether such continuing compliance and
as to whether or not any Fund shares are to be considered in determining the
Holding Level of any particular broker-dealer and what Fund shares, if any, are
to be attributed to such purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to the
Broker-Dealer named above and portions of the payments may be, in the
discretion of the Broker-Dealer, paid over to individual registered
representatives of said Broker-Dealer to whom there have been
1
<PAGE> 2
assigned accounts of clients or customers of the Broker-Dealer with respect to
which the respective Holding Level was determined.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Broker-Dealer shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be), and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act), of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Broker-dealer, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
----------------------------
Broker-dealer Firm Name
By:
- ------------------------ -------------------------
Firm Address Senior Vice President
By:
---------------------
Title:
------------------
2
<PAGE> 3
SCHEDULE 1
1. For Class A Shares, Class B Shares and Class C Shares:
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund
Van Kampen American Capital Ohio Tax Free Income Fund
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Utility Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
<PAGE> 4
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
2. For Class A Shares Only:
Van Kampen American Capital Tax Free Money Fund
<PAGE> 1
EXHIBIT 15.4
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is entered into as of the 7th day of April, 1995, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
American Capital, Inc.) (the "Company") and the undersigned (the
"Intermediary").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and a Service Plan (the
"Service Plan") relating to such Fund, the Distribution Plans being described
in the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution services agreements such as this Agreement with
certain financial intermediaries selected by the Company, and the Intermediary
has been so selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such financial intermediary on or after the
effective date of this Agreement, as determined pursuant to Section 4 hereof,
and held at the close of each day in accounts of clients or customers of
particular intermediary, such amount being referred to herein as the "Holding
Level"; for purposes of calculating the Holding Level, shares of such Fund
which are redeemed or otherwise disposed of from any account existing prior to
such effective date shall be deemed to have been shares sold prior to such
effective date to the extent of the number of shares held in such account
immediately after the close of business on the day prior to such effective
date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Intermediary agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Intermediary shall be entitled to distribution fee and
service fee payments, if any, to be paid by the Company with respect to each
class of the Fund's shares at the annual percentage rate of the Holding Level
set forth from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during which this
Agreement is in effect for less than the full amount of such period); it is
understood and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as to whether or
not any Fund shares are to be considered in determining the Holding Level of
any particular financial intermediary and what Fund shares, if any, are to be
attributed to such purpose to a particular financial intermediary, to a
different financial intermediary or to no financial intermediary.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
1
<PAGE> 2
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Intermediary shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Intermediary may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the Fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the
Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be) and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Intermediary, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By:
- ------------------ ----------------------
Intermediary Senior Vice President
- ------------------
Address
By:
---------------
Title
2
<PAGE> 3
SCHEDULE 1
1. For Class A Shares, Class B Shares and Class C Shares:
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund
Van Kampen American Capital Ohio Tax Free Income Fund
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Utility Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
<PAGE> 4
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
2. For Class A Shares Only:
Van Kampen American Capital Tax Free Money Fund
<PAGE> 1
EXHIBIT 16
COMPUTATION OF PERFORMANCE INFORMATION
CALCULATION OF TOTAL RETURN -- CLASS A SHARES
The Fund calculates its average annual total return quotations for Class A
shares for the designated period or periods ended June 30, 1996, the date of the
most recent balance sheet included in the registration statement, by finding the
average annual compounded rates of return over the designated period or periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n=ERV
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated period or periods at the end of the designated
period or periods (or fractional portion thereof);
</TABLE>
These calculations incorporate the following assumptions:
1. The maximum sales load (or other charges deducted from payments) is
deducted from the initial $1,000 payment.
2. All dividends and distributions by the Fund are reinvested at the
price stated in the prospectus on the reinvestment dates during the period,
i.e., any sales load charged upon reinvestment of dividends would be
reflected.
3. All recurring fees, if any, charged to all shareholder accounts are
included.
4. The ending redeemable value assumes a complete redemption at the
end of the designated period or periods and the deduction of all
nonrecurring charges, if any, deducted at the end of such period or
periods.
<PAGE> 2
CALCULATION OF TOTAL RETURN -- CLASS B SHARES
The Fund calculates its average annual total return quotations for Class B
shares for the designated period or periods ended June 30, 1996, the date of the
most recent balance sheet included in the registration statement, by finding the
average annual compounded rates of return over the designated period or periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n=ERV
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated period or periods at the end of the designated
period or periods (or fractional portion thereof);
</TABLE>
These calculations incorporate the following assumptions:
1. Assumes an initial $1,000 payment with the applicable contingent
deferred sales charge imposed upon redemption.
