<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
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. 48 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 33 [X]
</TABLE>
VAN KAMPEN PACE FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN INVESTMENTS INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 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 September 30, 1998 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.
Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
VAN KAMPEN PACE FUND
CROSS REFERENCE SHEET
(AS REQUIRED BY ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
PART A ------------------
<C> <S> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights; Fund Performance
4. General Description of Registrant.......... The Fund; Investment Objective and
Policies; Investment Practices; Description
of Shares of the Fund
5. Management of the Fund..................... Annual Fund Operating Expenses and Example;
The Fund; Investment Practices;
Investment Advisory Services; Inside Back
Cover
6. Capital Stock and Other Securities......... The Fund; Alternative Sales Arrangements;
Purchase of Shares; Shareholder Services;
Distribution and Service Plans;
Redemption of Shares; Distributions from
the Fund; Tax Status; Description of
Shares of the Fund; Additional
Information; 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>
STATEMENT OF ADDITIONAL INFORMATION CAPTION
PART B -------------------------------------------
<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......... Repurchase Agreements; Foreign Securities;
Options, Futures Contracts and Related
Options; Investment Restrictions
14. Management of the Fund..................... General Information; Trustees and Officers;
Investment Advisory Agreement
15. Control Persons and Principal Holders of
Securities............................... General Information; Trustees and Officers
16. Investment Advisory and Other Services..... General Information; Trustees and Officers;
Investment Advisory Agreement;
Distributor; Distribution and Service
Plans; Transfer Agent; Portfolio
Transactions and Brokerage; Other
Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; Exchange
Privilege
20. Tax Status................................. Tax Status of the Fund
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Fund Performance
23. Financial Statements....................... 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, so numbered, in Part C of this Registration Statement.
<PAGE> 3
- --------------------------------------------------------------------------------
VAN KAMPEN PACE FUND
- --------------------------------------------------------------------------------
Van Kampen Pace Fund (the "Fund") is a diversified, open-end management
investment company, commonly known as a mutual fund. The Fund's investment
objective 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 Asset Management Inc. (the
"Adviser"). This Prospectus sets forth certain information that a prospective
investor should know before investing in the Fund. Please read it carefully and
retain it for future reference. The address of the Fund is One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, and its telephone number is (800) 341-2911.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE COMMISSION OR ANY STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated September 30, 1998, 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) 341-2911 or for
Telecommunications Device For the Deaf at (800) 421-2833. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related materials at the
SEC's internet web site (http://www.sec.gov).
VAN KAMPEN FUNDS LOGO
THIS PROSPECTUS IS DATED SEPTEMBER 30, 1998.
<PAGE> 4
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 4
Annual Fund Operating Expenses and Example.................. 5
Financial Highlights........................................ 6
The Fund.................................................... 8
Investment Objective and Policies........................... 8
Investment Practices........................................ 8
Investment Advisory Services................................ 12
Alternative Sales Arrangements.............................. 13
Purchase of Shares.......................................... 14
Shareholder Services........................................ 20
Redemption of Shares........................................ 22
Distribution and Service Plans.............................. 24
Distributions from the Fund................................. 25
Tax Status.................................................. 26
Fund Performance............................................ 28
Description of Shares of the Fund........................... 29
Additional Information...................................... 30
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 5
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
THE FUND. Van Kampen 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 for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").
INVESTMENT OBJECTIVE. The investment objective of the Fund is capital growth.
There is no assurance the Fund will achieve its investment objective. See
"Investment Objective and Policies."
INVESTMENT POLICY. The Fund seeks to achieve its investment objective by
investing primarily in common stocks of companies that the Fund's investment
adviser believes have an above average potential for capital growth. The Fund
may invest in options, futures contracts and related options and invest in
foreign securities, which practices 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."
Class B Shares. Class B shares are offered at net asset value per share and
are subject to a maximum CDSC of 5.00% on redemptions made within the first year
after purchase and declining thereafter to 0.00% after the fifth year. See
"Redemption of Shares." Class B shares are subject to a combined annual
distribution fee and service fee of up to 1.00% of the Fund's average daily net
assets attributable to such class of shares. See "Purchase of Shares -- Class B
Shares" and "Distribution and Service Plans." Class B shares convert
automatically to Class A shares eight years after the end of the calendar month
in which the shareholder's order to purchase was accepted. See "Alternative
Sales Arrangements -- Conversion Feature."
Class C Shares. Class C shares are offered at net asset value per share and
are subject to a CDSC of 1.00% on redemptions made within one year of purchase.
See "Redemption of Shares." Class C shares are subject to a combined annual
distribution fee and service fee of up to 1.00% of the Fund's average daily net
assets attributable to such class of shares. See "Purchase of Shares -- Class C
Shares" and "Distribution and Service Plans."
INVESTMENT ADVISER. Van Kampen Asset Management Inc. (the "Adviser") is the
Fund's investment adviser.
DISTRIBUTOR. Van Kampen Funds Inc. (the "Distributor") distributes the Fund's
shares.
DISTRIBUTIONS FROM THE FUND. Dividends from net investment income and capital
gains, if any, are distributed annually. All dividends and distributions are
automatically reinvested in shares of the Fund at net asset value per share
(without sales charge) unless payment in cash is requested. See "Distributions
from the Fund."
The foregoing is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus.
3
<PAGE> 6
- --------------------------------------------------------------------------------
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 Year
original purchase price or redemption proceeds)........... None(2) Year 1--5.00% 1--1.00%
Year 2--4.00% After--None
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a percentage of amount redeemed)........ None None None
Exchange fee................................................ None None None
</TABLE>
- --------------------------------------------------------------------------------
(1) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on redemptions made
within one year of the purchase. See "Purchase of Shares -- Class A Shares."
4
<PAGE> 7
- --------------------------------------------------------------------------------
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)................................................... 0.44% 0.44% 0.44%
12b-1 Fees (as a percentage of average daily net
assets)(1)................................................ 0.23% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage of average daily net
assets)................................................... 0.21% 0.22% 0.22%
Total Expenses (as a percentage of average daily net
assets)................................................... 0.88% 1.66% 1.66%
</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) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
EXAMPLE: ---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (i) an operating expense ratio of 0.88% for Class
A shares, 1.66% for Class B shares and 1.66% for Class C
shares, (ii) a 5.00% annual return and (iii) redemption at
the end of each time period:
Class A................................................. $66 $84 $103 $160
Class B................................................. $67 $82 $105 $176*
Class C................................................. $27 $52 $ 90 $197
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of each time
period:
Class A................................................. $66 $84 $103 $160
Class B................................................. $17 $52 $ 90 $176*
Class C................................................. $17 $52 $ 90 $197
</TABLE>
- --------------------------------------------------------------------------------
* Based on conversion to Class A shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. The ten year amount with respect to Class B shares of the
Fund reflects the lower aggregate 12b-1 and service fees applicable to such
shares after conversion to Class A shares. Class B shares acquired through the
exchange privilege are subject to the CDSC schedule relating to the Class B
shares of the fund from which the purchase of Class B shares was originally
made. Accordingly, future expenses as projected could be higher than those
determined in the above table if the investor's Class B shares were exchanged
from a fund with a higher CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Investment
Advisory Services," "Redemption of Shares" and "Distribution and Service Plans."
5
<PAGE> 8
- --------------------------------------------------------------------------------
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 PricewaterhouseCoopers
LLP, independent accountants, whose report thereon was unqualified. The most
recent annual report (which contains financial highlights for the last five
years) is included in the Statement of Additional Information and may be
obtained by shareholders without charge by calling the telephone number on the
cover of this Prospectus. This information should be read in conjunction with
the financial statements and notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
CLASS A*
---------------------------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------
1998 1997 1996(A) 1995(A) 1994 1993 1992
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.... $13.872 $11.92 $11.62 $11.05 $12.95 $13.21 $12.37
--------- -------- -------- -------- -------- -------- --------
Net Investment Income...................... .122 .132 .12 .14 .13 .165 .195
Net Realized and Unrealized Gain/Loss...... 3.541 3.191 2.09 1.85 (.1475) 1.69 1.095
--------- -------- -------- -------- -------- -------- --------
Total from Investment Operations............ 3.663 3.323 2.21 1.99 (.0175) 1.855 1.29
--------- -------- -------- -------- -------- -------- --------
Less:
Distributions from and in Excess of Net
Investment Income........................ .144 .121 .15 .1225 .135 .145 .2375
Distributions from Net Realized Gain....... 2.420 1.250 1.76 1.2975 1.7475 1.97 .2125
--------- -------- -------- -------- -------- -------- --------
Total Distributions......................... 2.564 1.371 1.91 1.42 1.8825 2.115 .45
--------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of the Period.......... $14.971 $13.872 $11.92 $11.62 $11.05 $12.95 $13.21
========= ======== ======== ======== ======== ======== ========
Total Return(b)............................. 29.89% 30.06% 20.48% 20.62% (.64%) 15.20% 10.58%
Net Assets at End of the Period (In
millions).................................. $3,661.4 $2,992.2 $2,534.3 $2,279.4 $2,152.5 $2,446.2 $2,350.2
Ratio of Expenses to Average Net
Assets(c).................................. .88% .97% .94% 1.04% 1.02% 1.06% 1.00%
Ratio of Net Investment Income to Average
Net Assets (c)............................. .80% 1.01% 1.02% 1.24% .99% 1.22% 1.38%
Portfolio Turnover.......................... 67% 144% 213% 248% 112% 113% 54%
<CAPTION>
CLASS A*
------------------------------
1991 1990 1989
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period.... $12.69 $12.72 $11.19
-------- -------- --------
Net Investment Income...................... .275 .345 .315
Net Realized and Unrealized Gain/Loss...... .1575 1.3188 1.55
-------- -------- --------
Total from Investment Operations............ .4325 1.6638 1.865
-------- -------- --------
Less:
Distributions from and in Excess of Net
Investment Income........................ .29 .3675 .2875
Distributions from Net Realized Gain....... .4625 1.3263 .0475
-------- -------- --------
Total Distributions......................... .7525 1.6938 .335
-------- -------- --------
Net Asset Value, End of the Period.......... $12.37 $12.69 $12.72
======== ======== ========
Total Return(b)............................. 4.31% 13.69% 17.32%
Net Assets at End of the Period (In
millions).................................. $2,348.7 $2,456.8 $2,405.6
Ratio of Expenses to Average Net
Assets(c).................................. 1.01% .88% .72%
Ratio of Net Investment Income to Average
Net Assets (c)............................. 2.22% 2.55% 2.58%
Portfolio Turnover.......................... 40% 39% 45%
</TABLE>
(Table continued on following page)
6
<PAGE> 9
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------------------------------- --------
JANUARY 10, 1992
(COMMENCEMENT
YEAR ENDED JUNE 30, OF DISTRIBUTION)
-------------------------------------------------------------- TO JUNE 30,
1998 1997 1996(A) 1995(A) 1994(A) 1993(A) 1992(A) 1998
-------- -------- -------- -------- -------- ------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $13.730 $11.81 $11.53 $10.96 $12.86 $13.13 $13.87 $13.752
-------- -------- -------- -------- -------- ------- ------ --------
Net Investment Income............ .045 .046 .02 .05 .03 .03 .05 .028
Net Realized and Unrealized
Gain/Loss...................... 3.466 3.151 2.07 1.85 (.1575) 1.705 (.79) 3.482
-------- -------- -------- -------- -------- ------- ------ --------
Total from Investment
Operations....................... 3.511 3.197 2.09 1.90 (.1275) 1.735 (.74) 3.510
-------- -------- -------- -------- -------- ------- ------ --------
Less:
Distributions from and in Excess
of Net Investment Income....... .055 .027 .05 .0325 .025 .035 -- 0.55
Distributions from Net Realized
Gain........................... 2.420 1.250 1.76 1.2975 1.7475 1.97 -- 2.420
-------- -------- -------- -------- -------- ------- ------ --------
Total Distributions............... 2.475 1.277 1.81 1.33 1.7725 2.005 -- 2.475
-------- -------- -------- -------- -------- ------- ------ --------
Net Asset Value, End of the
Period........................... $14.766 $13.730 $11.81 $11.53 $10.96 $12.86 $13.13 $14.787
======== ======== ======== ======== ======== ======= ====== ========
Total Return(b)................... 28.92% 29.08% 19.44% 19.73% (1.46%) 12.84% (5.34%)** 28.87%
Net Assets at End of the Period
(In millions).................... $140.3 $95.5 $72.1 $53.0 $35.8 $27.7 $11.7 $11.7
Ratio of Expenses to Average Net
Assets(c)........................ 1.66% 1.74% 1.75% 1.84% 1.79% 1.98% 1.82% 1.66%
Ratio of Net Investment Income to
Average Net Assets(c)............ .03% 23% .21% .44% .21% .25% .56% .04%
Portfolio Turnover................ 67% 144% 213% 248% 112% 113% 54% 67%
<CAPTION>
CLASS C
------------------------------------------------
AUGUST 27, 1993
(COMMENCEMENT
YEAR ENDED JUNE 30, OF DISTRIBUTION)
----------------------------- TO JUNE 30,
1997 1996(A) 1995(A) 1994(A)
-------- ------- -------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $11.83 $11.52 $10.99 $13.25
-------- ------ -------- --------
Net Investment Income............ .036 .02 .05 .02
Net Realized and Unrealized
Gain/Loss...................... 3.163 2.10 1.81 (.4375 )
-------- ------ -------- --------
Total from Investment
Operations....................... 3.199 2.12 1.86 (.4175 )
-------- ------ -------- --------
Less:
Distributions from and in Excess
of Net Investment Income....... .027 .05 .0325 .095
Distributions from Net Realized
Gain........................... 1.250 1.76 1.2975 1.7475
-------- ------ -------- --------
Total Distributions............... 1.277 1.81 1.33 1.8425
-------- ------ -------- --------
Net Asset Value, End of the
Period........................... $13.752 $11.83 $11.52 $10.99
======== ====== ======== ========
Total Return(b)................... 29.04% 19.74% 19.27% (3.70%)**
Net Assets at End of the Period
(In millions).................... $7.0 $4.5 $2.2 $1.2
Ratio of Expenses to Average Net
Assets(c)........................ 1.74% 1.75% 1.84% 1.81%
Ratio of Net Investment Income to
Average Net Assets(c)............ .23% .15% .44% .24%
Portfolio Turnover................ 144% 213% 248% 112%
</TABLE>
- ------------
* Per share information for the years 1990 and 1989 has been adjusted to
reflect a 2 for 1 stock split effective June 8, 1990.
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 1997 the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to the
Adviser's reimbursement of certain expenses was less than 0.01%.
7
<PAGE> 10
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
The Fund is a diversified, open-end management investment company, commonly
known as a mutual fund. A mutual fund provides, for those who have similar
investment goals, a practical and convenient way to invest in a diversified
portfolio of securities by combining their resources in an effort to achieve
such goals.
Van Kampen Asset Management Inc. (the "Adviser") provides investment advisory
and administrative services to the Fund. The Adviser or its affiliates also act
as investment adviser to other mutual funds distributed by Van Kampen Funds Inc.
(the "Distributor"). To obtain prospectuses and other information on any of
these other funds, please call the telephone number on the cover page of the
Prospectus.
- --------------------------------------------------------------------------------
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 capital 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. 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. The Fund may invest in
other investment companies subject to regulatory limitations. During adverse
economic or market conditions, the Fund may invest up to 100% of its assets in
high quality debt securities for temporary defensive purposes.
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.
YEAR 200 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem". The Adviser
is taking steps that it believes are reasonably designed to address the Year
2000 Problem with respect to computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by the Fund's other
major service providers. At this time, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund. In addition,
the Year 2000 Problem may adversely affect the issuers of securities in which
the Fund may invest which, in turn, may adversely affect the net asset value of
the Fund.
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks or broker-dealers in order to earn a return on temporarily available cash.
A repurchase agreement is a short-term investment in which the purchaser (i.e.,
the Fund) acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the holding period. Repurchase agreements involve certain risks
in the event of a default by the other party. 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. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience losses in connection with
delays in liquidating the underlying securities including: (a) possible decline
in the value of the underlying security during the period while the
8
<PAGE> 11
Fund seeks to enforce its rights thereto; (b) possible lack of access to income
on the underlying security during this period; and (c) expenses of enforcing its
rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an SEC exemptive order authorizing this practice, which
conditions are designed to ensure the fair administration of the joint account
and to protect the amounts in that account.
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 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 may be available about the underlying
issuer in 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 options, futures contracts and options thereon in several different
ways, depending upon the status of the Fund's portfolio and the Adviser's
expectations concerning the securities markets.
In times of stable or rising stock prices, the Fund generally seeks to be
fully invested in equity securities. Even when the Fund is fully invested,
however, prudent management requires that at least a small portion of assets be
available as cash to honor redemption requests and for other short-term needs.
The Fund 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 compensate for the cash portion of its assets and may obtain performance
equivalent to investing 100% of its assets in equity securities.
If the Adviser forecasts a market decline, the Fund may seek to reduce its
exposure to the securities markets by increasing its cash position. By selling
stock index futures contracts instead of portfolio securities, a similar result
may be achieved to the extent that the performance of the futures contracts
correlates to the performance of the Fund's portfolio securities. Sales of
futures contracts frequently may be accomplished more rapidly and at less cost
than the actual sale of securities. Once the desired hedged position has been
effected, the Fund could then liquidate securities in a more deliberate manner,
reducing its futures position simultaneously to maintain the desired balance, or
it could maintain the hedged position.
As an alternative to selling futures contracts, the Fund can purchase puts (or
futures puts) to hedge the portfolio's risk in a declining market. Since the
value of a put increases as the underlying security declines below a specified
level, value is protected against a market decline to the degree the performance
of the put correlates inversely with the performance of the Fund's investment
portfolio. If the market remains stable or advances, the Fund can refrain from
exercising the put and its portfolio will participate in the advance, having
incurred only the premium cost for the put.
The Fund is authorized to purchase and sell over-the-counter options ("OTC
Options"). OTC Options are purchased from or sold to securities dealers,
financial institutions of other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. The Fund will sell only OTC Options
(other than OTC currency options) that are
9
<PAGE> 12
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 certain cases the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities.
Potential Risks of Options, Futures Contracts and Related Options. The
purchase and sale of options, futures contracts and related options involve
risks different from those involved with direct investments in underlying
securities. While utilization of options, futures contracts and similar
instruments may be advantageous to the Fund, if the Adviser is not successful in
employing such instruments in managing the Fund's investments, the Fund's
performance will be worse than if the Fund did not make such investments. In
addition, the Fund would pay commissions and other costs in connection with such
investments, which may increase the Fund's expenses and reduce its return.
In order to prevent leverage in connection with the purchase of futures
contracts or call options thereon by the Fund, an amount of cash or liquid
securities equal to the market value of the obligation under the futures
contracts or options (less any related margin deposits) will be maintained in a
segregated account with the Custodian. The Fund may not invest more than 10% of
its net assets in illiquid securities, including certain OTC Options deemed
illiquid and repurchase agreements which have a maturity of longer than seven
days. A more complete discussion of the potential risks involved in transactions
in options, futures contracts and related options is contained in the Statement
of Additional Information.
PORTFOLIO TURNOVER. The Fund purchases securities which are believed by the
Adviser to have above average potential for capital 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% in any given year, which is higher than
that of many other investment companies. A higher portfolio turnover rate
increases the Fund's transactions costs, including brokerage commissions, and
may result in the realization of more short-term capital gains than if the Fund
had a lower portfolio turnover. The turnover rate will not be a limiting factor,
however, if the Adviser deems portfolio changes appropriate.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES. The Adviser is responsible for
the placement of orders for the purchase and sale of portfolio securities for
the Fund and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution services rendered
on a continuing basis. The Adviser may place portfolio transactions, to the
extent permitted by law, with brokerage firms affiliated with the Fund, the
Adviser or the Distributor and with firms participating in the distribution of
shares of the Fund if it reasonably believes that the quality of the execution
and the commission are comparable to that available from other qualified firms.
The Adviser is authorized to pay higher commissions to brokerage firms that
provide it with investment and research information than to firms which do not
provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. The information
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 Small Capitalization Fund ("Small Cap Fund"). The shares of the Small Cap
Fund are available for investment only by certain funds advised by the Adviser
or its affiliates. The Adviser believes that the use of the Small Cap 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 while at the
same time minimizing costs. The Adviser charges no advisory fee for managing the
Small Cap Fund nor are there any sales loads or other charges associated with
distribution of its shares. Other expenses incurred by the Small Cap Fund are
borne by the Small Cap Fund, and thus indirectly by the Fund and other funds
that invest in the Small Cap Fund. With respect to such other expenses, the
Adviser anticipates that the efficiencies resulting from use of the Small Cap
Fund will result in cost savings for the Fund and other funds. In large part,
these savings are attributable to the fact that administrative actions that
would have to be performed multiple times if each fund held its own portfolio of
small capitalization will need to be performed only once.
10
<PAGE> 13
The Adviser expects that the Small Cap Fund will experience trading costs that
will be substantially less than the trading costs that would be incurred if
small capitalization securities were purchased separately for the Fund and other
funds. The Fund's investments in the Small Cap Fund are subject to the terms and
conditions set forth in the 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.
For purposes of reviewing the Fund's portfolio diversification, the Fund will
be deemed to own a pro rata portion of each investment of the Small Cap 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 fundamental investment
restrictions which, like the investment objective, may not be changed without
approval by a vote of a majority of the outstanding voting shares of the Fund
(as defined in the Investment Company Act of 1940, as amended (the "1940 Act")).
These restrictions provide, among other things, that the Fund may not:
1. 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; except that the Fund may purchase securities of other investment
companies without regard to this limitation to the extent permitted by (i)
the 1940 Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief from the provisions of the 1940 Act.
2. 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.
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.
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 the Fund may purchase
securities of other investment companies without regard to this limitation
to the extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act.
