<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1997
REGISTRATION NOS. 2-96030
811-4746
================================================================================
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. 18 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF [X]
1940
AMENDMENT NO. 22 [X]
</TABLE>
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, IL 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 AMERICAN CAPITAL, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(NAME AND ADDRESS OF AGENT FOR SERVICES)
---------------------
Copy 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:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24F-2
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES
ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 AND
INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A FORM 24F-2 FOR ITS
FISCAL YEAR ENDING NOVEMBER 30, 1997 ON OR ABOUT FEBRUARY 28, 1998.
================================================================================
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL HIGH YIELD MUNICIPAL FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM CAPTION
-------------- -------
PART A LOCATION IN PROSPECTUS
------ ----------------------
<C> <S> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... The Fund; Investment Objective and
Policies; Municipal Securities; 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;
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>
PART B STATEMENT OF ADDITIONAL INFORMATION
------ -----------------------------------
<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......... Municipal Securities; Temporary
Investments; Repurchase Agreements; Future
Contracts and Related Options; Investment
Restrictions
14. Management of the Fund..................... General Information; Investment Advisory
Agreement
15. Control Persons and Principal Holders of
Securities............................... General Information; Trustees and Officers;
Investment Advisory Agreement
16. Investment Advisory and Other Services..... Investment Advisory Agreement; Distributor;
Distribution and Service Plans; Transfer
Agent; Portfolio Transactions and
Brokerage; Other Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; 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 in Part C of this registration statement.
<PAGE> 3
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD MUNICIPAL FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital High Yield Municipal Fund (the "Fund") is a
diversified series of the Van Kampen American Capital Tax-Exempt Trust (the
"Trust"), an open-end management investment company. The Fund's investment
objective is to seek to provide investors as high a level of interest income
exempt from federal income tax as is consistent with the investment policies of
the Fund. The Fund seeks to achieve its investment objective by investing
principally in medium to lower rated tax-exempt debt securities. LOWER RATED
SECURITIES ARE REGARDED BY THE RATING AGENCIES AS PREDOMINANTLY SPECULATIVE WITH
RESPECT TO THE ISSUER'S CONTINUING ABILITY TO MEET PRINCIPAL AND INTEREST
PAYMENTS. The Fund is designed for investors willing to assume additional risk
in return for above average income. Investors should assess carefully the risks
associated with an investment in the Fund. There is no assurance that the Fund
will achieve its investment objective.
The Fund's investment adviser is Van Kampen American Capital Asset
Management, Inc. This Prospectus sets forth certain information that a
prospective investor should know before investing in the Fund. Please read it
carefully and retain it for future reference. The address of the Fund is One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, and its telephone number is
(800) 421-5666.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
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 March 28, 1997, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this Prospectus. A copy of the Statement of Additional Information
may be obtained without charge by calling (800) 421-5666 or for
Telecommunications Device For the Deaf at (800) 772-8889. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related Fund materials at
the SEC's internet web site (http.//www.sec.gov).
------------------
VAN KAMPEN AMERICAN CAPITAL SM
------------------
THIS PROSPECTUS IS DATED MARCH 28, 1997.
<PAGE> 4
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 6
Annual Fund Operating Expenses and Example.................. 7
Financial Highlights........................................ 9
The Fund.................................................... 11
Investment Objective and Policies........................... 11
Municipal Securities........................................ 16
Investment Practices........................................ 17
Investment Advisory Services................................ 23
Alternative Sales Arrangements.............................. 25
Purchase of Shares.......................................... 28
Shareholder Services........................................ 37
Redemption of Shares........................................ 41
Distribution and Service Plans.............................. 44
Distributions from the Fund................................. 46
Tax Status.................................................. 47
Fund Performance............................................ 52
Description of Shares of the Fund........................... 55
Additional Information...................................... 56
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 5
- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital High Yield Municipal Fund (the "Fund") is
a diversified series of Van Kampen American Capital Tax-Exempt Trust, an
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 to seek to provide
as high a level of interest income exempt from federal income tax as is
consistent with the investment policies of the Fund. There is, however, no
assurance that the Fund will be successful in achieving its investment
objective. See "Investment Objective and Policies."
INVESTMENT POLICY. Under normal market conditions, the Fund invests at least 80%
of its net assets in obligations issued by states, territories or possessions of
the United States and the District of Columbia and their political subdivisions,
the interest from which is exempt from federal income tax ("Municipal
Securities"). The Fund may acquire stand-by commitments. See "Investment
Practices -- Stand-By Commitments." The Fund may seek to hedge investments
through transactions in futures contracts and related options. Any net gains
from futures and options transactions are subject to federal income tax. See
"Investment Practices -- Futures Contracts and Related Options."
The Fund invests principally in medium to lower rated Municipal Securities.
See "Risk Factors" below.
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. For information on
redeeming shares see "Redemption of Shares."
Investment opportunities for lower rated securities may be more limited than
those in other sectors of the market. In order to facilitate the management of
the Fund's portfolio, the Fund may from time to time suspend the continuous
offering of its shares to investors. As market conditions permit, the Fund may
reopen sales
3
<PAGE> 6
of the Fund's shares to investors. Any such limited offerings of the Fund may
commence and terminate without any prior notice.
Class A Shares. Class A shares are offered at net asset value per share plus a
maximum initial sales charge of 4.75% of the offering price (4.99% of the net
amount invested), reduced on investments of $100,000 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 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 4.00% on redemptions made within the first or
second 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 American Capital Asset Management, Inc. (the
"Adviser") is the Fund's investment adviser. Van Kampen American Capital
Advisors, Inc. (the "Subadviser") provides advisory services to the Adviser. The
Adviser and the Subadviser are sometimes referred to as the "Advisers."
DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.
RISK FACTORS. Generally, Municipal Securities with longer maturities tend to
produce higher yields and are subject to greater market fluctuations as a result
of changes in interest rates ("market risk") than are Municipal Securities with
shorter maturities and lower yields. Lower rated Municipal Securities generally
provide a higher yield than higher rated Municipal Securities of similar
maturity but are subject to greater market risk and are also subject to a
greater degree of risk with respect to the ability of the issuer to meet its
principal and interest obligations ("financial risk"). Use of futures, options
on futures, and other instruments involves
4
<PAGE> 7
certain risks. See "Investment Practices -- Repurchase Agreements, Stand-By
Commitments, and Futures Contracts and Related Options." The Fund may experience
high portfolio turnover which involves higher transaction costs and may result
in short-term gains taxable as ordinary income. See "Investment Practices --
Portfolio Turnover."
The lower rated Municipal Securities in which the Fund invests are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Because investment in lower rated
Municipal Securities (commonly referred to as junk bonds) involves greater
investment risk, achievement of the Fund's investment objectives may be more
dependent on the Advisers' credit analysis than would be the case if the Fund
were investing in higher rated Municipal Securities. Lower rated Municipal
Securities may be more susceptible to real or perceived adverse economic and
competitive industry conditions than investment grade Municipal Securities and
thus be subject to higher risk. A projection of an economic downturn, for
example, could cause a decline in lower rated Municipal Securities prices
because the advent of a recession could lessen the ability of the issuer to make
principal and interest payments on its debt securities. In addition, the
secondary trading market for lower rated Municipal Securities may be less liquid
than the market for higher grade Municipal Securities. The market prices of all
Municipal Securities generally fluctuate with changes in interest rates so that
the Fund's net asset value can be expected to decrease as long-term rates rise
and to increase as long-term interest rates fall.
DISTRIBUTIONS FROM THE FUND. Dividends from net investment income are declared
daily and distributed monthly. Any short-term or long-term capital gains are
distributed at least annually. All dividends and distributions are automatically
reinvested in shares of the Fund at net asset value (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.
5
<PAGE> 8
- ------------------------------------------------------------------------------
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)............... 4.75%(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
the original purchase price or Year
redemption proceeds).......... None(2) Year 1--4.00% 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 $100,000 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."
6
<PAGE> 9
- ------------------------------------------------------------------------------
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)... 0.55% 0.55% 0.55%
12b-1 Fees (as a percentage of
average daily net assets)(1)... 0.25% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage
of average daily net assets)... 0.21% 0.22% 0.22%
Total Fund Operating Expenses (as
a percentage of average daily
net assets).................... 1.01% 1.77% 1.77%
</TABLE>
- ------------------------------------------------------------------------------
(1) Class A shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
shares and Class C shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Distribution and Service Plans."
(2) Individual long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales charges permitted as a Fund-level expense by
NASD Rules.
7
<PAGE> 10
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
EXAMPLE: ---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment assuming (i) an
operating expense ratio of 1.01% for
Class A shares, 1.77% for Class B
shares and 1.77% for Class C shares,
(ii) a 5.00% annual return and (iii)
redemption at the end of each time
period:
Class A............................. $57 $78 $101 $165
Class B............................. $58 $86 $111 $188*
Class C............................. $28 $56 $ 96 $208
You would pay the following expenses on
the same $1,000 investment assuming no
redemption at the end of each time
period:
Class A............................. $57 $78 $101 $165
Class B............................. $18 $56 $ 96 $188*
Class C............................. $18 $56 $ 96 $208
</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. Class B shares acquired through the exchange privilege are
subject to the deferred sales charge schedule relating to the Class B shares of
the fund from which the purchase of Class B shares was originally made.
Accordingly, future expenses as projected could be higher than those determined
in the above table if the investor's Class B shares were exchanged from a fund
with a higher CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of such
costs and expenses, see "Purchase of Shares," "Investment Advisory Services,"
"Redemption of Shares" and "Distribution and Service Plans."
8
<PAGE> 11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for a share of beneficial interest
outstanding throughout each of the periods indicated)
- --------------------------------------------------------------------------------
The following financial highlights have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. The most recent
annual report (which contains 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 page 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 NOVEMBER 30
-------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of the
period............................ $11.18 $10.44 $11.19 $10.95 $10.78 $10.72 $10.91
------- ------ ------ ------ ------ ------ ------
Net investment income............. .735 .74 .76 .8132 .815 .77 .90
Net realized and unrealized
gain/loss on securities......... (.041) .7475 (.744) .2303 .195 .13 (.23)
------- ------ ------ ------ ------ ------ ------
Total from investment operations... .694 1.4875 .016 1.0435 1.01 .90 .67
LESS DISTRIBUTIONS FROM NET
INVESTMENT INCOME................. .735 .7475 .766 .8035 .84 .84 .86
------- ------ ------ ------ ------ ------ ------
Net asset value, end of the
period............................ $11.139 $11.18 $10.44 $11.19 $10.95 $10.78 $10.72
======= ====== ====== ====== ====== ====== ======
TOTAL RETURN*(A)................... 6.47% 14.65% .10% 9.65% 9.77% 8.73% 6.43%
Net assets at end of the period (in
millions)......................... $621.0 $516.3 $411.1 $408.0 $309.5 $225.3 $222.3
Ratio of expenses to average net
assets*........................... 1.01% .98% 1.02% 1.03% 1.07% 1.06% .97%
Ratio of net investment income to
average net assets*............... 6.64% 6.81% 6.98% 7.13% 7.45% 7.20% 8.34%
Portfolio turnover................. 23% 26% 33% 27% 24% 20% 29%
* If certain expenses had not been assumed by the Adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of expenses to average net
assets............................ 1.01% .98% 1.02% 1.03% 1.07% 1.06% 1.06%
Ratio of net investment income to
average net assets................ 6.64% 6.81% 6.98% 7.13% 7.45% 7.20% 8.27%
<CAPTION>
CLASS A
---------------------------
YEAR ENDED NOVEMBER 30
---------------------------
1989 1988 1987
------ ------ -------
<S> <C> <C> <C>
Net asset value, beginning of the
period............................ $10.72 $10.85 $12.08
------ ------ -------
Net investment income............. .94 .96 .9851
Net realized and unrealized
gain/loss on securities......... .1418 (.105) (1.2751)
------ ------ -------
Total from investment operations... 1.0818 .855 (.29)
LESS DISTRIBUTIONS FROM NET
INVESTMENT INCOME................. .8918 .985 .94
------ ------ -------
Net asset value, end of the
period............................ $10.91 $10.72 $10.85
====== ====== =======
TOTAL RETURN*(A)................... 10.39% 8.12% (2.51%)
Net assets at end of the period (in
millions)......................... $233.3 $206.3 $157.0
Ratio of expenses to average net
assets*........................... .85% .85% .78%
Ratio of net investment income to
average net assets*............... 8.86% 8.84% 8.55%
Portfolio turnover................. 19% 36% 137%
* If certain expenses had not been
ratios would have been as follows:
Ratio of expenses to average net
assets............................ 1.04% 1.07% 1.05%
Ratio of net investment income to
average net assets................ 8.65% 8.62% 8.28%
</TABLE>
(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(Table continued on following page)
9
<PAGE> 12
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------
JULY 20, 1992
(COMMENCEMENT
OF DISTRIBUTION)
YEAR ENDED NOVEMBER 30 TO
-------------------------------------- NOVEMBER 30,
1996 1995 1994 1993(a) 1992(a)
------- ------ ------ ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of the period............... $11.18 $10.43 $11.18 $10.96 $11.08
------- ------ ------ ------ -----
Net investment income................................. .653 .66 .68 .6919 .27
Net realized and unrealized gain/loss on securities... (.046) .7535 (.748) .2476 (.1122)
------- ------ ------ ------ -----
Total from investment operations....................... .607 1.4135 (.068) .9395 .1578
LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME.......... .651 .6635 .682 .7195 .2778
------- ------ ------ ------ -----
Net asset value, end of the period..................... $11.136 $11.18 $10.43 $11.18 $10.96
======= ====== ====== ====== =====
TOTAL RETURN(b)........................................ 5.67% 13.89% (.76%) 8.84% 1.45%*
Net assets at end of the period (in millions).......... $323.8 $233.9 $159.3 $104.8 $21.0
Ratio of expenses to average net assets(c)............. 1.77% 1.73% 1.77% 1.77% 1.71%
Ratio of net investment income to average net
assets(c)............................................. 5.88% 6.03% 6.19% 6.15% 5.88%
Portfolio turnover..................................... 23% 26% 33% 27% 24%
<CAPTION>
CLASS C
---------------------------------------
DECEMBER 10,
1993
YEAR ENDED (COMMENCEMENT
NOVEMBER 30, OF DISTRIBUTION)
----------------- TO NOVEMBER 30,
1996 1995 1994(a)
------- ------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of the period............... $11.17 $10.42 $11.29
------- ------ ------
Net investment income................................. .652 .66 .63
Net realized and unrealized gain/loss on securities... (.045) .7535 (.8363)
------- ------ ------
Total from investment operations....................... .607 1.4135 (.2063)
LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME.......... .651 .6635 .6637
------- ------ ------
Net asset value, end of the period..................... $11.126 $11.17 $10.42
======= ====== ======
TOTAL RETURN(b)........................................ 5.68% 13.79% (1.80%)*
Net assets at end of the period (in millions).......... $50.0 $31.1 $15.3
Ratio of expenses to average net assets(c)............. 1.77% 1.72% 1.75%
Ratio of net investment income to average net
assets(c)............................................. 5.86% 5.98% 6.07%
Portfolio turnover..................................... 23% 26% 33%
</TABLE>
- ------------------------------
*Non-Annualized
(a) Based on average month-end 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) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to the Adviser's reimbursement of expenses was less than 0.01%.
10
<PAGE> 13
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company, commonly
known as a mutual fund. A mutual fund provides, for those who have similar
investment goals, a practical and convenient way to invest in a diversified
portfolio of securities by combining their resources in an effort to achieve
such goals. The Fund is a diversified series of the Trust.
Van Kampen American Capital Asset Management, Inc. (the "Adviser") provides
investment advisory and administrative services to the Fund. The Adviser and its
affiliates also manage other mutual funds distributed by Van Kampen American
Capital Distributors, Inc. (the "Distributor"). To obtain prospectuses and other
information on any of these other funds, please call the telephone number on the
cover page of the Prospectus.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The Fund's investment objective is to seek to provide as high a level of
interest income exempt from federal income tax as is consistent with the
investment policies of the Fund. There is, however, no assurance that the
investment objective of the Fund will be achieved. The Fund seeks to achieve its
investment objective by investing principally in medium or lower rated Municipal
Securities.