2. All dividends and distributions by the Fund are reinvested at the
price stated in the prospectus on the reinvestment dates during the period.
3. All recurring fees, if any, charged to all shareholder accounts are
included.
4. The ending redeemable value assumes a complete redemption at the
end of the designated period or periods and the deduction of all
nonrecurring charges, if any, deducted at the end of such period or
periods.
<PAGE> 3
CALCULATION OF TOTAL RETURN -- CLASS C SHARES
The Fund calculates its average annual total return quotations for Class C
shares for the designated period or periods ended June 30, 1996, the date of the
most recent balance sheet included in the registration statement, by finding the
average annual compounded rates of return over the designated period or periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n=ERV
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated period or periods at the end of the designated
period or periods (or fractional portion thereof);
</TABLE>
These calculations incorporate the following assumptions:
1. Assumes an initial $1,000 payment with a 1% contingent deferred
sale charge imposed if redeemed during the first year.
2. All dividends and distributions by the Fund are reinvested at the
price stated in the prospectus on the reinvestment dates during the period.
3. All recurring fees, if any, charged to all shareholder accounts are
included.
4. The ending redeemable value assumes a complete redemption at the
end of the designated period or periods and the deduction of all
nonrecurring charges, if any, deducted at the end of such period or
periods.
<PAGE> 1
EXHIBIT 17.1
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
OCTOBER 4, 1996
Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Growth and Income Portfolio
<PAGE> 2
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax -Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
Internet Trust
Michigan Real Estate Income and Growth Trust
Van Kampen American Capital Insured Income Trust
Van Kampen American Capital Insured Income Trust (Intermediate)
Strategic Ten Trust, United States
Strategic Ten Trust, United Kingdom
Strategic Ten Trust, Hong Kong
Strategic Five Trust, United States
Van Kampen American Capital Equity Opportunity Trust
Great International Firms Trust
Gruntal & Co. Incorporated Undervalued Growth Opportunities Trust
Principal Trust Princor Emerging Growth and Treasury
International Assets Advisory Corporation Global Blue Chip Trust
Renaissance Trust
Mississippi Insured Municipal Trust
Blue Chip Opportunity and Treasury Trust
Wheat First Butcher Singer Wheat First Strategic Opportunity Unit Trust
Baby Boomer Opportunity Trust
Van Kampen American Capital Utility Income Trust
Global Energy Trust
Michigan Select Trust
<PAGE> 3
<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust . . . . . . . . . . . . . . . . Series 1
Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . Series 1 through 379
Insured Municipals Income Trust (Discount) . . . . . . . . . . . . . . Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) . . . . . . . Series 1 through 105
1009 Insured Municipals Income Trust (Intermediate Term) . . . . . . . Series 5 through 88
Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . Series 9 through 85
Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity) . . . Series 1 and 2
Insured Tax Free Bond Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Insured Tax Free Bond Trust (Limited Term) . . . . . . . . . . . . . Series 1
Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . Series 1 through 93
Investors' Quality Tax-Exempt Trust-Intermediate . . . . . . . . . . . Series 1
Investors' Corporate Income Trust . . . . . . . . . . . . . . . . . . Series 1 through 12
Investors' Governmental Securities Income Trust . . . . . . . . . . . Series 1 through 7
Van Kampen Merritt International Bond Income Trust . . . . . . . . . . Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1
Alabama Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 16
Arizona Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 17
Arkansas Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1
California Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1 through 158
California Insured Municipals Income Trust (Premium Bond Series) . . . Series 1
California Insured Municipals Income Trust (1st Intermediate Series) . Series 1 through 3
California Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered) . . Series 1 through 22
Colorado Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 81
Colorado Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 18
Connecticut Insured Municipals Income Trust . . . . . . . . . . . . . Series 1 through 31
Connecticut Investors' Quality Tax-Exempt Trust . . . . . . . . . . . Series 1
Delaware Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipal Income Trust - Intermediate . . . . . . . . Series 1 and 2
Florida Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 107
Florida Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered) . . . Series 1 through 13
Georgia Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 81
Georgia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . Series 1
Investors' Quality Municipals Trust (AMT) . . . . . . . . . . . . . . Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 58
Louisiana Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1 through 17
Maine Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . . Series 1