2. 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.
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; except that the
Fund may purchase securities of other investment companies without regard
to this limitation to the extent permitted by
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<PAGE> 14
(i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions of
the 1940 Act.
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INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen
Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset management
company with more than two million retail investor accounts, extensive
capabilities for managing institutional portfolios, and more than $65 billion
under management or supervision. Van Kampen's more than 50 open-end and 39
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen Funds Inc. (the
"Distributor"), the distributor of the Fund and the sponsor of the funds
mentioned above, is also a wholly-owned subsidiary of Van Kampen. Van Kampen is
an indirect wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financing and investing; and securities lending.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to average daily net assets of the
Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
------------------------ -----------
<S> <C>
First $1 billion............................................ 0.50 of 1.00%
Next $1 billion............................................. 0.45 of 1.00%
Next $1 billion............................................. 0.40 of 1.00%
Over $3 billion............................................. 0.35 of 1.00%
</TABLE>
Under the Advisory Agreement, the Fund also reimburses the Adviser for the
cost of the Fund's accounting services, which include maintaining its financial
books and records and calculating its daily net asset value. Operating expenses
paid by the Fund include shareholder service agency fees, service fees,
distribution fees, custodian fees, legal and accounting fees, the costs of
reports and proxies to shareholders, trustees' fees (other than those who are
affiliated persons as defined in the 1940 Act of the Adviser, Distributor or Van
Kampen), and all other business expenses not specifically assumed by the
Adviser. Advisory (management) fee and total operating expense ratios are shown
under the caption "Annual Fund Operating Expenses and Example" herein.
From time to time the Adviser or the Distributor may voluntarily undertake to
reduce the Fund's expenses by reducing the fees payable to them to the extent
of, or bearing expenses in excess of, such limitations as they may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.")
PERSONAL INVESTMENT POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit directors, trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to pre-clearance and other procedures designed to prevent conflicts of
interest.
PORTFOLIO MANAGEMENT. Mr. John Cunniff has been primarily responsible for the
day-to-day management of the Fund's investment portfolio since July 1998. Mr.
Cunniff has assisted in co-managing the Fund's investment portfolio since
November 1996. Mr. Cunniff has been a Vice President and Portfolio Manager of
the Adviser and Advisory Corp. since
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<PAGE> 15
October 1995. Prior to that time, Mr. Cunniff was a Vice President, Portfolio
Manager with Templeton Quantitative Advisors.
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ALTERNATIVE SALES ARRANGEMENTS
- --------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial given the amount of the
purchase and the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
maximum sales charge of up to 5.75% of the offering price (6.10% of the net
amount invested), reduced on investments of $50,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a CDSC of 1.00% may be imposed on certain redemptions made within one year of
the purchase. Class A shares are subject to an ongoing service fee at an annual
rate of up to 0.25% of the Fund's aggregate average daily net assets
attributable to the Class A shares. Certain purchases of Class A shares qualify
for 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 convert
automatically to Class A shares eight years after the end of the calendar month
in which the shareholder's order to purchase was accepted. See "Purchase of
Shares -- Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.25% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the 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. See "Purchase of Shares -- Class
C Shares."
CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares six years after the end of the calendar month in which the shares
were purchased. Class C shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares ten years after the end of the calendar month in which such
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a share acquired through the
exchange privilege is determined by reference to the Participating Fund from
which such share was originally purchased.
The conversion of such shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) the conversion of shares does not constitute a taxable
event under federal income tax law. The conversion may be suspended if such an
opinion is no longer available and such shares might continue to be subject to
the higher aggregate fees applicable to such shares for an indefinite period.
FACTORS FOR CONSIDERATION. In deciding which class of shares to purchase,
investors should take into consideration their investment goals, present and
anticipated purchase amounts, time horizons and temperaments. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the higher aggregate fees and CDSC on Class B shares and Class C shares would be
less than the initial sales charge on Class A shares purchased at the same time,
and to what extent such differential would be offset by the higher dividends per
share on Class A shares. To assist investors in making this determination, the
table under the caption "Annual Fund Operating Expenses and Example" sets forth
examples of the charges applicable to each class of shares. In this regard,
Class A shares may be more beneficial to
13
<PAGE> 16
the investor who qualifies for reduced initial sales charges or purchases at net
asset value. It is presently the policy of the Distributor not to accept any
order of $500,000 or more for Class B shares or any order of $1 million or more
for Class C shares as it ordinarily would be more beneficial for such an
investor to purchase Class A shares.
Class A shares are not subject to an ongoing distribution fee and,
accordingly, receive correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase for accounts
under $1 million, investors in Class A shares do not have all their funds
invested initially and, therefore, initially own fewer shares. Other investors
might determine that it is more advantageous to purchase either Class B shares
or Class C shares and have all their funds invested initially, although
remaining subject to a CDSC. Ongoing distribution fees on Class B shares and
Class C shares may be offset to the extent of the additional funds originally
invested and any return realized on those funds. However, there can be no
assurance as to the return, if any, which will be realized on such additional
funds. For investments held for ten years or more, the relative value upon
liquidation of the three classes tends to favor Class A shares or Class B
shares, rather than Class C shares.
Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, prefer not to pay redemption charges or have a
longer-term investment horizon. Class B shares may be appropriate for investors
who wish to avoid a front-end sales charge, put 100% of their investment dollars
to work immediately or have a longer-term investment horizon. Class C shares may
be appropriate for investors who wish to avoid a front-end sales charge, put
100% of their investment dollars to work immediately, have a shorter-term
investment horizon or desire a short CDSC schedule.
The distribution expenses incurred by the Distributor in connection with the
sale of the shares will be reimbursed, in the case of Class A shares, from the
proceeds of the initial sales charge and, in the case of Class B shares and
Class C shares, from the proceeds of the ongoing distribution fee and any CDSC
incurred upon redemption within five years or one year, respectively, of
purchase. Sales personnel of broker-dealers distributing the Fund's shares and
other persons entitled to receive compensation for selling such shares may
receive differing compensation for selling such shares. INVESTORS SHOULD
UNDERSTAND THAT THE PURPOSE AND FUNCTION OF THE CDSC AND ONGOING DISTRIBUTION
FEE WITH RESPECT TO THE CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE
OF THE INITIAL SALES CHARGE WITH RESPECT TO CLASS A SHARES. See "Distribution
and Service Plans."
GENERAL. Dividends paid by the Fund with respect to Class A shares, Class B
shares and Class C shares will be calculated in the same manner at the same time
on the same day except that the higher distribution fees and transfer agency
costs relating to Class B shares or Class C shares will be borne by the
respective class. See "Distributions from the Fund." Shares of the Fund may be
exchanged, subject to certain limitations, for shares of the same class of
certain other mutual funds advised by the Adviser and its affiliates and
distributed by the Distributor. See "Shareholder Services -- Exchange
Privilege."
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PURCHASE OF SHARES
- --------------------------------------------------------------------------------
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
this Prospectus and forwarding the application, through the authorized dealer,
to the shareholder service agent, Van Kampen Investor Services Inc. ("Investor
Services"), a wholly-owned subsidiary of
14
<PAGE> 17
Van Kampen. When purchasing shares of the Fund, investors must specify whether
the purchase is for Class A shares, Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or contingent deferred sales charge depending on the class of shares
chosen by the investor, as shown in the tables herein. Net asset value per share
for each class is determined once daily as of the close of trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m., New York time) each
day the Exchange is open. Net asset value per share for each class is determined
by dividing the value of the Fund's securities, cash and other assets (including
accrued interest) attributable to such class less all liabilities (including
accrued expenses) 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 higher distribution fee and transfer agency
costs applicable with respect to the Class B shares and Class C shares and the
differential in the dividends paid on the classes of shares. The price paid for
shares purchased is based on the next calculation of net asset value (plus sales
charges, where applicable) after an order is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. Orders received by authorized dealers after the
close of the Exchange are priced based on the next close provided they are
received by the Distributor prior to the Distributor's close of business on such
day. It is the responsibility of authorized dealers to transmit orders received
by them to the Distributor so they will be received prior to such time. Orders
of less than $500 are mailed by the authorized dealer and processed at the
offering price next calculated after receipt by Investor Services.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights except that (i) Class B shares
and Class C shares bear the expenses of the deferred sales arrangement and any
expenses (including the higher distribution fee and transfer agency costs)
resulting from such sales arrangement, (ii) generally, each class of shares has
exclusive voting rights with respect to approvals of the Rule 12b-1 distribution
plan pursuant to which its distribution fee or service fee is paid, (iii) each
class of shares has different exchange privileges, (iv) certain classes of
shares are subject to a conversion feature and (v) certain classes of shares
have different shareholder service options available. The net income
attributable to Class B shares and Class C shares and the dividends payable on
Class B shares and Class C shares will be reduced by the amount of the
distribution fee and other expenses associated with such shares. Sales personnel
of authorized dealers distributing the Fund's shares and other persons entitled
to receive compensation for selling such shares may receive differing
compensation for selling Class A shares, Class B shares or Class C shares.
The Distributor may from time to time implement programs under which an
authorized dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
authorized dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor, an amount not exceeding the total
applicable sales charges on the sales generated by the authorized dealer at the
public offering price during such programs. Other programs provide, among other
things and subject to certain conditions, for certain favorable distribution
arrangements for shares of the Fund. Also, the Distributor in its discretion may
from time to time, pursuant to objective criteria established by the
Distributor, pay fees to, and sponsor business seminars for, qualifying
authorized dealers for certain services or activities which are primarily
intended to result in sales of shares of the Fund. Fees may include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. In some instances additional compensation or promotional incentives may
be offered to brokers, dealers or financial intermediaries that have sold or may
sell significant amounts of shares during specified periods of time. The
Distributor may provide additional compensation to Edward D. Jones & Co. or an
affiliate thereof based on a combination of its sales of shares and increases in
assets under management. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total
15
<PAGE> 18
daily net assets of the Fund on an annual basis. These programs will not change
the price an investor will pay for shares or the amount that a Fund will receive
from such sale.
CLASS A SHARES
The public offering price of Class A shares is the net asset value plus a
sales charge, as set forth below.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED
AS % OF TO DEALERS
SIZE OF AS % OF NET AMOUNT (AS A % OF
INVESTMENT OFFERING PRICE INVESTED OFFERING PRICE)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Less than $50,000........................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............................. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............................. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............................. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........................... 2.00% 2.04% 1.75%
$1,000,000 or more*......................................... * * *
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC
of 1.00% on redemptions made within one year of the purchase. A
commission will be paid to authorized dealers who initiate and are
responsible for purchases of $1 million or more as follows: 1.00% on
sales to $2 million, plus 0.80% on the next $1 million and 0.50% on the
excess over $3 million.
In addition to the reallowances from the applicable public offering price
described above, the Distributor may, from time to time, pay or allow additional
reallowances or promotional incentives, in the form of cash or other
compensation, to authorized dealers that sell shares of the Fund. Authorized
dealers which are reallowed all or substantially all of the sales 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.
QUANTITY DISCOUNTS
Investors purchasing Class A shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described below.
Investors, or their authorized dealers, must notify the Fund at the time of
the purchase order whenever a quantity discount is applicable to purchases. Upon
such notification, an investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated at any time. For more
information about quantity discounts, investors should contact their authorized
dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or
her spouse and children under 21 years of age and any corporation, partnership
or sole proprietorship which is 100% owned, either alone or in combination, by
any of the foregoing; a trustee or other fiduciary purchasing for a single trust
or for a single fiduciary account, or a "company" as defined in Section 2(a)(8)
of the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
16
<PAGE> 19
Volume Discounts. The size of investment shown in the preceding sales charge
table applies to the total dollar amount being invested by any person in shares
of the Fund, or in any combination of shares of the Fund and shares of other
Participating Funds, although other Participating Funds may have different sales
charges.
Cumulative Purchase Discount. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds which have been previously purchased and are
still owned.
Letter of Intent. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the preceding sales charge
table. The size of investment shown in the preceding sales charge table also
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charges applicable to the total amount of the investment goal.
If the goal is not achieved within the period, the investor must pay the
difference between the sales charge applicable to the purchases made and the
sales charges previously paid. The initial purchase must be for an amount equal
to at least 5% of the minimum total purchase amount of the level selected. If
trades not initially made under a Letter of Intent subsequently qualify for a
lower sales charge through the 90-day back-dating provisions, an adjustment will
be made at the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustments in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. Additional
information is contained in the application form accompanying this Prospectus.
OTHER PURCHASE PROGRAMS
Purchasers of Class A shares may be entitled to reduced initial sales charges
in connection with unit investment trust reinvestment programs and purchases by
registered representatives of selling firms or purchases by persons affiliated
with the Fund or the Distributor. The Fund reserves the right to modify or
terminate these arrangements at any time.
Unit Investment Trust Reinvestment Programs. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
shares of the Fund, at net asset value and with no minimum initial or subsequent
investment requirement, if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the authorized dealer,
if any, through which such participation in the qualifying program was initiated
0.50% of the offering price as a dealer concession or agency commission. Persons
desiring more information with respect to this program, including the applicable
terms and conditions thereof, should contact their authorized dealer or the
Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each participating investor in a computerized format fully
compatible with Investor Services processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NAV Purchase Options. Class A shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by the Fund,
by:
(1) Current or retired trustees or directors of funds advised by the Adviser
or Advisory Corp. and such persons' families and their beneficial
accounts.
17
<PAGE> 20
(2) Current or retired directors, officers and employees of Morgan Stanley
Dean Witter & Co. or any of its subsidiaries, employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser, and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21
years of age when purchasing for any accounts they beneficially own, or,
in the case of any such financial institution, when purchasing for
retirement plans for such institution's employees; provided that such
purchases are otherwise permitted by such institutions.
(4) Registered investment advisers, who charge a fee for their services trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers
through which purchases are made an amount up to 0.50% of the amount
invested, over a 12-month period following such transaction.
(5) Trustees and other fiduciaries purchasing shares for retirement plans
which invest in multiple fund families through broker-dealer retirement
plan alliance programs that have entered into agreements with the
Distributor and which are subject to certain minimum size and operational
requirements. Directors and other fiduciaries should refer to the
Statement of Additional Information for further details with respect to
such alliance programs.
(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax advantaged retirement account who purchase shares
of the Fund with proceeds from distribution from such plan or retirement
account other than distributions taken to correct an excess contribution.
(7) Accounts as to which a bank or broker-dealer charges an account
management fee ("wrap accounts"), provided the bank or broker-dealer has
a separate agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Code, or custodial accounts
held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(c)(3) of
the Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided, for plans
initially establishing accounts with the Distributor in the Participating
Funds after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating Fund or have
received proposals from the Distributor prior to February 1, 1997 based
on net asset value purchase privileges previously in effect will be
qualified to purchase shares of the Participating Funds at net asset
value for accounts established on or before May 1, 1997. Section 403(b)
and similar accounts for which Van Kampen Trust Company served as
custodian will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible
employees, except under certain uniform criteria established by the
Distributor from time to time. Prior to February 1, 1997, a commission
will be paid to authorized dealers who initiate and are responsible for
such purchases within a rolling twelve-month period as follows: 1.00% on
sales to $5 million, plus 0.50% on the next $5 million, plus 0.25% on the
excess over $10 million. For purchases on February 1, 1997 and
thereafter, a commission will be paid as follows: 1.00% on sales to $2
million, plus 0.80% on the next $1 million, plus 0.50% on the next $47
million and 0.25% on the excess over $50 million.
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its
endorsement or authorization, on behalf of the group, for purchase of
shares of the Fund and Participating Funds, (iv) has a membership that
the authorized dealer can certify as to the group's members and (v)
satisfies other uniform criteria established by the Distributor for the
purpose of realizing economies of scale in distributing such shares. A
qualified group does not include one whose sole organizational nexus, for
example, is that its participants are credit card holders of the same
institution, policy holders of an insurance company, customers of a bank
or broker-dealer, clients of an investment adviser or other similar
groups. Shares purchased in each group's participants account in
connection with this privilege will be subject to a CDSC of 1.00% in the
event of redemption within one year of purchase, and a commission will be
paid to authorized dealers who initiate and are responsible for such
sales to each individual as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million and 0.50% on the excess over $3 million.
18
<PAGE> 21
The term "families" includes a person's spouse, children under 21 years of age
and grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as described
herein under "Distribution and Service Plans" on purchases made as described in
(3) through (9) above. The Fund may terminate, or amend the terms of, offering
shares of the Fund at net asset value to such groups at any time.
CLASS B SHARES
Class B shares are offered at net asset value. Class B shares which are
redeemed within five years of purchase are subject to a CDSC at the rates set
forth in the following table, charged as a percentage of the dollar amount
subject thereto. The charge is assessed on an amount equal to the lesser of the
then current market value or the cost of the shares being redeemed. Accordingly,
no sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on shares derived from
reinvestment of dividends or capital gains distributions. It is presently the
policy of the Distributor not to accept any order for Class B shares in an
amount of $500,000 or more because it ordinarily will be more advantageous for
an investor making such an investment to purchase Class A shares.
The amount of the CDSC, if any, varies depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month are aggregated and deemed to have been made on the last day of
the month.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ---------------------------------------------------------------------------------------------
<S> <C>
First....................................................... 5.00%
Second...................................................... 4.00%
Third....................................................... 3.00%
Fourth...................................................... 2.50%
Fifth....................................................... 1.50%
Sixth and After............................................. None
</TABLE>
- --------------------------------------------------------------------------------
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC, second of shares held for over five years and
third of shares held longest during the five-year period.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds is subject to a deferred sales charge at a
rate of 4.00% (the applicable rate in the second year after purchase).
A commission or transaction fee of 4.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Additionally, the Distributor
may, from time to time, pay additional promotional incentives, in the form of
cash or other compensation, to authorized dealers that sell Class B shares of
the Fund.
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the lower of the then current market
value or
19
<PAGE> 22
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.
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 annually commencing in the second
year after purchase. Additionally, the Distributor may, from time to time, pay
additional promotional incentives, in the form of cash or other compensation, to
authorized dealers that sell Class C shares of the Fund.
WAIVER OF CDSC
The CDSC is waived on redemptions of Class B shares and Class C shares (i)
following the death or disability (as defined in the Code) of a shareholder,
(ii) in connection with required minimum distributions from an IRA or other
retirement plan, (iii) pursuant to the Fund's systematic withdrawal plan but
limited to 12% annually of the initial value of the account and (iv) in
circumstances under which no commission or transaction fee is paid to authorized
dealers at the time of purchase of such shares; or (v) effected pursuant to the
right of the Fund to liquidate a shareholder's account as described herein under
"Redemption of Shares." The CDSC is also waived on redemptions of Class C shares
as it relates to the reinvestment of redemption proceeds in shares of the same
class of the Fund within 180 days after redemption. See the Statement of
Additional Information for further discussion of waiver provisions.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investments in its shares at little or no extra cost to the investor. The
following is a description of such services.
INVESTMENT ACCOUNT. Investor Services, transfer agent for the Funds and a
wholly-owned subsidiary of Van Kampen, performs bookkeeping, data processing and
administration services related to the maintenance of shareholder accounts. Each
shareholder has an investment account under which the investor's shares of the
Fund are held by Investor Services. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a statement
showing the activity in the account. Each shareholder who has an account in any
of the Participating Funds will receive statements quarterly from Investor
Services showing any reinvestments of dividends and capital gains distributions
and any other activity in the account since the preceding statement. Such
shareholders also will receive separate confirmations for each purchase or sale
transaction other than reinvestment of dividends and capital gains distributions
and systematic purchases or redemptions. Additions to an investment account may
be made at any time by purchasing shares through authorized dealers or by
mailing a check directly to Investor Services.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen Funds, c/o Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain
a Surety Bond in a form acceptable to Investor Services. On the date the letter
is received, Investor Services will calculate a fee for replacing the lost
certificate equal to no more than 2.00% of the net asset value of the issued
shares, and bill the party to whom the replacement certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge), on the record date. Unless the shareholder instructs otherwise, the
reinvestment plan is automatic. This instruction may be made by telephone by
calling (800) 341-2911 ((800) 421-2833 for the hearing impaired) or in writing
to Investor Services. The investor may, on the initial application or prior to
any declaration, instruct that dividends be paid
20
<PAGE> 23
in cash and capital gains distributions be reinvested at net asset value, or
that both dividends and capital gains distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize Investor Services to charge a bank account on
a regular basis to invest predetermined amounts in the Fund. Additional
information is available from the Distributor or authorized dealers.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; 401(k) plans; Section 403(b)(7) plans in the case of
employees of public school systems and certain non-profit organizations; or
other pension or profit sharing plans. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
Trust Company serves as custodian under the IRA, 403(b)(7) and Keogh plans.
Details regarding fees, as well as full plan administration for profit sharing,
pension and 401(k) plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of ACH. In addition, the shareholder must fill out the appropriate
section of the account application. The shareholder must also include a voided
check or deposit slip from the bank account into which redemptions are to be
deposited together with the completed application. Once Investor Services has
received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing Investor
Services.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus, or by calling (800) 341-2911 ((800) 421-2833 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any
Participating Fund so long as the investor has a pre-existing account for such
class of shares of the other fund. Both accounts must be of the same type,
either non-retirement or retirement. If the accounts are retirement accounts,
they must both be for the same class and of the same type of retirement plan
(e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the same individual.
If a qualified, pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the fund into which distributions would be invested. Distributions are invested
into the selected fund at its net asset value per share as of the payable date
of the distribution.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of
the Participating Fund. Shareholders seeking an exchange into a Participating
Fund should obtain and read the current prospectus for such fund.