Among the various types of Municipal Securities are general obligation bonds,
revenue or special obligation bonds, industrial development bonds, pollution
control bonds, variable rate demand notes, and short-term tax-exempt municipal
obligations such as tax anticipation notes. General obligations are backed by
the taxing power of the issuing municipality. Revenue obligations are backed by
the revenues of a project or facility -- tolls from a toll-bridge, for example.
Industrial development revenue obligations are a specific type of revenue
obligation backed by the credit and security of a private user. Variable rate
demand notes are described under "Investment Practices -- Variable Rate Demand
Notes."
The Fund maintains at least 80% of its net assets invested in Municipal
Securities except as a temporary defensive measure during periods of adverse
market conditions. This is a fundamental policy and may not be changed without
the approval by a vote of at least a majority of the outstanding voting shares
of the Fund as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund generally does not invest in any securities
except Municipal Securities and Temporary Investments as defined below. The Fund
may seek to hedge against changes in interest rates through transactions in
listed futures contracts related to U.S. Government securities or based upon the
Bond Buyers Municipal Bond Index and options thereon. See "Investment
Practices -- Futures Contracts and Related Options."
11
<PAGE> 14
On a temporary basis, to provide cash reserves or pending investment in
Municipal Securities, the Fund may invest up to 20% of its net assets in taxable
securities of at least comparable quality to the Municipal Securities in which
the Fund invests ("Temporary Investments"). The Fund also may invest temporarily
a greater proportion of its assets in Temporary Investments for defensive
purposes, when, in the judgment of the Adviser(s), market conditions warrant.
Temporary Investments include but are not limited to securities issued or
guaranteed by the United States Government, its agencies or instrumentalities;
corporate bonds and debentures; certificates of deposit and bankers' acceptances
of domestic banks with assets of $500 million or more and having deposits
insured by the Federal Deposit Insurance Corporation; commercial paper; and
repurchase agreements.
The Fund may invest up to 10% of its net assets in illiquid securities which
include Municipal Securities issued in limited placements under which the Fund
represents that it is purchasing for investment purposes only, repurchase
agreements maturing in more than seven days and other securities subject to
legal or contractual restrictions on resale. Municipal Securities acquired in
limited placements generally may be resold only in a privately negotiated
transaction to one or more other institutional investors. Such limitation could
result in the Fund's inability to realize a favorable price upon disposition,
and in some cases might make disposition of such securities at the time desired
by the Fund impossible. The 10% limitation applies at the time the purchase
commitments are made. See also "Investment Practices -- Repurchase Agreements."
Generally Municipal Securities with longer maturities tend to produce higher
yields and are subject to greater market fluctuations as a result of changes in
interest rates than Municipal Securities with shorter maturities and lower
yields. In general, market prices of Municipal Securities vary inversely with
interest rates. Lower rated Municipal Securities generally provide a higher
yield than higher rated Municipal Securities of similar maturity but are subject
to greater market and financial risk. The Funds may purchase short-term or
long-term Municipal Securities (with remaining maturities of up to 30 years or
more). There is no limitation on the average maturity of the Municipal
Securities in the Fund, and such average maturity is likely to change from time
to time based on the view of market conditions held by the Adviser(s). At
November 30, 1996, the Fund's average maturity was 20 years.
The Fund invests, under normal market conditions, at least 75% of its net
assets in medium to lower rated high yielding Municipal Securities which are
subject to high risk as described below. Municipal Securities ratings of Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P")
are described in the Statement of Additional Information. See also "Municipal
Securities" herein. Because an investment in the Fund entails relatively greater
risks, it may not be an appropriate investment for all investors.
12
<PAGE> 15
The investment policies of the Fund are not governed by specific rating
categories. The Advisers generally seek medium and lower rated Municipal
Securities (commonly referred to as junk bonds) for the Fund. Generally, the
Fund invests at least 75% of its assets in Municipal Securities rated, at the
time of purchase, in the following quality grades as determined by either
Moody's (Baa or lower for bonds, and MIG 3 or VMIG 3 or lower for notes) or by
S&P (BBB or lower for bonds and SP-2 or lower for notes), or non-rated Municipal
Securities considered by the Advisers to be of comparable quality. Lower rated
obligations generally are more speculative with respect to the capacity of the
issuer to make interest and principal payments. For example, Municipal
Securities rated BB by S&P or Ba by Moody's or lower are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. Municipal Securities
rated CC by S&P or Ca by Moody's are considered speculative in a high degree.
The Fund does not purchase obligations which are in default or rated C (lowest
grade by Moody's) or rated C or D by S&P or non-rated bonds, notes and other
obligations considered by the Advisers to be of comparable quality, although the
Fund may retain obligations assigned such ratings after a purchase is made. The
Fund may also invest under normal market conditions up to 20% of its assets in
Municipal Securities rated A, SP-1 or higher by S&P or A, MIG 2, VMIG 2 or
higher by Moody's, and in tax-exempt commercial paper rated Prime-3 or higher by
Moody's or A-3 or higher by S&P.
While the Fund normally will invest at least 75% of its assets in medium and
lower rated Municipal Securities, it may invest in higher rated issues,
particularly when the difference in returns between quality classifications is
very narrow or when the Advisers expect interest rates to increase. These
investments may lessen the decline in net asset value but may also affect the
amount of current income, since high rated yields are usually lower than medium
rated yields.
While the Fund may invest in both general obligations and revenue obligations,
a substantial portion of the Fund generally is invested in revenue obligations,
which may include public utility, housing, industrial development, pollution
control, hospital and health care issues. The Fund's ability to achieve its
objective depends to a great extent on the ability of these various issuers to
meet their scheduled payments of principal and interest.
13
<PAGE> 16
The table below sets forth the percentages of the Fund's assets invested
during the fiscal year ended November 30, 1996 in the various Moody's and S&P
rating categories and in unrated securities determined by the Adviser to be of
comparable quality. The percentages are based on the dollar-weighted average of
credit ratings of all Municipal Securities held by the Fund during the 1996
fiscal year, computed on a monthly basis.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1996
-------------------------------------------
UNRATED SECURITIES OF
RATED SECURITIES COMPARABLE QUALITY
RATING AS A PERCENTAGE OF AS A PERCENTAGE OF
CATEGORY PORTFOLIO VALUE PORTFOLIO VALUE
-------- ------------------ ---------------------
<S> <C> <C>
AAA/Aaa................................... 1.71% 3.02%
AA/Aa..................................... 1.25% 0.00%
A/A....................................... 1.32% 1.28%
BBB/Baa................................... 12.92% 26.54%
BB/Ba..................................... 7.82% 34.91%
B/B....................................... 0.31% 8.78%
CCC/Caa................................... 0.04% 0.10%
CC/Ca..................................... 0.00% 0.00%
C/C....................................... 0.00% 0.00%
D......................................... 0.00% 0.00%
------ ------
Percentage of Rated and Unrated
Securities.............................. 25.37% 74.63%
====== ======
</TABLE>
The portfolio composition shown in the table above reflects the allocation of
asset by the Fund during the period indicated. The percentage of the Fund's
assets invested in securities of various grades may from time to time vary
substantially from those set forth above.
RISK FACTORS OF INVESTING IN LOWER RATED MUNICIPAL SECURITIES. The market for
lower rated Municipal Securities is relatively new and its growth has paralleled
a long economic expansion. Past experience may not, therefore, provide an
accurate indication of future performance of this market, particularly during
periods of economic recession. An economic downturn or increase in interest
rates is likely to have a greater negative effect on this market, the value of
lower rated Municipal Securities in the Fund, the Fund's net asset value and the
ability of the bonds' issuers to repay principal and interest, meet projected
business goals and obtain additional financing than on higher rated securities.
These circumstances also may result in a higher incidence of defaults than with
respect to higher rated securities. An investment in this Fund may be considered
more speculative than investment in shares of a fund which invests primarily in
higher rated Municipal Securities.
Prices of lower rated Municipal Securities may be more sensitive to adverse
economic changes or individual issuer developments than higher rated
investments. Municipal Securities with longer maturities, which may have higher
yields, may
14
<PAGE> 17
increase or decrease in value more than Municipal Securities with shorter
maturities. Market prices of lower rated Municipal Securities structured as zero
coupon or pay-in-kind securities are affected to a greater extent by interest
rate changes and may be more volatile than securities which pay interest
periodically and in cash. When deemed appropriate and in the best interests of
shareholders, the Fund may incur additional expenses to seek recovery on a
Municipal Security on which the issuer has defaulted and to pursue litigation to
protect its interests as a debtholder.
Because the market for lower rated securities may be thinner and less active
than for higher rated securities, there may be market price volatility for these
securities and limited liquidity in the resale market. Nonrated securities are
usually not as attractive to as many buyers as are rated securities, a factor
which may make nonrated securities less marketable. These factors may have the
effect of limiting the availability of the securities for purchase by the Fund
and may also limit the ability of the Fund to sell such securities at their fair
value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of lower rated Municipal Securities, especially in a thinly traded
market. To the extent the Fund owns or may acquire illiquid or restricted lower
rated Municipal Securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of Municipal Securities which the Fund owns will
affect its net asset value per share. If market quotations are not readily
available for the Fund's lower rated or nonrated securities, these securities
will be valued by a method that the Trustees believe accurately reflects fair
value. See "Purchase of Shares -- General" herein and "Determination of Net
Asset Value" in the Statement of Additional Information. Judgment plays a
greater role in valuing lower rated Municipal Securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in lower rated
Municipal Securities structured as zero coupon or pay-in-kind securities. The
Fund accrues income on these securities prior to the receipt of cash payments.
The Fund must distribute substantially all of its income to its shareholders to
qualify for pass-through treatment under the tax laws and may, therefore, have
to dispose of portfolio securities to satisfy cash distribution requirements for
shareholders who do not reinvest dividends.
While credit ratings are only one factor the Advisers rely on in evaluating
lower rated Municipal Securities, certain risks are associated with using credit
ratings. Credit ratings evaluate the safety of principal and interest payments,
not market value risk. Credit rating agencies may fail to timely change the
credit ratings to reflect subsequent events; however, the Advisers continuously
monitor the issuers of lower rated Municipal Securities in its portfolio in an
attempt to determine if the
15
<PAGE> 18
issuers will have a sufficient cash flow and profits to meet required principal
and interest payments. Achievement of the Fund's investment objective may be
more dependent upon the Advisers' credit analysis than is the case for higher
quality Municipal Securities. Credit ratings for individual securities may
change from time to time and the Fund may retain a portfolio security whose
rating has been changed.
Investors should consider carefully the additional risks associated with
investment in Municipal Securities which carry lower ratings.
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.
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MUNICIPAL SECURITIES
- ------------------------------------------------------------------------------
Municipal Securities include debt obligations of a state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, issued to obtain funds for various
public purposes, including the construction of a wide range of public facilities
such as airports, highways, bridges, schools, hospitals, housing, mass
transportation, streets and water and sewer works. Other public purposes for
which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to lend to other public institutions and facilities. Certain types of Municipal
Securities are issued to obtain funding for privately operated facilities.
Many new issues of Municipal Securities are sold on a "when-issued" basis.
While the Fund has ownership rights to such Municipal Securities, the Fund does
not have to pay for them until they are delivered, normally 15 to 45 days later.
To meet that payment obligation, the Fund sets aside with the custodian
sufficient cash or liquid securities equal to the amount that will be due. See
"Investment Practices -- Delayed Delivery and When-Issued Securities."
The yields of Municipal Securities depend on, among other things, general
money market conditions, general conditions of the Municipal Securities market,
size of a particular offering, the maturity of the obligation and rating of the
issue. The ratings of S&P and Moody's represent their opinions of the quality of
the Municipal Securities they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, Municipal Securities with the same maturity, coupon and rating may
have different yields while Municipal Securities of the same maturity and coupon
with different ratings may have the same yield. A description of the ratings is
included in the Statement of Additional Information.
16
<PAGE> 19
The Fund considers investments in tax-exempt Municipal Securities not to be
subject to concentration policies and may invest a relatively high percentage of
the assets of the Fund in Municipal Securities issued by entities having similar
characteristics. The issuers may be located in the same geographic area or may
pay their interest obligations from revenue of similar projects such as
hospitals, utility systems and housing finance agencies. This may make the
Fund's investments more susceptible to similar economic, political or regulatory
occurrences. As the similarity in issuers increases, the potential for
fluctuation in the Fund's per share net asset value also increases. The Fund may
invest more than 25% of its total assets in Municipal Securities with similar
characteristics, such as industrial development revenue bonds, including
pollution control revenue bonds, housing finance agency bonds, or hospital
bonds. The Fund may not, however, invest more than 25% of its total assets in
industrial development revenue bonds, including pollution control bonds, issued
for companies in the same industry. See "Investment Practices -- Investment
Restrictions." Sizeable investments in such obligations could involve an
increased risk to the Fund should any of such issuers or any such related
projects or facilities experience financial difficulties.
The Fund has no fundamental policy limiting its investments in securities
whose issuers are located in the same state. However, it is not the present
intention of the Fund to invest more than 25% of the value of its total assets
in securities whose issuers are located in the same state.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Securities. It may be expected that similar proposals may
be introduced in the future. If any such proposal were to be enacted, the
ability of the Fund to pay "exempt-interest" dividends may be adversely affected
and the Fund would re-evaluate its investment objective and policies and
consider changes in its structure.
- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
domestic banks or broker-dealers in order to earn a return on temporarily
available cash. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. Repurchase agreements involve
certain risks in the event of 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. In the event of the bankruptcy or
other default of a seller of a repurchase
17
<PAGE> 20
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.
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.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes ("VRDNs") are tax-
exempt obligations which contain a floating or variable interest rate adjustment
formula and which are subject to an unconditional right of demand to receive
payment of the principal balance plus accrued interest either at any time or at
specified intervals not exceeding one year and in either case upon no more than
seven days' notice. The interest rates are adjustable ("floating rate") at
intervals ranging from daily to up to one year to some prevailing market rate
for similar investments, such adjustment formula being calculated to maintain
the market value of the VRDN at approximately the par value of the VRDN upon the
adjustment date. The adjustments are typically based upon the prime rate of a
bank or some other appropriate interest rate adjustment index.
Investments by the Fund in VRDNs may also be made in the form of participation
interests ("Participating VRDNs") in variable rate tax-exempt obligations held
by a financial institution, typically a commercial bank ("institution").
Participating VRDNs provide the Fund with a specified undivided interest (up to
100%) in the underlying obligation and the right to demand payment of the unpaid
principal balance plus accrued interest on the Participating VRDNs from the
institution upon a specified number of days' notice, not to exceed seven days.
The Fund has an undivided interest in the underlying obligation and thus
participates on the same basis as the institution in such obligation except that
the institution typically retains fees out of the interest paid on the
obligation for servicing the obligation and issuing the repurchase commitment.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with respect
to Municipal Securities held by it. Under a stand-by commitment, a bank or
18
<PAGE> 21
dealer from which Municipal Securities are acquired agrees to purchase from the
Fund, at the Fund's option, the Municipal Securities at a specified price. Such
commitments are sometimes called "liquidity puts."
The amount payable to the Fund upon its exercise of a stand-by commitment is
normally (i) the Fund's acquisition cost of the Municipal Securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during that period.
Stand-by commitments generally can be acquired when the remaining maturity of
the underlying Municipal Securities is not greater than one year, and are
exercisable by the Fund at any time before the maturity of such obligations.
The Fund's right to exercise stand-by commitments is unconditional and
unqualified. A stand-by commitment generally is not transferable by the Fund,
although the Fund can sell the underlying Municipal Securities to a third party
at any time.
The Fund expects that stand-by commitments will generally be available without
the payment of any direct or indirect consideration. However, if necessary or
advisable, the Fund may pay for a stand-by commitment either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the commitment (thus reducing the yield to maturity otherwise available for
the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund will not exceed 1/2 of 1% of the value of
the Fund's total assets calculated immediately after each stand-by commitment is
acquired. The Fund intends to enter into stand-by commitments only with banks
and dealers which, in the Adviser's opinion, present minimal credit risks.