Maryland Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 79
Massachusetts Insured Municipals Income Trust . . . . . . . . . . . . Series 1 through 34
Massachusetts Insured Municipals Income Trust (Premium Bond Series). . Series 1
Michigan Financial Institutions Trust . . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 140
Michigan Insured Municipals Income Trust (Premium Bond Series) . . . . Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series) . . Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 30
Michigan Select Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Minnesota Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1 through 59
Minnesota Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . Series 1 through 21
Mississippi Insured Municipals Income Trust . . . . . . . . . . . . . Series 1
Missouri Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1 through 99
Missouri Insured Municipals Income Trust (Premium Bond Series) . . . . Series 1
Missouri Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . Series 1 through 15
Missouri Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . Series 1
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Nebraska Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 9
New Mexico Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1 through 18
New Jersey Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1 through 114
New Jersey Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . Series 1 through 22
New Jersey Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . Series 1 and 4
New York Insured Municipals Income Trust-Intermediate . . . . . . . . Series 1 through 6
New York Insured Municipals Income Trust (Limited Term) . . . . . . . Series 1
New York Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1 through 136
New York Insured Tax-Free Bond Trust . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . Series 1 through 17
New York Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1
North Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . Series 1 through 89
Ohio Insured Municipals Income Trust . . . . . . . . . . . . . . . . . Series 1 through 104
Ohio Insured Municipals Income Trust (Premium Bond Series) . . . . . . Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term) . . . . . . . Series 1
Ohio Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . Series 1 through 16
Oklahoma Insured Municipal Income Trust . . . . . . . . . . . . . . . . Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . Series 1 through 53
Pennsylvania Insured Municipals Income Trust - Intermediate . . . . . . Series 1 through 6
Pennsylvania Insured Municipals Income Trust . . . . . . . . . . . . . Series 1 through 223
Pennsylvania Insured Municipals Income Trust (Premium Bond Series). . . Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust . . . . . . . . . . . Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . Series 1 through 84
Stepstone Growth Equity and Treasury Securities Trust . . . . . . . . . Series 1
Tennessee Insured Municipals Income Trust . . . . . . . . . . . . . . . Series 1-3 and 5-37
Texas Insured Municipals Income Trust . . . . . . . . . . . . . . . . Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder) . . . . . . Series 1
Virginia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . Series 1 through 73
Van Kampen American Capital Equity Opportunity Trust . . . . . . . . . Series 1 through 41
Van Kampen American Capital Utility Income Trust . . . . . . . . . . . Series 1 through 8
Van Kampen American Capital Insured Income Trust . . . . . . . . . . . Series 1 through 61
Van Kampen American Capital Insured Income Trust (Intermediate Term). . Series 1 through 60
Van Kampen Merritt Select Equity Trust . . . . . . . . . . . . . . . . Series 1
Van Kampen Merritt Select Equity and Treasury Trust . . . . . . . . . . Series 1
Washington Insured Municipals Income Trust . . . . . . . . . . . . . . Series 1
West Virginia Insured Municipals Income Trust . . . . . . . . . . . . . Series 1 through 7
Principal Financial Institutions Trust . . . . . . . . . . . . . . . . Series 1
Internet Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 3
Michigan Real Estate Income and Growth Trust . . . . . . . . . . . . . Series 1
Strategic Ten Trust, United States . . . . . . . . . . . . . . . . . . Series 1 through 10
Strategic Ten Trust, United Kingdom . . . . . . . . . . . . . . . . . . Series 1 through 10
Strategic Ten Trust, Hong Kong . . . . . . . . . . . . . . . . . . . . Series 1 through 10
Strategic Five Trust, United States . . . . . . . . . . . . . . . . . . Series 1 through 4
Equity Opportunity Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 42
Great International Firms Trust . . . . . . . . . . . . . . . . . . . . Series 1
Undervalued Growth Opportunities Trust . . . . . . . . . . . . . . . . Series 1
Emerging Growth and Treasury . . . . . . . . . . . . . . . . . . . . . Series 1
Global Blue Chip Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1
Renaissance Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Blue Chip Opportunity and Treasury Trust . . . . . . . . . . . . . . . Series 1 through 4
Wheat First Strategic Opportunity Unit Trust . . . . . . . . . . . . . Series 1
Baby Boomer Opportunity Trust . . . . . . . . . . . . . . . . . . . . . Series 1
Global Energy Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 2
</TABLE>
<PAGE> 1
EXHIBIT 17.2
OFFICERS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------------- ---------------------------------- --------------------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX
William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer
Ronald A. Nyberg Executive Vice President & General Oakbrook Terrace, IL
Counsel
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Debra A. Nichols Sr. Vice President Houston, TX
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL
Timothy K. Brown 1st Vice President Laguna Niguel, CA
James S. Fosdick 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President San Francisco, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Thomas M. Byron Vice President Oakbrook Terrace, IL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
Richard J. Charlino Vice President Houston, TX
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Houston, TX
Tracey M. DeLusant Vice President Lynbrook, NY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
David B. Dibo Vice President Oakbrook Terrace, IL
Howard A. Doss Vice President Tampa, FL
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhaven Vice President Denver, CO
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
Gregory Heffington Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Robert S. Hunt Vice President Baltimore, MD
Lowell Jackson Vice President Norcross, GA
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
S. William Lehew III Vice President Charlotte, NC
Robert C. Lodge Vice President Philadelphia, PA
Walter Lynn Vice President Flower Mound, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Ruth L. McKeel Vice President Oakbrook Terrace, IL
John Mills Vice President Kenner, LA
Robert Muller, Jr. Vice President Houston, TX
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Boston, MA
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
James D. Stevens Vice President Boston, MA
William C. Strafford Vice President Granger, IN
David A. Tabone Vice President Phoenix, AZ
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Jeff Warland Vice President Oakbrook Terrace, IL
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
James R. Yount Vice President Seattle, WA
Patrick M. Zacchea Vice President New York, NY
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Brian P. Arcara Asst. Vice President Philadelphia, PA
Christopher M. Bisaillon Asst. Vice President Oakbrook Terrace, IL
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Robert C. Brooks Asst. Vice President Manchester, MA
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL
Deanna Margaret Chiaro Asst. Vice President San Jose, CA
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Daniel R. DeJong Asst. Vice President Oakbrook Terrace, IL
Melissa B. Epstein Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Scott F. Heyer Asst. Vice President Tampa, FL
Jeffrey S. Kinney Asst. Vice President Oakbrook Terrace, IL
Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Patricia D. Lathrop Asst. Vice President Tampa, FL
Tony E. Leal Asst. Vice President Houston, TX
Ivan R. Lowe Asst. Vice President Houston, TX
Linda S. MacAyeal Asst. Vice President Oakbrook Terrace, IL
Ann Therese McGrath Asst. Vice President Laguna, CA
Stuart R. Moehlman Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
Gregory S. Parker Asst. Vice President Houston, TX
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Jeffrey S. Rourke Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Traci T. Sorensen Asst. Vice President Oakbrook Terrace, IL
Gary Steele Asst. Vice President Philadelphia, PA
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Robert A. Watson Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
Gina Grippo Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
Francis McGarvey Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ---------------------------------
<S> <C> <C>
Don G. Powell Chairman & CEO 2800 Post Oak Blvd.
Houston, TX 77056
William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181
William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT 18
MULTI-CLASS PLAN
FOR
VAN KAMPEN AMERICAN CAPITAL FAMILY OF FUNDS
This Plan is adopted pursuant to Rule 18f-3 under the Act to provide
for the issuance and distribution of multiple classes of shares by each of the
Funds in accordance with the terms, procedures and conditions set forth below.
A majority of the Trustees of the Funds, including a majority of the Trustees
who are not interested persons of the Funds within the meaning of the Act,
found this Multi-Class Plan, including the expense allocations, to be in the
best interest of each Fund and each Class of Shares of each Fund and adopted
this Plan on January 26, 1996.
A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
1. The Act - Investment Company Act of 1940, as amended.
2. CDSC - contingent deferred sales charge.
3. CDSC Period - the period of years following acquisition during
which Shares are assessed a CDSC upon redemption.
4. Class - a class of Shares of a Fund.
5. Class A Shares - shall have the meaning ascribed in Section B. 1.
6. Class B Shares - shall have the meaning ascribed in Section B. 1.
7. Class C Shares - shall have the meaning ascribed in Section B. 1.
8. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of
Shares as defined in a Plan of Distribution and/or board
resolutions.
9. Distribution Fee - a fee paid by a Fund to the Distributor in
reimbursement of Distribution Expenses.
10. Distributor - Van Kampen American Capital Distributors, Inc.
11. Fund - an investment company listed on Exhibit A hereto and each
series thereof.