When Class B shares and Class C shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such shares from a Participating Fund. If such
Class B shares or Class C shares are redeemed and not exchanged for shares of
another Participating Fund, Class B shares and Class C shares are subject to the
CDSC schedule imposed by the Participating Fund from which such shares are
originally purchased.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written
request to Investor Services or by contacting the telephone transaction line at
(800) 421-5684. A shareholder automatically has telephone exchange privileges
unless otherwise designated in the application form accompanying this
Prospectus. Van Kampen and its subsidiaries, including Investor Services
(collectively, "VK"), and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape recording telephone
communications, and providing
21
<PAGE> 24
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither VK nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VK and the
Fund may be liable for any losses due to unauthorized or fraudulent instructions
if reasonable procedures are not followed. If the exchanging shareholder does
not have an account in the fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital gain
options (except dividend diversification) and authorized dealer of record as the
account from which shares are exchanged, unless otherwise specified by the
shareholder. In order to establish a systematic withdrawal plan for the new
account or reinvest dividends from the new account into another fund, however,
an exchanging shareholder must file a specific written request. The Fund
reserves the right to reject any order to acquire its shares through exchange.
In addition, the Fund may modify, restrict or terminate the exchange privilege
at any time on 60 days' notice to its shareholders of any termination or
material amendment.
A prospectus of any of these Participating Funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares is a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a 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 per share. If periodic withdrawals
continuously exceed reinvested dividends and capital gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Withdrawals made concurrently with the purchase of additional shares
ordinarily will be disadvantageous to the shareholder because of the duplication
of sales charges. Any gain or loss realized by the shareholder upon redemption
of shares is a taxable event. The Fund reserves the right to amend or terminate
the systematic withdrawal program on 30 days' notice to its shareholders.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.vankampen.com for further instruction. VK and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
through the internet are genuine. Such procedures include requiring use of
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed neither VK nor the Fund will be
liable for following instructions through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.
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REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their
shares of the Fund at any time. To do so, a written request in proper form must
be sent directly to Van Kampen Investor Services Inc., P.O. Box 418256, Kansas
City, Missouri 64141-9256. Shareholders may also place redemption requests
through an authorized dealer. Orders received from authorized dealers must be at
least $500 unless transmitted via the FUNDSERV network. The redemption price for
such shares is the net asset value next calculated after an order is received by
an authorized dealer provided such order is transmitted to the Distributor prior
to the Distributor's close of business on such day. It is the responsibility of
22
<PAGE> 25
authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time.
As described herein under "Purchase of Shares," redemptions of Class B shares
and Class C shares are subject to a CDSC. In addition, a CDSC of 1.00% may be
imposed on certain redemptions of Class A shares made within one year of
purchase for investments of $1 million or more. The CDSC incurred upon
redemption is paid to the Distributor in reimbursement for distribution-related
expenses. A custodian of a retirement plan account may charge fees based on the
custodian's fee schedule.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
record address has changed within the previous 30 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it will do so if a special request has been
made to Investor Services. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request. In the event the redemption is requested by a corporation, partnership,
trust, fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 120 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to Investor Services. Where Van Kampen Trust
Company serves as IRA custodian, special IRA, 403(b)(7), or Keogh redemption
forms must be obtained from and be forwarded to Van Kampen Trust Company, P.O.
Box 944, Houston, Texas 77001-0944. Contact the custodian for information.
In the case of redemption requests sent directly to Investor Services, the
redemption price is the net asset value per share next determined after the
request is received. Payment for shares redeemed will be made by check mailed
within seven days after acceptance by Investor Services of the request and any
other necessary documents in proper order. Such payment may be postponed or the
right of redemption suspended as provided by the rules of the SEC. If the shares
to be redeemed have been recently purchased by check, Investor Services may
delay mailing a redemption check until it confirms that the purchase check has
cleared, which may take up to 15 days. A taxable gain or loss will be recognized
by the shareholder upon redemption of shares.
GENERAL REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with a value on the date of the notice of redemption less than the minimum
initial investment as specified in this Prospectus. At least 60 days advance
written notice of any such involuntary redemption will be given and the
shareholder is given an opportunity to purchase the required value of additional
shares at the next determined net asset value per share without sales charge.
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) 341-2911 to request that
a copy of the Telephone Redemption Authorization form be sent to them for
completion. To redeem shares contact the telephone transaction line at (800)
421-5684. VK and the Fund employ procedures considered by them to be reasonable
to confirm that instructions communicated by telephone are genuine. Such
procedures include requiring certain personal identification information prior
to acting upon telephone instructions, tape recording telephone communications
and providing written confirmation of instructions communicated by telephone. If
reasonable procedures are employed, neither VK nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. VK
and the Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. Telephone redemptions
may not be available if the shareholder cannot reach Investor Services by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's
23
<PAGE> 26
regular redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, on a regular business day will be
processed at the net asset value per share determined that day. These privileges
are available for all accounts other than retirement accounts and accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their 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 retirement account (IRA) for which Van Kampen Trust Company acts
as custodian. The Fund reserves the right at any time to terminate, limit or
otherwise modify this redemption privilege.
REDEMPTION UPON DEATH OR DISABILITY. The Fund will waive the CDSC on
redemptions following the death or 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
CDSC on Class B shares and Class C shares.
In cases of death or disability, the CDSC on Class B shares and Class C shares
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 death or the initial determination of
disability. This waiver of the CDSC on Class B shares and Class C shares applies
to a total or partial redemption, but only to redemptions of shares held at the
time of death or 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 CDSC
paid upon such redemption. Such reinstatement is made at the net asset value per
share (without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption. Reinstatement at
net asset value per share is also offered to participants in those eligible
retirement plans held or administered by Van Kampen Trust Company for repayment
of principal (and interest) on their borrowings on such plans.
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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
24
<PAGE> 27
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 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, 1998, there were $4.6 million and $124,009 of unreimbursed
distribution-related expenses with respect to Class B shares and Class C shares,
respectively, representing 3.29% and 1.05% of the Fund's net assets attributable
to Class B shares and Class C shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the Fund or
recovered through CDSCs.
The Distributor will not use the proceeds from the CDSC applicable to a
particular class of shares to defray distribution-related expenses attributable
to any other class of shares. Various federal and state laws prohibit national
banks and some state-chartered commercial banks from underwriting or dealing in
the Fund's shares. In addition, state securities laws on this issue may differ
from the interpretations of federal law, and banks and financial institutions
may be required to register as dealers pursuant to state law. In the unlikely
event that a court were to find that these laws prevent such banks from
providing such services described above, the Fund would seek alternate providers
and expects that shareholders would not experience any disadvantage.
- --------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- --------------------------------------------------------------------------------
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS. Dividends from stocks and interest earned from other investments
are the Fund's main source of income. Substantially all of this income, less
expenses, is distributed at least annually as dividends to shareholders. Unless
the
25
<PAGE> 28
shareholder instructs otherwise, dividends are automatically applied to purchase
additional shares of the Fund at the next determined net asset value per share.
See "Shareholder Services -- Reinvestment Plan."
The per share dividends on Class B shares and Class C shares may be lower than
the per share dividends on Class A shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
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 dividends, capital gains distributions are automatically
reinvested in additional shares of the Fund at net asset value per share unless
the shareholder instructs otherwise. See "Shareholder Services -- Reinvestment
Plan."
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TAX STATUS
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXATION. The Fund has elected and qualified, and intends to
continue to qualify each year, to be treated as a regulated investment company
under Subchapter M of the Code. To qualify as a regulated investment company,
the Fund must comply with certain requirements of the Code relating to, among
other things, the source of its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including tax-exempt interest, taxable
income and net short-term capital gain, but not net capital gains, which are the
excess of net long-term capital gains over net short-term capital losses), it
will not be required to pay federal income taxes on any income distributed to
shareholders. The Fund intends to distribute at least the minimum amount of net
investment income necessary to satisfy the 90% distribution requirement. The
Fund will not be subject to federal income tax on any net capital gains
distributed to shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute, by
December 31(st) of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income (not including tax-exempt income) for such year and (ii) 98%
of its capital gain net income (the latter of which generally is computed on the
basis of the one-year period ending on October 31(st) of such year), together
with any amounts that were not distributed in previous taxable years. For
purposes of the excise tax, any ordinary income or capital gain net income
retained by, and subject to federal income tax in the hands of, the Fund will be
treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.
Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or gain without receiving cash with which
to make distributions in amounts necessary to satisfy the 90% distribution
requirement and the distribution requirements for avoiding income and excise
taxes. The Fund will monitor its transactions and may make certain tax elections
in order to mitigate the effect of these rules and prevent disqualification of
the Fund as a regulated investment company.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For
26
<PAGE> 29
example, with respect to securities issued at a discount, the Fund will be
required to accrue as income each year a portion of the discount and to
distribute such income each year in order to maintain its qualification as a
regulated investment company and to avoid income and excise taxes. In order to
generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
DISTRIBUTIONS. Distributions of the Fund's net investment income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gains ("capital gains dividends"), if any, are taxable
to shareholders as long-term capital gains regardless of the length of time
shares of the Fund have been held by such shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the tax rates applicable to capital gains
(including capital gains dividends), see "Capital Gains Rates" below. Tax-exempt
shareholders not subject to federal income tax on their income generally will
not be taxed on distributions from the Fund.
Shareholders receiving distributions in the form of additional shares issued
by the Fund will be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the distribution date. The basis of such shares will equal the
fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Fund distributions
will not qualify for the dividends received deduction for corporations, except
to the extent the Fund receives dividends from domestic corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31(st) prior to the date of
payment. In addition, certain other distributions made after the close of a
taxable year of the Fund may be "spilled back" and treated as paid by the Fund
(except for purposes of the 4% excise tax) during such taxable year. In such
case, shareholders will be treated as having received such dividends in the
taxable year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
Under Code Section 988, foreign currency gains or losses from certain forward
contracts not traded in the interbank market as well as certain other gains or
losses attributable to currency exchange rate fluctuations are typically treated
as ordinary income or loss. Such income or loss may increase or decrease (or
possibly eliminate) the Fund's income available for distribution. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
Fund's income available for distribution is decreased or eliminated, all or a
portion of the dividends declared by the Fund may be treated for federal income
tax purposes as a return of capital or, in some circumstances, as capital gain.
Generally, a shareholder's tax basis in Fund shares will be reduced to the
extent that an amount distributed to such shareholder is treated as a return of
capital.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a regulated investment company
that holds stock of a PFIC will be subject to federal income tax (i) on a
portion of any "excess distribution" received on the stock or (ii) on any gain
from a sale or disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the regulated investment company distributes the PFIC
income as a taxable dividend to its stockholders. The balance of the PFIC income
will be included in the regulated investment company's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders. If the Fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, which most likely would
27
<PAGE> 30
have to be distributed by the Fund to satisfy the distribution requirement for
avoiding income and excise taxes. In many instances it may be very difficult to
make this election due to certain requirements imposed with respect to the
election.
As an alternative to making the above-described election to treat the PFIC as
a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (a "PFIC Mark-to-Market Election").
"Mark-to-market," in this context, means recognizing as ordinary income or loss
each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or proceeds from dispositions
of, the PFIC stock. This amount would not be deductible from the Fund's taxable
income. The PFIC Mark-to-Market Election applies to the taxable year for which
made and to all subsequent taxable years, unless the Internal Revenue Service
consents to revocation of the election. By making the PFIC Mark-to-Market
Election, the Fund could ameliorate the adverse tax consequences arising from
its ownership of PFIC stock, but in any particular year may be required to
recognize income in excess of the distributions it receives from the PFIC and
proceeds from the dispositions of PFIC stock.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are non-resident aliens, may
be subject to United States withholding tax on certain distributions (whether
received in cash or in shares) at a rate of 30% or such lower rate as prescribed
by an applicable treaty.
SALE OF SHARES. The sale of shares (including transfers in connection with a
redemption or repurchase of shares) will be a taxable transaction for federal
income tax purposes. Selling shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
shares and the amount received. If such shares are held as a capital asset, the
gain or loss will be a capital gain or loss. For a summary of the tax rates
applicable to capital gains, see "Capital Gains Rates" below. Any loss
recognized upon a taxable disposition of shares held for six months or less will
be treated as a long-term capital loss to the extent of any capital gains
dividends received with respect to such shares. For purposes of determining
whether shares have been held for six months or less, the holding period is
suspended for any periods during which the shareholder's risk of loss is
diminished as a result of holding one or more other positions in substantially
similar or related property or through certain options or short sales.
CAPITAL GAINS RATES. The maximum tax rate applicable to net capital gains
recognized by individuals and other non-corporate taxpayers is (i) the same as
the maximum ordinary income tax rate for capital assets held for one year or
less or (ii) 20% for capital assets held for more than one year. A special 28%
tax rate may apply to a portion of the capital gain dividends paid by the Fund
with respect to its taxable year ended June 30, 1998.
GENERAL. The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal tax consequences of purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
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FUND PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise its total return for prior periods.
Any such advertisement would include at least average annual total return
quotations for one year, five year, and ten year periods. Other total return
quotations, aggregate or average, over other time periods may also be included.
The total return of the Fund for a particular period represents the increase,
or decrease, in the value of a hypothetical investment in the Fund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; the calculation assumes
the initial investment is made at the current maximum public offering price
(which includes a maximum sales charge of 5.75% for Class A shares); that all
income dividends or capital gains distributions during the
28
<PAGE> 31
period are reinvested in Fund shares at net asset value per share; and that any
applicable CDSC has been paid. The Fund's total return will vary depending on
market conditions, the securities comprising the Fund's portfolio, the Fund's
operating expenses and unrealized net capital gains or losses during the period.
Since Class A shares of the Fund were offered at a maximum sales charge of 8.50%
prior to June 12, 1989, actual Fund total return would have been somewhat less
than that computed on the basis of the current maximum sales charge. Total
return is based on historical earnings and asset value fluctuations and is not
intended to indicate future performance. No adjustments are made to reflect any
income taxes payable by shareholders on dividends and distributions paid by the
Fund or to reflect the fact no 12b-1 fees were incurred prior to October 1,
1989.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
Total return is calculated separately for Class A shares, Class B shares and
Class C shares. Class A shares total return figures include the maximum sales
charge of 5.75%; Class B shares and Class C shares total return figures include
any applicable CDSC. Because of the differences in sales charges and
distribution fees, the total returns for each of the classes will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the rankings or ratings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds with the Consumer Price Index, the Dow Jones
Industrial Average Index, Standard & Poor's indices, or the NASDAQ Composite
Index, other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking services and by nationally
recognized financial publications. Such comparative performance information will
be stated in the same terms in which the comparative data or indices are stated.
Such advertisements and sales material may also include a yield quotation as of
a current period. In each case, such total return and yield information, if any,
will be calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce Fund
performance. The Fund will include performance data for each class of shares of
the Fund in any advertisement or information including performance data of the
Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by standard performance information required by the SEC as described
above.
The Fund's Annual Report and Semi-Annual Report contain additional performance
information. A copy of the Annual Report or Semi-Annual Report may be obtained
without charge by calling or writing the Fund at the telephone number and
address printed on the cover of this Prospectus.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The Fund was originally incorporated in Delaware on December 2, 1968 and was
reincorporated by merger into a Maryland corporation on December 30, 1982. The
Fund was again reorganized as a business trust under the laws of the State of
Delaware as of August 31, 1995 as Van Kampen American Capital Pace Fund. On July
14, 1998, the Fund adopted its current name.
The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share, divided into classes.
The Fund currently offers three classes of shares, designated Class A shares,
Class B
29
<PAGE> 32
shares and Class C shares. Other classes may be established from time to time in
accordance with provisions of the Fund's Declaration of Trust.
Each class of shares represents an interest in the same assets of the Fund and
generally are identical in all respects except that each class bears certain
distribution expenses and has exclusive voting rights with respect to its
distribution fee. Except as described herein, there are no conversion,
preemptive or other subscription rights. In the event of liquidation, each of
the shares of the Fund is entitled to its portion of all of the Fund's net
assets after all debt and expenses of the Fund have been paid. Since Class B
shares and Class C shares pay higher distribution fees and transfer agent costs,
the liquidation proceeds to Class B shareholders and Class C shareholders are
likely to be lower than to other shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
1940 Act. More detailed information concerning the Fund is set forth in the
Statement of Additional Information.
The Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to his or her private property for the satisfaction of any
obligation or liability of the Fund but the assets of the Fund only shall be
liable.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
The fiscal year end of the Fund is June 30. The Fund sends to its shareholders
at least semi-annually reports showing the Fund's portfolio and other
information. An Annual Report, containing financial statements audited by the
Fund's independent accountants, is sent to shareholders each year. After the end
of each year, shareholders will receive federal tax information regarding
dividends and capital gains dividends.
30
<PAGE> 33
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 341-2911
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 421-2833
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424
VAN KAMPEN PACE FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN ASSET
MANAGEMENT INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Pace Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Pace Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 34
- --------------------------------------------------------------------------------
PACE FUND
- --------------------------------------------------------------------------------
P R O S P E C T U S
SEPTEMBER 30, 1998
VAN KAMPEN FUNDS LOGO
PF PRO 9/98
<PAGE> 35
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN PACE FUND
Van Kampen Pace Fund (the "Fund") is a diversified, open-end management
investment company. This Statement of Additional Information is not a
prospectus. This Statement of Additional Information should be read in
conjunction with the Fund's Prospectus (the "Prospectus") dated as of the same
date as this Statement of Additional Information. This Statement of Additional
Information does not include all the information a prospective investor should
consider before purchasing shares of the Fund. Investors should obtain and read
the Prospectus prior to purchasing shares of the Fund. A Prospectus may be
obtained without charge by writing or calling Van Kampen Funds Inc. at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181 or (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... B-2
Repurchase Agreements....................................... B-2
Foreign Securities.......................................... B-3
Options, Futures Contracts and Related Options.............. B-3
Investment Restrictions..................................... B-8
Trustees and Officers....................................... B-10
Legal Counsel............................................... B-17
Investment Advisory Agreement............................... B-17
Distributor................................................. B-18
Distribution and Service Plans.............................. B-18
Transfer Agent.............................................. B-19
Portfolio Transactions and Brokerage........................ B-20
Determination of Net Asset Value............................ B-21
Purchase and Redemption of Shares........................... B-21
Exchange Privilege.......................................... B-23
Tax Status of the Fund...................................... B-24
Fund Performance............................................ B-24
Other Information........................................... B-25
Report of Independent Accountants........................... B-26
Financial Statements........................................ B-27
Notes to Financial Statements............................... B-44
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 30, 1998.
<PAGE> 36
GENERAL INFORMATION
The Fund was originally incorporated in Delaware on December 2, 1968, and
reincorporated by merger into a Maryland corporation on December 30, 1982. The
Fund was reorganized as Van Kampen American Capital Pace Fund under the laws of
the State of Delaware as a business trust as of August 31, 1998. The Fund
adopted its present name as of July 14, 1998.
Van Kampen Asset Management Inc. (the "Adviser"), Van Kampen Funds Inc.
(the "Distributor"), and Van Kampen Investor Services Inc. ("Investor Services")
are wholly-owned subsidiaries of Van Kampen Investments Inc. ("Van Kampen"),
which is an indirect wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The principal office of the Fund, the Adviser, the Distributor and Van Kampen is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financing and investing; and securities lending.
As of September 3, 1998, no person was known by the Fund to own
beneficially or to hold of record 5% or more of the outstanding Class A shares,
Class B shares or Class C shares of the Fund, except as follows:
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OWNERSHIP AT CLASS PERCENTAGE
OF HOLDER SEPTEMBER 3, 1998 OF SHARES OWNERSHIP
---------------- ------------------ --------- ----------
<S> <C> <C> <C>
Van Kampen Trust Company............................... 121,423,159 A 50.029%
2800 Post Oak Blvd. 3,623,068 B 40.405%
Houston, TX 77056 133,292 C 20.154%
</TABLE>
Van Kampen Trust Company acts as custodian for certain employee benefit plans
and independent retirement accounts.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with banks or broker-dealers
deemed to be creditworthy by the Adviser under guidelines approved by the
Trustees. 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 fully
collateralized by the underlying debt securities and are considered to be loans
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
pays for such securities only upon physical delivery or evidence of book entry
transfer to the account of a custodian or bank acting as agent. The seller under
a repurchase agreement will be required to maintain the value of the underlying
securities marked-to-market daily at not less than the repurchase price. The
underlying securities (normally securities of the U.S. Government, or its
agencies and instrumentalities) may have maturity dates exceeding one year. The
Fund does not bear the risk of a decline in value of the underlying security
unless the seller defaults under its repurchase obligation. 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 loss
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (b) possible lack
of access to income on the underlying security during this period, and (c)
expenses of enforcing its rights. 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
B-2
<PAGE> 37
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.
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 or for cross-hedging purposes. A call option is
covered if, at all times during the option period, the Fund would own or have
the right to acquire securities of the type that it would be obligated to
deliver if any outstanding option were exercised. An option is for cross-hedging
purposes if it is not covered by the security subject to the option, but is
designed to provide a hedge against another security which the Fund owns or has
the right to acquire. In such circumstances, the Fund collateralizes the option
by maintaining in a segregated account with the Fund's Custodian, cash or liquid
securities in an amount not less than the market value of the underlying
security, marked to market daily, while the option is outstanding.
The purchaser of a put option pays a premium to the 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 or liquid
securities in an amount of not less than the exercise price of the option, or
would hold a put on the same underlying security at an equal or greater exercise
price.
B-3
<PAGE> 38
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.
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 the Fund might become obligated
to purchase the underlying security at an exercise price that exceeds the then
current market price.
PURCHASING CALL AND PUT OPTIONS
The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire.
Alternatively, call options could be purchased for capital appreciation. Since
the premium paid for a call option is typically a small fraction of the price of
the underlying security, a given amount of funds will purchase call options
covering a much larger quantity of such security than could be purchased
directly. By purchasing call options, the Fund could benefit from any
significant increase in the price of the underlying security to a greater extent
than had it invested the same amount in the security directly. However, because
of the very high volatility of option premiums, the Fund would bear a
significant risk of losing the entire premium if the price of the underlying
security did not rise sufficiently, or if it did not do so before the option
expired.