The Fund would acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The acquisition of a stand-by commitment would not affect the
valuation of the underlying Municipal Securities which would continue to be
valued in accordance with the method of valuation employed for the Fund in which
they are held. Stand-by commitments acquired by the Fund would be valued at zero
in determining net asset value. Where the Fund paid any consideration directly
or indirectly for a stand-by commitment, its costs would be reflected as
unrealized depreciation for the period during which the commitment was held by
the Fund.
DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. Municipal Securities may at times
be purchased or sold on a delayed delivery or a when-issued basis. These
transactions arise when securities are purchased or sold by a Fund with payment
and delivery taking place in the future, often a month or more after the
purchase. The payment obligation and the interest rate are each fixed at the
time the Fund enters into the commitment. The Fund will only make commitments to
purchase
19
<PAGE> 22
such securities with the intention of actually acquiring the securities, but the
Fund may sell these securities prior to settlement date if it is deemed
advisable. Purchasing Municipal Securities on a when-issued basis involves the
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself; if yields so
increase, the value of the when-issued obligation will generally decrease. The
Fund maintains a separate account at its custodian bank consisting of cash or
liquid securities (valued on a daily basis) equal at all times to the amount of
any when-issued commitment.
FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may engage in transactions in
listed futures contracts and related options. Such transactions may be in listed
futures contracts based upon The Bond Buyer Municipal Bond Index (the "Index"),
a price weighted measure of the market value of 40 large sized, recent issues of
tax-exempt bonds or in listed contracts based on U.S. Government securities.
Futures contracts and options thereon may be used for defensive hedging or
anticipatory hedging purposes, depending upon the composition of the Fund and
the Adviser's expectations concerning the securities markets. See the Statement
of Additional Information for discussion of futures contracts and related
options.
Potential Risks of Futures Contracts and Related Options. The purchase and
sale of futures contracts and related options involve risks different from those
involved with direct investments in underlying securities. While utilization of
futures contracts and related options may be advantageous to a Fund, if the
Adviser is not successful in employing such instruments in managing the Fund's
investments, the Fund's performance will be worse than if the Fund did not make
such investments. In addition, the Fund would pay commissions and other costs in
connection with such investments, which may increase the Fund's expenses and
reduce its return. The Fund may not purchase or sell futures contracts or
related options for which the aggregate initial margin and premiums exceed 5% of
the fair market value of the Fund's assets. In order to prevent leverage in
connection with the purchase of futures contracts thereon by the Fund, an amount
of cash or liquid securities equal to the market value of the obligation under
the futures contract or option (less any related margin deposits) will be
maintained in a segregated account with the custodian.
PORTFOLIO TURNOVER. The Fund may purchase or sell securities without regard to
the length of time the security has been held to take advantage of short-term
differentials in bond yields consistent with its objective of seeking tax-exempt
interest income. The Fund may engage in short-term trading if the anticipated
benefits are expected by the Adviser to exceed the transaction costs. The annual
turnover rate for the Fund is expected to vary from year to year depending on
market conditions. A 100% turnover rate would occur, for example, if all the
securities in the Fund were replaced in a period of one year. Municipal
Securities
20
<PAGE> 23
with remaining maturities of less than one year are excluded in the computation
of the portfolio turnover rate. Higher portfolio turnover involves higher
transaction costs and may result in realization of short-term capital gains if
securities are held for one year or less. Such gains are taxable to shareholders
as ordinary income except to the extent such gains are offset by any capital
losses. Portfolio turnover is not a limiting factor in making portfolio
decisions, except as limited by federal tax requirements for qualification as a
regulated investment company. See "Tax Status of the Fund" in the Statement of
Additional Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE. The Adviser is responsible for the
placement of orders for the purchase and sale of portfolio securities for the
Fund. The Municipal Securities and other obligations in which the Fund invests
are generally traded in the over-the-counter market. Such securities are
generally traded on a net basis with dealers acting as principal for their own
accounts without a stated commission, although the prices of the securities
usually include a profit to the dealers. In underwritten offerings, securities
are purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
It is the policy of the Fund to obtain the best net results taking into account
such factors as price (including the applicable dealer spread), the size, type
and difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved and the provision of supplemental investment research by the firm.
While the Fund generally seeks reasonably competitive spreads or commissions,
the Fund will not necessarily be paying the lowest spread or commission
available. Brokerage commissions are paid on transactions in futures contracts
and options thereon. The Adviser is authorized to place portfolio transactions
with broker/dealers participating in the distribution of shares of the Fund and
other Van Kampen American Capital funds if they reasonably believe that the
quality of the execution and any commission are comparable to that available
from other qualified firms. The Adviser is authorized to pay higher commissions
to brokerage firms that provide them 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.
INVESTMENT RESTRICTIONS. The Fund has adopted certain 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 1940
Act). These restrictions provide, among other things, that the Fund may not:
1. Invest in securities other than Municipal Securities, Temporary Investments
(as defined herein), stand-by commitments, futures contracts described in
the next paragraph and options on such contracts or securities issued by
other investment companies except as part of a merger, reorganization or
other acquisition and except to the extent permitted by (i) the 1940 Act,
as
21
<PAGE> 24
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. Purchase or sell commodities or commodity contracts except that the Fund
may purchase, hold and sell listed futures contracts related to U.S.
Government securities, Municipal Securities or to an index of Municipal
Securities;
3. Invest more than 5% of its total assets at market value at the time of
purchase in the securities of any one issuer (other than obligations of the
United States Government or any agency or instrumentality thereof), 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;
4. Borrow money, except that the Fund may borrow from banks to meet
redemptions or for other temporary or emergency purposes, with such
borrowing not to exceed 5% of the total assets of the Fund at market value
at the time of borrowing. Any such borrowing may be secured provided that
not more than 10% of the total assets of the Fund at market value at the
time of pledging may be used as security for such borrowings; or
5. Purchase any securities which would cause more than 25% of the value of the
Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided that this limitation shall not
apply to Municipal Securities or governmental guarantees of Municipal
Securities; and provided, further, that for the purpose of this limitation
only, industrial development bonds that are considered to be issued by
non-governmental users shall not be deemed to be Municipal Securities; and
provided, further, 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.
Each state and each political subdivision, agency or instrumentality of such
state, and each multi-state agency of which a state is a member is a separate
"issuer" as that term is used in this Prospectus. The non-government user of
facilities financed by industrial development or pollution control bonds is also
considered as a separate issuer. In certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee.
22
<PAGE> 25
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------
THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $57 billion under management or supervision. Van Kampen American Capital's
more than 40 open-end and 38 closed-end funds and more than 2,500 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. Van Kampen American Capital Distributors, Inc., the Distributor of
the Trust and the sponsor of the funds mentioned above, is also a wholly-owned
subsidiary of Van Kampen American Capital.
Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM Holdings II, Inc.
which, in turn, is a wholly-owned subsidiary of Morgan Stanley Group Inc. The
Adviser's principal office is located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries, including 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; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financial and
investing; and global custody, securities clearance services and securities
lending.
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions being
met, it is currently anticipated that the transaction will close in mid-1997.
Thereafter, Van Kampen American Capital Asset Management, Inc. will be an
indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three major
businesses; full service brokerage, credit services and asset management.
ADVISORY AGREEMENTS. The Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the
23
<PAGE> 26
"Advisory Agreement"), the Fund pays the Adviser a monthly fee computed on
average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET
ASSETS % PER ANNUM
----------------- -------------
<S> <C>
First $300 million.............................. 0.60 of 1.00%
Next $300 million............................... 0.55 of 1.00%
Over $600 million............................... 0.50 of 1.00%
</TABLE>
Under the Advisory Agreement, the Fund also reimburses the Adviser for the
costs of the Fund's accounting services, which include maintaining its financial
books and records and calculating the daily net asset value of the Fund.
Operating expenses paid by the Fund include shareholder service agency fees,
distribution fees, service fees, custodian fees, legal and accounting fees, the
costs of reports and proxies to shareholders, trustees' fee (other than those
who are affiliated persons, as defined in the 1940 Act, of the Advisers,
Distributor or Van Kampen American Capital), 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.
The Adviser has entered into a subadvisory agreement (the "Subadvisory
Agreement") with the Subadviser to assist it in performing its investment
advisory function with respect to the Fund. Pursuant to the Subadvisory
Agreement, the Subadviser receives a monthly fee computed on average daily net
assets of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET
ASSETS % PER ANNUM
----------------- -------------
<S> <C>
First $20 million............................... 0.40 of 1.00%
Next $30 million................................ 0.25 of 1.00%
Over $50 million................................ 0.15 of 1.00%
</TABLE>
From time to time the Adviser or the Distributor may voluntarily undertake to
reduce the Trust's expenses by reducing the fees payable to them to the extent
of, or bearing expenses in excess of, such limitations as they may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Investment Advisory Corp.
PERSONAL INVESTMENT POLICIES. The Fund and the Advisers have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Advisers 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.
24
<PAGE> 27
PORTFOLIO MANAGEMENT. Mr. Wayne D. Godlin has been primarily responsible for
the day-to-day management of the Fund's investment portfolio since March 1990.
Mr. Godlin has been Vice President of the Adviser since March 1990 and has been
Vice President of Van Kampen American Capital Investment Advisory Corp. since
June 1995. Mr. Godlin has been Vice President of the Subadviser since September
1993.
- ------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------
The Alternative Sales Arrangements permits 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 4.75% of the offering price (4.99% of the net
amount invested), reduced on investments of $100,000 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 redemptions made within one year of the
purchase. Class A shares of each Fund are subject to an ongoing service fee at
an annual rate of up to 0.25% of the Fund's aggregate average daily net assets
attributable to the Class A shares. Certain purchases of Class A shares qualify
for reduced initial sales charges. See "Purchase of Shares -- Class A Shares."
CLASS B SHARES. Class B shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within five years of purchase. Class B
shares are subject to an ongoing service fee at an annual rate of up to 0.25% of
the Fund's aggregate average daily net assets attributable to the Class B shares
and an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class B shares. Class B
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
B shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. Class B shares automatically
convert to Class A shares eight years after the end of the calendar month in
which the shareholder's order to purchase was accepted. See "Purchase of Shares
- -- Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.25% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class C shares. Class C
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
C shares will cause such shares to
25
<PAGE> 28
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 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 distribution fee and higher 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 class of 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 accumulated distribution fees and CDSC on Class B shares and Class C shares
would be less than the initial sales charge on Class A shares purchased at the
same time, and to what extent such differential would be offset by the higher
dividends per share on Class A shares. To assist investors in making this
determination, the table under the caption "Annual Fund Operating Expenses and
Example" sets forth examples of the charges applicable to each class of shares.
In this regard, Class A shares may be more beneficial to the investor who
qualifies for reduced initial sales charges or purchases at net asset value. It
is presently the policy of the Distributor not to accept any order of $500,000
or more for Class B shares or any order of $1 million or more for Class C shares
as it ordinarily would be more beneficial for such 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,
26
<PAGE> 29
therefore, initially own fewer shares. Other investors might determine that it
is more advantageous to purchase either Class B shares or Class C shares and
have all their funds invested initially, although remaining subject to a CDSC.
Ongoing distribution fees on Class B shares and Class C shares are offset to the
extent of the additional funds originally invested and any return realized on
those funds. However, there can be no assurance as to the return, if any, which
will be realized on such additional funds. For investments held for ten years or
more, the relative value upon liquidation of the three classes tends to favor
Class A shares or Class B shares, rather than Class C shares.
Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges or have a longer-term investment horizon.
In addition, the check writing privilege is only available for Class A shares
(see "Shareholder Services -- Check Writing Privilege"). 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
contingent deferred sales charge incurred upon redemption within five years or
one year, respectively, of purchase. Sales personnel of broker/dealers
distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling such shares. INVESTORS SHOULD UNDERSTAND THAT THE PURPOSE AND FUNCTION
OF THE CDSC AND ONGOING DISTRIBUTION FEE WITH RESPECT TO THE CLASS B SHARES AND
CLASS C SHARES OF EACH FUND 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 any incremental
transfer agency costs relating to Class B shares or Class C shares will be borne
by the respective class. See "Distributions from the Fund." Shares of the Fund
may be exchanged, subject to certain limitations, for shares of the same class
of certain other mutual funds advised by the Adviser and its affiliates and
distributed by the Distributor. See "Shareholder Services -- Exchange
Privilege."
27
<PAGE> 30
- ------------------------------------------------------------------------------
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."
Investment opportunities for lower rated securities may be more limited than
those in other sectors of the market. In order to facilitate the management of
the Fund's portfolio, the Fund may from time to time suspend the continuous
offering of its shares to investors. As market conditions permit, the Fund may
reopen sales of the Fund's shares to investors. Any such limited offerings of
the Fund may commence and terminate without any prior notice.
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 shares 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 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, ACCESS Investor Services, Inc. ("ACCESS"), a
wholly-owned subsidiary of Van Kampen American Capital. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A shares,
Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or 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 computed as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open.
Net asset value per share for each class is determined by dividing the value of
the Fund's securities, cash and other assets (including accrued interest)
attributable to such class, less all liabilities (including accrued expenses)
attributable to such class, by the total number of shares of the class
outstanding. The Fund's investments are valued by an independent pricing
service.
28
<PAGE> 31
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 and transfer
agency fees applicable with respect to the Class B shares and Class C shares and
the differential in the dividends paid on the classes of shares. The price paid
for shares purchased is based on the next calculation of net asset value (plus
sales charges, where applicable) after an order is received by an authorized
dealer provided such order is transmitted to the Distributor prior to the
Distributor's close of business on such day. Orders received by authorized
dealers after the close of the Exchange are priced based on the next close,
provided they are received by the Distributor prior to the Distributor's close
of business on such day. It is the responsibility of authorized dealers to
transmit orders received by them to the Distributor so they will be received
prior to such time. Orders of less than $500 are mailed by the authorized dealer
and processed at the offering price next calculated after acceptance by ACCESS.
Each class of shares represents an interest in the same portfolio of
investments, has the same rights and is identical in all respects, except that
(i) Class B shares and Class C shares bear the expenses of the deferred sales
arrangement and any expenses (including the higher distribution fee and
incremental transfer agency costs) resulting from such sales arrangement, (ii)
generally, each class has exclusive voting rights with respect to approvals of
the Rule 12b-1 distribution plan pursuant to which its distribution fee or
service fee is paid, (iii) each class has different exchange privileges, (iv)
certain shares are subject to a conversion feature and (v) certain 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 incremental 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.
Agreements are in place which provide, among other things and subject to
certain conditions, for certain favorable distribution arrangements for shares
of the Fund with subsidiaries of The Travelers Inc.
The Distributor may from time to time implement programs under which an
authorized dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
authorized dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor, an amount not exceeding the total
applicable sales charges on the sales generated by the authorized dealer at the
public offering price during such programs. Other programs provide, among other
things and subject to certain
29
<PAGE> 32
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. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. All of the foregoing payments are made by the Distributor out of its
own assets. Such fees paid for such services and activities with respect to the
Fund will not exceed in the aggregate 1.25% of the average total daily net
assets of the Fund on an annual basis. These programs will not change the price
an investor will pay for shares or the amount that a Fund will receive from such
sale.
CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value plus a sales charge, as set forth below.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED TO
DEALERS (AS
AS % OF AS % OF A %
SIZE OF OFFERING NET AMOUNT OF OFFERING
INVESTMENT PRICE INVESTED PRICE)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000.............. 4.75% 4.99% 4.25%
$100,000 but less than
$250,000...................... 3.75% 3.90% 3.25%
$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 herein, 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
30
<PAGE> 33
reallowed all or substantially all of the sales charges may be deemed to be
underwriters for purposes of the Securities Act of 1933, as amended.