12. Money Market Fund - Van Kampen American Capital Reserve Fund or
Van Kampen American Capital Tax Free Money Market Fund.
<PAGE> 2
13. Plan of Distribution - Any plan adopted under Rule 12b-1 under the
Act with respect to payment of a Distribution Fee.
14. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders and/or
the maintenance of shareholder accounts.
15. Share - a share of beneficial interest in a Fund.
16. Trustees - the trustees of a Fund.
B. Classes. Each Fund may offer three Classes as follows:
1. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Trustees and set forth in the Funds' prospectus,
which may be reduced or eliminated for Money Market Funds,
larger purchases, under a combined purchase privilege, under a
right of accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act
and as set forth in the Fund's prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing, may be subject to a CDSC for the CDSC Period set forth
in Section D.1. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with Rule
22c-1 and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service
Fees approved from time to time by the Trustees and set forth in
the Funds' prospectus. Although shares of Van Kampen American
Capital Tax Free Money Market Fund are not designated as "Class A"
they are substantially similar to Class A Shares as defined herein
and shall be treated as Class A shares for the purposes of this
Plan.
2. Class B Shares. Class B Shares shall be (1) offered at net asset
value, (2) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares three to ten years after the calendar month in which the
shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.
3. Class C Shares. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC Period set forth
in Section D. 1. , (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares eight to fifteen years after the calendar month in which
the shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.
<PAGE> 3
C. Rights and Privileges of Classes. Each Class of each Fund will
represent an interest in the same portfolio of investments of that
Fund and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except as
described otherwise herein.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class
B Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be one year. The CDSC Period for Class B Shares shall be at
least three but not more than ten years as recommended by the
Distributor and approved by the Trustees.
2. CDSC Rate. The CDSC rate shall be recommended by the Distributor
and approved by the Trustees. If a CDSC is imposed for a period
greater than one year the CDSC rate must decline during the CDSC
Period such that (a) the CDSC rate is less in the last year of the
CDSC Period than in the first and (b) in each succeeding year the
CDSC rate shall be less than or equal to the CDSC rate in the
preceding year.
3. Disclosure and Changes. The CDSC rates and CDSC Period shall be
disclosed in a Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved as set forth in Section L.
4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current market value or the cost of
the Shares being redeemed. No sales charge shall be imposed on
increases in the net asset value of the Shares being redeemed above
the initial purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares and Class C
Shares are to be redeemed when not all of such Shares would be
subject toa CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares under circumstances
previously approved by the Trustees and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of Shares subject
to a CDSC shall be computed in accordance with Rule 22c-1 and
Section 22(d) of the Act and the rules and regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of
a Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in
<PAGE> 4
connection with the sale of Shares subject to a CDSC and
Distribution Expenses to the extent of such commissions and
Distribution Expenses eligible for reimbursement and approved by
the Trustees.
E. Service and Distribution Fees. Class A Shares shall be subject to a
Service Fee and Class B and Class C Shares shall be subject to a
Service Fee and a Distribution Fee. The Service Fee applicable to any
class shall not exceed 0.25% per annum of the average daily net assets
of the Class and the Distribution Fee shall not exceed 0.75% per annum
of the average daily net assets of the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees shall be
governed by the plans adopted by the Fund with respect to such fees
and Rule 12b-1 of the Act.
F. Conversion. Shares purchased through the reinvestment of dividends
and distributions paid on Shares subject to conversion shall be
treated as if held in a separate sub-account . Each time any Shares
in a Shareholder's account (other than Shares held in the sub-
account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset
values of the two Classes without the imposition of any sales load or
other charge. So long as any Class of Shares converts into Class A
Shares, the Distributor shall waive or reimburse each Fund, or take
such other actions with the approval of the Trustees as may be
reasonably necessary, to ensure the expenses, including payments
authorized under a Plan of Distribution, applicable to the Class A
Shares are not higher than the expenses, including payments authorized
under the Plan of Distribution, applicable to the class of shares
converting into Class A Shares.
G. Allocation of Expenses, Income and Gains Among Classes.
1. Expenses applicable to a particular class. Each Class of each
Fund shall pay any Service Fee, Distribution Fee and CDSC
applicable to that Class. Other expenses applicable to a
particular Class such as incremental transfer agency fees, but not
including advisory or custodial fees or other expenses related to
the management of the Fund's assets, shall be allocated between
Classes in different amounts if they are actually incurred in
different amounts by the Classes or the Classes receive services
of a different kind or to a different degree than other Classes.