Put options may be purchased to protect (i.e., hedge) against anticipated
declines in the market value of either specific portfolio securities or of the
Fund's assets generally. Alternatively, put options may be purchased for capital
appreciation in anticipation of a price decline in the underlying security and a
corresponding increase in the value of the put option. The purchase of put
options for capital appreciation involves the same significant risk of loss as
described above for call options.
In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.
OPTIONS ON STOCK INDICES
Options on stock indices are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash which amount will depend upon the closing
level of the stock index upon which the option is based being greater than (in
the case of a call) or less than (in the case of a put) the exercise price of
the option. The amount of cash received will be the difference between the
closing price of the index and the exercise price of the option, multiplied by a
specified dollar multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount.
Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indices
B-4
<PAGE> 39
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 would be exempt from
registration as a "commodity pool."
A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of cash equal to a specified dollar amount
multiplied by the difference between the stock index value at a specified time
and the price at which the futures contract originally was struck. No physical
delivery of the underlying stocks in the index is made.
Currently, stock index futures contracts can be purchased with respect to
the Standard & Poor's 500 Stock Index on the Chicago Mercantile Exchange
("CME"), the New York Stock Exchange Composite Index on the New York Futures
Exchange and the Value Line Stock Index on the Kansas City Board of Trade.
Differences in the stocks included in the indexes may result in differences in
correlation of the futures contracts with movements in the value of the
securities being hedged.
An interest rate futures contract is an agreement pursuant to which a party
agrees to take or make delivery of a specified debt security (such as U.S.
Treasury bonds or notes) at a specified future time and at a specified price.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its custodian in an
account in the broker's name an amount of cash or liquid securities equal to a
percentage (which will normally range between 2% and 10%) of the contract
amount. This amount is known as initial margin. The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transaction. Rather, the initial margin is in the nature
of a performance bond or good faith deposit on the contract, which is returned
to the Fund upon termination of the futures contract and satisfaction of its
contractual obligations. Subsequent payments to and from the broker, called
variation margin, are made on a daily basis as the price of the underlying
securities or index fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as marking to market.
For example, when the Fund purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund receives from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund purchases a futures contract and
the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the 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
B-5
<PAGE> 40
market has stabilized. As individual securities are purchased, an equivalent
amount of futures contracts could be terminated by offsetting sales. The Fund
may sell futures contracts in anticipation of or in a general market or market
sector decline that may adversely affect the market value of the Fund's
securities ("defensive hedge"). To the extent that the Fund's portfolio of
securities changes in value in correlation with the underlying security or
index, the sale of futures contracts substantially reduces the risk to the Fund
of a market decline and, by so doing, provides an alternative to the liquidation
of securities positions in the Fund with attendant transaction costs. Ordinarily
commissions on futures transactions are lower than transaction costs incurred in
the purchase and sale of securities.
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.
B-6
<PAGE> 41
Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in a futures contract and thus provide an offset to
losses on the futures contract.
The Fund will not enter into futures or options (except for closing
transactions) for other than bona fide hedging purposes if, immediately
thereafter, the sum of its initial margin and premiums on open futures contracts
and options exceed 5% of the current fair market value of the Fund's assets;
however, in the case an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. In order
to prevent leverage in connection with the purchase of futures contracts by the
Fund, an amount of cash or liquid securities equal to the market value of the
obligation under the futures contracts (less any related margin deposits) will
be maintained in a segregated account with the custodian.
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purposes as the sale of a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts is intended to serve the same purpose as the actual purchase
of the futures contracts.
RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS
In addition to the risks described above which apply to all options
transactions, there are several special risks relating to options on futures.
The Adviser will not purchase options on futures on any exchange unless in the
Adviser's opinion, a liquid secondary exchange market for such options exists.
Compared to the use of futures, the purchase of options on futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances, such as when there is no movement in the 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.
B-7
<PAGE> 42
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.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which may not be changed
without approval by the vote of a majority of its outstanding voting shares
which is defined by the 1940 Act 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 except as part of a
merger, reorganization or other acquisition and except to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the Securities and Exchange
Commission ("SEC") under the 1940 Act, as amended from time to time, or
(iii) an exemption or other relief from the provisions of the 1940 Act;
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; except that the Fund may purchase securities of other
investment companies to the extent permitted by (i) the 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated
by the SEC under the 1940 Act, as amended from time to time or (iii) an
exemption or other relief from the provisions of the 1940 Act;
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
B-8
<PAGE> 43
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; except that the Fund may purchase securities of other
investment companies without regard to such limitation to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time or (iii) an exemption or other relief from
the provisions of the 1940 Act;
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;
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 interests in oil, gas, mineral exploration or development
programs, although the Fund may acquire securities of companies that
engage in these businesses;
5. Invest more than 5% of its assets in the securities of any one issuer
other than the United States government except that the Fund may invest
in other investment companies without regard to such limitation to the
extent permitted by (i) the 1940 Act as amended from time to time, (ii)
the rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act;
6. 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
B-9
<PAGE> 44
or nationalization of companies, or establishment of exchange controls
or adoption of other restrictions which might adversely affect the
investment; or
7. 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 except that the Fund may invest in
other investment companies without regard to such limitation to the
extent permitted by (i) the 1940 Act as amended from time to time, (ii)
the rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act.
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Fund and executive
officers of the Fund's investment adviser and their principal occupations for
the last five years and their affiliations, if any, with Van Kampen Investments
Inc., ("Van Kampen"), Van Kampen Investment Advisory Corp. ("Advisory Corp."),
Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc.,
the distributor of the Fund's shares (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Corp., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc., the Fund's transfer agent ("Investor Services"). Advisory Corp. and Asset
Management sometimes are referred to herein collectively as the "Advisers". For
purposes hereof, the term "Fund Complex" includes each of the open-end
investment companies advised by the Advisers (excluding Van Kampen American
Capital Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to August 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT
Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a
Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which
develops, manufactures, markets and services medical and
scientific equipment. Trustee/Director of each of the
funds in the Fund Complex.
Richard M. DeMartini*..................... President and Chief Operating Officer, Individual Asset
Two World Trade Center Management Group, a division of Morgan Stanley Dean
66th Floor Witter & Co. Mr. DeMartini is a Director of InterCapital
New York, NY 10048 Funds, Dean Witter Distributors, Inc. and Dean Witter
Date of Birth: 10/12/52 Trust Company. Trustee of the TCW/DW Funds. Director of
the National Healthcare Resources, Inc. Formerly Vice
Chairman of the Board of the National Association of
Securities Dealers, Inc. and Chairman of the Board of the
Nasdaq Stock Market, Inc. Trustee/Director of each of the
funds in the Fund Complex.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an executive
Sears Tower search firm. Prior to 1997, Partner, Ray & Berndtson,
233 South Wacker Drive Inc., an executive recruiting and management consulting
Suite 7000 firm. Formerly, Executive Vice President of ABN AMRO,
Chicago, IL 60606 N.A., a Dutch bank holding company. Prior to 1992,
Date of Birth: 06/03/48 Executive Vice President of La Salle National Bank.
Trustee on the University of Chicago Hospitals Board, The
International House Board and the Women's Board of the
University of Chicago. Trustee/Director of each of the
funds in the Fund Complex.
</TABLE>
B-10
<PAGE> 45
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
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/Director of each of the funds in the Fund
Complex.
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee/Director of each of
the funds in the Fund Complex.
Don G. Powell*............................ Chairman and a Director of Van Kampen. Chairman and a
2800 Post Oak Blvd. Director of the Advisers and the Distributor. Chairman
Houston, TX 77056 and a Director of Investor Services. Director or officer
Date of Birth: 10/19/39 of certain other subsidiaries of Van Kampen. Chairman of
the Board of Governors and the Executive Committee of the
Investment Company Institute. Prior to July of 1998,
Director and Chairman of VK/AC Holding, Inc. Prior to
November 1996, President, Chief Executive Officer and a
Director of VK/AC Holding, Inc. Trustee/Director of each
of the funds in the Fund Complex and
Trustee/Director/Managing General Partner of other funds
advised by the Advisers or Van Kampen Management Inc.
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company,
One ServiceMaster Way a business and consumer services company. Director of
Downers Grove, IL 60515 Illinois Tool Works, Inc., a manufacturing company; the
Date of Birth: 07/08/44 Urban Shopping Centers Inc., a retail mall management
company; and Stone Container Corp., a paper manufacturing
company. Trustee, University of Notre Dame. Formerly,
President and Chief Executive Officer, Waste Management,
Inc., an environmental services company, and prior to
that President and Chief Operating Officer, Waste
Management, Inc. Trustee/Director of each of the funds in
the Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee/Director of each of the
funds in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, and other open-end and closed-end funds advised
Date of Birth: 08/22/39 by the Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the Fund
Complex, and Trustee/Managing General Partner of other
open-end and closed-end funds advised by the Advisers or
Van Kampen Management Inc.
</TABLE>
- ---------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. DeMartini and
Powell are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter & Co. or its affiliates.
B-11
<PAGE> 46
OFFICERS
Messrs. McDonnell, Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin,
Wetherell and Hill are located at One Parkview Plaza, Oakbrook Terrace, IL
60181. The Fund's other officers are located at 2800 Post Oak Blvd., Houston, TX
77056.
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Dennis J. McDonnell.................. Executive Vice President and a Director of Van Kampen.
Date of Birth: 05/20/42 President, Chief Operating Officer and a Director of the
President Advisers, Van Kampen Advisors Inc., and Van Kampen
Management Inc. Prior to July of 1998, Director and
Executive Vice President of VK/AC Holding, Inc. Prior to
April of 1998, President and a Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April of 1997, Mr.
McDonnell was a Director of Van Kampen Merritt Equity
Holdings Corp. Prior to September of 1996, Mr. McDonnell was
Chief Executive Officer and Director of MCM Group, Inc.,
McCarthy, Crisanti & Maffei, Inc. and Chairman and Director
of MCM Asia Pacific Company, Limited and MCM (Europe)
Limited. Prior to July of 1996, Mr. McDonnell was President,
Chief Operating Officer and Trustee of VSM Inc. and VCJ Inc.
President of each of the funds in the Fund Complex.
President, Chairman of the Board and Trustee/Managing
General Partner of other investment companies advised by the
Advisers or their affiliates.
Peter W. Hegel....................... Executive Vice President of the Advisers, Van Kampen
Date of Birth: 06/25/56 Management Inc. and Van Kampen Advisors Inc. Prior to July
Vice President of 1996, Mr. Hegel was a Director of VSM Inc. Prior to
September of 1996, he was a Director of McCarthy, Crisanti &
Maffei, Inc. Vice President of each of the funds in the Fund
Complex and certain other investment companies advised by
the Advisers or their affiliates.
Curtis W. Morell..................... Senior Vice President of the Advisers, Vice President and
Date of Birth: 08/04/46 Chief Accounting Officer of each of the funds in the Fund
Vice President and Chief Accounting Complex and certain other investment companies advised by
Officer the Advisers or their affiliates.
Ronald A. Nyberg..................... Executive Vice President, General Counsel, Secretary and
Date of Birth: 07/29/53 Director of Van Kampen. Mr. Nyberg is Executive Vice
Vice President and Secretary President, General Counsel, Assistant Secretary and a
Director of the Advisers and the Distributor, Van Kampen
Advisors Inc., Van Kampen Management Inc., Van Kampen
Exchange Corp., American Capital Contractual Services, Inc.
and Van Kampen Trust Company. Executive Vice President,
General Counsel and Assistant Secretary of Investor
Services. Director or officer of certain other subsidiaries
of Van Kampen. Director of ICI Mutual Insurance Co., a
provider of insurance to members of the Investment Company
Institute. Prior to July of 1998, Director and Executive
Vice President, General Counsel and Secretary of VK/AC
Holding, Inc. Prior to April of 1998, Executive Vice
President, General Counsel and Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April of 1997, he was
Executive Vice President, General Counsel and a Director of
Van Kampen Merritt Equity Holdings Corp. Prior to September
of 1996, he was General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July of 1996, Mr. Nyberg was Executive
Vice President and General Counsel of VSM Inc. and Executive
Vice President and General Counsel of VCJ Inc. Vice
President and Secretary of each of the funds in the Fund
Complex and certain other investment companies advised by
the Advisers or their affiliates.
</TABLE>
B-12
<PAGE> 47
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Paul R. Wolkenberg................... Executive Vice President and Director of Van Kampen.
Date of Birth: 11/10/44 Executive Vice President of Asset Management and the
Vice President Distributor. President and a Director of Investor Services.
President and Chief Operating Officer of Van Kampen
Recordkeeping Services, Inc. Prior to July of 1998, Director
and Executive Vice President of VK/AC Holding, Inc. Vice
President of each of the funds in the Fund Complex and
certain other investment companies advised by the Advisers
or their affiliates.
Edward C. Wood III................... Senior Vice President of the Advisers, Van Kampen and Van
Date of Birth: 01/11/56 Kampen Management Inc. Senior Vice President and Chief
Vice President and Chief Financial Operating Officer of the Distributor. Vice President and
Officer Chief Financial Officer of each of the funds in the Fund
Complex and certain other investment companies advised by
the Advisers or their affiliates.
John L. Sullivan..................... First Vice President of Van Kampen and the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund Complex and
Treasurer certain other investment companies advised by the Advisers
or their affiliates.
Tanya M. Loden....................... Vice President of Van Kampen and the Advisers. Controller of
Date of Birth: 11/19/59 each of the funds in the Fund Complex and other investment
Controller companies advised by the Advisers or their affiliates.
Nicholas Dalmaso..................... Associate General Counsel and Assistant Secretary of Van
Date of Birth: 03/01/65 Kampen. Vice President, Associate General Counsel and
Assistant Secretary Assistant Secretary of the Advisers, the Distributor, Van
Kampen Advisors Inc. and Van Kampen Management Inc.
Assistant Secretary of each of the funds in the Fund Complex
and other investment companies advised by the Advisers or
their affiliates.
Huey P. Falgout, Jr.................. Vice President, Assistant Secretary and Senior Attorney of
Date of Birth: 11/15/63 Van Kampen. Vice President, Assistant Secretary and Senior
Assistant Secretary Attorney of the Advisers, the Distributor, Van Kampen
Investor Services Inc., Van Kampen Management Inc., American
Capital Contractual Services, Inc., Van Kampen Exchange
Corp. and Van Kampen Advisors Inc. Assistant Secretary of
each of the funds in the Fund Complex and other investment
companies advised by the Advisers or their affiliates.
Scott E. Martin...................... Senior Vice President, Deputy General Counsel and Assistant
Date of Birth: 08/20/56 Secretary of Van Kampen. Senior Vice President, Deputy
Assistant Secretary General Counsel and Secretary of the Advisers, the
Distributor, Investor Services, American Capital Contractual
Services, Inc., Van Kampen Management Inc., Van Kampen
Exchange Corp., Van Kampen Advisors Inc., Van Kampen
Insurance Agency of Illinois Inc., Van Kampen System Inc.
and Van Kampen Recordkeeping Services Inc. Prior to July of
1998, Senior Vice President, Deputy General Counsel and
Assistant Secretary of VK/AC Holding, Inc. Prior to April of
1998, Van Kampen Merritt Equity Advisors Corp. Prior to
April of 1997, Senior Vice President, Deputy General Counsel
and Secretary of Van Kampen American Capital Services, Inc.
and Van Kampen Merritt Holdings Corp. Prior to September of
1996, Mr. Martin was Deputy General Counsel and Secretary of
McCarthy, Crisanti & Maffei, Inc., and prior to July of
1996, he was Senior Vice President, Deputy General Counsel
and Secretary of VSM Inc. and VCJ Inc. Assistant Secretary
of each of the funds in the Fund Complex and other
investment companies advised by the Advisers or their
affiliates.
</TABLE>
B-13
<PAGE> 48
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Weston B. Wetherell.................. Vice President, Associate General Counsel and Assistant
Date of Birth: 06/15/56 Secretary of Van Kampen, the Advisers, the Distributor, Van
Assistant Secretary Kampen Management Inc. and Van Kampen Advisors Inc. Prior to
September of 1996, Mr. Wetherell was Assistant Secretary of
McCarthy, Crisanti & Maffei, Inc. Assistant Secretary of
each of the funds in the Fund Complex and other investment
companies advised by the Advisers or their affiliates.
Steven M. Hill....................... Vice President of Van Kampen and the Advisers. Assistant
Date of Birth: 10/16/64 Treasurer of each of the funds in the Fund Complex and other
Assistant Treasurer investment companies advised by the Advisers or their
affiliates.
Michael Robert Sullivan.............. Assistant Vice President of the Advisers. Assistant
Date of Birth: 03/30/33 Controller of each of the funds in the Fund Complex and
Assistant Controller other investment companies advised by the Advisers or their
affiliates.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 64 operating funds in the Fund Complex. For purposes of the following
compensation and benefits discussion, the Fund Complex is divided into the
following three groups: the funds advised by Asset Management (the "AC Funds"),
the funds advised by Advisory Corp. excluding funds organized as series of the
Van Kampen Series Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Van Kampen Series Fund, Inc. (the "MS Funds").
Each trustee/director who is not an affiliated person of VK, the Advisers, the
Distributor, Investor Services, Van Kampen Investments Inc. or Morgan Stanley
Dean Witter & Co. (each a "Non-Affiliated Trustee") is compensated by an annual
retainer and meeting fees for services to the funds in the Fund Complex. Each
fund in the Fund Complex (except the money market series of the MS Funds)
provides a deferred compensation plan to its Non-Affiliated Trustees that allows
trustees/directors to defer receipt of their compensation and earn a return on
such deferred amounts. Deferring compensation has the economic effect as if the
Non-Affiliated Trustee reinvested his or her compensation into the funds. Each
fund in the Fund Complex (except the money market series of the MS Funds)
provides a retirement plan to its Non-Affiliated Trustees that provides
Non-Affiliated Trustees with compensation after retirement, provided that
certain eligibility requirements are met as more fully described below.
The trustees recently reviewed and adopted a standardized compensation and
benefits program for each fund in the Fund Complex. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes an annual retainer in
an amount equal to $50,000 per calendar year, due in four quarterly installments
on the first business day of each quarter. Payment of the annual retainer is
allocated among the funds in the Fund Complex (except the money market series of
the MS Funds) on the basis of the relative net assets of each fund as of the
last business day of the preceding calendar quarter. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes a per meeting fee from
each fund in the Fund Complex (except the money market series of the MS Funds)
in the amount of $200 per quarterly or special meeting attended by the
Non-Affiliated Trustee, due on the date of the meeting, plus reasonable expenses
incurred by the Non-Affiliated Trustee in connection with his or her services as
a trustee, provided that no compensation will be paid in connection with certain
telephonic special meetings.
For each AC Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from the AC
Funds includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per
B-14
<PAGE> 49
meeting fee in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.
For each VK Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from each VK
Fund includes an annual retainer in an amount equal to $2,500 per calendar year,
due in four quarterly installments on the first business day of each calendar
quarter. Each Non-Affiliated Trustee receives a per meeting fee from each VK
Fund in the amount of $125 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee
from each VK Fund in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.
For the period from July 2, 1997 up to and including December 31, 1997, the
compensation of each Non-Affiliated Trustee from the MS Funds was based
generally on the compensation amounts and methodology used by such funds prior
to their joining the current Fund Complex on July 2, 1997. Each trustee/director
was elected as a director of the MS Funds on July 2, 1997. Prior to July 2,
1997, the MS Funds were part of another fund complex (the "Prior Complex") and
the former directors of the MS Funds were paid an aggregate fee allocated among
the funds in the Prior Complex that resulted in individual directors receiving
total compensation between approximately $8,000 to $10,000 from the MS Funds
during such funds' last fiscal year.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.
B-15
<PAGE> 50
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
FUND COMPLEX
----------------------------------------------------------
AGGREGATE AGGREGATE TOTAL
YEAR FIRST PENSION OR ESTIMATED MAXIMUM COMPENSATION
APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS BEFORE DEFERRAL
ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON FROM FUND
NAME(1) BOARD FUND(2) EXPENSES(3) RETIREMENT(4) COMPLEX(5)
------- -------------- ------------------------ ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1991 $5,641 $30,328 $60,000 $111,197
Linda Hutton Heagy* 1995 5,441 3,141 60,000 111,197
R. Craig Kennedy* 1995 5,641 2,229 60,000 111,197
Jack E. Nelson* 1995 5,641 15,820 60,000 104,322
Jerome L. Robinson 1995 2,220 32,020 15,750 107,947
Phillip B. Rooney* 1997 5,641 0 60,000 74,697
Dr. Fernando Sisto* 1991 5,641 60,208 60,000 111,197
Wayne W. Whalen* 1995 5,641 10,788 60,000 111,197
</TABLE>
- ---------------
* Currently a member of the Board of Trustees.
(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Mr. Robinson retired from the Board of
Trustees on December 31, 1997. Trustees not eligible for compensation are
not included in the compensation table.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended June 30, 1998. The
following trustees deferred compensation from the Fund during the fiscal
year ended June 30, 1998: Mr. Branagan, $5,641; Ms. Heagy, $5,441; Mr.
Kennedy, $2,820; Mr. Nelson, $5,641; Mr. Robinson, $2,220; Mr. Rooney,
$5,641; Dr. Sisto, $2,820; and Mr. Whalen, $5,641. Amounts deferred are
retained by the Fund and earn a rate of return determined by reference to
either the return on the common shares of the Fund or other funds in the
Fund Complex as selected by the respective Non-Affiliated Trustee, with the
same economic effect as if such Non-Affiliated Trustee had invested in one
or more funds in the Fund Complex. To the extent permitted by the 1940 Act,
each Fund may invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation. The cumulative deferred compensation (including interest)
accrued with respect to each trustee, including former trustees, from the
Fund as of June 30, 1998 is as follows: Mr. Branagan, $10,977; Dr. Caruso,
$23,760; Mr. Gaughan, $2,269; Ms. Heagy, $16,354; Mr. Kennedy, $10,348; Mr.