The Distributor may also pay financial institutions (which may include banks)
and other industry professionals that provide services to facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the reallowance allowable to authorized dealers described herein. Such
financial institutions, other industry professionals and authorized dealers are
hereinafter referred to as "Service Organizations." Banks are currently
prohibited under the Glass-Steagall Act from providing certain underwriting or
distribution services. If banking firms were prohibited from acting in any
capacity or providing any of the described services, the Distributor would
consider what action, if any, would be appropriate. The Distributor does not
believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. State securities laws regarding
registration of banks and other financial institutions may differ from the
interpretations 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 whenever a
quantity discount is applicable to purchases. Upon such notification, an
investor will receive the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, their
spouse and 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 of a single trust estate or
single fiduciary account, or a "company" as defined in Section 2(a)(8) of the
1940 Act.
As used herein, "Participating Funds" refers to all open-end investment
companies advised by the Adviser or Van Kampen American Capital Investment
Advisory Corp. and distributed by the Distributor.
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
31
<PAGE> 34
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 table also includes
purchases of shares of the Participating Funds over a 13-month period based on
the total amount of intended purchases plus the value of all shares of the
Participating Funds previously purchased and still owned. An investor may elect
to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
If the goal is not achieved within the period, the investor must pay the
difference between the sales charge applicable to the purchases made and the
sales charges previously paid. The initial purchase must be for an amount equal
to at least 5% of the minimum total purchased amount of the level selected. If
trades not initially made under a Letter of Intent subsequently qualify for a
lower sales charge through the 90-day back-dating provisions, an adjustment will
be made at the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustment in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. Additional
information is contained in the application accompanying by this Prospectus.
OTHER PURCHASE PROGRAMS
Purchases 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 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.
32
<PAGE> 35
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide ACCESS with appropriate backup data
for each participating investor in a computerized format fully compatible with
ACCESS' 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 such Fund,
by:
(1) Current or retired trustees or directors of funds advised by the Adviser
or Van Kampen American Capital Investment Advisory Corp. and such persons'
families and their beneficial accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley
Group Inc. and any of its subsidiaries, employees of an investment
subadviser to any fund, described in (1) above, or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and registered representatives of financial
institutions that have a selling group agreement with the Distributor and
their spouses and children under 21 years of age when purchasing for any
accounts they beneficially own, or, in the case of any such financial
institution, when purchasing for retirement plans for such institution's
employees.
(4) Registered investment advisers, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients provided that
the aggregate amount invested in the Fund alone, or any combination of
shares of the Fund and shares of other Participating Funds as described
herein under "Purchase of Shares -- Class A Shares -- Volume Discounts,"
during the 13-month period commencing with the first investment pursuant
hereto which equals at least $1 million. The Distributor may pay
authorized dealers through which purchases are made of an amount up to
0.50% of the amount invested, over a 12-month period following such
transaction.
33
<PAGE> 36
(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $3 million or more and which
invest in multiple fund families through national wirehouse alliance
programs.
(6) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.
(7) Investors purchasing shares of the Fund with redemption proceeds from
other mutual fund complexes on which the investor has paid a front-end
sales charge or was subject to a deferred sales charge, whether or not
paid, if such redemption has occurred no more than 30 days prior to such
purchase.
(8) 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 other 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 economics 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.
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 ACCESS by the investment
adviser, trust company or bank trust department, provided that ACCESS receives
federal funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized dealer may charge a transaction
fee for placing an order to purchase shares pursuant to this provision or for
placing a redemption order with respect to such shares. Authorized dealers will
be paid a service fee as described herein under "Distribution and Service Plans"
on purchases made as described in (3) through (8) above. The Fund may terminate,
or amend the terms of, offering shares of the Funds at net asset value to such
groups at any time.
34
<PAGE> 37
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 purchase 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........................................ 4.00%
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 or
shares acquired pursuant to reinvestment of dividends or distributions and third
of shares held longest during the five-year period.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired ten
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
35
<PAGE> 38
subject to a deferred sales charge at a rate of 4.00% (the applicable rate in
the second year after purchase).
A commission or transaction fee of 4.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Additionally, the Distributor
may, from time to time, pay additional promotional incentives in the form of
cash or other compensation to authorized dealers that sell Class B shares of the
Fund.
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the lesser of the then current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. It is presently the policy of the Distributor
not to accept any order in an amount of $1 million or more for Class C shares
because it ordinarily will be more advantageous for an investor making such an
investment to purchase Class A shares.
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC and second of shares held for more than one year
or shares acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of 1.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Authorized dealers will also 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 CONTINGENT DEFERRED SALES CHARGE
The CDSC is waived on redemptions of Class B shares and Class C shares (i)
following the death or disability (as defined in the Code) of a shareholder,
(ii) in connection with required minimum distributions from an IRA or other
retirement plan, (iii) pursuant to the Fund's systematic withdrawal plan but
limited to 12% annually of the initial value of the account and (iv) effected
pursuant to the right of the Fund to liquidate a shareholder's account as
described herein under "Redemption of Shares." The CDSC also is waived on
redemptions of Class C shares as it relates to the reinvestment of redemption
proceeds in shares of the same
36
<PAGE> 39
class of the Fund within 120 days after redemption. See the Statement of
Additional Information for further discussion of waiver provisions.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. The
following is a description of such services.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares are held by ACCESS, the Fund's transfer agent. ACCESS performs
bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a statement
showing the activity in the account. Each shareholder who has an account in
certain of the Participating Funds will receive statements quarterly from ACCESS
showing any reinvestments of dividends and capital gains distributions and any
other activity in the account since the preceding statement. Such shareholders
also will receive separate confirmations for each purchase or sale transaction
other than reinvestment of dividends and capital gains distributions and
systematic purchases or redemptions. Additions to an investment account may be
made at any time by purchasing shares through authorized dealers or by mailing a
check directly to ACCESS.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a
Surety Bond in a form acceptable to ACCESS. On the date the letter is received,
ACCESS will calculate 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 certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date. Unless the shareholder instructs otherwise, the reinvestment
privilege is automatic. This instruction may be made by telephone by calling
(800) 421-5666 ((800) 772-8889 for the hearing impaired). The investor may, on
the initial application or prior to any declaration, instruct that dividends be
paid in cash and capital gains distributions be reinvested at net asset value,
or that both dividends and capital gains distributions be paid in cash.
37
<PAGE> 40
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize ACCESS to charge a bank account on a regular
basis to invest pre-determined amounts in shares of the Fund. Additional
information is available from the Distributor or authorized dealers.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of Automated Clearing House. In addition, the shareholder must fill out
the appropriate section of the account application. The shareholder must also
include a voided check or deposit slip from the bank account into which
redemptions are to be deposited together with the completed application. Once
ACCESS has received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing ACCESS.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus or by calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any other
Participating Funds so long as the shareholder has a pre-existing account for
such class of shares of the other fund. Both accounts must be of the same type,
either non-retirement or retirement. If the accounts are retirement accounts,
they must both be for the same class and of the same type of retirement plan
(e.g., IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the same
individual. If a qualified, pre-existing account does not exist, the shareholder
must establish a new account subject to minimum investment and other
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value as of
the payable date of the distribution.
EXCHANGE PRIVILEGE. Shares of the Fund or of any Participating Fund, other
than Van Kampen American Capital Government Target Fund ("Government Target"),
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund") or Van
Kampen American Capital Reserve Fund ("Reserve Fund"), may be exchanged for
shares of the same class of any other fund without sales charge, provided that
shares of certain Van Kampen American Capital fixed-income funds, including the
Fund, are subject to a 30 day holding period requirement before exchange. Shares
of Government Target may be exchanged for Class A shares of the Fund without
sales charge. Class A shares of the Tax Free Money Fund or Reserve Fund that
were not acquired in exchange for Class B shares or Class C
38
<PAGE> 41
shares of a Participating Fund may be exchanged for Class A shares of the Fund
upon payment of the excess, if any, of the sales charge rate applicable to the
shares being acquired over the sales charge rate previously paid. Shares of the
Tax Free Money Fund or Reserve Fund acquired through an exchange of Class B
shares or Class C shares may be exchanged only for the same class of shares of a
Participating Fund without incurring a CDSC. Shares of any Participating Fund
may be exchanged for shares of any other Participating Fund only if shares of
that Participating Fund are available for sale; however, during periods of
suspension of sales, shares of a Participating Fund may be available for sale
only to existing shareholders of a Participating Fund.
Class B shareholders and Class C shareholders of each Fund have the ability to
exchange their shares ("original shares") for the same class of shares of any
other Participating Fund that offers such shares ("new shares") in an amount
equal to the aggregate net asset value of the original shares, without the
payment of any CDSC otherwise due upon redemption of the original shares. For
purposes of computing the CDSC payable upon a disposition of the new shares, the
holding period for the original shares is added to the holding period of the new
shares. Class B shareholders and Class C shareholders would remain subject to
the CDSC schedule imposed by the original fund upon their redemption from the
Van Kampen American Capital complex of funds.
Shares of the fund to be acquired must be registered for sale in the
investor's state. Exchanges of shares are sales and may result in a gain or loss
for federal income tax purposes, although if the shares exchanged have been held
for less than 91 days, the sales charge paid on such shares is not included in
the tax basis of the exchanged shares, but is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
otherwise designated in the application form accompanying this Prospectus. Van
Kampen American Capital and its subsidiaries, including ACCESS (collectively,
"VKAC"), and the Fund employ procedures considered by them to be reasonable to
confirm that instructions communicated by telephone are genuine. Such procedures
include requiring certain personal identification information prior to acting
upon telephone instructions, tape recording telephone communications, and
providing written confirmation of instructions communicated by telephone. If
reasonable procedures are employed, neither VKAC nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine.
VKAC and the Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. Exchanges are effected
at the net asset value per share next calculated after the request is received
in good order with
39
<PAGE> 42
adjustment for any additional sales charge. If the exchanging shareholder does
not have an account in the fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital gains
options (except dividend diversification) and authorized dealer of record as the
account from which shares are exchanged, unless otherwise specified by the
shareholder. In order to establish a systematic withdrawal plan for the new
account or reinvest dividends from the new account into another fund, however,
an exchanging shareholder must file a specific written request. The Fund
reserves the right to reject any order to acquire shares through exchange. In
addition, the Fund may modify, restrict or terminate the exchange privilege at
any time on 60 days' notice to its shareholders of any termination or material
amendment.
A prospectus of any of these mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for additional information regarding such
fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares in a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a quarterly, 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.
Class B shareholders and Class C shareholders who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with the purchase of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. Any taxable gain or loss will be recognized by the shareholder upon the
redemption of shares.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares for which
certificates have not been issued and which are in a non-escrow status may
appoint
40
<PAGE> 43
ACCESS as agent by completing the Authorization for Redemption by Check form
and the appropriate section of the application and returning the form and the
application to ACCESS. Once the form is properly completed, signed and returned
to ACCESS, a supply of checks drawn on State Street Bank and Trust Company
("State Street Bank") will be sent to the Class A shareholder. These checks may
be made payable by the Class A shareholder to the order of any person in any
amount of $100 or more.
When a check is presented to State Street Bank for payment, full and
fractional Class A shares required to cover the amount of the check are redeemed
from the shareholder's Class A account by ACCESS at the next determined net
asset value. Check writing redemptions represent the sale of Class A shares. Any
gain or loss realized on the sale of shares is a taxable event. See "Redemption
of Shares."
Checks will not be honored for redemption of Class A shares held less than
fifteen calendar days, unless such Class A shares have been paid for by bank
wire. Any Class A shares for which there are outstanding certificates may not be
redeemed by check. If the amount of the check is greater than the value of all
uncertificated shares held in the shareholder's Class A account, the check will
be returned and the shareholder may be subject to additional charges. A Class A
shareholder may not liquidate the entire account by means of a check. The check
writing privilege may be terminated or suspended at any time by the Fund or
State Street Bank. Accounts that are subject to backup withholding are not
eligible for the privilege. A "stop payment" system is not available on these
checks. See the Statement of Additional Information for further information
regarding the establishment of the privilege.
- ------------------------------------------------------------------------------
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 ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256.
Shareholders may also place redemption requests through an authorized dealer.
Orders received from authorized dealers must be at least $500 unless transmitted
via the FUNDSERV network. The redemption price for such shares is the net asset
value next calculated after an order is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit redemption requests received by them to the Distributor so they will be
received prior to such time.
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
41
<PAGE> 44
purchase for investments of $1 million or more. The CDSC incurred upon
redemption is paid to the Distributor in reimbursement for distribution-related
expenses.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
record address has changed within the previous 30 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker/dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it will do so if a special request has been
made to ACCESS. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request. In the event the redemption is requested by a corporation, partnership,
trust, fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 60 days must
accompany the redemption request.
In the case of redemption requests sent directly to ACCESS, the redemption
price is the net asset value per share next determined after the request is
received in proper form. Payment for shares redeemed will be made by check
mailed within seven days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payment may be postponed or the right
of redemption suspended as provided by the rules of the SEC. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check until the purchase check has cleared, usually a period of up to
fifteen days. A taxable gain or loss will be recognized by the shareholder upon
redemption of shares.
The Fund may redeem any shareholder account with a net asset value on the date
of the notice of redemption less than the minimum initial investment as
specified in this Prospectus. At least 60 days advance written notice of any
such involuntary redemption is required and the shareholder is given an
opportunity to purchase the required value of additional shares at the next
determined net asset value without sales charge. Any applicable CDSC will be
deducted from the proceeds of this redemption. Any involuntary redemption may
only occur if the shareholder account is less than the minimum initial
investment due to shareholder redemptions.
42
<PAGE> 45
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 of the account or to the
bank account of record as described herein. To establish such privilege, a
shareholder must complete the appropriate section of the application form
accompanying this Prospectus or call the Fund at (800) 421-5666 to request that
a copy of the Telephone Redemption Authorization form be sent to them for
completion. To redeem shares, contact the telephone transaction line at (800)
421-5684. VKAC and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape recording telephone
communications and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, neither VKAC nor the Fund
will be liable for following telephone instructions which it reasonably believes
to be genuine. VKAC and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed. Telephone redemptions may not be available if the shareholder cannot
reach ACCESS by telephone, whether because all telephone lines are busy or for
any other reason; in such case, a shareholder would have to use the Fund's
regular redemption procedure described herein. Requests received by ACCESS prior
to 4:00 p.m., New York time, on a regular business day will be processed at the
net asset value per share determined that day. These privileges are available
for all accounts other than retirement accounts. The telephone redemption
privilege is not available for shares represented by certificates. If an account
has multiple owners, ACCESS may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions are expected to be wired on the next business day following the date
of redemption. The Fund reserves the right at any time to terminate, limit or
otherwise modify this redemption privilege.
REDEMPTION UPON DISABILITY. The Fund will waive the CDSC on redemptions
following the disability of a Class B shareholder or Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Code, which in pertinent part
defines a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite
43
<PAGE> 46
duration." While the Fund does not specifically adopt the balance of the Code's
definition which pertains to furnishing the Secretary of Treasury with such
proof as he or she may require, the Distributor will require satisfactory proof
of disability before it determines to waive the CDSC on Class B shares and Class
C shares.
In cases of disability, the CDSC on Class B shares and Class C shares will be
waived where the disabled person is either an individual shareholder or owns the
shares as a joint tenant with right of survivorship or is the beneficial owner
of a custodial or fiduciary account, and where the redemption is made within one
year of the initial determination of disability. This waiver of the CDSC on
Class B shares and Class C shares applies to a total or partial redemption, but
only to redemptions of shares held at the time of the initial determination of
disability.
REINSTATEMENT PRIVILEGE. A Class A shareholder or Class B shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A shares of the Fund. A Class C shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class C shares of the Fund with credit given for any CDSC
paid upon such redemption. Such reinstatement is made at the net asset value
(without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption.
- ------------------------------------------------------------------------------
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
44
<PAGE> 47
shareholders' accounts. The Fund pays the Distributor the lesser of the balance
of the 0.25% not paid to such brokers, dealers or financial intermediaries or
the amount of the Distributor's actual distribution-related expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C shares up to 0.75% of the Fund's average daily
net assets attributable to Class C shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution-related expense attributable to the Class C shares. In
addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets attributable to the Class C shares 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
45
<PAGE> 48
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 November
30, 1996, there were $11,299,204 and $80,323 of unreimbursed
distribution-related expenses with respect to Class B shares and Class C shares,
respectively, representing 3.49% and 0.16% 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
- ------------------------------------------------------------------------------
DIVIDEND POLICY. Income dividends are declared each business day and
distributed monthly. The Fund intends to distribute after the end of a fiscal
year the net capital gains, if any, realized during the fiscal year by the Fund
except to the extent that such gains are offset by capital loss carryovers. The
daily dividend is a fixed amount determined for each class at least monthly
which is not expected to exceed the net income of the Fund for the month divided
by the number of business days during the month.