2. Distribution Expenses. Distribution Expenses actually
attributable to the sale of all Classes shall be allocated to each
Class based upon the ratio which sales of each Class bears to the
sales of all Shares of the Fund. For this purpose, Shares issued
upon reinvestment of dividends or distributions, upon conversion
from Class B Shares or Class C Shares to Class A Shares or upon
stock splits will not be considered sales.
3. Income, capital gains and losses, and other expenses applicable to
all Classes. Income, realized and unrealized capital gains and
losses, and expenses such as advisory fees applicable to all
Classes shall be allocated to each Class on the basis of the net
asset value of that Class in relation to the net asset value of
the Fund.
<PAGE> 5
4. Determination of nature of expenses. The Trustees shall determine
in their sole discretion whether any expense other than those
listed herein is properly treated as attributed to a particular
Class or all Classes.
H. Exchange Privilege. Exchanges of Shares shall be permitted between
Funds as follows.
1. General. Shares of one Fund may be exchanged for Shares of the
same Class of another Fund at net asset value and without sales
charge, provided that
a. The Distributor may specify that certain Funds may not be
exchanged within a designated period, which shall not exceed
90 days, after acquisition without prior Distributor approval.
b. Class A Shares of a Money Market Fund that were not acquired
in exchange for Class B or Class C Shares of a Fund may be
exchanged for Class A Shares of another Fund only upon payment
of the excess, if any, of the sales charge rate applicable to
the Shares being acquired over the sales charge rate
previously paid.
c. Shares of a Money Market Fund acquired through an exchange of
Class B Shares or Class C Shares may be exchanged only for the
same Class of another Fund as the Class they were acquired in
exchange for or any Class into which those shares were
converted.
2. Target Fund. Shares of Van Kampen American Capital Government
Target Fund may be exchanged for Class A Shares of a Fund.
3. CDSC Computation. The acquired Shares will remain subject to the
CDSC rate schedule and CDSC Period for the original Fund upon the
redemption of the Shares from the Van Kampen American Capital
complex of funds. For purposes of computing the CDSC payable on a
disposition of the new Shares, the holding period for the
original Shares shall be added to the holding period of the new
Shares.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on
any matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that
d. If any amendment is proposed to the plan under which Service
Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by Class A
Shares under that plan, then no Class B Shares or Class C
Shares shall convert into Class A Shares of that Fund until
the holders of Class B Shares and Class C Shares of that Fund
have also approved the proposed amendment.
<PAGE> 6
e. If the holders of either the Class B Shares and/or Class C
Shares referred to in subparagraph a. do not approve the
proposed amendment, the Trustees of the Fund and the
Distributor shall take such action as is necessary to ensure
that the Class voting against the amendment shall convert into
another Class identical in all material respects to Class A
Shares of the Fund as constituted prior to the amendment.
2. Shareholders shall have separate voting rights on any matter
submitted to shareholders in which the interest of one Class
differs from the interests of any other Class.
J. Dividends. Dividends paid by a Fund with respect to each Class, to
the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in substantially
the same amount, except any Distribution Fees,Service Fees or
incremental expenses relating to a particular Class will be borne
exclusively by that Class.
K. Reports to Trustees. The Distributor shall provide to the Trustees of
each Fund quarterly and annual statements concerning distribution and
Shareholder servicing expenditures complying with paragraph (b)(3)(ii)
of Rule 12b-1 of the Act, as it may be amended from time to time. The
Distributors also shall provide the Trustees such information as the
Trustees may from time to time deem to be reasonably necessary to
evaluate this Plan.
L. Amendment. Any material amendment to this Plan shall be approved by
the affirmative vote of a majority of the Trustees of a Fund,
including the affirmative vote of the trustees of the Fund
who are not interested persons of the Fund, except that any amendment
that increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares of the
affected Class. The Distributor shall provide the Trustees such
information as may be reasonably necessary to evaluate any amendment
to this Plan.
<PAGE> 7
EXHIBIT A
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL PACE FUND
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST
<PAGE> 1
POWER OF ATTORNEY EXHIBIT 19
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open-End Trusts, as indicated on Schedule 1 attached hereto
and incorporated by reference, each a Delaware business trust, except for the
Van Kampen American Capital Pennsylvania Tax Free Income Fund, being a
Pennsylvania business trust (individually, a "Trust"), do hereby, in the
capacities shown below, individually appoint Dennis J. McDonnell and Ronald A.