Miller, $6,851; Mr. Nelson, $18,783; Mr. Rees, $64,017; Mr. Robinson,
$14,298; Mr. Rooney, $6,334; Dr. Sisto, $68,574; Mr. Vernon, $5,504; and Mr.
Whalen, $17,878. The deferred compensation plan is described above the
Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for each of the current trustees for the Funds' respective
fiscal years ended in 1997. The retirement plan is described above the
Compensation Table.
(4) For Mr. Robinson, this is the sum of the actual annual benefits payable by
the operating investment companies in the Fund Complex as of the date of his
retirement for each year of the 10-year period since his retirement. For the
remaining trustees, this is the sum of the estimated maximum annual benefits
payable by the operating investment companies in the Fund Complex for each
year of the 10-year period commencing in the year of such trustee's
anticipated retirement. The Retirement Plan is described above the
Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all operating investment companies in the Fund Complex as of December 31,
1997 before deferral by the trustees under the deferred compensation plan.
Because the funds in the Fund Complex have different fiscal year ends, the
B-16
<PAGE> 51
amounts shown in this column are presented on a calendar year basis. Certain
trustees deferred all or a portion of their aggregate compensation from the
Fund Complex during the calendar year ended December 31, 1997. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
Advisers and their affiliates also serve as investment adviser for other
investment companies; however, with the exception of Mr. Whalen, the
Non-Affiliated Trustees were not trustees of such investment companies.
Combining the Fund Complex with other investment companies advised by the
Advisers and their affiliates, Mr. Whalen received Total Compensation of
$268,447 during the calendar year ended December 31, 1997.
As of September 3, 1998, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The Adviser obtains and evaluates
economic, statistical, and financial information to formulate and implement the
Fund's investment programs. 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 material.
In addition, the Adviser furnishes at no cost to the Fund the services of the
Fund's President, 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 service fees, distribution fees, service
fees, custodian fees, legal and auditing fees, the costs of reports to
shareholders and all other ordinary expenses not specifically assumed by the
Adviser. The Advisory Agreement also provides that the Adviser shall not be
liable to the Fund for any actions or omissions if it acted without willful
misfeasance, bad faith, negligence or reckless disregard of its obligations.
Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Fund at an annual
rate of: 0.50% on the first $1 billion of 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 Fund's 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 Van Kampen
in connection with the purchase and sale of portfolio investments of the Fund,
less any direct expenses incurred by such subsidiary of Van Kampen 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
B-17
<PAGE> 52
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 Van Kampen 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.
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 will terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.
During the fiscal years ended June 30, 1998, 1997 and 1996, the Adviser
received $15,236,351, $12,472,408 and $11,589,844, respectively, in advisory
fees from the Fund. For such periods, the Fund paid $424,808, $370,314 and
$351,270, respectively, for accounting services.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
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 supplemental sales literature and
advertising. The Distribution and Service Agreement is renewable from year to
year if approved (a) by the Fund's Trustees or by a vote of a majority of the
Fund's outstanding voting securities and (b) by the affirmative vote of a
majority of Trustees who are not parties to the Distribution and Service
Agreement or interested persons of any party, by votes cast in person at a
meeting called for such purpose. The Distribution and Service Agreement provides
that it will terminate if assigned, and that it may be terminated without
penalty be either party on 90 days' written notice. Total underwriting
commissions on the sale of shares of the Fund for the last three fiscal periods
are shown in the chart below. Advantage Capital Corporation is a former
affiliated dealer of the Fund.
<TABLE>
<CAPTION>
DEALER REALLOWANCES
AMOUNTS RECEIVED BY
TOTAL UNDERWRITING RETAINED ADVANTAGE CAPITAL
COMMISSIONS BY DISTRIBUTOR CORPORATION
------------------ -------------- -------------------
<S> <C> <C> <C>
Fiscal Year Ended June 30, 1998................. $2,388,642 $373,660 -0-
Fiscal Year Ended June 30, 1997................. $2,100,107 $292,564 -0-
Fiscal Year Ended June 30, 1996................. $2,160,395 $789,307 $ 46,686
</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
B-18
<PAGE> 53
shares and in connection with the provision of ongoing services to shareholders
of such class, respectively. The Distribution Plan and the Service Plan are
being implemented through an agreement (the "Distribution and Service
Agreement") with the Distributor of each class of the Fund's shares,
sub-agreements between the Distributor and members of the NASD who are acting as
securities dealers and NASD members or eligible non-members who are acting as
brokers or agents and similar agreements between the Fund and financial
intermediaries who are acting as brokers (collectively, "Selling Agreements")
that may provide for their customers or clients certain services or assistance,
which may include, but not be limited to, processing purchase and redemption
transactions, establishing and maintaining shareholder accounts regarding the
Fund, and such other services as may be agreed to from time to time and as may
be permitted by applicable statute, rule or regulation. Brokers, dealers and
financial intermediaries that have entered into sub-agreements with the
Distributor and sell shares of the Fund are referred to herein as "financial
intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
The Distributor has entered into agreements with (i) Smith Barney Inc.
("Smith Barney") under which the Fund shall be offered pursuant to the
MultiChoice Program and (ii) Merrill Lynch ("Merrill") under which the Fund
shall be offered pursuant to the Merrill Program. Trustees and other fiduciaries
of retirement plans seeking to invest in multiple fund families through
broker-dealer retirement plan alliance programs should contact Smith Barney or
Merrill for further information concerning the MultiChoice and Merrill Programs
including, but not limited to, minimum size and operational requirements.
For the fiscal year ended June 30, 1998, the Fund's aggregate expenses
under the Class A Plan were $7,215,641 or 0.25% of the Class A shares' average
net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $0 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class A shares of the Fund and $7,215,641
for fees paid to financial intermediaries for servicing Class A shareholders and
administering the Plans.
For the fiscal year ended June 30, 1998, the Fund's aggregate expenses
under the Class B Plan were $1,112,045 or 1.00% of the Class B shares' average
net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $838,839 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class B shares of the Fund and
$273,206 for fees paid to financial intermediaries for servicing Class B
shareholders and administering the Plans. For the fiscal year ended June 30,
1998, the Fund's aggregate expenses under the Plans for Class C shares were
$79,361 or 1.00% of the Class C shares' average net assets. Such expenses were
paid to reimburse the Distributor for the following payments: $39,858 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class C shares of the Fund and $39,503 for fees paid to financial
intermediaries for servicing Class C shareholders and administering the Class C
Plan.
TRANSFER AGENT
During the fiscal years ended June 30, 1998, 1997 and 1996, Investor
Services, shareholder service agent and dividend disbursing agent for the Fund,
received fees aggregating $4,409,763, $4,496,200 and $4,762,121, respectively,
for these services. Prior to 1988, the transfer agency prices were determined at
cost plus a profit.
B-19
<PAGE> 54
Beginning in 1998, the transfer agency prices are determined through
negotiations with the Fund's Board of Trustees and are based on competitive
market benchmarks.
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 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 Advisory Agreement, the Fund's Trustees have
authorized the Adviser to cause the Fund to incur brokerage commissions in an
amount higher than the lowest available rate in return for research services
provided to the Adviser. The Adviser is of the opinion that the continued
receipt of supplemental investment research services from dealers is essential
to its provision of high quality portfolio management services to the Fund. The
Adviser undertakes that such higher commissions will not be paid by the Fund
unless (a) the Adviser determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction or in terms of
the Adviser's overall responsibilities with respect to the accounts as to which
it exercises investment discretion, (b) such payment is made in compliance with
the provisions of Section 28(e) and other applicable state and federal laws, and
(c) in the opinion of the Adviser, the total commissions paid by the Fund are
reasonable in relation to the expected benefits to the Fund over the long term.
The investment advisory fee paid by the Fund under the investment advisory
agreement is not reduced as a result of the Adviser's receipt of research
services.
The Adviser places portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by firms
through which the Fund effects its securities transactions may be used by the
Adviser in servicing all of its accounts; not all of such services may be used
by the Adviser in connection with the Fund. In the opinion of the Adviser, the
benefits from research services to each of the accounts (including the Fund)
managed by the Adviser cannot be measured separately. Because the volume and
nature of the trading activities of the accounts are not uniform, the amount of
commissions in excess of the lowest available rate paid by each account for
brokerage and research services will vary. However, in the opinion of the
Adviser, such costs to the Fund will not be disproportionate to the benefits
received by the Fund on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have
B-20
<PAGE> 55
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.
During the year ended June 30, 1998 the Fund paid $1,746,900 in brokerage
commissions on transactions totaling $731,348,297 to brokers selected primarily
on the basis of research services provided to the Adviser.
Effective October 31, 1996, Morgan Stanley Group Inc. ("Morgan Stanley")
became an affiliate of the Adviser. Effective May 31, 1997, Dean Witter Discover
& Co. ("Dean Witter") became an affiliate of the Adviser. The 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>
AFFILIATED BROKERS
------------------
MORGAN DEAN
BROKERS STANLEY WITTER
---------- -------- -------
<S> <C> <C> <C>
Commissions paid:
Fiscal year 1996........................................... 10,021,557 N/A N/A
Fiscal year 1997........................................... 8,351,024 $180,596 $24,540
Fiscal year 1998........................................... 5,141,222 $1,001 N/A
Fiscal year 1998 Percentages:
Commissions with affiliate to total commissions............ 0.02% N/A
Value of brokerage transactions with affiliate to total
transactions............................................. N/A N/A
</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 ("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 with remaining maturities of 60 days or less are valued at amortized
cost.
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."
LETTER OF INTENT
The Fund will escrow shares totalling 5% of the dollar amount of the Letter
of Intent to be held by Investor Services in the name of the shareholder. The
Letter of Intent does not obligate the investor to
B-21
<PAGE> 56
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 purposes of the CDSC -- Class A, when shares of one fund are exchanged
for shares of another fund, the purchase date for the shares of the fund
exchanged into will be assumed to be the date on which shares were purchased in
the fund from which the exchange was made. If the exchanged shares themselves
are acquired through an exchange, the purchase date is assumed to carry over
from the date of the original election to purchase shares subject to a
CDSC -- Class A rather than a front-end load sales charge. In determining
whether a CDSC -- Class A is payable, it is assumed that shares held the longest
are the first to be redeemed.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B
AND C")
As described in the Prospectus under "Purchase of Shares," redemptions of
Class B shares and Class C shares will be subject to a CDSC. 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 Participating Funds
(as
B-22
<PAGE> 57
defined in the Prospectus); in such event, as described below, the Fund will
"tack" the period for which the original shares were held onto the holding
period of the shares acquired in the transfer or rollover for purposes of
determining what, if any, CDSC -- Class B and C is applicable in the event that
such acquired shares are redeemed following the transfer or rollover. The charge
also will be waived on any redemption which results from the return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code, the return of
excess deferral amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from
the death or disability of the employee (see Code Section 72(m)(7) and
72(t)(2)(A)(ii)). In addition, the charge will be waived on any minimum
distribution required to be distributed in accordance with Code Section
401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be specified by the shareholder upon his or her
election to participate in the Plan. The CDSC -- Class B and C 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. 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
180 Days After Redemption
A shareholder who has redeemed Class C shares of a Fund may reinvest at net
asset value, with credit for any CDSC -- Class C paid on the redeemed shares,
any portion or all of his or her redemption proceeds (plus that amount necessary
to acquire a fractional share to round off his or her purchase to the nearest
full share) in Class C shares of the Fund, provided that the reinvestment is
effected within 180 days after such redemption and the shareholder has not
previously exercised this reinvestment privilege with respect to Class C shares
of the Fund. Shares acquired in this manner will be deemed to have the original
cost and purchase date of the redeemed shares for purposes of applying the
CDSC -- Class C to subsequent redemptions.
(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 Investor Services
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 Investor Services to be genuine. Van Kampen and its subsidiaries,
including Investor Services, and the Fund employ procedures considered by them
to be reasonable to confirm
B-23
<PAGE> 58
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, Investor Services nor the Fund will
be liable for following telephone instructions which it reasonably believes to
be genuine. Van Kampen, Investor Services and the Fund may be liable for any
losses due to unauthorized or fraudulent instructions if reasonable procedures
are not followed.
For purposes of determining the sales charge rate previously paid on Class
A shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of his securities, the security upon
which the highest 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 each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund has elected and
qualified, and intends to continue to qualify each year, to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). If the Fund complies with certain requirements of the Code
relating to, among other things, the source of its income and the
diversification of its assets, the Fund will not be subject to federal income
tax on any income distributed to its shareholders. The Fund will be subject to
tax if, among other things, it fails to distribute net capital gains, or if its
annual distributions, as a percentage of its income, are less than the
distributions required by tax laws.
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, 1998 was 22.39%, (ii) the five year period ended June 30, 1998 was
18.11% and (iii) the ten year period ended June 30, 1998 was 14.06%. 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, 1998
was 23.92%, (ii) the five year period ended June 30, 1998 was 18.43%, (iii) the
six year, 5 1/2 month period since January 10, 1992, the commencement of
distribution for Class B shares of the Fund, through June 30, 1998 was 15.45%.
The Fund's average annual total return for Class C shares of the Fund for (i)
the one year period ended June 30, 1998 was 27.87% and (ii) the four year, ten
month period since August 27, 1993, the commencement of distribution for Class C
shares of the Fund, through June 30, 1998 was 18.64%. 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.
B-24
<PAGE> 59
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) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return. Such illustrations may be in the
form of charts or graphs and will not be based on historical returns experienced
by the Funds.
The 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 seeks to remain fully invested and diversified across many
industries to achieve consistent long-term performance. From time to time
marketing materials may provide a portfolio manager update, an adviser update or
discuss general economic conditions and outlooks. The 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 believes the
Fund compares relative to other Van Kampen 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 -- PricewaterhouseCoopers LLP, 200 East Randolph Street,
Chicago, Illinois 60601, the independent accountants for the Fund, performs
annual audits of the Fund's financial statements.
B-25
<PAGE> 60
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Van Kampen 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 Pace Fund (the "Fund")
at June 30, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
July 28, 1998
B-26
<PAGE> 61
Portfolio of Investments
June 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks 98.8%
Buildings & Materials 0.1%
Hanson PLC - ADR (United Kingdom)............... 56,250 $ 1,705,078
------------
Consumer Distribution 7.3%
American Stores Co.............................. 130,000 3,144,375
Brightpoint, Inc.(a)............................ 235,000 3,407,500
CompUSA, Inc.(a)................................ 675,000 12,192,188
Costco Cos., Inc.(a)............................ 157,800 9,951,263
CVS Corp........................................ 240,000 9,345,000
Dayton Hudson Corp.............................. 557,400 27,033,900
Family Dollar Stores, Inc....................... 396,000 7,326,000
Federated Department Stores, Inc.(a)............ 449,200 24,172,575
General Nutrition Cos., Inc.(a)................. 20,000 622,500
Herman Miller, Inc.............................. 10,000 243,125
Home Depot, Inc................................. 65,000 5,399,063
Kroger Co.(a)................................... 525,800 22,543,675
Lear Corp.(a)................................... 128,800 6,609,050
Lowe's Cos., Inc................................ 348,000 14,115,750
McKesson Corp................................... 133,000 10,806,250
Proffitt's, Inc.(a)............................. 407,100 16,436,663
Rite Aid Corp................................... 225,000 8,451,562
Ross Stores, Inc................................ 285,000 12,255,000
Safeway, Inc.(a)................................ 888,000 36,130,500
Sears Roebuck & Co.............................. 182,700 11,156,119
Tech Data Corp.(a).............................. 25,000 1,071,875
TJX Cos., Inc................................... 1,074,000 25,910,250
Venator Group, Inc.(a).......................... 225,000 4,303,125
Wal-Mart Stores, Inc............................ 100,000 6,075,000
------------
278,702,308
------------
Consumer Durables 2.8%
Brunswick Corp.................................. 70,000 1,732,500
Chrysler Corp................................... 170,000 9,583,750
Cooper Tire & Rubber Co......................... 60,000 1,237,500
Dana Corp....................................... 368,000 19,688,000
Eaton Corp...................................... 40,000 3,110,000
Ford Motor Co................................... 585,400 34,538,600
General Motors Corp............................. 265,000 17,705,312
Magna International, Inc., Class A.............. 85,000 5,833,125
Maytag Corp..................................... 139,000 6,863,125
</TABLE>
See Notes to Financial Statements
B-27
<PAGE> 62
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
===============================================================================
Number
Description of Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Consumer Durables (Continued)
Oakwood Homes Corp............................. 95,000 $ 2,850,000
Sony Corp. - ADR (Japan)....................... 25,000 2,151,563
------------
105,293,475
------------
Consumer Non-Durables 8.9%
Anheuser Busch Cos., Inc....................... 170,000 8,021,875
Bestfoods...................................... 50,000 2,903,125
Borders Group, Inc.(a)......................... 208,000 7,696,000
Campbell Soup Co............................... 55,000 2,921,875
Coca-Cola Co................................... 60,000 5,130,000
Colgate - Palmolive Co......................... 161,800 14,238,400
ConAgra, Inc................................... 180,000 5,703,750
Dial Corp...................................... 1,844,800 47,849,500
First Brands Corp.............................. 222,800 5,709,250
Fruit of the Loom, Inc.(a)..................... 95,000 3,152,812
Gallaher Group PLC - ADR (United Kingdom)...... 45,000 984,375
Heinz, H. J. & Co.............................. 50,000 2,806,250
Jones Apparel Group, Inc.(a)................... 53,000 1,937,813
Kimberly Clark Corp............................ 498,000 22,845,750
Liz Claiborne, Inc............................. 231,600 12,101,100
Loews Corp..................................... 35,000 3,049,375
PepsiCo, Inc................................... 50,000 2,059,375
Philip Morris Cos., Inc........................ 2,248,200 88,522,875
Procter & Gamble Co............................ 90,000 8,195,625
Quaker Oats Co................................. 120,000 6,592,500
RJR Nabisco Holdings Corp...................... 1,554,600 36,921,750
Sara Lee Corp.................................. 65,000 3,635,937
Tommy Hilfiger Corp.(a)........................ 576,000 36,000,000
Unilever NV - ADR (Netherlands)................ 80,000 6,315,000
V.F. Corp...................................... 80,000 4,120,000
------------
339,414,312
------------
Consumer Services 6.0%
AccuStaff, Inc.(a)............................. 350,900 10,965,625
Brinker International, Inc.(a)................. 489,000 9,413,250
Carnival Corp.................................. 200,000 7,925,000
CBS Corp....................................... 476,000 15,113,000
Cendant Corp.(a)............................... 507,155 10,586,861
Chancellor Media Corp.(a)...................... 161,000 7,994,656
CKE Restaurants, Inc........................... 177,000 7,301,250
</TABLE>
See Notes to Financial Statements
B-28
<PAGE> 63
Portfolio of Investments (Continued)
June 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Consumer Services (Continued)
Foodmaker, Inc. (a)................................... 278,000 $ 4,691,250
Gannett Co., Inc...................................... 276,000 19,613,250
Harcourt General, Inc................................. 40,600 2,415,700
Hilton Hotels Corp.................................... 337,100 9,607,350
Host Marriott Corp. (a)............................... 90,000 1,603,125
International Game Technology......................... 70,000 1,697,500
Jacor Communications, Inc., Class A (a)............... 135,000 7,965,000
Knight Ridder, Inc.................................... 95,000 5,230,938
Metamor Worldwide, Inc. (a)........................... 191,000 6,720,813
New York Times Co., Class A........................... 210,000 16,642,500
News Corp. Ltd. - ADR (Australia) (a)................. 112,200 3,169,650
Omnicom Group, Inc.................................... 464,000 23,142,000
Promus Hotel Corp. (a)................................ 171,800 6,614,300
Service Corp. International........................... 120,000 5,145,000
Tele-Communications, Inc., Class A (a)................ 175 6,727
Time Warner, Inc...................................... 204,000 17,429,250
Tribune Co............................................ 181,000 12,455,062
Viacom, Inc., Class B (a)............................. 70,000 4,077,500
Walt Disney Co........................................ 105,000 11,031,562
------------
228,558,119
------------
Energy 3.4%
Amoco Corp............................................ 282,000 11,738,250
Atlantic Richfield Co................................. 78,200 6,109,375
British Petroleum Co. PLC - ADR (United Kingdom)..... 141,000 12,443,250
Chevron Corp.......................................... 149,000 12,376,313
Coastal Corp.......................................... 134,000 9,354,875
Cooper Cameron Corp. (a).............................. 113,100 5,768,100
El Paso Natural Gas Co................................ 375,000 14,343,750
ENI - ADR (Italy)..................................... 148,000 9,620,000
Enron Corp............................................ 150,000 8,109,375
EVI Weatherford, Inc. (a)............................. 152,500 5,661,563
Rowan Cos., Inc. (a).................................. 161,700 3,143,044
Texaco, Inc........................................... 108,000 6,446,250
Total SA - ADR (France)............................... 110,000 7,191,250
USX - Marathon Group.................................. 110,100 3,777,806
YPF Sociedad Anonima - ADR (Argentina), Class D....... 500,000 15,031,250
------------
131,114,451
------------
</TABLE>
See Notes to Financial Statements
B-29
<PAGE> 64
Portfolio of Investments (Continued)