Shares (other than shares acquired through an exchange) become entitled to
dividends on the day ACCESS receives payment for the shares. With respect to
shares acquired through an exchange, such shares become entitled to dividends on
the day after ACCESS receives payment for the shares. If a dealer delays
forwarding to ACCESS payment for shares which an investor has made to the
dealer, this will in effect cost the investor money because it will delay the
date upon which he or she becomes entitled to dividends. Shares (other than
shares sold through an exchange) remain entitled to dividends through the day
before such shares are priced for redemption purposes, which occurs when a valid
redemption request with respect to such shares is received by ACCESS. With
respect to shares
46
<PAGE> 49
sold through an exchange, such shares remain entitled to dividends through and
including the day such shares are priced for redemption.
The per share dividends on Class B shares and Class C shares will be lower
than the per share dividends on Class A shares of the Fund as a result of the
higher distribution fees and transfer agency fees applicable to such classes of
shares.
Unless the shareholder instructs otherwise, dividends and capital gains
distributions are automatically applied to purchase additional shares of the
Fund at the next determined net asset value. See "Shareholder
Services -- Reinvestment Plan."
- ------------------------------------------------------------------------------
TAX STATUS
- ------------------------------------------------------------------------------
FEDERAL INCOME TAXATION. The Fund has qualified and intends to continue to
qualify each year and to elect to be treated as a regulated investment company
under Subchapter M of the Code. To qualify as a regulated investment company,
the Fund must comply with certain requirements of the Code relating to, among
other things, the source of its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including tax-exempt interest, taxable
income and net short-term capital gain, but not net capital gains, which are the
excess of net long-term capital gains over net short-term capital losses), it
will not be required to pay federal income taxes on any income distributed to
shareholders. The Fund intends to distribute at least the minimum amount of net
investment income necessary to satisfy the 90% distribution requirement. The
Fund will not be subject to federal income tax on any net capital gains
distributed to shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute, by
December 31 of each year, at least 98% of its ordinary income (not including
tax-exempt income) for such year and at least 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31 of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and
47
<PAGE> 50
profits to shareholders (less any interest charge). In addition, if the Fund
failed to qualify as a regulated investment company for its first taxable year
or, if immediately after qualifying as a regulated investment company for any
taxable year, it failed to qualify for a period greater than one taxable year,
the Fund would be required to recognize any net built-in gains (the excess of
aggregate gains, including items of income, over aggregate losses that would
have been realized if it had been liquidated) in order to qualify as a regulated
investment company in a subsequent year.
Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to mark-to-market some of the positions in its portfolio (i.e.,
treat them as if they were sold for fair market value at the end of the
tax-year), which may cause the Fund to recognize income without receiving cash
with which to make distributions in amounts necessary to satisfy the 90%
distribution requirement and the distribution requirements for avoiding income
and excise taxes. The Fund will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.
The Fund's ability to dispose of portfolio securities may be limited by the
requirement for qualification as a regulated investment company that less than
30% of the Fund's annual gross income be derived from the disposition of
securities held for less than three months.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
DISTRIBUTIONS. The Fund intends to invest in sufficient Municipal Securities
to permit payment of "exempt-interest dividends" (as defined in the Code).
Dividends paid by the Fund from the net tax-exempt interest earned from
Municipal Securities qualify as exempt-interest dividends if, at the close of
each quarter of its taxable year, at least 50% of the value of the total assets
of the Fund consists of
48
<PAGE> 51
Municipal Securities.
The Tax Reform Act of 1986 (the "Tax Reform Act") may have an adverse impact
upon the Fund and its shareholders. The Tax Reform Act imposed new limitations
on the use and investment of the proceeds of state and local governmental bonds
and other funds, which limitations must be satisfied in order to maintain the
exclusion from gross income for interest on such bonds. The provisions of the
Tax Reform Act generally apply to bonds issued after August 15, 1986. In light
of these requirements, bond counsel qualify their opinions as to the federal tax
status of bonds issued after August 15, 1986 by making them contingent on the
issuer's future compliance with these limitations. Any failure on the part of an
issuer to comply could cause the interest on its bonds to become taxable to
investors retroactive to the date the bonds were issued.
Except as provided below, exempt-interest dividends paid to shareholders
generally are not includable in the shareholders' gross income for federal
income tax purposes. For each of the last three fiscal years of the Fund, over
99% of the dividends paid by the Fund were exempt-interest dividends. The
percentage of the total dividends paid by the Fund during any taxable year that
qualify as exempt-interest dividends will be the same for all shareholders of
the Fund receiving dividends during such year.
The Tax Reform Act also makes interest on certain "private-activity bonds" an
item of tax preference subject to the alternative minimum tax on individuals and
corporations. The Fund invests a portion of its assets in Municipal Securities
subject to this provision so that a portion of its exempt-interest dividends is
an item of tax preference to the extent such dividends represent interest
received from these private-activity bonds. Accordingly, investment in the Fund
could cause shareholders to be subject to (or result in an increased liability
under) the alternative minimum tax. The Tax Reform Act also imposed per capita
volume limitations on certain private-activity bonds which could limit the
amount of such bonds available for investment by the Fund.
The Fund is subject to the requirement that at least 80% of its assets be
invested in securities, the income from which is exempt from both regular
federal income tax and the federal alternative minimum tax. For the fiscal year
ended November 30, 1996, approximately 12.54% of the interest income earned by
the Fund consisted of interest on private-activity bonds which is an item of tax
preference.
Exempt-interest dividends are included in determining what portion, if any, of
a person's social security and railroad retirement benefits will be includable
in gross income subject to federal income tax.
Although exempt-interest dividends generally may be treated by Fund
shareholders as items of interest excluded from their gross income, each
shareholder is
49
<PAGE> 52
advised to consult his tax adviser with respect to whether exempt-interest
dividends retain this exclusion if the purchaser would be treated as a
"substantial user" (or a "related person" of a substantial user) of the
facilities financed with respect to any of the tax-exempt obligations held by
the Fund, or by the Trust if it is required to qualify as a regulated investment
company as described below. "Substantial user" is defined under U.S. Treasury
Regulations to include a non-exempt person who regularly uses in his trade or
business a part of any facilities financed with the tax-exempt obligations and
whose gross revenues derived from such facilities exceed five percent of the
total revenues derived from the facilities by all users, or who occupies more
than 5% of the useable area of the facilities or for whom the facilities or a
part thereof were specifically constructed, reconstructed or acquired. Examples
of "related persons" include certain related natural persons, affiliated
corporations, a partnership and its partners and an S corporation and its
shareholders.
The Omnibus Budget Reconciliation Act of 1993 included certain provisions that
requires gains on dispositions of tax-exempt securities purchased at a market
discount be treated as ordinary income to the extent of the accrued market
discount, if the securities are acquired after April 30, 1993. Such securities
were exempt from the market discount rules under prior law. Interest on
indebtedness incurred or continued by a shareholder to purchase or carry shares
of the Fund is not deductible for federal income tax purposes if the Fund
distributes exempt-interest dividends during the shareholder's taxable year. If
a shareholder receives an exempt-interest dividend with respect to any shares
and such shares are held for six months or less, any short-term capital loss on
the sale or exchange of the shares will be disallowed to the extent of the
amount of such exempt-interest dividend.
While the Fund expects that a major portion of its net investment income will
constitute tax-exempt interest, a significant portion may consist of investment
company taxable income. Distributions of the Fund's net investment company
taxable 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. Interest on indebtedness which is incurred to purchase or carry
shares of a mutual fund which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). Tax-exempt shareholders not subject to federal income tax on
their income generally will not be taxed on distributions from the Fund.
Shareholders receiving distributions in the form of additional shares issued
by the Fund will be treated for federal income tax purposes as receiving a
distribution in an
50
<PAGE> 53
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. The aggregate
amount of dividends so designated cannot exceed, however, the amount of interest
exempt from tax under Section 103 of the Code received by the Fund during the
year over any amounts disallowed as deductions under Sections 265 and 171(a)(2)
of the Code. Since the percentage of dividends which are "exempt-interest"
dividends is determined on an average annual method for the fiscal year, the
percentage of income designated as tax-exempt for any particular dividend may be
substantially different from the percentage of the Fund's income that was tax
exempt during the period covered by the dividend. Fund distributions generally
will not qualify for the dividends received deduction for corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31 prior to the date of payment. In
addition, certain other distributions made after the close of a taxable year of
the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.
SALE OF SHARES. The sale of shares (including transfers in connection with a
redemption or repurchase of shares) will be a taxable transaction for federal
income tax purposes. Selling shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
shares and the amount received. If such shares are held as a capital asset, the
gain or loss will be a capital gain or loss and will be long-term if such shares
have been held for more than one year. Any loss realized upon a taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gains dividends received with respect
to such shares. For purposes of determining whether shares have been held for
six months or less, the holding period is suspended for any periods during which
the shareholder's risk of loss is diminished
51
<PAGE> 54
as a result of holding one or more other positions in substantially similar or
related property or through certain options or short sales.
STATE AND LOCAL TAXES. The exemption of interest income for federal income tax
purposes may not result in similar exemptions under the laws of a particular
state or local taxing authority. Income distributions may be taxable to
shareholders under state or local law as dividend income even though a portion
of such distributions may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such income taxes. It is
recommended that investors consult their tax advisers for information in this
regard. The Fund will report annually to its shareholders the percentage and
source, on a state-by-state basis, of interest income earned on Municipal
Securities received by the Fund during the preceding calendar year. Dividends
and distributions paid by the Fund from sources other than tax-exempt interest
are generally subject to taxation at the state and local levels.
GENERAL. The federal, state and local income tax discussion set forth above
is for general information only. Prospective investors should consult their
advisors regarding the specific federal tax consequences of holding and
disposing of shares, as well as the effects of state, local and foreign tax law
and any proposed tax law changes.
- ------------------------------------------------------------------------------
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 4.75% for Class A shares); that all
income dividends or capital gains distributions during the period are reinvested
in Fund shares at net asset value; and that any applicable CDSC has been paid.
The Fund's total return will vary depending on market conditions, the securities
comprising the Fund's portfolio, the Fund's operating expenses and unrealized
net capital gains or losses during the period. 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.
52
<PAGE> 55
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.
In addition to total return information, the Fund may also advertise its
current "yield." Yield figures are based on historical earnings and are not
intended to indicate future performance. Yield is determined by analyzing the
Fund's net income per share for a 30-day (or one month) period (which period
will be stated in the advertisement) and dividing by the maximum offering price
per share on the last day of the period. A "bond equivalent" annualization
method is used to reflect a semiannual compounding. The Fund's "tax-equivalent
yield" is calculated by determining the rate of return that would have to be
achieved on a fully taxable investment to produce the after-tax equivalent of
the Fund's yield, assuming certain tax brackets for a Fund shareholder.
For purposes of calculating yield quotations, net income is determined by a
standard formula prescribed by the SEC to facilitate comparison with yields
quoted by other investment companies. Net income computed for this formula
differs from net income reported by the Fund in accordance with generally
accepted accounting principles and from net income computed for federal income
tax reporting purposes. Thus the yield computed for a period may be greater or
less than the Fund's then current dividend rate.
The Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by the Fund, portfolio maturity and the Fund's
expenses.
Yield quotations should be considered relative to changes in the net asset
value of the Fund's shares, the Fund's investment policies, and the risks of
investing in shares of a Fund. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
To increase the Fund's yield, the Adviser may, from time to time, absorb a
certain amount of the future ordinary business expenses. The Adviser may stop
absorbing these expenses at any time without prior notice. A yield quotation
which reflects an expense reimbursement or subsidization by the Adviser will be
accompanied by a hypothetical yield quotation excluding such reimbursement.
Yield and total return are calculated separately for Class A shares, Class B
shares and Class C shares. Total return figures for Class A shares include the
maximum sales charge of 4.75%; total return figures for Class B shares and Class
C shares include any applicable CDSC. Because of the differences in sales
charges and distribution fees, the total returns for each of the classes will
differ.
53
<PAGE> 56
Since yield fluctuates, yield data cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses and market conditions.
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 Trust may compare its performance with that of other mutual funds as listed
in the ratings or rankings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds; or with municipal bond indices, such as Lehman
Brothers Municipal Bond Index or Bond Buyer's Index of 25 Revenue Bonds, 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's performance. The Fund will include performance data for each
class of shares of any Fund in any advertisement or information including
performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
54
<PAGE> 57
The Fund's Annual Report contains additional performance information. A copy
of the Annual Report may be obtained without charge by calling or writing the
Fund at the telephone number and address printed on the cover page of this
Prospectus.
- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------
The Trust was originally organized on December 5, 1984, under the laws of the
Commonwealth of Massachusetts as a business entity commonly known as a
"Massachusetts business trust". The Trust was reorganized as a Delaware business
trust on July 31, 1995. It is a diversified, open-end investment company. The
Fund is a diversified series of the Trust.
The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share divided into classes.
The Fund currently offers three classes of shares, designated Class A shares,
Class B shares and Class C shares. Other classes of shares may be established
from time to time in accordance with provisions of the Trust's Declaration of
Trust. Shares issued by the Fund are fully paid, non-assessable and, except as
described herein, have no preemptive or conversion rights.
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. There are no conversion, preemptive or other subscription
rights, except with respect to the conversion of certain shares into Class A
shares as described herein. In the event of liquidation, each of the shares of
the Fund is entitled to its portion of all of the Fund's net assets after all
debt and expenses of the Fund have been paid. Since Class B shares and Class C
shares pay higher distribution expenses, the liquidation proceeds to Class B
shareholders and Class C shareholders are likely to be lower than to other
shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. 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 Trust's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
55
<PAGE> 58
- ------------------------------------------------------------------------------
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 November 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 income tax information
regarding dividends and capital gains distributions.
Shareholder inquiries should be directed to the Van Kampen American Capital
High Yield Municipal Fund, One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
Attn: Correspondence.
For Automated Telephone Service which provides 24-hour direct dial access to
Fund facts and shareholder account information, dial (800) 421-5666. For
inquiries through Telecommunications Device for the Deaf (TDD) dial (800)
772-8889.
56
<PAGE> 59
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE TRUST'S TOLL-FREE
NUMBER--(800) 421-5666
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424
VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD MUNICIPAL FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Subadviser
VAN KAMPEN AMERICAN CAPITAL
ADVISORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen American Capital
High Yield Municipal Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital
High Yield Municipal Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (Illinois)
335 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICE WATERHOUSE LLP
1201 Louisiana
Suite 2900
Houston, TX 77002
<PAGE> 60
- ------------------------------------------------------------------------------
HIGH YIELD
MUNICIPAL FUND
------------------------------------------------------------------------------
P R O S P E C T U S
MARCH 28, 1997
- ------ ------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 61
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL HIGH YIELD MUNICIPAL FUND
Van Kampen American Capital High Yield Municipal Fund (the "Fund") is a
diversified series of Van Kampen American Capital Tax-Exempt Trust (the
"Trust"), an 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 American Capital Distributors, Inc. at One Parkview Plaza,
Oakbrook Terrace, IL 60181 at (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... B-2
Municipal Securities........................................ B-2
Temporary Investments....................................... B-4
Repurchase Agreements....................................... B-4
Futures Contracts and Related Options....................... B-5
Investment Restrictions..................................... B-8
Trustees and Officers....................................... B-9
Legal Counsel............................................... B-17
Investment Advisory Agreement............................... B-17
Distributor................................................. B-19
Distribution and Service Plans.............................. B-19
Transfer Agent.............................................. B-20
Portfolio Transactions and Brokerage........................ B-20
Determination of Net Asset Value............................ B-21
Purchase and Redemption of Shares........................... B-22
Exchange Privilege.......................................... B-25
Check Writing Privilege..................................... B-26
Tax Status of the Fund...................................... B-26
Fund Performance............................................ B-26
Other Information........................................... B-27
Ratings of Investments...................................... B-28
Report of Independent Accountants........................... B-32
Financial Statements........................................ B-33
Notes to Financial Statements............................... B-51
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MARCH 28, 1997.