Nyberg, each of Oakbrook Terrace, Illinois, and each of them, as the agents and
attorneys-in-fact with full power of substitution and resubstitution, for each
of the undersigned, to execute and deliver, for and on behalf of the
undersigned, any and all amendments to the Registration Statement filed by each
Trust with the Securities and Exchange Commission pursuant to the provisions of
the Securities Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Dated: March 1, 1996
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/ s / Fernando Sisto, Sc.D Trustee
- ----------------------------------------------
Fernando Sisto, Sc.D.
/ s / Donald C. Miller Trustee
- ----------------------------------------------
Donald C. Miller
/ s / Don G. Powell Trustee
- ----------------------------------------------
Don G. Powell
/ s / Dennis J. McDonnell Trustee
- ----------------------------------------------
Dennis J. McDonnell
/ s / J. Miles Branagan Trustee
- ----------------------------------------------
J. Miles Branagan
/ s / Linda Hutton Heagy Trustee
- ----------------------------------------------
Linda Hutton Heagy
/ s / Roger Hilsman, Ph.D. Trustee
- ----------------------------------------------
Roger Hilsman, Ph.D.
/ s / William Stewart Woodside Trustee
- ----------------------------------------------
William Stewart Woodside
/ s / R. Craig Kennedy Trustee
- ----------------------------------------------
R. Craig Kennedy
/ s / Jack E. Nelson Trustee
- ----------------------------------------------
Jack E. Nelson
/ s / Wayne W. Whalen Trustee
- ----------------------------------------------
Wayne W. Whalen
/ s / Jerome L. Robinson Trustee
- ----------------------------------------------
Jerome L. Robinson
/ s / Edward C. Wood III Vice President and
- ----------------------------------------------
Edward C. Wood III Chief Financial Officer
</TABLE>
<PAGE> 2
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
3. VAN KAMPEN AMERICAN CAPITAL TRUST
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
8. VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
9. VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
10. VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
11. VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
12. VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
13. VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
14. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
15. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
16. VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
17. VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
18. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
19. VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
20. VAN KAMPEN AMERICAN CAPITAL PACE FUND
21. VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
22. VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
23. VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND
24. VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
25. VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
26. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
27. VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> VKAC PACE FUND - A
<NUMBER> 01
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996<F1>
<PERIOD-START> JUL-01-1995<F1>
<PERIOD-END> JUN-30-1996<F1>
<INVESTMENTS-AT-COST> 2290779902<F1>
<INVESTMENTS-AT-VALUE> 2610166737<F1>
<RECEIVABLES> 74449957<F1>
<ASSETS-OTHER> 128931<F1>
<OTHER-ITEMS-ASSETS> 1073<F1>
<TOTAL-ASSETS> 2684746698<F1>
<PAYABLE-FOR-SECURITIES> 65278153<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 8556816<F1>
<TOTAL-LIABILITIES> 73834969<F1>
<SENIOR-EQUITY> 2191045
<PAID-IN-CAPITAL-COMMON> 2076215544
<SHARES-COMMON-STOCK> 212622907
<SHARES-COMMON-PRIOR> 196211415
<ACCUMULATED-NII-CURRENT> 11815798<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 200704405<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 319984937<F1>
<NET-ASSETS> 2610911729
<DIVIDEND-INCOME> 41112554<F1>
<INTEREST-INCOME> 8213613<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 24193735<F1>
<NET-INVESTMENT-INCOME> 25132432<F1>
<REALIZED-GAINS-CURRENT> 388484135<F1>
<APPREC-INCREASE-CURRENT> 51718717<F1>
<NET-CHANGE-FROM-OPS> 465335284<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 28239265
<DISTRIBUTIONS-OF-GAINS> 331334720