June 30, 1998
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Finance 16.2%
Ace Ltd............................................... 51,000 $ 1,989,000
Ahmanson H.F. & Co.................................... 60,000 4,260,000
Allstate Corp......................................... 210,000 19,228,125
AMBAC, Inc............................................ 461,800 27,015,300
American Bankers Insurance Group, Inc................. 365,300 21,963,662
American General Corp................................. 120,000 8,542,500
American International Group, Inc..................... 30,000 4,380,000
Associates First Capital Corp., Class A............... 150,238 11,549,546
BancOne Corp.......................................... 88,280 4,927,128
BankAmerica Corp...................................... 245,200 21,194,475
BankBoston Corp....................................... 302,600 16,832,125
Bankers Trust New York Corp........................... 40,000 4,642,500
Bear Stearns Cos., Inc................................ 443,950 25,249,656
Chase Manhattan Corp.................................. 669,400 50,539,700
CIGNA Corp............................................ 105,000 7,245,000
Citicorp.............................................. 40,000 5,970,000
CMAC Investment Corp.................................. 314,400 19,335,600
Comerica, Inc......................................... 75,000 4,968,750
Conseco, Inc.......................................... 969,800 45,338,150
Countrywide Credit Industries, Inc.................... 120,000 6,090,000
Equitable Cos., Inc................................... 90,000 6,744,375
Everest Reinsurance Holdings, Inc..................... 162,800 6,257,625
Federal Home Loan Mortgage Corp....................... 20,000 941,250
Federal National Mortgage Assn........................ 297,400 18,067,050
First Union Corp...................................... 311,896 18,167,942
Green Tree Financial Corp............................. 40,000 1,712,500
GreenPoint Financial Corp............................. 70,000 2,633,750
Household International, Inc.......................... 241,000 11,989,750
Jefferson-Pilot Corp.................................. 45,000 2,607,188
LandAmerica Financial Group, Inc...................... 141,700 8,112,325
Lehman Brothers Holdings, Inc......................... 80,000 6,205,000
Liberty Financial Cos., Inc........................... 106,350 3,669,075
Lincoln National Corp................................. 45,000 4,111,875
MBIA, Inc............................................. 94,000 7,038,250
Merrill Lynch & Co., Inc.............................. 75,000 6,918,750
MGIC Investment Corp.................................. 156,200 8,913,163
NationsBank Corp...................................... 50,000 3,825,000
Nationwide Financial Services, Inc., Class A.......... 56,800 2,896,800
</TABLE>
See Notes to Financial Statements
B-30
<PAGE> 65
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
==============================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Finance (Continued)
Norwest Corp......................................................... 230,200 $ 8,603,725
Providian Financial Corp............................................. 40,000 3,142,500
SLM Holding Corp..................................................... 17,500 857,500
SouthTrust Corp...................................................... 112,500 4,893,750
St. Paul Cos., Inc................................................... 110,000 4,626,875
SunAmerica, Inc...................................................... 292,050 16,774,622
Torchmark, Inc....................................................... 315,300 14,424,975
Travelers Group, Inc................................................. 523,575 31,741,734
U.S. Bancorp......................................................... 250,000 10,750,000
United Asset Management Corp......................................... 213,300 5,559,131
Van Kampen Small Capitalization Fund (an affiliate of Van Kampen)....5,487,382 64,531,612
Washington Mutual, Inc............................................... 477,600 20,745,750
------------
618,725,059
------------
Healthcare 12.6%
Abbott Laboratories, Inc............................................. 100,000 4,087,500
Aetna, Inc........................................................... 137,900 10,497,638
American Home Products Corp.......................................... 664,000 34,362,000
Bausch & Lomb, Inc................................................... 369,000 18,496,125
Becton Dickinson & Co................................................ 116,000 9,004,500
Bristol-Myers Squibb Co.............................................. 419,800 48,250,762
Columbia / HCA Healthcare Corp....................................... 170,000 4,951,250
ESC Medical Systems Ltd. (a)......................................... 240,000 8,100,000
Guidant Corp......................................................... 255,200 18,198,950
HBO & Co............................................................. 260,000 9,165,000
Health Care & Retirement Corp. (a)................................... 211,000 8,321,313
Health Management Assn., Inc., Class A (a)........................... 280,500 9,379,219
HEALTHSOUTH Corp. (a)................................................ 648,600 17,309,512
Johnson & Johnson, Inc............................................... 165,000 12,168,750
Lincare Holdings, Inc. (a)........................................... 321,200 13,510,475
Merck & Co., Inc..................................................... 128,000 17,120,000
Mylan Laboratories, Inc.............................................. 657,000 19,751,062
PacifiCare Health Systems, Class B (a)............................... 296,800 26,229,700
Pfizer, Inc.......................................................... 93,200 10,129,675
Pharmacia & Upjohn, Inc.............................................. 262,000 12,084,750
Phycor, Inc. (a)..................................................... 150,000 2,484,375
Rhodia, SA - ADR (France) (a)........................................ 71,600 1,951,100
Rhone-Poulenc, SA - ADR (France), Class A............................ 379,000 21,295,062
</TABLE>
See Notes to Financial Statements
B-31
<PAGE> 66
Portfolio of Investments (Continued)
June 30, 1998
==============================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Healthcare (Continued)
Schering-Plough Corp............................... 372,200 $ 34,102,825
Tenet Healthcare Corp.(a).......................... 1,134,800 35,462,500
Total Renal Care Holdings, Inc.(a)................. 322,883 11,139,464
U.S. Surgical Corp................................. 75,000 3,421,875
United Healthcare Corp............................. 107,000 6,794,500
Universal Health Services, Inc., Class B(a)........ 177,000 10,332,375
Warner-Lambert Co.................................. 60,000 4,162,500
Watsons Pharmaceuticals, Inc.(a)................... 318,000 14,846,625
Wellpoint Health Networks, Inc., Class A(a)........ 296,500 21,941,000
------------
479,052,382
------------
Producer Manufacturing 7.5%
Aeroquip Vickers, Inc.............................. 75,100 4,383,963
AlliedSignal, Inc.................................. 50,000 2,218,750
Alstom SA - ADR (France)(a)........................ 441,100 14,363,319
American Power Conversion Corp.(a)................. 492,100 14,763,000
ASM Lithography Holding NV (Netherlands)(a)........ 120,000 3,487,500
Bouygues Offshore SA - ADR (France)................ 282,500 5,967,813
Canadian Pacific Ltd............................... 295,000 8,370,625
Caterpillar, Inc................................... 90,000 4,758,750
Cognex Corp.(a).................................... 491,200 9,087,200
Cooper Industries, Inc............................. 87,800 4,823,513
Deere & Co......................................... 90,000 4,758,750
General Electric Co................................ 195,800 17,817,800
Hartford Financial Services Group, Inc............. 45,000 5,146,875
Illinois Tool Works, Inc........................... 109,000 7,268,937
Ingersoll-Rand Co.................................. 126,300 5,565,094
ITT Industries, Inc................................ 30,000 1,121,250
Johnson Controls, Inc.............................. 30,000 1,715,625
LucasVarity PLC - ADR (United Kingdom)(a).......... 273,000 10,868,812
Navistar International Corp.(a).................... 232,900 6,724,987
Paccar, Inc........................................ 90,000 4,702,500
Philips Electronics NV - ADR (Netherlands)......... 110,000 9,350,000
Republic Services, Inc............................. 141,700 3,400,800
Textron, Inc....................................... 231,000 16,559,812
The St. Joe Co..................................... 276,100 7,558,237
Tyco International Ltd............................. 268,000 16,884,000
United States Filter Corp.(a)...................... 287,600 8,070,775
United Technologies Corp........................... 253,000 23,402,500
</TABLE>
See Notes to Financial Statements
B-32
<PAGE> 67
Portfolio of Investments (Continued)
June 30, 1998
==============================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Producer Manufacturing (Continued)
USA Waste Services, Inc.(a)........................ 520,000 $ 25,675,000
Waste Management, Inc.............................. 1,008,000 35,280,000
------------
284,096,187
------------
Raw Materials/Processing Industries 4.8%
Air Products & Chemicals, Inc...................... 82,200 3,288,000
Barrick Gold Corp.................................. 619,100 11,878,981
Bethlehem Steel Corp.(a)........................... 287,300 3,573,294
Boise Cascade Corp................................. 287,000 9,399,250
British Steel PLC - ADR (United Kingdom)........... 1,026,000 23,341,500
Champion International Corp........................ 57,000 2,803,688
Crompton & Knowles Corp............................ 236,000 5,944,250
Crown Cork & Seal Co., Inc......................... 25,000 1,187,500
Cytec Industries, Inc.(a).......................... 222,000 9,823,500
Dow Chemical Co.................................... 85,000 8,218,437
Du Pont (E. I.) de Nemours & Co.................... 197,000 14,701,125
Freeport-McMoRan Copper & Gold, Inc., Class B...... 403,000 6,120,563
Homestake Mining Co................................ 1,542,000 15,998,250
Imperial Chemical Industries PLC -
ADR (United Kingdom)............................ 92,000 5,934,000
Louisiana-Pacific Corp............................. 747,000 13,632,750
Mead Corp.......................................... 125,000 3,968,750
Newmont Mining Corp................................ 543,000 12,828,375
Nucor Corp......................................... 60,000 2,760,000
Owens Illinois, Inc.(a)............................ 50,000 2,237,500
Phelps Dodge Corp.................................. 92,000 5,261,250
Placer Dome, Inc................................... 842,500 9,899,375
Stone Container Corp.(a)........................... 265,000 4,140,625
Union Carbide Corp................................. 40,000 2,135,000
USX U.S. Steel Group, Inc.......................... 150,000 4,950,000
------------
184,025,963
------------
Technology 17.2%
3Com Corp.(a)...................................... 45,000 1,380,938
ADC Telecommunications, Inc........................ 13,600 496,825
Alcatel Alsthom CGE - ADR (France)................. 100,000 4,068,750
Altera Corp.(a).................................... 60,200 1,779,662
America Online, Inc.(a)............................ 9,000 954,000
Amkor Technology, Inc.(a).......................... 384,500 3,592,672
Applied Materials, Inc.(a)......................... 160,000 4,720,000
Ascend Communications, Inc.(a)..................... 187,000 9,268,187
</TABLE>
See Notes to Financial Statements
B-33
<PAGE> 68
Portfolio of Investments (Continued)
June 30, 1998
==============================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
Autodesk Inc....................................... 180,000 $ 6,952,500
Avnet, Inc......................................... 125,600 6,868,750
AVX Corp........................................... 85,000 1,365,313
Bay Networks, Inc.(a).............................. 180,000 5,805,000
BMC Software, Inc.(a).............................. 490,600 25,480,537
Cadence Design Systems, Inc.(a).................... 406,600 12,706,250
Cambridge Technology Partners, Inc.(a)............. 14,200 775,675
Check Point Software Tech Ltd.(a).................. 14,900 487,975
CIENA Corp.(a)..................................... 50,000 3,481,250
Cisco Systems, Inc.(a)............................. 318,700 29,340,319
Citrix Systems, Inc.(a)............................ 131,750 9,008,406
Compaq Computer Corp............................... 300,000 8,512,500
Computer Associates International, Inc............. 452,950 25,167,034
Computer Sciences Corp.(a)......................... 238,000 15,232,000
Compuware Corp.(a)................................. 446,000 22,801,750
Comverse Technology, Inc.(a)....................... 107,000 5,550,625
Cypress Semiconductor Corp.(a)..................... 37,900 315,044
Dell Computer Corp.(a)............................. 178,400 16,557,750
Electronics for Imaging, Inc.(a)................... 307,200 6,489,600
EMC Corp.(a)....................................... 688,000 30,831,000
Etec Systems, Inc.(a).............................. 131,600 4,630,675
First Data Corp.................................... 50,000 1,665,625
Gateway 2000, Inc.(a).............................. 20,000 1,012,500
General Dynamics Corp.............................. 150,000 6,975,000
General Signal Corp................................ 65,000 2,340,000
Harris Corp........................................ 110,000 4,915,625
Hewlett-Packard Co................................. 65,000 3,891,875
Hexcel Corp.(a).................................... 155,000 3,506,875
Intel Corp......................................... 210,000 15,566,250
International Business Machines Corp............... 237,000 27,210,562
KLA - Tencor Corp.(a).............................. 55,000 1,522,813
Lattice Semiconductor Corp.(a)..................... 30,000 852,188
Legato Systems, Inc.(a)............................ 31,800 1,240,200
Linear Technology Corp............................. 76,000 4,583,750
Lockheed Martin Corp............................... 55,000 5,823,125
Lucent Technologies, Inc........................... 514,800 42,824,925
Maxim Integrated Products, Inc.(a)................. 295,700 9,369,994
Micron Technology, Inc.(a)......................... 407,300 10,106,131
</TABLE>
See Notes to Financial Statements
B-34
<PAGE> 69
Portfolio of Investments (Continued)
June 30, 1998
==============================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
Microsoft Corp. (a)................................ 435,200 $ 47,164,800
Networks Associates, Inc. (a)...................... 409,050 19,583,269
Nokia Corp. - ADR (Finland) (a).................... 248,600 18,039,037
Northern Telecom Ltd............................... 80,000 4,540,000
Northrop Grumman Corp.............................. 55,000 5,671,875
Oracle Systems Corp. (a)........................... 123,100 3,023,644
Parametric Technology Co........................... 29,600 802,900
Peoplesoft, Inc. (a)............................... 210,000 9,870,000
Pitney Bowes, Inc.................................. 150,000 7,218,750
Quantum Corp. (a).................................. 943,400 19,575,550
Rational Software Corp. (a)........................ 11,300 172,325
Raytheon Co., Class B.............................. 120,000 7,095,000
Sanmina Corp. (a).................................. 113,000 4,901,375
SCI Systems, Inc. (a).............................. 338,000 12,717,250
Software AG Systems, Inc. (a)...................... 23,000 672,750
Sterling Software, Inc. (a)........................ 310,000 9,164,375
Storage Technology Corp. (a)....................... 198,000 8,588,250
Sun Microsystems, Inc. (a)......................... 230,000 9,990,625
Sundstrand Corp.................................... 70,000 4,007,500
SunGard Data Systems, Inc. (a)..................... 641,900 24,632,912
Synopsys, Inc. (a)................................. 20,000 915,000
Tellabs, Inc. (a).................................. 165,000 11,818,125
Texas Instruments, Inc............................. 20,000 1,166,250
Thomas & Betts Corp................................ 40,000 1,970,000
VERITAS Software Co. (a)........................... 24,600 1,017,825
VLSI Technology, Inc. (a).......................... 329,000 5,521,031
Western Digital Corp. (a).......................... 115,000 1,358,438
Xerox Corp......................................... 31,600 3,211,350
Xilinx, Inc........................................ 139,700 4,749,800
------------
657,188,431
------------
Transportation 1.6%
AMR Corp. (a)...................................... 243,000 20,229,750
British Airways PLC - ADR (United Kingdom)......... 20,000 2,151,250
Canadian National Railway Co....................... 184,100 9,780,313
Continental Airlines, Inc., Class B (a)............ 170,500 10,379,188
Delta Air Lines, Inc............................... 80,000 10,340,000
FDX Corp. (a)...................................... 90,000 5,647,500
</TABLE>
See Notes to Financial Statements
B-35
<PAGE> 70
Portfolio of Investments (Continued)
June 30, 1998
==============================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Transportation (Continued)
U.S. Airways Group, Inc.(a)...................... 25,000 $ 1,981,250
UAL Corp.(a)...................................... 20,000 1,560,000
------------
62,069,251
------------
Utilities 10.4%
Ameritech Corp.................................... 611,000 27,418,625
AT & T Corp....................................... 107,000 6,112,375
Baltimore Gas & Electric Co....................... 71,100 2,208,544
BEC Energy........................................ 431,000 17,886,500
Bell Atlantic Corp................................ 614,000 28,013,750
BellSouth Corp.................................... 180,000 12,082,500
CMS Energy Corp................................... 245,400 10,797,600
DTE Energy Co..................................... 254,000 10,255,250
Edison International.............................. 93,000 2,749,313
Endesa SA - ADR (Spain)........................... 408,400 8,831,650
FPL Group, Inc.................................... 57,000 3,591,000
GPU, Inc.......................................... 373,700 14,130,531
GTE Corp.......................................... 40,000 2,225,000
Houston Industries, Inc........................... 1,243,200 38,383,800
Idaho Power Co.................................... 487,200 16,869,300
Illinova Corp..................................... 340,000 10,200,000
NCR Corp.(a)...................................... 80,000 2,600,000
New Century Energies, Inc......................... 90,500 4,112,094
Niagara Mohawk Power Corp.(a)..................... 117,100 1,749,181
NIPSCO Industries, Inc............................ 116,000 3,248,000
Northeast Utilities(a)............................ 375,400 6,358,337
Northern States Power Co. MN...................... 300,000 8,587,500
OGE Energy Corp................................... 534,200 14,423,400
PacifiCorp........................................ 862,000 19,502,750
Pinnacle West Capital Corp........................ 373,000 16,785,000
Public Service Co. of New Mexico.................. 524,000 11,888,250
SBC Communications, Inc........................... 491,000 19,640,000
Sierra Pacific Resources.......................... 35,000 1,270,938
Texas Utilities Co................................ 941,300 39,181,612
US West, Inc...................................... 734,700 34,530,900
------------
395,633,700
------------
</TABLE>
See Notes to Financial Statements
B-36
<PAGE> 71
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
================================================================================================================
Description Market Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Total Long-Term Investments 98.8%
(Cost $2,714,081,869).......................................................................... $3,765,578,716
--------------
Short-Term Investments 2.0%
Repurchase Agreement 0.6%
BA Securities ($22,420,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 06/30/98, to be sold on 07/01/98 at $22,423,768)............... 22,420,000
--------------
U.S. Government Agency Obligations 1.4%
Federal Home Loan Mortgage Discount Notes ($20,000,000 par, yielding 5.45%, 07/20/98 maturity)... 19,939,777
Federal Home Loan Mortgage Discount Notes ($10,000,000 par, yielding 5.48%, 07/31/98 maturity)... 9,953,155
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding 5.51%, 08/28/98 maturity)... 24,777,111
--------------
Total U.S. Government Agency Obligations......................................................... 54,670,043
--------------
Total Short-Term Investments 2.0%
(Cost $77,090,043)............................................................................. 77,090,043
--------------
Total Investments 100.8%
(Cost $2,791,171,912).......................................................................... 3,842,668,759
Liabilities in Excess of Other Assets (0.8%)..................................................... (29,223,056)
--------------
Net Assets 100.0%................................................................................ $3,813,445,703
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
B-37
<PAGE> 72
Statement of Assets and Liabilities
June 30, 1998
================================================================================
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $2,791,171,912)........................ $3,842,668,759
Receivables:
Dividends.................................................... 6,655,518
Investments Sold............................................. 4,658,116
Fund Shares Sold............................................. 4,277,122
Other.......................................................... 114,085
--------------
Total Assets................................................. 3,858,373,600
--------------
Liabilities:
Payables:
Fund Shares Repurchased...................................... 32,740,324
Investments Purchased........................................ 7,071,413
Distributor and Affiliates................................... 2,612,073
Investment Advisory Fee...................................... 1,320,436
Accrued Expenses............................................... 855,298
Trustees' Deferred Compensation and Retirement Plans........... 328,353
--------------
Total Liabilities.......................................... 44,927,897
--------------
Net Assets..................................................... $3,813,445,703
==============
Net Assets Consist of:
Capital........................................................ $2,478,104,833
Net Unrealized Appreciation.................................... 1,051,496,847
Accumulated Net Realized Gain.................................. 268,846,068
Accumulated Undistributed Net Investment Income................ 14,997,955
--------------
Net Assets..................................................... $3,813,445,703
==============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $3,661,449,547 and 244,569,116
shares of beneficial interest issued and outstanding)...... $ 14.97
Maximum sales charge (5.75%* of offering price)............ .91
--------------
Maximum offering price to public........................... $ 15.88
==============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $140,264,625 and 9,498,871
shares of beneficial interest issued and outstanding)...... $ 14.77
==============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $11,731,531 and 793,372
shares of beneficial interest issued and outstanding)...... $ 14.79
==============
*On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>
See Notes to Financial Statements
B-38
<PAGE> 73
Statement of Operations
For the Year Ended June 30, 1998
================================================================================
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Dividends ($971,179 from affiliates of Van Kampen)..................... $ 49,774,060
Interest............................................................... 8,880,824
--------------
Total Income...................................................... 58,654,884
--------------
Expenses:
Investment Advisory Fee................................................ 15,236,351
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $7,664,713, $1,151,207 and $82,505, respectively)................. 8,898,425
Shareholder Services................................................... 5,735,785
Custody................................................................ 234,468
Legal.................................................................. 88,994
Trustees' Fees and Expenses............................................ 73,197
Other.................................................................. 1,380,135
--------------
Total Expenses.................................................... 31,647,355
--------------
Net Investment Income.................................................. $ 27,007,529
==============
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments ($20,161,960 from affiliates of Van Kampen).............. $ 440,324,582
Futures.............................................................. 11,012,682
--------------
Net Realized Gain...................................................... 451,337,264
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period.............................................. 623,187,786
End of the Period:
Investments.......................................................... 1,051,496,847
--------------
Net Unrealized Appreciation During the Period.......................... 428,309,061
--------------
Net Realized and Unrealized Gain....................................... $ 879,646,325
==============
Net Increase in Net Assets From Operations............................. $ 906,653,854
==============
</TABLE>
See Notes to Financial Statements
B-39
<PAGE> 74
Statement of Changes in Net Assets
For the Years Ended June 30, 1998 and 1997
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income......................................... $ 27,007,529 $ 27,093,350
Net Realized Gain............................................. 451,337,264 403,968,224
Net Unrealized Appreciation During the Period................. 428,309,061 303,202,849
--------------- ---------------
Change in Net Assets from Operations.......................... 906,653,854 734,264,423
--------------- ---------------
Distributions from Net Investment Income*..................... (30,494,141) (24,489,713)
Distributions from Net Realized Gain*......................... (524,699,711) (259,006,785)