B-1
<PAGE> 62
GENERAL INFORMATION
Van Kampen American Capital Tax-Exempt Trust (the "Trust") was originally
organized as a business trust under the laws of Massachusetts on December 5,
1984. As of July 31, 1995, the Trust was reorganized as a Delaware business
trust. The Trust currently is comprised of one series: the Van Kampen American
Capital High Yield Municipal Fund (the "Fund").
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor") and ACCESS
Investor Services, Inc. ("ACCESS") are wholly-owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is a wholly-owned subsidiary of MSAM Holdings
II, Inc. which, in turn, is a wholly-owned subsidiary of Morgan Stanley Group
Inc. The principal office of the Fund, the Adviser, the Distributor and VKAC is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries, including 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; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; and global custody, securities clearance services and securities
lending.
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover &
Co. announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions being
met, it is currently anticipated that the transaction will close in mid-1997.
Thereafter, Van Kampen American Capital Asset Management, Inc. will be an
indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three
major businesses; full service brokerage, credit services and asset management.
VKAC offers one of the industry's broadest lines of investments --
encompassing mutual funds, closed-end funds and unit investment trusts -- and is
currently the nation's 5th largest broker-sold mutual fund group according to
Strategic Insight, July 1995. VKAC manages or supervises more than $57 billion
in mutual funds, closed-end funds and unit investment trusts -- assets which
have been entrusted to VKAC in more than 2 million investor accounts. VKAC has
one of the largest research teams (outside of the rating agencies) in the
country, with more than 80 analysts devoted to various specializations. Each of
our high yield analysts, based either in San Francisco, Chicago, Houston or
Boston, has the responsibility to cover a specific region of the country. This
regional focus enables each high yield analyst to provide more specialized
coverage of the market and alert the portfolio manager to issues of local
importance.
As of March 14, 1997, 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 AND NATURE
OF OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER MARCH 22, 1996 SHARES OWNERSHIP
-------------------------- ----------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith, Inc. 3,221,854 shares Class A 5.79%
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246-6484 Class B 11.56%
3,406,845 shares
294,762 shares Class C 6.45%
</TABLE>
The term "Adviser" refers to both the Adviser, Van Kampen American Capital
Asset Management, Inc., and the Subadviser, Van Kampen American Capital
Advisors, Inc.
MUNICIPAL SECURITIES
Municipal Securities include debt obligations issued to obtain funds for
various public purposes, including construction of a wide range of public
facilities, refunding of outstanding obligations and obtaining funds for
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general operating expenses and loans to other public institutions and
facilities. In addition, certain types of industrial development obligations are
issued by or on behalf of public authorities to finance various privately-
operated facilities. Such obligations are included within the term Municipal
Securities if the interest paid thereon is exempt from federal income tax.
Municipal Securities also include short-term tax-exempt municipal obligations
such as tax anticipation notes, bond anticipation notes, revenue anticipation
notes, and variable rate demand notes.
The two principal classifications of Municipal Securities are "general
obligations" and "revenue" or "special obligations." General obligations are
secured by the issuer's pledge of faith, credit, and taxing power for the
payment of principal and interest. Revenue or special obligations are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source such as from the user of the facility being financed. Industrial
development bonds, including pollution control bonds, are revenue bonds and do
not constitute the pledge of the credit or taxing power of the issuer of such
bonds. The payment of the principal and interest on such industrial revenue
bonds depends solely on the ability of the user of the facilities financed by
the bonds to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. The Fund may also
include "moral obligation" bonds which are normally issued by special purpose
public authorities. If an issuer of moral obligation bonds is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question.
When a Fund engages in when-issued and delayed delivery transactions, the
Fund relies on the buyer or seller, as the case may be, to consummate the trade.
Failure of the buyer or seller to do so may result in the Fund missing the
opportunity of obtaining a price considered to be advantageous.
The Fund may invest in Municipal Notes which include demand notes and
short-term municipal obligations (such as tax anticipation notes, revenue
anticipation notes, construction loan notes and short-term discount notes) and
tax-exempt commercial paper provided that such obligations have the ratings
described in the Prospectus for the Fund or if unrated are of comparable quality
as determined by the Adviser. Demand notes are obligations which normally have a
stated maturity in excess of one year, but permit any holder to demand payment
of principal plus accrued interest upon a specified number of days' notice.
Frequently, such obligations are secured by letters of credit or other credit
support arrangements provided by banks. The issuer of such notes normally has a
corresponding right, after a given period, to prepay at its discretion the
outstanding principal of the note plus accrued interest upon a specified number
of days' notice to the noteholders. Demand notes may also include Municipal
Securities subject to a Stand-By Commitment as described in the Prospectus. The
interest rate on a demand note may be based on a known lending rate, such as a
bank's prime rate, and may be adjusted when such rate changes, or the interest
rate on a demand note may be a market rate that is adjusted at specified
intervals. Participation interests in variable rate demand notes will be
purchased only if in the opinion of counsel interest income on such interests
will be tax-exempt when distributed as dividends to shareholders.
Yields on Municipal Securities are dependent on a variety of factors,
including the general condition of the money market and of the municipal bond
market, the size of a particular offering, the maturity of the obligation, and
the rating of the issue. The ability of the Fund to achieve its investment
objective is also dependent on the continuing ability of the issuers of the
Municipal Securities in which the Fund invests to meet their obligations for the
payment of interest and principal when due. There are variations in the risks
involved in holding Municipal Securities, both within a particular
classification and between classifications, depending on numerous factors.
Furthermore, the rights of holders of Municipal Securities and the obligations
of the issuers of such Municipal Securities may be subject to applicable
bankruptcy, insolvency and similar laws and court decisions affecting the rights
of creditors generally, and such laws, if any, which may be enacted by Congress
or state legislatures imposing a moratorium on the payment of principal and
interest or imposing other constraints or conditions on the payments of
principal of and interest on Municipal Securities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Securities. It may be expected that similar proposals may
be introduced in the future. If such a proposal were enacted, the ability of the
Fund to
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pay "exempt interest" dividends may be adversely affected and the Fund would
re-evaluate its investment objective and policies and consider changes in its
structure.
ADDITIONAL RISKS OF LOWER RATED MUNICIPAL SECURITIES
Additional risks of lower rated Municipal Securities include limited
liquidity and secondary market support. As a result, the prices of lower rated
Municipal Securities may decline rapidly in the event a significant number of
holders decide to sell. Changes in expectations regarding an individual issuer,
an industry or lower rated Municipal Securities generally could reduce market
liquidity for such securities and make their sale by the Fund more difficult, at
least in the absence of price concessions. Reduced liquidity could also create
difficulties in accurately valuing such securities at certain times. The high
yield, high risk bond market (these securities are commonly referred to as "junk
bonds") has grown primarily during a period of long economic expansion and it is
uncertain how it would perform during an economic downturn. An economic downturn
or an increase in interest rates could severely disrupt the market for high
yield, high risk bonds and adversely affect the value of outstanding bonds and
the ability of the issuers to repay principal and interest. The Fund will take
such actions as it considers appropriate in the event of anticipated financial
difficulties, default or bankruptcy of either the issuer or any Municipal
Security owned by the Fund or the underlying source of funds for debt service.
Such action may include retaining the services of various persons and firms to
evaluate or protect any real estate, facilities or other assets securing any
such obligation or acquired by the Fund as a result of any such event. The Fund
incurs additional expenditures in taking protective action with respect to Fund
obligations in default and assets securing such obligations. Investment in lower
rated Municipal Securities are not generally meant for short-term investment.
TEMPORARY INVESTMENTS
The taxable securities in which the Funds may invest as temporary
investments include United States Government securities, corporate bonds and
debentures, domestic bank certificates of deposit and bankers' acceptances of
domestic banks with assets of $500 million or more and having deposits insured
by the Federal Deposit Insurance Corporation, commercial paper and repurchase
agreements. The taxable securities are subject to the same rating requirements
applicable to the Municipal Securities in which the Fund invests, including, in
the case of unrated securities, that such obligations be in the opinion of the
Adviser of comparable quality.
United States Government securities include obligations issued or
guaranteed as to principal and interest by the United States Government, its
agencies and instrumentalities which are supported by any of the following: (a)
the full faith and credit of the United States Government, (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the United
States Government, (c) discretionary authority of the United States Government
agency or instrumentality or (d) the credit of the instrumentality. Such
agencies or instrumentalities include, but are not limited to, the Federal
National Mortgage Association, the Government National Mortgage Association,
Federal Land Banks, and the Farmer's Home Administration. The Fund may not
invest in any security issued by a commercial bank unless the bank is organized
and operating in the United States and has total assets of at least $500 million
and is a member of the Federal Deposit Insurance Corporation.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with domestic banks or
broker-dealers. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, usually not
more than seven days from the date of purchase, thereby determining the yield
during the purchaser's holding period. Repurchase agreements are collateralized
by the underlying debt securities and may be considered to be loans under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of a custodian or bank acting as agent. The seller
under a repurchase agreement is required to maintain the value of the underlying
securities marked to market daily at not less than the repurchase price. The
underlying securities (securities of the U.S. Government, or its agencies and
instrumentalities) may have maturity dates exceeding
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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. The Fund will not invest
in repurchase agreements maturing in more than seven days if any such
investment, together with any other illiquid security owned by the Fund, exceeds
10% of the value of its net assets. See "Investment Practices -- Repurchase
Agreements" in the Prospectus for further information.
FUTURES CONTRACTS AND RELATED OPTIONS
FUTURES CONTRACTS
A municipal bond futures contract is an agreement pursuant to which two
parties agree to take and make delivery of an amount of cash equal to a
specified dollar amount times the differences between The Bond Buyer Municipal
Bond Index (the "Index") value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. The
Index is a price-weighted measure of the market value of 40 large sized, recent
issues of tax-exempt bonds.
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 not
more than 5% 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 a 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 otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract
serves as a temporary substitute for the purchase of individual securities,
which may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
substantially reduces the risk to the Fund of a market decline and, by so doing,
provides an alternative to the liquidation of securities positions in the Fund
with attendant transaction costs.
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<PAGE> 66
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in 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 contact.
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 judged over a very short time frame.
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 movements, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
The Fund could 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
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<PAGE> 67
Fund would be exempt from registration as a "commodity pool." CFTC regulations
require, among other things, (i) that futures and related options be used solely
for bona fide hedging purposes (or meet certain conditions as specified in CFTC
regulations) and (ii) that the Fund not enter into futures and related options
for which the aggregate initial margin and premiums exceed 5% of the fair market
value of the Fund's assets. In order to minimize 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 purchase 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 in initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purpose as it could sell, a futures contract. The purchase of call
options on futures contracts would be intended to serve the same purpose as the
actual purchase of the futures contract.
Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Adviser will not purchase
options on futures on any exchange unless in the Adviser's opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances, such as when
there is no movement in the level of the index or in the price of the underlying
security, when the use of an option on a future would result in a loss to the
Fund when the use of a future would not.
ADDITIONAL RISKS OF FUTURES CONTRACTS AND RELATED OPTIONS
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written on
one or more accounts or through one or more brokers). Option positions of all
investment companies advised by the Adviser are combined for purposes of these
limits. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the 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.
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INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which, along with its
investment objective, 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 in person or by
proxy 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. In addition to the fundamental investment
limitations set forth in the Prospectus, a Fund shall not:
1. Purchase or hold securities of any issuer if any of the Fund's officers
or trustees, or officers or directors of its investment adviser, who
beneficially owns more than 1/2% of the securities of that issuer,
together own beneficially more than 5% of the securities of such
issuer;
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities. The deposit or payment by the Fund of an
initial or maintenance margin in connection with futures contracts or
related option transactions is not considered the purchase of a
security on margin;
3. Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional
cost securities identical to those sold short;
4. Make loans of money or securities to other persons except that the Fund
may purchase or hold debt instruments and enter into repurchase
agreements in accordance with its investment objective and policies;
5. Invest in real estate or mortgage loans (but this shall not prevent the
Fund from investing in Municipal Securities or Temporary Investments
secured by real estate or interests therein); or in interests in oil,
gas, or other mineral exploration or development programs; or in any
security not payable in United States currency;
6. Invest more than 10% of the value of its net assets in securities which
are illiquid, including securities restricted as to disposition under
the Securities Act of 1933 (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 Securities and Exchange Commission (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) and
including repurchase agreements maturing in more than 7 days;
7. Invest in securities of any one issuer with a record of less than 3
years of continuous operation, including predecessors, except
obligations issued or guaranteed by the United States Government or its
agencies or Municipal Securities (except that in the case of industrial
revenue bonds, this restriction shall apply to the entity supplying the
revenues from which the issue is to be paid), if such investments by
the Fund would exceed 5% of the value of its total assets (taken at
market value), 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;
8. Underwrite the securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 by virtue
of disposing of portfolio securities;
9. Invest in securities other than Municipal Securities, Temporary
Investments (as defined herein), stand-by commitments, futures
contracts described in the next paragraph and options on such contracts
or securities issued by other investment companies except as part of a
merger, reorganization or other acquisition and except to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act;
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10. Purchase or sell commodities or commodity contracts except that the
Fund may purchase, hold and sell listed futures contracts related to
U.S. Government securities, Municipal Securities or to an index of
Municipal Securities;
11. Invest more than 5% of its total assets at market value at the time of
purchase in the securities of any one issuer (other than obligations of
the United States Government or any agency or instrumentality thereof)
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;
12. Borrow money, except that the Fund may borrow from banks to meet
redemptions or for other temporary or emergency purposes, with such
borrowing not to exceed 5% of the total assets of the Fund at market
value at the time of borrowing. Any such borrowing may be secured
provided that not more than 10% of the total assets of the Fund at
market value at the time of pledging may be used as security for such
borrowings;
13. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided that this limitation shall
not apply to Municipal Securities or governmental guarantees of
Municipal Securities; and provided, further, that for the purpose of
this limitation only, industrial development bonds that are considered
to be issued by non-governmental users shall not be deemed to be
Municipal Securities; and provided, further, 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; or
14. 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".
Because of the nature of the securities in which the Fund may invest, the
Fund may not invest in voting securities or invest for the purpose of exercising
control or management. If a percentage restriction is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in value will not constitute a violation of such restriction.
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and their principal occupations for the last five
years and their affiliations, if any, with Van Kampen American Capital
Investment Advisory Corp. (the "VK Adviser"), Van Kampen American Capital Asset
Management, Inc. (the "Adviser" or the "AC Adviser"), Van Kampen American
Capital Distributors, Inc. (the "Distributor"), Van Kampen American Capital,
Inc. ("Van Kampen American Capital"), VK/AC Holding, Inc. or ACCESS Investor
Services, Inc. ("ACCESS"). For purposes hereof, the terms "Van Kampen American
Capital Funds" or "Fund Complex" includes each of the open-end investment
companies advised
B-9
<PAGE> 70
by the VK Adviser and each of the open-end investment companies advised by the
AC Adviser (excluding the Van Kampen American Capital Exchange Fund and the
Common Sense Trust).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Co-founder, Chairman, Chief Executive Officer and
1632 Morning Mountain Road President of MDT Corporation, a company which develops
Raleigh, NC 27614 manufactures, markets and services medical and scientific
Date of Birth: 07/14/32 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Linda Hutton Heagy........................ Managing Partner, Paul Ray Berndtson, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Date of Birth: 06/03/48 of La Salle National Bank. Trustee of each of the Van
Kampen American Capital Funds.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. Trustee of
each of the Van Kampen American Capital Funds.
Dennis J. McDonnell*...................... President, Chief Operating Officer and a Director of the
One Parkview Plaza VK Adviser, the AC Adviser, Van Kampen American Capital
Oakbrook Terrace, IL 60181 Advisors, Inc. and Van Kampen American Capital
Date of Birth: 05/20/42 Management, Inc. Executive Vice President and a Director
of VK/AC Holding, Inc. and Van Kampen American Capital.