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 107853497
<NUMBER-OF-SHARES-REDEEMED> 121801653
<SHARES-REINVESTED> 30359648
<NET-CHANGE-IN-ASSETS> 276336901
<ACCUMULATED-NII-PRIOR> 15141317<F1>
<ACCUMULATED-GAINS-PRIOR> 151712168<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11589844<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 24201235<F1>
<AVERAGE-NET-ASSETS> 2458985584
<PER-SHARE-NAV-BEGIN> 11.62
<PER-SHARE-NII> .120
<PER-SHARE-GAIN-APPREC> 2.090
<PER-SHARE-DIVIDEND> 0.150
<PER-SHARE-DISTRIBUTIONS> 1.760
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.92
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the Fund on a composite basis
and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> VKAC PACE FUND - B
<NUMBER> 02
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996<F1>
<PERIOD-START> JUL-01-1995<F1>
<PERIOD-END> JUN-30-1996<F1>
<INVESTMENTS-AT-COST> 2290779902<F1>
<INVESTMENTS-AT-VALUE> 2610166737<F1>
<RECEIVABLES> 74449957<F1>
<ASSETS-OTHER> 128931<F1>
<OTHER-ITEMS-ASSETS> 1073<F1>
<TOTAL-ASSETS> 2684746698<F1>
<PAYABLE-FOR-SECURITIES> 65278153<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 8556816<F1>
<TOTAL-LIABILITIES> 73834969<F1>
<SENIOR-EQUITY> 2191045<F1>
<PAID-IN-CAPITAL-COMMON> 2076215544
<SHARES-COMMON-STOCK> 6103794
<SHARES-COMMON-PRIOR> 4592679
<ACCUMULATED-NII-CURRENT> 11815798<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 200704405<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 319984937
<NET-ASSETS> 2610911729<F1>
<DIVIDEND-INCOME> 41112554<F1>
<INTEREST-INCOME> 8213613<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 24193735<F1>
<NET-INVESTMENT-INCOME> 25132432<F1>
<REALIZED-GAINS-CURRENT> 388484135<F1>
<APPREC-INCREASE-CURRENT> 51718717<F1>
<NET-CHANGE-FROM-OPS> 465335284<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 222479
<DISTRIBUTIONS-OF-GAINS> 7831468
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22765160
<NUMBER-OF-SHARES-REDEEMED> 21936339
<SHARES-REINVESTED> 682294
<NET-CHANGE-IN-ASSETS> 276336901
<ACCUMULATED-NII-PRIOR> 15141317<F1>
<ACCUMULATED-GAINS-PRIOR> 151712168<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11589844<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 24201235
<AVERAGE-NET-ASSETS> 60492262
<PER-SHARE-NAV-BEGIN> 11.53
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 2.070
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 1.760
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.81
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> VKAC PACE FUND - C
<NUMBER> 03
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996<F1>
<PERIOD-START> JUL-01-1995<F1>
<PERIOD-END> JUN-30-1996<F1>
<INVESTMENTS-AT-COST> 2290779902<F1>
<INVESTMENTS-AT-VALUE> 2610166737<F1>
<RECEIVABLES> 74449957<F1>
<ASSETS-OTHER> 128931<F1>
<OTHER-ITEMS-ASSETS> 1073<F1>
<TOTAL-ASSETS> 2684746698<F1>
<PAYABLE-FOR-SECURITIES> 65278153<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 8556816<F1>
<TOTAL-LIABILITIES> 73834969<F1>
<SENIOR-EQUITY> 2191045<F1>
<PAID-IN-CAPITAL-COMMON> 2076215544
<SHARES-COMMON-STOCK> 377788
<SHARES-COMMON-PRIOR> 193762
<ACCUMULATED-NII-CURRENT> 11815798<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 200704405<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 319984937<F1>
<NET-ASSETS> 2610911729
<DIVIDEND-INCOME> 41112554<F1>
<INTEREST-INCOME> 8213613<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 24193735<F1>
<NET-INVESTMENT-INCOME> 25132432<F1>
<REALIZED-GAINS-CURRENT> 388484135<F1>
<APPREC-INCREASE-CURRENT> 51718717<F1>
<NET-CHANGE-FROM-OPS> 465335284<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 9253
<DISTRIBUTIONS-OF-GAINS> 325710
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3991112
<NUMBER-OF-SHARES-REDEEMED> 3834141
<SHARES-REINVESTED> 27055
<NET-CHANGE-IN-ASSETS> 276336901
<ACCUMULATED-NII-PRIOR> 15141317<F1>
<ACCUMULATED-GAINS-PRIOR> 151712168<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11589844<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 24201235<F1>
<AVERAGE-NET-ASSETS> 2983255
<PER-SHARE-NAV-BEGIN> 11.52
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 2.100
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 1.760
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.83
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