--------------- ---------------
Total Distributions.......................................... (555,193,852) (283,496,498)
--------------- ---------------
Net Change in Net Assets from Investment Activities........... 351,460,002 450,767,925
--------------- ---------------
From Capital Transactions:
Proceeds from Shares Sold..................................... 1,921,901,750 1,643,070,575
Net Asset Value of Shares Issued Through Dividend Reinvestment 515,581,788 262,459,571
Cost of Shares Repurchased.................................... (2,070,189,122) (1,872,518,515)
--------------- ---------------
Net Change in Net Assets from Capital Transactions............ 367,294,416 33,011,631
--------------- ---------------
Total Increase in Net Assets.................................. 718,754,418 483,779,556
Net Assets:
Beginning of the Period....................................... 3,094,691,285 2,610,911,729
--------------- ---------------
End of the Period (Including accumulated
undistributed net investment income
of $14,997,955 and $15,027,238, respectively)............... $ 3,813,445,703 $ 3,094,691,285
=============== ===============
Year Ended Year Ended
*Distributions by Class June 30, 1998 June 30, 1997
- ----------------------------------------------------------------------------------------------------
Distributions from Net Investment Income:
Class A Shares.............................................. $ (30,092,754) $ (24,328,961)
Class B Shares.............................................. (375,733) (153,305)
Class C Shares.............................................. (25,654) (7,447)
--------------- ---------------
$ (30,494,141) $ (24,489,713)
--------------- ---------------
Distributions from Net Realized Gain:
Class A Shares.............................................. $ (507,041,781) $ (251,595,348)
Class B Shares.............................................. (16,529,561) (7,068,097)
Class C Shares.............................................. (1,128,369) (343,340)
--------------- ---------------
$ (524,699,711) $ (259,006,785)
--------------- ---------------
</TABLE>
See Notes to Financial Statements
B-40
<PAGE> 75
Financial Highlights
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
=====================================================================================================================
Year Ended June 30,
--------------------------------------------------------
Class A Shares 1998 1997 1996(a) 1995(a) 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................. $ 13.872 $ 11.92 $ 11.62 $ 11.05 $ 12.95
-------- -------- -------- -------- --------
Net Investment Income..................................... .122 .132 .12 .14 .13
Net Realized and Unrealized Gain/Loss..................... 3.541 3.191 2.09 1.85 (.1475)
-------- -------- -------- -------- --------
Total from Investment Operations.......................... 3.663 3.323 2.21 1.99 (.0175)
-------- -------- -------- -------- --------
Less:
Distributions from and in Excess of Net Investment Income. .144 .121 .15 .1225 .135
Distributions from Net Realized Gain...................... 2.420 1.250 1.76 1.2975 1.7475
-------- -------- -------- -------- --------
Total Distributions....................................... 2.564 1.371 1.91 1.42 1.8825
-------- -------- -------- -------- --------
Net Asset Value, End of the Period........................ $ 14.971 $ 13.872 $ 11.92 $ 11.62 $ 11.05
======== ======== ======== ======== ========
Total Return (b).......................................... 29.89% 30.06% 20.48% 20.62% (.64%)
Net Assets at End of the Period (In millions)............. $3,661.4 $2,992.2 $2,534.3 $2,279.4 $2,152.5
Ratio of Expenses to Average Net Assets (c)............... .88% .97% .94% 1.04% 1.02%
Ratio of Net Investment Income to Average Net Assets (c).. .80% 1.01% 1.02% 1.24% .99%
Portfolio Turnover........................................ 67% 144% 213% 248% 112%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 1997 the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
B-41
<PAGE> 76
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
========================================================================================================================
Year Ended June 30,
---------------------------------------------------
Class B Shares 1998 1997 1996(a) 1995(a) 1994(a)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......................... $13.730 $ 11.81 $11.53 $ 10.96 $ 12.86
------- ------- ------ ------- -------
Net Investment Income............................................. .045 .046 .02 .05 .03
Net Realized and Unrealized Gain/Loss............................. 3.466 3.151 2.07 1.85 (.1575)
------- ------- ------ ------- -------
Total from Investment Operations.................................. 3.511 3.197 2.09 1.90 (.1275)
------- ------- ------ ------- -------
Less:
Distributions from Net Investment Income.......................... .055 .027 .05 .0325 .025
Distributions from Net Realized Gain.............................. 2.420 1.250 1.76 1.2975 1.7475
------- ------- ------ ------- -------
Total Distributions............................................... 2.475 1.277 1.81 1.33 1.7725
------- ------- ------ ------- -------
Net Asset Value, End of the Period................................ $14.766 $13.730 $11.81 $ 11.53 $ 10.96
======= ======= ====== ======= =======
Total Return (b).................................................. 28.92% 29.08% 19.44% 19.73% (1.46%)
Net Assets at End of the Period (In millions)..................... $ 140.3 $ 95.5 $ 72.1 $ 53.0 $ 35.8
Ratio of Expenses to Average Net Assets (c)....................... 1.66% 1.74% 1.75% 1.84% 1.79%
Ratio of Net Investment Income to Average Net Assets (c).......... .03% .23% .21% .44% .21%
Portfolio Turnover................................................ 67% 144% 213% 248% 112%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 1997 the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
B-42
<PAGE> 77
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
August 27, 1993
Year Ended June 30, (Commencement of
------------------------------------------ Distribution) to
Class C Shares
1998 1997 1996(a) 1995(a) June 30, 1994 (a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................ $13.752 $ 11.83 $11.52 $ 10.99 $ 13.25
------- ------- ------ ------- ---------
Net Investment Income................................... .028 .036 .02 .05 .02
Net Realized and Unrealized Gain/Loss................... 3.482 3.163 2.10 1.81 (.4375)
------- ------- ------ ------- ---------
Total from Investment Operations........................ 3.510 3.199 2.12 1.86 (.4175)
------- ------- ------ ------- ---------
Less:
Distributions from and in Excess of Net Investment
Income................................................ .055 .027 .05 .0325 .095
Distributions from Net Realized Gain.................... 2.420 1.250 1.76 1.2975 1.7475
------- ------- ------ ------- ---------
Total Distributions..................................... 2.475 1.277 1.81 1.33 1.8425
------- ------- ------ ------- ---------
Net Asset Value, End of the Period...................... $14.787 $13.752 $11.83 $ 11.52 $ 10.99
======= ======= ====== ======= =========
Total Return (b)........................................ 28.87% 29.04% 19.74% 19.27% (3.70%)*
Net Assets at End of the Period (In millions)........... $ 11.7 $ 7.0 $ 4.5 $ 2.2 $ 1.2
Ratio of Expenses to Average Net Assets (c)............. 1.66% 1.74% 1.75% 1.84% 1.81%
Ratio of Net Investment Income to Average Net
Assets (c)............................................ .04% .23% .15% .44% .24%
Portfolio Turnover...................................... 67% 144% 213% 248% 112%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 1997 the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
*Non-Annualized
See Notes to Financial Statements
B-43
<PAGE> 78
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen Pace Fund, formerly known as Van Kampen American Capital Pace Fund,
(the "Fund") is organized as a Delaware business trust, and is registered as a
diversified open-end management investment company under the Investment Company
Act of 1940, as amended. The Fund's investment objective is to provide long-term
growth of capital by investing principally in common stock. The Fund commenced
investment operations on July 22, 1969. The distribution of the Fund's Class B
and Class C shares commenced on January 10, 1992 and August 27, 1993,
respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuation--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sale price is not
available are valued at the mean of the bid and asked prices or, if not
available, their fair value as determined in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost.
B. Security Transactions--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments 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 invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. Income and Expenses--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discounts on
debt securities purchased are amortized over the expected life of each
applicable security. Premiums on debt securities are not amortized. Expenses of
the Fund are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. Federal Income Taxes--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gain differs for financial reporting and tax purposes as a
result of the deferral for tax purposes of losses resulting from wash sales.
At June 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $2,797,906,284; the aggregate gross unrealized
appreciation is $1,121,214,760 and the aggregate gross unrealized depreciation
is $76,452,285, resulting in net unrealized appreciation of $1,044,762,475.
B-44
<PAGE> 79
Notes to Financial Statements (Continued)
June 30, 1998
- --------------------------------------------------------------------------------
E. Distribution of Income and Gains--The Fund declares and pays dividends
annually from net investment income and from net realized gains on securities.
Distributions from net realized gains for book purposes may include short-term
capital gains and gains on futures transactions. All short-term capital gains
and a portion of futures gains are included in ordinary income for tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the current fiscal year have been identified and appropriately reclassified.
A permanent difference related to short-term gains totaling $3,457,329 has been
reclassified from accumulated net realized gain to accumulated net investment
income.
2. Investment Advisory Agreement and Other Transactions with Affiliates Under
the terms of the Fund's Investment Advisory Agreement, the Adviser will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
Average Net Assets % Per Annum
- ---------------------------------------------------------------------
First $1 billion.......................................... .50 of 1%
Next $1 billion........................................... .45 of 1%
Next $1 billion........................................... .40 of 1%
Over $3 billion........................................... .35 of 1%
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $88,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $424,800 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended June
30, 1998, the Fund recognized expenses of approximately $4,409,800. Beginning in
1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
For the year ended June 30, 1998, the Fund paid brokerage commissions to
Morgan Stanley Dean Witter and Co., which is an affiliate of Van Kampen, of
$1,000.
During the year ended June 30, 1998, the Fund entered into transactions
with the following Van Kampen Fund which was managed by the Adviser:
<TABLE>
<CAPTION>
Transactions
During the Period
% of ----------------------
Net Assets at Cost of Proceeds
June 30, 1998 Purchases of Sales
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Capitalization Fund................. 1.69% -0- 39,976,722
</TABLE>
B-45
<PAGE> 80
Notes to Financial Statements (Continued)
June 30, 1998
================================================================================
At June 30, 1998, the Fund owned 100% of the Van Kampen Small
Capitalization Fund. This entity does not charge an investment advisory fee or
sales charge and the shares of this entity may only be purchased by other funds
in the Van Kampen fund complex.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At June 30, 1998, capital aggregated $2,352,705,544, $115,697,048 and
$9,702,241 for Classes A, B, and C, respectively. For the year ended June 30,
1998, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
=============================================================================
<S> <C> <C>
Sales:
Class A..................................... 114,528,015 $ 1,658,797,819
Class B..................................... 15,697,912 224,894,498
Class C..................................... 2,661,609 38,209,433
------------ ---------------
Total Sales................................... 132,887,536 $ 1,921,901,750
============ ===============
Dividend Reinvestment:
Class A..................................... 39,614,547 $ 499,143,289
Class B..................................... 1,243,314 15,504,133
Class C..................................... 74,809 934,366
------------ ---------------
Total Dividend Reinvestment................... 40,932,670 $ 515,581,788
============ ===============
Repurchases:
Class A..................................... (125,272,563) $(1,827,462,304)
Class B..................................... (14,397,387) (207,460,144)
Class C..................................... (2,449,887) (35,266,674)
------------ ---------------
Total Repurchases............................. (142,119,837) $(2,070,189,122)
============ ===============
</TABLE>
B-46
<PAGE> 81
Notes to Financial Statements (Continued)
June 30, 1998
================================================================================
At June 30, 1997, capital aggregated $2,022,226,740, $82,758,561 and
$5,825,116 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------------------------
Sales:
<S> <C> <C>
Class A................................ 105,486,346 $ 1,322,487,505
Class B................................ 21,645,218 268,448,586
Class C................................ 4,201,247 52,134,484
------------- ---------------
Total Sales.............................. 131,332,811 $ 1,643,070,575
============= ===============
Dividend Reinvestment:
Class A................................ 21,956,046 $ 255,568,391
Class B................................ 568,820 6,581,245
Class C................................ 26,765 309,935
------------- ---------------
Total Dividend Reinvestment.............. 22,551,631 $ 262,459,571
------------- ---------------
Repurchases:
Class A................................ (124,366,182) $(1,557,255,115)
Class B................................ (21,362,800) (264,482,526)
Class C................................ (4,098,959) (50,780,874)
------------- ---------------
Total Repurchases........................ (149,827,941) $(1,872,518,515)
============= ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year. The CDSC for
Class B and C shares will be imposed on most redemptions made within five years
of the purchase for Class B and one year of the purchase for Class C as detailed
in the following schedule.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
Year of Redemption Class B Class C
- -------------------------------------------------------------------------------
<S> <C> <C>
First.................................... 5.00% 1.00%
Second................................... 4.00% None
Third.................................... 3.00% None
Fourth................................... 2.50% None
Fifth.................................... 1.50% None
Sixth and Thereafter..................... None None
</TABLE>
For the year ended June 30, 1998, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$374,900 and CDSC on redeemed shares of approximately $117,300. Sales charges do
not represent expenses of the Fund.
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $2,250,893,598 and $2,273,952,335,
respectively.
B-47
<PAGE> 82
Notes to Financial Statements (Continued)
June 30, 1998
================================================================================
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used to
provide the return of an index without purchasing all of the securities
underlying the index or to manage the Fund's overall exposure to the equity
markets.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).
Transactions in futures contracts for the year ended June 30, 1998, were as
follows:
<TABLE>
<CAPTION>
Contracts
================================================================================
<S> <C>
Outstanding at June 30, 1997.......................................... 250
Futures Opened........................................................ 740
Futures Closed........................................................ (990)
-----
Outstanding at June 30, 1998.......................................... -0-
=====
</TABLE>
6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended June 30, 1998, are payments retained by Van Kampen of
approximately $1,179,700.
B-48
<PAGE> 83
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
List of all financial statements and exhibits as part of the Registration
Statement.
(a) Financial Statements:
Included in Part A of Registration Statement:
Financial Highlights
Included in Part B of Registration Statement:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits:
<TABLE>
<S> <C>
(1)(a) -- First Amended and Restated Agreement and Declaration of
Trust(7)
(b) -- Second Certificate of Amendment+
(c) -- Second Amended and Restated Certificate of Designation+
(2) -- Amended and Restated Bylaws(7)
(4)(a) -- Specimen Class A Share Certificate+
(b) -- Specimen Class B Share Certificate+
(c) -- Specimen Class C Share Certificate+
(5) -- Investment Advisory Agreement(8)
(6)(a) -- Distribution and Service Agreement(8)
(b) -- Form of Dealer Agreement(8)
(c) -- Form of Broker Fully Disclosed Selling Agreement(7)
(d) -- Form of Bank Fully Disclosed Selling Agreement(7)
(8)(a) -- Custodian Contract(8)
(b) -- Transfer Agency and Service Agreement(8)
(9)(a) -- Data Access Services Agreement dated December 2, 1993(6)
(b) -- Fund Accounting Agreement(8)
(10) -- Opinion and Consent of Skadden, Arps, Slate, Meagher &
Flom (Illinois)(7)
(11) -- Consent of PricewaterhouseCoopers LLP+
(14)(a) -- Individual Retirement Account Brochure with
Application(3)
(b) -- 403(b)(7) Custodial Account(2)
(c) -- ORP 403(b)(7) Custodial Account(2)
(d) -- Retirement Plans for the Small Business-Forms Package and
Plan Documents(5)
(e) -- Prototype Profit Sharing/Money Purchase Plan and Trust(1)
(f) -- Prototype 401(k) Plan and Trust(1)
(g) -- Salary Reduction Simplified Employee Pension Plan(4)
(15)(a) -- Plan of Distribution Pursuant to Rule 12b-1(7)
(b) -- Form of Shareholder Assistance Agreement(7)
(c) -- Form of Administrative Services Agreement(7)
(d) -- Service Plan(7)
(16) -- Computation of Performance Quotations+
</TABLE>
C-1
<PAGE> 84
<TABLE>
<S> <C>
(17)(a) -- List of certain investment companies in response to Item
29(a)+
(b) -- List of officers and directors of Van Kampen Funds Inc.
in response to Item 29(b)+
(18) -- Amended Multi-Class Plan(8)
(24) -- Power of Attorney+
(27) -- Financial Data Schedules+
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 61 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File No. 2-21657, filed March 27, 1991.
(2) Incorporated herein by reference to Post-Effective Amendment No. 30 to Van
Kampen American Capital Reserve Fund's Registration Statement on Form N-1A,
File No. 2-50870, filed September 24, 1992.
(3) Incorporated herein by reference to Post-Effective Amendment No. 31 to Van
Kampen American Capital Reserve Fund's Registration Statement on Form N-1A,
File No. 2-50870, filed September 24, 1993.
(4) Incorporated herein by reference to Post-Effective Amendment No. 9 to Van
Kampen American Capital World Portfolio Series Trust's Registration
Statement on Form N-1A, File No. 33-37879, filed September 24, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment No. 18 to Van
Kampen American Capital Government Securities Fund's Registration Statement
on Form N-1A, File No. 2-90482, filed February 25, 1994.
(6) Incorporated herein by reference to Post-Effective Amendment No. 1 to Van
Kampen American Capital Utilities Income Fund, Inc.'s Registration Statement
on Form N-1A, File No. 33-68452, filed May 19, 1994.
(7) Incorporated herein by reference to Post-Effective Amendment No. 46 to
Registrant's Registration Statement on Form N-1A, File No. 2-31417, filed
October 25, 1996.
(8) Incorporated herein by reference to Post-Effective Amendment No. 47 to
Registrants' Registration Statement on Form N-1A, File No. 2-31417, Filed
October 27, 1997.
+ Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of September 3, 1998
<TABLE>
<CAPTION>
(2)
NUMBER OF RECORD HOLDERS
(1) ---------------------------
TITLE OF CLASS CLASS A CLASS B CLASS C
-------------- ------- ------- -------
<S> <C> <C> <C>
Shares of Beneficial Interest,
$0.01 par value................................. 193,630 11,283 1,110
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
C-2
<PAGE> 85
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 each of the officers and
directors of Van Kampen Asset Management Inc., reference is made to the
Adviser's current Form ADV (File No. 801-1669) filed under the Investment
Advisers Act of 1940, as amended, incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen Funds Inc., which acts as
principal underwriter for certain investment companies and unit investment
trusts set forth in Exhibit 17(a) incorporated by reference herein.
(b) Van Kampen Funds Inc., which is an affiliated person of an affiliated
person of Registrant, is the sole principal underwriter for Registrant. The
name, principal business address and positions and offices with Van Kampen Funds
Inc. of each of the directors and officers thereof are set forth in Exhibit
17(b). Except as disclosed under the heading, "Trustees and Officers" in Part B
of this Registration Statement, none of such persons has any position or office
with Registrant.
C-3
<PAGE> 86
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, Van Kampen Investor Services Inc., 7501
Tiffany Springs Parkway, Kansas City, Missouri 64153, or at the State Street
Bank and Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the
Adviser, will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181; and (iii) by Van Kampen Funds Inc., the
principal underwriter, will be maintained at its offices located at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
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> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN PACE FUND, certifies
that it meets all of the requirements for effectiveness of this Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Oakbrook Terrace and State of Illinois, on the 29th day of September 1998.
VAN KAMPEN 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 the Registration Statement has been signed on September 29, 1998 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
Principal Executive Officer:
/s/ DENNIS J. MCDONNELL* President
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/ RICHARD M. DEMARTINI* Trustee
Richard M. DeMartini
/s/ LINDA H. HEAGY* Trustee
Linda H. Heagy
/s/ R. CRAIG KENNEDY* Trustee
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
Jack E. Nelson
/s/ DON G. POWELL* Trustee
Don G. Powell
/s/ PHILLIP B. ROONEY* Trustee
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
Wayne W. Whalen
- ---------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney filed herewith.
/s/ RONALD A. NYBERG September 29, 1998
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
<PAGE> 88
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 48 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON SEPTEMBER 29, 1998
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S>
(1)(b) -- Second Certificate of Amendment
(c) -- Second Amended and Restated Certificate of Designation
(4)(a) -- Specimen Class A Share Certificate
(b) -- Specimen Class B Share Certificate
(c) -- Specimen Class C Share Certificate
(11) -- Consent of PricewaterhouseCoopers LLP
(16) -- Computation of Performance Quotations
(17)(a) -- List of certain investment companies in response to Item
29(a)
(17)(b) -- List of officers and directors of Van Kampen Funds Inc.
in response to Item 29(b)
(24) -- Power of Attorney
(27) -- Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 1(b)
SECOND CERTIFICATE OF AMENDMENT DATED JULY 14, 1998
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 1.1 is amended and restated in its entirety
to read as follows:
1.1 Name. The name of the Trust shall be
-----
"VAN KAMPEN 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.
EXECUTED, to be effective as of July 14, 1998
/s/ Ronald A. Nyberg
_____________________________
Ronald A. Nyberg,
Secretary
<PAGE> 1
EXHIBIT (1)(c)
VAN KAMPEN PACE FUND
Second Amended and Restated Certificate of Designation
of
Van Kampen Pace Fund
The undersigned, being the Secretary of Van Kampen 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 Restated
Agreement and Declaration of Trust ("Declaration"), and by the affirmative vote
of a Majority of the Trustees does hereby amend and restate in its entirety the
Amended and Restated Certificate of Designation of the Van Kampen American
Capital Pace Fund Series of the Trust dated December 12, 1996 by redesignating
such Series as the Van Kampen Pace Fund Series with the following rights,
preferences and characteristics:
1. SHARES. The beneficial interest in the Trust shall be divided into Shares
having a nominal or par value of $0.01 per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Trust. The
Trustees shall have the authority from time to time to authorize separate
Series of Shares for the Trust as they deem necessary or desirable.
2. 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.
3. 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.
4. CONVERSION. Each Class B Share and certain Class C Shares 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.
5. 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.
<PAGE> 2
6. 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.
7. 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 Shares of the Trust unless otherwise specified in
this Certificate of Designation, in which case this Certificate of Designation
shall govern.
8. 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
any 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.
9. 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.