President and Director of Van Kampen Merritt Equity
Advisors Corp. Director of Van Kampen Merritt Equity
Holdings Corp. Director of McCarthy, Crisanti & Maffei,
Inc. Prior to September 1996, Chief Executive Officer of
McCarthy, Crisanti & Maffei, Inc. and Chairman and
Director of MCM Asia Pacific Company, Limited. Prior to
July 1996, President, Chief Operating Officer and Trustee
of VSM Inc. and VCJ Inc. President, Chief Executive
Officer and Trustee of each of the Van Kampen American
Capital Funds. President and Trustee of each of the Van
Kampen American Capital Funds. President, Chairman of the
Board and Trustee of other investment companies advised
by the VK Adviser. Executive Vice President of other
investment companies advised by the AC Adviser.
Jack E. Nelson............................ President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Date of Birth: 02/13/36 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. ("SIPC"). Trustee of each of
the Van Kampen American Capital Funds.
Jerome L. Robinson........................ President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Date of Birth: 10/10/22 software programming company specializing in white collar
productivity. Director of Panasia Bank. Trustee of each
of the Van Kampen American Capital Funds.
</TABLE>
B-10
<PAGE> 71
<TABLE>
<S> <C>
Fernando Sisto............................ George M. Bond Chaired Professor and, prior to 1995, Dean of Graduate
155 Hickory Lane School and Chairman, Department of Mechanical Engineering, Stevens
Closter, NJ 07624-2322 Institute of Technology. Director of Dynalysis of Princeton, a firm
Date of Birth: 08/02/24 engaged in engineering research. Trustee of each of the Van Kampen
American Capital Funds.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive (Illinois), legal counsel to the Van Kampen American Capital Funds, The
Chicago, IL 60606 Explorer Institutional Trust and the closed-end investment companies
Date of Birth: 08/22/39 advised by the VK Adviser. Trustee of each of the Van Kampen American
Capital Funds, The Explorer Institutional Trust and the closed-end
investment companies advised by the VK Adviser.
</TABLE>
- ---------------
* Such trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act).
B-11
<PAGE> 72
OFFICERS
The address for Curtis W. Morell, Alan T. Sachtleben, Paul R. Wolkenberg,
Tanya M. Loden, Huey P. Falgout, Jr. and Robert Sullivan is 2800 Post Oak Blvd.,
Houston, TX 77056. The address for Peter W. Hegel, Ronald A. Nyberg, Edward C.
Wood III, John L. Sullivan, Nicholas Dalmaso, Scott E. Martin, Weston B.
Wetherell and Steven M. Hill is One Parkview Plaza, Oakbrook Terrace, IL 60181.
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Peter W. Hegel.............. Vice President Executive Vice President of the VK Adviser,
Date of Birth: 06/25/56 AC Adviser, Van Kampen American Capital
Management, Inc. and Van Kampen American
Capital Advisors, Inc. Prior to September
1996, Director of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Director
of VSM Inc. Vice President of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Curtis W. Morell............ Vice President and Chief Senior Vice President of the VK Adviser and
Date of Birth: 08/04/46 Accounting Officer the AC Adviser. Vice President and Chief
Accounting Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel
Date of Birth: 07/29/53 and Secretary of Van Kampen American
Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen Merritt Equity Advisors Corp. and
Van Kampen Merritt Equity Holdings Corp.
Executive Vice President, General Counsel
and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van
Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc. and ACCESS. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen
American Capital Trust Company. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to September 1996,
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Executive
Vice President and General Counsel of VSM
Inc. and VCJ Inc. Vice President and
Secretary of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
</TABLE>
B-12
<PAGE> 73
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Alan T. Sachtleben.......... Vice President Executive Vice President of the VK Adviser
Date of Birth: 04/20/42 and Van Kampen American Capital Management,
Inc. Executive Vice President and a
Director of the AC Adviser and Van Kampen
American Capital Advisors, Inc. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Paul R. Wolkenberg.......... Vice President Executive Vice President of VK/AC Holding,
Date of Birth: 11/10/44 Inc., Van Kampen American Capital, the
Distributor and the AC Adviser. President,
Chief Executive Officer and a Director of
Van Kampen American Capital Trust Company
and ACCESS. Director of American Capital
Contractual Services, Inc. Vice President
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Edward C. Wood III.......... Vice President and Chief Senior Vice President of the VK Adviser,
Date of Birth: 01/11/56 Financial Officer the AC Adviser and Van Kampen American
Capital Management, Inc. Vice President and
Chief Financial Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
John L. Sullivan............ Treasurer First Vice President of the VK Adviser and
Date of Birth: 08/20/55 the AC Adviser. Treasurer of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Tanya M. Loden.............. Controller Vice President of the VK Adviser and the AC
Date of Birth: 11/19/59 Adviser. Controller of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Nicholas Dalmaso............ Assistant Secretary Assistant Vice President and Senior
Date of Birth: 03/01/65 Attorney of Van Kampen American Capital.
Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser and Van Kampen
American Capital Management, Inc. Assistant
Vice President of Van Kampen American
Capital Advisors, Inc. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
</TABLE>
B-13
<PAGE> 74
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Huey P. Falgout, Jr......... Assistant Secretary Assistant Vice President and Senior
Date of Birth: 11/15/63 Attorney of Van Kampen American Capital.
Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and ACCESS. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of Van
Kampen American Capital and VK/AC Holding,
Inc. Senior Vice President, Deputy General
Counsel and Secretary of the VK Adviser,
the AC Adviser, the Distributor, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc., ACCESS, Van Kampen Merritt
Equity Advisors Corp. and Van Kampen
Merritt Equity Holdings Corp. Prior to
September 1996, Deputy General Counsel and
Secretary of McCarthy, Crisanti & Maffei,
Inc. Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Weston B. Wetherell......... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: 06/15/56 and Assistant Secretary of Van Kampen
American Capital, the VK Adviser, the AC
Adviser, the Distributor, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Steven M. Hill.............. Assistant Treasurer Assistant Vice President of the VK Adviser
Date of Birth: 10/16/64 and AC Adviser. Assistant Treasurer of each
of the Van Kampen American Capital Funds
and other investment companies advised by
the VK Adviser and the AC Adviser.
</TABLE>
B-14
<PAGE> 75
<TABLE>
<S> <C> <C>
Robert Sullivan.............. Assistant Controller Assistant Vice President of the VK Adviser and the AC
Date of Birth: 03/30/33 Adviser. Assistant Controller of each of the Van
Kampen American Capital Funds and other investment
companies advised by the VK Adviser and the AC
Adviser.
</TABLE>
Each of the foregoing trustees and officers holds the same position with
each of the funds in the Fund Complex. As of December 31, 1996, there were 51
funds in the Fund Complex. Each trustee who is not an affiliated person of the
VK Adviser, the AC Adviser, the Distributor or Van Kampen American Capital (each
a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting
fees for services to the funds in the Fund Complex. Each fund in the Fund
Complex provides a deferred compensation plan to its Non-Affiliated Trustees
that allows trustees to defer receipt of his or her compensation and earn a
return on such deferred amounts based upon the return of the common shares of
the funds in the Fund Complex as more fully described below. Each fund in the
Fund Complex also provides a retirement plan to its Non-Affiliated Trustees that
provides Non-Affiliated Trustees with compensation after retirement, provided
that certain eligibility requirements are met as more fully described below.
The compensation of each Non-Affiliated Trustee includes a retainer by the
funds in the Fund Complex advised by the AC Adviser (the "AC Funds") in an
amount equal to $35,000 per calendar year, due in four quarterly installments on
the first business day of each calendar quarter. The AC Funds pay each Non-
Affiliated Trustee a per meeting fee in the amount of $2,000 per regular
quarterly meeting attended by the Non-Affiliated Trustee, due on the date of
such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in
connection with his or her services as a trustee. Payment of the annual retainer
and the regular meeting fee is allocated among the AC Funds (i) 50% on the basis
of the relative net assets of each AC Fund to the aggregate net assets of all
the AC Funds and (ii) 50% equally to each AC Fund, in each case as of the last
business day of the preceding calendar quarter. Each AC Fund participating in
any special meeting of the trustees generally pays each Non-Affiliated Trustee a
per meeting fee in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.
The trustees approved an aggregate compensation cap with respect to funds
in the Fund Complex of $84,000 per Non-Affiliated Trustee per year (excluding
any retirement benefits) for the period July 22, 1995 through December 31, 1996,
subject to the net assets and the number of funds in the Fund Complex as of July
21, 1995 and certain other exceptions. In addition, each of the VK Adviser or
the AC Adviser, as the case may be, agreed to reimburse each fund in the Fund
Complex through December 31, 1996 for any increase in the aggregate trustee's
compensation over the aggregate compensation paid by such fund in its 1994
fiscal year, provided that if a fund did not exist for the entire 1994 fiscal
year appropriate adjustments will be made.
Each Non-Affiliated Trustee can elect to defer receipt of all or a portion
of the compensation earned by such Non-Affiliated Trustee until retirement.
Amounts deferred are retained by the Fund and earn a rate of return determined
by reference to the return on the common shares of the Fund or other funds in
the Fund Complex as selected by the respective Non-Affiliated Trustee. To the
extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
The Fund adopted a retirement plan on January 25, 1996. Under the Fund's
retirement plan, a Non-Affiliated Trustee who is receiving trustee's fees from
the Fund prior to such Non-Affiliated Trustee's retirement, has at least ten
years of service and retires at or after attaining the age of 60, is eligible to
receive a retirement benefit equal to $2,500 per year for each of the ten years
following such trustee's retirement. Trustees retiring prior to the age of 60 or
with fewer than 10 years but more than 5 years of service may receive reduced
retirement benefits from a series. The retirement plan contains a Fund Complex
retirement benefit
B-15
<PAGE> 76
cap of $60,000 per year. The AC Adviser is reimbursing the Fund for expenses
related to the retirement plan through December 31, 1996.
Additional information regarding compensation and benefits for trustees is
set forth below. The "Registrant" is the Trust, which currently consists of one
operating series. As indicated in the notes accompanying the table, the amounts
relate to either the Registrant's last fiscal year ended November 30, 1996 or
the Fund Complex' last calendar year ended December 31, 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
ESTIMATED TOTAL
PENSION OR ANNUAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS BEFORE DEFERRAL
COMPENSATION BENEFITS ACCRUED FROM FROM REGISTRANT
BEFORE DEFERRAL AS PART OF REGISTRANT AND FUND
FROM REGISTRANT UPON COMPLEX PAID TO
NAME(1) REGISTRANT(2) EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan...................... 2,555 $-0- $2,500 $104,875
Philip P. Gaughan...................... 780 -0- -0- 16,875
Linda Hutton Heagy..................... 2,555 -0- 2,500 104,875
Dr. Roger Hilsman...................... 2,555 -0- 2,500 103,750
R. Craig Kennedy....................... 2,555 -0- 2,500 104,875
Donald C. Miller....................... 2,555 -0- -0- 104,875
Jack E. Nelson......................... 2,555 -0- 2,500 97,875
David Rees............................. 960 -0- 2,500 22,000
Jerome L. Robinson..................... 2,555 -0- -0- 101,625
Lawrence J. Sheehan.................... 960 -0- -0- 22,000
Dr. Fernando Sisto..................... 2,555 -0- 2,500 104,875
Wayne W. Whalen........................ 2,555 -0- 2,500 104,875
William S. Woodside.................... 2,555 -0- 2,500 104,875
</TABLE>
- ---------------
(1) Mr. McDonnell, a trustee of the Trust, is an affiliated person of the VK
Adviser and AC Adviser and is not eligible for compensation or retirement
benefits from the Registrant. Mr. McDonnell was appointed to the Board of
Trustees on January 30, 1996. Mr. Don G. Powell resigned from the Board of
Trustees on August 15, 1996, and did not receive any compensation or
benefits from the Fund while a trustee because he was an affiliated person
of the VK Adviser and AC Adviser. Messrs. Gaughan and Rees retired from the
Board of Trustees on January 26, 1996 and January 29, 1996, respectively.
Mr. Sheehan was removed from the Board of Trustees effective January 29,
1996. Messrs. Hilsman, Miller and Woodside retired from the Board of
Trustees on December 31, 1996.
(2) The amounts shown in this column are aggregated from the compensation paid
by each series in operation during the Registrant's fiscal year ended
November 30, 1996 before deferral by the trustees under the deferred
compensation plan. The following trustees deferred all or a portion of their
compensation from the Registrant during the fiscal year ended November 30,
1996: Mr. Branagan, $635; Mr. Gaughan, $780; Ms. Heagy, $2,105; Mr. Kennedy,
$1,440; Mr. Miller, $2,555; Mr. Nelson, $2,555; Mr. Robinson, $2,555; and
Mr. Whalen, $2,555. The cumulative deferred compensation (including
interest) accrued with respect to each trustee from the Registrant as of
November 30, 1996 is as follows: Mr. Branagan, $612; Mr. Gaughan, $751; Ms.
Heagy, $2,212; Mr. Kennedy, $1,541; Mr. Miller, $2,737; Mr. Nelson, $2,838;
Mr. Robinson, $2,676; Dr. Sisto, $1,828; and Mr. Whalen, $2,837. The
deferred compensation plan is described above the Compensation Table.
Amounts deferred are retained by the Fund and earn a rate of return
determined by reference to either the return on the common shares of the
Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee. To the extent permitted by the 1940 Act, the Fund
may invest in securities of those funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation.
(3) The amounts shown in this column are zero in the Fund's fiscal year ended
November 30, 1996 because the Adviser agreed to reimburse the Fund for
expenses related to the retirement plan through December 31, 1996. Absent
such reimbursement, the aggregate expenses of the Fund for all trustees
would have been approximately $17,000 in its fiscal year ended November 30,
1996. The Retirement Plan is described above the Compensation Table.
(4) The amounts shown in this column are the estimated annual benefits payable
by the Registrant in each year of the 10-year period commencing in the year
of such trustee's retirement from the Registrant (based
B-16
<PAGE> 77
on $2,500 per series for each series of the Registrant in operation)
assuming: the trustee has 10 or more years of service on the Board of the
respective series and retires at or after attaining the age of 60. The
actual annual benefit may be less if the trustee is subject to the Fund
Complex retirement benefit cap or if the trustee is not fully vested at the
time of retirement.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1996, before
deferral by the trustees under the deferred compensation plan. The following
trustees deferred compensation paid by the Registrant and the Fund Complex
during the calendar year ended December 31, 1996: Mr. Gaughan, $15,625; Ms.
Heagy, $68,750; Mr. Kennedy, $44,000; Mr. Miller, $97,375; Mr. Nelson,
$97,375; Mr. Rees, $15,070; Mr. Robinson, $94,250; and Mr. Whalen, $97,375.
The deferred compensation earns a rate of return determined by reference to
the return on the common shares of the Fund or other funds in the Fund
Complex as selected by the respective Non-Affiliated Trustee. To the extent
permitted by the 1940 Act, the Fund may invest in securities of those funds
selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The trustees' Fund Complex compensation cap covered
the period July 22, 1995 through December 31, 1996. For the calendar year
ended December 31, 1996, certain trustees received compensation over $84,000
in the aggregate due to compensation received but not subject to the cap,
including compensation from new funds added to the Fund Complex after July
22, 1995 and certain special meetings in December 1995 and 1996. The VK
Adviser, AC Adviser and their affiliates also serve as investment adviser
for other investment companies; however, with the exception of Messrs.
McDonnell and Whalen, the trustees were not trustees of such investment
companies. Combining the Fund Complex with other investment companies
advised by the VK Adviser, AC Adviser and their affiliates, Mr. Whalen
received Total Compensation of $243,375 during the calendar year ended
December 31, 1996.
As of March 14, 1997, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund. As of March 14, 1997, no trustee
or officer of the Fund owns or would be able to acquire 5% or more of the common
stock of VK/AC Holding, Inc. Mr. McDonnell owns, or has the opportunity to
purchase, an equity interest in VK/AC Holding, Inc., the parent company of Van
Kampen American Capital, and has entered into an employment contract (for a term
until February 17, 1998) with Van Kampen American Capital.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The Adviser is responsible for
obtaining and evaluating economic, statistical, and financial data and for
formulating and implementing investment programs in furtherance of the Fund's
investment objectives. The Adviser also furnishes at no cost to the Fund (except
as noted herein) the services of sufficient executive and clerical personnel for
the Fund as are necessary to prepare registration statements, prospectuses,
shareholder reports, and notices and proxy solicitation materials. In addition,
the Adviser furnishes at no cost to the Fund the services of a President of the
Fund, one or more Vice Presidents as needed, and a Secretary.