July 14, 1998
/s/ Ronald A. Nyberg
---------------------------
Ronald A. Nyberg, Secretary
<PAGE> 1
EXHIBIT 4(a)
NUMBER SHARES
______ ______
VAN KAMPEN 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 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
PACE FUND
DELAWARE SEAL)
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED BY VAN KAMPEN 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 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:
VAN KAMPEN INVESTOR SERVICES
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 Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________________
_______________________________________________________________________ Attorney
to transfer the said share on the books of the within-named Trust 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
Minors Act
TEN ENT - as tenants by
the entireties
___________________________
(State)
JT TEN - as joint tenants
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
NUMBER SHARES
______ ______
VAN KAMPEN 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 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
PACE FUND
DELAWARE SEAL)
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED BY VAN KAMPEN 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 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:
VAN KAMPEN INVESTOR SERVICES
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 Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said share on the books of the within-named Trust 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
Minors Act
TEN ENT - as tenants by
the entireties
---------------------------
(State)
JT TEN - as joint tenants
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
NUMBER SHARES
______ ______
VAN KAMPEN 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 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
PACE FUND
DELAWARE SEAL)
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED BY VAN KAMPEN 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 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:
VAN KAMPEN INVESTOR SERVICES
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 Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
---------------------------------------------
Attorney
- -----------------------------------------------------------------------
to transfer the said shares on the books of the within-named Trust 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
Minors Act
TEN ENT - as tenants by
the entireties
___________________________
(State)
JT TEN - as joint tenants
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 (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. 48, Amendment No. 33, to
the registration statement on Form N-1A (the "Registration Statement") of our
report dated July 28, 1998, relating to the financial statements and financial
highlights of Van Kampen 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 Statements,
'Experts'" and "Independent Accountants" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
and "Experts" in such Prospectus
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
September 29, 1998
<PAGE> 1
EXHIBIT (16)
VAN KAMPEN AMERICAN CAPITAL PACE FUND - CLASS A SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1998
<TABLE>
<S> <C>
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,223.89 = ERV
n
One year period ended 06/30/98 1 =
TOTAL RETURN FOR THE PERIOD 22.39% = T
Excluding Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,298.87 = ERV
n
One year period ended 06/30/98 1 =
TOTAL RETURN FOR THE PERIOD 29.89% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,298.75 = ERV
n
Five years ended 06/30/98 5 =
TOTAL RETURN FOR THE PERIOD 18.11% = T
Excluding Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,438.93 = ERV
n
Five years ended 06/30/98 5 =
TOTAL RETURN FOR THE PERIOD 19.52% = T
TOTAL RETURN CALCULATION TEN YEARS ENDED JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $3,727.90 = ERV
n
Ten years ended 06/30/98 10 =
TOTAL RETURN FOR THE PERIOD 14.06% = T
Excluding Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $3,954.92 = ERV
n
Ten years ended 06/30/98 10 =
TOTAL RETURN FOR THE PERIOD 14.74% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $39,268.42 = ERV
n
Inception through 6/30/98 28.94 =
TOTAL RETURN FOR THE PERIOD 13.52% = T
Excluding Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $41,664.55 = ERV
n
Inception through 06/30/98 28.94 =
TOTAL RETURN FOR THE PERIOD 13.75% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1998 IV:
Formula ERV - P
--------
P = T
Including Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $39,268.42 = ERV
TOTAL RETURN FOR THE PERIOD 3,826.84% = T
Excluding Payment of the Sales Charge
Net Asset Value $14.97
Initial Investment $1,000.00 = P
Ending Redeemable Value $41,664.55 = ERV
TOTAL RETURN FOR THE PERIOD 4,066.46% = T
</TABLE>
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL PACE FUND - CLASS B SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,239.23 = ERV
n
One year period ended 06/30/98 1 =
TOTAL RETURN FOR THE PERIOD 23.92% = T
Excluding Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,289.23 = ERV
n
One year period ended 06/30/98 1 =
TOTAL RETURN FOR THE PERIOD 28.92% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,330.12 = ERV
n
Five years ended 06/30/98 5 =
TOTAL RETURN FOR THE PERIOD 18.43% = T
Excluding Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,345.12 = ERV
n
Five years ended 06/30/98 5 =
TOTAL RETURN FOR THE PERIOD 18.59% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,533.54 = ERV
n
Inception through 06/30/98 6.47 =
TOTAL RETURN FOR THE PERIOD 15.45% = T
Excluding Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,533.54 = ERV
n
Inception through 06/30/98 6.47 =
TOTAL RETURN FOR THE PERIOD 15.45% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1998
Formula ERV - P
----------
P = T
Including Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,533.54 = ERV
TOTAL RETURN FOR THE PERIOD 153.35% = T
Excluding Payment of the CDSC
Net Asset Value $14.77
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,533.54 = ERV
TOTAL RETURN FOR THE PERIOD 153.35% = T
<PAGE> 3
VAN KAMPEN AMERICAN CAPITAL PACE FUND - CLASS C SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1998
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $14.79
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,278.74 = ERV
n
One year period ended 06/31/97 1 =
TOTAL RETURN FOR THE PERIOD 27.87% = T
Excluding Payment of the CDSC
Net Asset Value $14.79
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,288.74 = ERV
n
One year period ended 06/30/97 1 =
TOTAL RETURN FOR THE PERIOD 28.87% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH JUNE 30, 1998
Formula P(1+T)" = ERV
Including Payment of the CDSC
Net Asset Value $14.79
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,287.33 = ERV
n
Inception through 06/30/97 4.84 =
TOTAL RETURN FOR THE PERIOD 18.64% = T
Excluding Payment of the CDSC
Net Asset Value $14.79
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,287.33 = ERV
n
Inception through 06/30/97 4.84 =
TOTAL RETURN FOR THE PERIOD 18.64% = T
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1998
Formula ERV - P
-------
P = T
Including Payment of the CDSC
Net Asset Value $14.79
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,287.33 = ERV
TOTAL RETURN FOR THE PERIOD 128.73% = T
Excluding Payment of the CDSC
Net Asset Value $14.79
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,287.33 = ERV
TOTAL RETURN FOR THE PERIOD 128.73% = T
<PAGE> 1
EXHIBIT 17(a)
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN FUNDS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
AUGUST 27, 1998
Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Short-Term Global Income Fund
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Utility Fund
Van Kampen American Capital Value Fund
Van Kampen Great American Companies Fund
Van Kampen Growth Fund
Van Kampen Prospector Fund
Van Kampen Aggressive Growth Fund
Van Kampen Foreign Securities Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Limited Maturity Government Fund
Van Kampen Global Managed Assets Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust
Asset Allocation Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Comstock Portfolio
<PAGE> 2
Van Kampen Small Capitalization Fund
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax -Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
Van Kampen Aggressive Equity Fund
Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Emerging Markets Debt Fund
Van Kampen Equity Growth Fund
Van Kampen Global Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Fixed Income Fund
Van Kampen Global Franchise Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth and Income Fund II
Van Kampen High Yield & Total Return Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund
Van Kampen Latin American Fund
Van Kampen MidCap Growth Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Van Kampen U.S. Real Estate Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Insured Municipals Income Trust..........................................................................Series 401
Arizona Insured Municipals Income Trust................................................................. Series 18
California Insured Municipals Income Trust.............................................................. Series 174
Colorado Insured Municipals Income Trust................................................................ Series 87
Connecticut Insured Municipals Income Trust ............................................................ Series 37
Florida Insured Municipals Income Trust................................................................. Series 120
Georgia Insured Municipals Income Trust................................................................. Series 86
Kentucky Investors' Quality Tax-Exempt Trust............................................................ Series 60
Maryland Investors' Quality Tax-Exempt Trust............................................................ Series 86
Massachusetts Insured Municipals Income Trust........................................................... Series 35
Michigan Insured Municipals Income Trust................................................................ Series 151
Minnesota Insured Municipals Income Trust............................................................... Series 62
Missouri Insured Municipals Income Trust................................................................ Series 107
New Jersey Insured Municipals Income Trust.............................................................. Series 123
New York Insured Municipals Income Trust................................................................ Series 146
North Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 95
Ohio Insured Municipals Income Trust.................................................................... Series 110
Pennsylvania Insured Municipals Income Trust............................................................ Series 237
South Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 86
Tennessee Insured Municipals Income Trust............................................................... Series 41
Virginia Investors' Quality Tax-Exempt Trust............................................................ Series 81
Van Kampen American Capital Insured Income Trust........................................................ Series 71
Internet Trust.......................................................................................... Series 11
Strategic Ten Trust, United States Portfolio............................................................ August 1998 Series
Strategic Ten Trust, United States Portfolio............................................................ August 1998
Traditional Series
Strategic Five Trust, United States Portfoliio.......................................................... August 1998 Series
Strategic Five Trust, United States Portfolio........................................................... August 1998
Traditional Series
EAFE Strategic 20 Trust................................................................................. August 1998 Series
EURO Strategic 20 Trust................................................................................. August 1998 Series
Strategic Picks Opportunity Trust....................................................................... August 1998 Series
Strategic Fifteen Trust Global Portfolio................................................................ July 1998 Series
Strategic Thirty Trust Global Portfolio................................................................. July 1998 Series
Great International Firms Trust......................................................................... Series 5
Blue Chip Opportunity and Treasury Trust................................................................ Series 6
Blue Chip Opportunity Trust............................................................................. Sereis 4
Baby Boomer Opportunity Trust........................................................................... Series 4
Global Energy Trust..................................................................................... Series 6
Brand Name Equity Trust................................................................................. Series 6
Edward Jones Select Growth Trust........................................................................ July 1998 Series
Banking Trust........................................................................................... Series 3
Morgan Stanley High-Technology 35 Index Trust........................................................... Series 3
Health Care Trust....................................................................................... Series 3
Telecommunications Trust................................................................................ Series 3
Utility Trust........................................................................................... Series 3
Financial Services Trust................................................................................ Series 1
Natcity Investments, Inc. Great American Equities Trust................................................. Series 1
First Albany Banking Growth Trust....................................................................... Series 1
Gruntal Global Transport Trust.......................................................................... Series 1
</TABLE>
<PAGE> 1
EXHIBIT 17 (b)
Officers
Van Kampen Funds Inc.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman Houston, TX
Richard F. Powers, III Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman President Oakbrook Terrace, IL
Douglas B. Gehrman Executive Vice President Houston, TX
Ronald A. Nyberg Executive Vice President, General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
John. E. Doyle Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Richard G. Gold Sr. Vice President Annapolis, MD
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Mark T. McGannon Sr. Vice President Oakbrook Terrace, IL
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
Colette M. Saucedo Sr. Vice President Houston, TX
Frederick Shepherd Sr. Vice President Houston, TX
Steven P. Sorenson Sr. Vice President Oakbrook Terrace, IL
Michael L. Stallard Sr. Vice President Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward C. Wood Sr. Vice President and Oakbrook Terrace, IL
Chief Operating Officer
Glenn M. Cackovic 1st Vice President Laguna Nigel, CA
Eric J. Hargens 1st Vice President Orlando, FL
David B. Hogaboom 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President Danville, CA
Carl Mayfield 1st Vice President Oakbrook Terrace, IL
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
George J. Vogel 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
Robert J. Abreu Vice President New York, NY
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Sheldon Barker Vice President Moon, PA
Patricia A. Bettlach Vice President Chesterfield, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
Michael P. Boos Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Robert C. Brooks Vice President Oakbrook Terrace, IL
William F Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
Joseph N. Caggiano Vice President New York, NY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Daniel R. Chambers Vice President Austin, TX
Richard J. Charlino Vice President Houston, TX
Deanna Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
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 Oakbrook Terrace, IL
Nicholas Dalmaso Vice President, Associate Oakbrook Terrace, IL
General Counsel & Asst. Secretary
Tracey M. DeLusant Vice President New York, NY
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Jonathan Eckard Vice President Tampa, FL
Huey P. Falgout, Jr. Vice President, Assistant Houston, TX
Secretary and Senior Attorney
Charles Edward Fisher Vice President Naperville, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhoven Vice President Englewood, CO
Charles Friday Vice President Gibsonia, PA
Timothy D. Griffith Vice President Kirkland, WA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Joseph Hays Vice President Cherry Hill, NJ
Daniel M. Hazard Vice President Huntington Beach, CA
Gregory Heffington Vice President Ft. Collins, CO
Susan J. Hill Vice President and Senior Attorney Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Robert S. Hunt Vice President Phoenix, MD
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Jeffrey S. Kinney Vice President Overland Park, KS
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
Richard D. Kozlowski Vice President Atlanta, GA
Bradford N. Langs Vice President Oakbrook Terrace, IL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
S. William Lehew III Vice President Charlotte, NC
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Kevin S. Marsh Vice President Bellevue, WA
Linda S. MacAyeal Vice President and Senior Attorney Oakbrook Terrace, IL
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
Maura A. McGrath Vice President New York, NY
John Mills Vice President Kenner, LA
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Ted Morrow Vice President Dallas, TX
Robert Muller, Jr. Vice President Cypress, TX
Peter Nicholas Vice President Beverly, MA
Michael D. Ossmen Vice President Oakbrook Terrace, IL
Todd W. Page Vice President Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Anthony Piazza Vice President Old Bridge, NJ
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Fairlawn, OH
Daniel D. Reams Vice President Royal Oak, MI
Michael W. Rohr Vice President Oakbrook Terrace, IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Thomas Rowley Vice President St. Louis, MO
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Andrew J. Scherer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Gwen L. Shaneyfelt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorensen Vice President Oakbrook Terrace, IL
Kimberly M. Spangler Vice President Fairfax, VA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Gary R. Steele Vice President Philadelphia, PA
Richard Stefanec Vice President Los Angeles, CA
James D. Stevens Vice President North Andover, MA
William C. Strafford Vice President Granger, IN
Mark A. Syswerda Vice President Oakbrook Terrace, IL
David A. Tabone Vice President Scottsdale, AZ
James C. Taylor Vice President Naperville, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Todd Volkman Vice President Austin, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
David M. Wynn Vice President Phoenix, AZ
James R. Yount Vice President Mercer Island, WA
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Joan E. Blackwood Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Gregory T. Brunk Asst. Vice President Oakbrook Terrace, IL
Gina Costello Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Sarah K. Gieser Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Houston, TX
Valri G. Hamilton Asst. Vice President Houston, TX
Laurie L. Jones Asst. Vice President Houston, TX
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
Pamela D. Meyer Asst. Vice President Phoenix, AZ
Stuart R. Moehlman Asst. Vice President Houston, TX
Cathy Napoli Asst. Vice President Oakbrook Terrace, IL
Steven R. Norvid Asst. Vice President Oakbrook Terrace, IL
Vincent M. Pellegrini Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
Vanessa M. Sanchez Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Christina L. Schmieder Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Sharon M. C. Wells Asst. Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
Theresa M. Renn Officer Oakbrook Terrace, IL
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN FUNDS INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ----------------------------
<S> <C> <C>
Don G. Powell Chairman 2800 Post Oak Blvd.
Houston, TX 77056
Richard F. Powers, III Chief Executive Officer One Parkview Plaza
Oakbrook Terrace, IL 60181
John H. Zimmerman President One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President, One Parkview Plaza
General Counsel Oakbrook Terrace, IL 60181
& Assistant Secretary
William R. Rybak Executive Vice President One Parkview Plaza
& Chief Financial Officer Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open End Trusts (individually, a "Trust") 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, and being officers and
directors of the Morgan Stanley Fund, Inc. (the "Corporation"), a Maryland
corporation, 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 or the Corporation 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: April 24, 1998
Signature Title
--------- -----
/s/ Dennis J. McDonnell President and Trustee/Director
- ---------------------------
Dennis J. McDonnell
/s/ Edward C. Wood III Vice President and Chief Financial Officer
- ---------------------------
Edward C. Wood III
/s/ J. Miles Branagan Trustee/Director
- ---------------------------
J. Miles Branagan
/s/ Richard M. DeMartini Trustee/Director
- ---------------------------
Richard M. DeMartini
/s/ Linda Hutton Heagy Trustee/Director
- ---------------------------
Linda Hutton Heagy
/s/ R. Craig Kennedy Trustee/Director
- ---------------------------
R. Craig Kennedy
/s/ Jack E. Nelson Trustee/Director
- ---------------------------
Jack E. Nelson
/s/ Don G. Powell Trustee/Director
- ---------------------------
Don G. Powell
/s/ Phillip B. Rooney Trustee/Director
- ---------------------------
Phillip B. Rooney
/s/ Fernando Sisto, Sc.D. Trustee/Director
- ---------------------------
Fernando Sisto, Sc. D.
/s/ Wayne W. Whalen Trustee/Director and Chairman
- ---------------------------
Wayne W. Whalen
<PAGE> 2
SCHEDULE 1
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL EMREGING 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 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 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 U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> PACE FUND A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 2,791,171,912<F1>
<INVESTMENTS-AT-VALUE> 3,842,668,759<F1>
<RECEIVABLES> 15,590,756<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 114,085<F1>
<TOTAL-ASSETS> 3,858,373,600<F1>
<PAYABLE-FOR-SECURITIES> 7,071,413<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 37,856,484<F1>
<TOTAL-LIABILITIES> 44,927,897<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,352,705,544
<SHARES-COMMON-STOCK> 244,569,116
<SHARES-COMMON-PRIOR> 215,699,117
<ACCUMULATED-NII-CURRENT> 14,997,955<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 268,846,068<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,051,496,847<F1>
<NET-ASSETS> 3,661,449,547
<DIVIDEND-INCOME> 49,774,060<F1>
<INTEREST-INCOME> 8,880,824<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (31,647,355)<F1>
<NET-INVESTMENT-INCOME> 27,007,529<F1>
<REALIZED-GAINS-CURRENT> 451,337,264<F1>
<APPREC-INCREASE-CURRENT> 428,309,061<F1>
<NET-CHANGE-FROM-OPS> 906,653,854<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (30,092,754)
<DISTRIBUTIONS-OF-GAINS> (507,041,781)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114,528,015
<NUMBER-OF-SHARES-REDEEMED> (125,272,563)
<SHARES-REINVESTED> 39,614,547
<NET-CHANGE-IN-ASSETS> 669,223,957
<ACCUMULATED-NII-PRIOR> 15,027,238<F1>
<ACCUMULATED-GAINS-PRIOR> 345,665,844<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 15,236,351<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 31,647,355<F1>
<AVERAGE-NET-ASSETS> 3,374,265,888
<PER-SHARE-NAV-BEGIN> 13.872
<PER-SHARE-NII> 0.122
<PER-SHARE-GAIN-APPREC> 3.541
<PER-SHARE-DIVIDEND> (0.144)
<PER-SHARE-DISTRIBUTIONS> (2.420)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.971
<EXPENSE-RATIO> 0.88
<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
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 2,791,171,912<F1>
<INVESTMENTS-AT-VALUE> 3,842,668,759<F1>
<RECEIVABLES> 15,590,756<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 114,085<F1>
<TOTAL-ASSETS> 3,858,373,600<F1>
<PAYABLE-FOR-SECURITIES> 7,071,413<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 37,856,484<F1>
<TOTAL-LIABILITIES> 44,927,897<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,697,048
<SHARES-COMMON-STOCK> 9,498,871
<SHARES-COMMON-PRIOR> 6,955,032
<ACCUMULATED-NII-CURRENT> 14,997,955<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 268,846,068<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,051,496,847<F1>
<NET-ASSETS> 140,264,625
<DIVIDEND-INCOME> 49,774,060<F1>
<INTEREST-INCOME> 8,880,824<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (31,647,355)<F1>
<NET-INVESTMENT-INCOME> 27,007,529<F1>
<REALIZED-GAINS-CURRENT> 451,337,264<F1>
<APPREC-INCREASE-CURRENT> 428,309,061<F1>
<NET-CHANGE-FROM-OPS> 906,653,854<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (375,733)
<DISTRIBUTIONS-OF-GAINS> (16,529,561)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,697,912
<NUMBER-OF-SHARES-REDEEMED> (14,397,387)
<SHARES-REINVESTED> 1,243,314
<NET-CHANGE-IN-ASSETS> 44,768,788
<ACCUMULATED-NII-PRIOR> 15,027,238<F1>
<ACCUMULATED-GAINS-PRIOR> 345,665,844<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 15,236,351<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 31,647,355<F1>
<AVERAGE-NET-ASSETS> 115,127,336
<PER-SHARE-NAV-BEGIN> 13.730
<PER-SHARE-NII> 0.045
<PER-SHARE-GAIN-APPREC> 3.466
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> (2.420)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.766
<EXPENSE-RATIO> 1.66
<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>
<NUMBER> 13
<NAME> PACE FUND C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 2,791,171,912<F1>
<INVESTMENTS-AT-VALUE> 3,842,668,759
<RECEIVABLES> 15,590,756<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 114,085<F1>
<TOTAL-ASSETS> 3,858,373,600<F1>
<PAYABLE-FOR-SECURITIES> 7,071,413<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 37,856,484<F1>
<TOTAL-LIABILITIES> 44,927,897<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,702,241
<SHARES-COMMON-STOCK> 793,372
<SHARES-COMMON-PRIOR> 506,841
<ACCUMULATED-NII-CURRENT> 14,997,955<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 268,846,068<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,051,496,847<F1>
<NET-ASSETS> 11,731,531
<DIVIDEND-INCOME> 49,774,060<F1>
<INTEREST-INCOME> 8,880,824<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (31,647,355)<F1>
<NET-INVESTMENT-INCOME> 27,007,529<F1>
<REALIZED-GAINS-CURRENT> 451,337,264<F1>
<APPREC-INCREASE-CURRENT> 428,309,061<F1>
<NET-CHANGE-FROM-OPS> 906,653,854<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (25,654)
<DISTRIBUTIONS-OF-GAINS> (1,128,369)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,661,609
<NUMBER-OF-SHARES-REDEEMED> (2,449,887)
<SHARES-REINVESTED> 74,809
<NET-CHANGE-IN-ASSETS> 4,761,673
<ACCUMULATED-NII-PRIOR> 15,027,238<F1>
<ACCUMULATED-GAINS-PRIOR> 345,665,844<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 15,236,351<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 31,647,355<F1>
<AVERAGE-NET-ASSETS> 8,254,790
<PER-SHARE-NAV-BEGIN> 13.752
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> 3.482
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> (2.420)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.787
<EXPENSE-RATIO> 1.66
<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>