Under the Advisory Agreement, the Fund bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating the daily net asset value of the Fund. 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. The
services are provided at cost which is allocated among the investment companies
advised by the Adviser. The Fund also pays transfer agency fees, distribution
fees, service fees, custodian fees, legal fees, the costs of reports to
shareholders and all other ordinary expenses not specifically assumed by the
Adviser.
Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Fund at an annual
rate of 0.60% of the first $300 million of aggregate average net assets, 0.55%
of the next $300 million of aggregate average net assets and 0.50% of aggregate
average net assets in excess of $600 million.
B-17
<PAGE> 78
The Adviser has entered into a subadvisory agreement (the "Subadvisory
Agreement") with the Subadviser to assist it in performing its investment
advisory function with respect to the Fund. Pursuant to the Subadvisory
Agreement, the Subadviser receives a fee payable monthly computed on average
daily net assets of the Fund at an annual rate of 0.40% of the first $20 million
of average daily net assets, 0.25% of the next $30 million of average daily net
assets and 0.15% of the excess over $50 million.
The average daily net assets are determined by taking the average of all of
the determinations of the net assets for each business day during a given
calendar month. Such fees are payable for each calendar month as soon as
practicable after the end of that month. The fee payable to the Adviser is
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the Adviser or any other direct or indirect
majority-owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the Fund, less any direct expenses
incurred by such subsidiary of VK/AC Holding, Inc. in connection with obtaining
such payments. The Adviser shall use its best efforts to recapture all available
tender solicitation fees and exchange offer fees in connection with each of the
Fund's transactions and shall advise the Trustees of the Fund of any other
commissions, fees, brokerage or similar payments which may be possible under
applicable laws for the Adviser or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc. to receive in connection with the Fund's
portfolio transactions or other arrangements which may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed 0.95% of the average
daily net assets, 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 do not include (1) interest and taxes, (2) brokerage commissions, (3)
payments made pursuant to Distribution Plan (described herein), (4) certain
litigation and indemnification expenses as described in the Advisory Agreement,
and (5) insurance premiums paid by the Fund to insure the timely payment of
principal and interest on its portfolio obligations. The Advisory Agreement also
provides that the Adviser shall not be liable to the Fund for any actions or
omissions if it acted in good faith without negligence or misconduct.
For the period ended December 1, 1987 to March 31, 1990, in addition to the
contractual expense limitation, the Adviser elected to reimburse the Fund for
all ordinary business expenses, exclusive of taxes and interest, in excess of
0.85% of the average daily net assets.
B-18
<PAGE> 79
The following table shows expenses payable under the Advisory Agreement
during the fiscal years ending November 30, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
11/30/94:
------------------
<S> <C>
Gross Advisory Fees $3,172,407
Accounting Services $ 163,929
Contractual Expense Reimbursement $ -0-
FISCAL YEAR ENDING
11/30/95:
------------------
Gross Advisory Fees $3,906,255
Accounting Services $ 158,098
Contractual Expense Reimbursement $ 8,371
FISCAL YEAR ENDING
11/30/96:
------------------
Gross Advisory Fees $4,757,392
Accounting Services $ 208,513
Voluntary Expense Reimbursement $ 17,000
</TABLE>
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Trust's Trustees or (ii) by vote of a
majority of the Trust's outstanding voting securities, and (b) by the
affirmative vote of a majority of the Trustees who are not parties to the
agreement or interested persons of any such party by votes cast in person at a
meeting called for such purpose. The Advisory Agreement provides that it shall
terminate automatically if assigned and that it may be terminated without
penalty by either party on 30 days' written notice.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the shares of the Fund
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 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 by either party on 60 days'
written notice.
For the fiscal years ending November 30, 1994, 1995 and 1996, total
underwriting commissions on the sale of shares of the Fund were $2,667,572,
$3,369,458 and $5,191,191, respectively. Of such totals, the amount retained by
the Distributor was $27,152, $399,162 and $587,095, respectively. The remainder
was reallowed to dealers. For the fiscal years ended November 30, 1994 and 1995,
dealer reallowances of $81,508 and $173,684, respectively, were received by
Advantage Capital Corporation. During the fiscal year ended November 30, 1996,
Advantage Capital Corporation ceased to be an affiliated dealer of the Fund.
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-19
<PAGE> 80
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.
For the fiscal year ending November 30, 1996, gross aggregate expenses
under the Class A Plan were $1,380,920, or 0.25% of the Class A shares' average
daily net assets. Such expenses were paid to reimburse the Distributor for
payments made to authorized dealers for servicing Fund shareholders and
administering the Class A Plan.
For the fiscal year ended November 30, 1996, the aggregate expenses under
the Class B Plan were $2,708,233, or 1.00%, of the Class B shares' average daily
net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $2,031,175 for commissions and transaction fees paid to
authorized dealers in respect of sales of Class B shares of the Fund and
$677,058 for fees paid to Service Organizations for servicing Class B
shareholders and administering the Class B Plan.
For the fiscal year ended November 30, 1996, the aggregate expenses under
the Class C Plan were $389,696, or $1.00% of the Class C shares' average daily
net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $389,676 for the commissions and transactions fees paid to
authorized dealers in respect of sales of Class C shares of the Fund and $0 for
fees paid to authorized dealers for servicing Class C shareholders and
administering the Class C Plan.
TRANSFER AGENT
During the fiscal years ended November 30, 1994, 1995 and 1996, ACCESS,
shareholder service agent and dividend disbursing agent for the Fund, received
fees of $561,481, $648,335 and $728,605, respectively, for these services. These
services are provided at cost plus a profit.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisers are responsible for decisions to buy and sell securities for
the Fund and for the placement of its portfolio business and the negotiation of
any commissions, if any, paid on such transactions. As most transactions made by
the Fund are principal transactions at net prices, the Fund incurs little or no
brokerage costs except for commissions paid with respect to transactions in
future contracts and options. Fund securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities.
Purchases from underwriters of portfolio securities include a commission or
concession paid by the issuer to
B-20
<PAGE> 81
the underwriter and purchases from dealers serving as market makers include the
spread between the bid and asked price. Sales to dealers are effected at bid
prices.
The Advisers are responsible for placing portfolio transactions and do so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker/dealers and in negotiating commissions, the Advisers consider
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, consideration may be given to firms which also provide research
services to the Fund or the Advisers. No specific value can be assigned to such
research services which are furnished without cost to the Advisers. The
investment advisory fee is not reduced as a result of the Advisers' receipt of
such research services. Services provided may include (a) furnishing advice as
to the value of the 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 the accounts, and (c) effecting securities transactions and
performing functions incidental thereto (such as clearance, settlement and
custody). Research services furnished by firms through which the Fund effects
its securities transactions may be used by the Advisers in servicing all of
their advisory accounts; not all of such services may be used by the Advisers in
connection with the Fund.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking best execution of such other
policies as the Trustees may determine, the Advisers may consider sales of
shares of the Fund as a factor in the selection of firms to execute portfolio
transactions for the Fund.
The Advisers place portfolio transactions for other advisory accounts
including other investment companies. The Advisers seek to allocate portfolio
transactions equitably whenever concurrent decisions are made to purchase or
sell securities by the Fund and another advisory account. In some cases, this
procedure could have an adverse effect on the price or the amount of securities
available to the Fund. In making such allocations among the Fund and other
advisory accounts, the main factors considered by the Advisers 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 fiscal years ended November 30, 1994, 1995 and 1996, the Fund
paid $79,957, $38,053 and $0, respectively, in brokerage commissions on
portfolio transactions. 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 conducted no affiliated brokerage transactions through affiliated
brokers during the last three fiscal years.
During the year ended November 30, 1996, the Fund paid $0 in brokerage
commissions on transactions totalling $0 to brokers selected primarily on the
basis of research services provided to the Adviser.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is computed by dividing the
value of all securities held by the Fund plus other assets, less liabilities
(including accrued expenses), by the number of shares outstanding. Such
computation is made 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.
Each Fund's investments in bonds are valued by an independent pricing
service ("Service"). When, in the judgment of the Service, quoted bid prices for
bonds are readily available and are representative of the bid side of the
market, these bonds are valued at such quoted bid prices (as obtained by the
Service from dealers in such securities). Other bonds are carried at fair value
as determined by the Service, based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality, coupon, maturity
B-21
<PAGE> 82
and type; indications as to values from dealers; and general market conditions.
The Service may employ electronic data processing techniques and/or a matrix
system to determine valuations. Options are valued at the last sale price or, if
no sales are reported, at the mean between the bid and asked prices. Any bonds
which are not valued by the independent pricing service would be valued at fair
value using methods determined in good faith by the Trustees. Expenses and fees,
including the investment advisory fee are accrued daily and taken into account
for the purpose of determining the net asset value of shares of each Fund.
Short-term instruments having 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 of the Fund will be invested together in a single portfolio. The
net asset value of each class will be determined separately by subtracting the
expenses and liabilities allocated to that class.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements the section in the Fund's Prospectus
captioned "Purchase of Shares."
PURCHASE OF SHARES
Shares of the Fund are sold in a continuous offering and may be purchased
on any business day through authorized dealers.
ALTERNATIVE SALES ARRANGEMENTS
The Fund issues three classes of shares: Class A shares; Class B shares and
Class C shares. The three classes of shares each represent interests in the same
portfolio of investments of the Fund, have the same rights and are identical in
all respects, except that Class B shares and Class C shares bear the expenses of
the deferred sales arrangements, distribution fees, and any expenses (including
higher transfer agency costs) resulting from such sales arrangements, and except
that each class has exclusive voting rights with respect to the Rule 12b-1
distribution plan pursuant to which its distribution fees are paid.
INVESTMENTS BY MAIL
A shareholder investment account may be opened by completing the
application accompanying the Prospectus and forwarding the application, through
the authorized dealer, to ACCESS, at P.O. Box 419319, Kansas City, Missouri
64141-6319. The account is opened only upon acceptance of the application by
ACCESS. The minimum initial investment of at least $500 per class of shares, in
the form of a check payable to the Fund, must accompany the application. This
minimum may be waived by the Distributor for plans involving continuing
investments. Minimum subsequent investments of at least $25 per class of shares
may be mailed directly to ACCESS. All such investments are made at the public
offering price of the Fund's shares next computed following receipt of payment
by ACCESS. Confirmations of the opening of an account and of all subsequent
transactions in the account are forwarded by ACCESS to the investor's authorized
dealer.
In processing applications and investments, ACCESS acts as agent for the
investor and for the authorized dealer named thereon, and also as agent for the
Distributor, in accordance with the terms of the Prospectus. If ACCESS ceases to
act as such, a successor company named by the Fund will act in the same capacity
so long as the account remains open.
CUMULATIVE PURCHASE DISCOUNT
The reduced sales charges reflected in the sales charge table as shown in
the Prospectus under "Sales Charge Table" apply to purchases of Class A shares
of the Fund where the aggregate investment is $100,000 or more. For purposes of
determining eligibility for volume discounts, spouses and their children under
21 years of age are treated as a single purchaser, as is a trustee or other
fiduciary of a single trust estate or a single fiduciary account. An aggregate
investment includes all shares of the Fund and all shares of certain other
participating Van Kampen American Capital mutual funds described in the
Prospectus (the "Participating
B-22
<PAGE> 83
Funds"), which have been previously purchased and are still owned, plus the
shares being purchased. The current offering price is used to determine the
value of all such shares. The same reduction is applicable to purchases under a
Letter of Intent as described in the next paragraph. THE DEALER MUST NOTIFY THE
DISTRIBUTOR AT THE TIME AN ORDER IS PLACED FOR A PURCHASE WHICH WOULD QUALIFY
FOR THE REDUCED CHARGE ON THE BASIS OF PREVIOUS PURCHASES. SIMILAR NOTIFICATION
MUST BE MADE IN WRITING WHEN SUCH AN ORDER IS PLACED BY MAIL. The reduced sales
charge will not be applied if such notification is not furnished at the time of
the order. The reduced sales charge will also not be applied should a review of
the records of the Distributor or ACCESS fail to confirm the investor's
representations concerning his holdings.
LETTER OF INTENT
Purchases of Class A shares of the Participating Funds described above
under "Cumulative Purchase Discount" made pursuant to the Letter of Intent and
still owned are also included in determining the applicable quantity discount. A
Letter of Intent permits an investor to establish a total investment goal to be
achieved by any number of investments over a 13-month period. Each investment
made during the period will receive the reduced sales charge applicable to the
amount represented by the goal as if it were a single investment. Escrowed
shares totaling 5% of the dollar amount of the Letter of Intent are held by
ACCESS in the name of the shareholder. The effective date of a Letter of Intent
may be back-dated up to 90 days in order that any investments made during this
90-day period, valued at the investor's cost, can become subject to the Letter
of Intent. The Letter of Intent does not obligate the investor to purchase the
indicated amount. In the event the Letter of Intent goal is not achieved within
the 13-month period, the investor is required to pay the difference between
sales charges otherwise applicable to the purchases made during this period and
sales charges actually paid. Such payment may be made directly to the
Distributor or, if not paid, the Distributor will liquidate sufficient escrowed
shares to obtain such difference. If the goal is exceeded in an amount which
qualifies for a lower sales charge, a price adjustment is made by refunding to
the investor in shares of the Fund, the amount of excess sales charges, if any,
paid during the 13-month period.
REDEMPTION OF SHARES
Redemptions are not made on days during which the Exchange is closed. The
right of redemption may be suspended and the payment therefor may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practical 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 investments in the amount of $1,000,000 or more of Class A shares of
the Fund ("Qualified Purchaser"), the front-end sales charge will be waived and
a contingent deferred sales charge ("CDSC-Class A") of 1.00% is imposed in the
event of certain redemptions within one year of the purchase. If a CDSC-Class A
is imposed upon redemption, the amount of the CDSC-Class A will be equal to the
lesser of 1.00% of the net asset value of shares at the time of purchase or
1.00% of the net asset value of the shares at the time of redemption.
The CDSC-Class A will be imposed only if a Qualified Purchaser redeems an
amount which causes the value of the account to fall below the total dollar
amount of purchase payments made by the Qualified Purchaser without an initial
sales charge during the one-year period prior to the redemption. No CDSC-Class A
will be imposed on exchanges between funds. For purposes of the CDSC-Class A,
when shares of one fund are exchanged for shares of another fund, the purchase
date for the shares of the fund exchanged into will be assumed to be the date on
which shares were purchased in the fund from which the exchange was made. If the
exchanged shares themselves are acquired through an exchange, the purchase date
is assumed to carry over from the date of the original election to purchase
shares subject to a CDSC-Class A rather than a front-end load sales charge. In
determining whether a CDSC-Class A is payable, it is assumed that shares held
the longest are the first to be redeemed.
B-23
<PAGE> 84
Cumulative Purchase Discounts and Letters of Intent apply to the net asset
value privilege. Also, in order to establish an amount of $1,000,000 or more, a
Qualified Purchaser may aggregate shares of the Participating Funds described in
the Prospectus.
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," redemption 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 shares 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 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 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 or C will be waived
where the descendent 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 or 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 may be waived upon the tax-free rollover or transfer of assets
to another Retirement Plan invested in one or more of Van Kampen American
Capital funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any CDSC -- Class B and C is applicable in the event that such acquired shares
are redeemed following the transfer or rollover. The charge also will be waived
on any redemption which results from the return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code, the return of excess deferral
amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan (the
"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
B-24
<PAGE> 85
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 Trust 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 Trust will waive the CDSC -- Class B and C
upon such involuntary redemption.
(e) Reinvestment of Redemption Proceeds in Shares of the Same Trust Within
120 Days After Redemption
A shareholder who has redeemed Class C shares of a Trust 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 120 days after such redemption and the
shareholder has not previously exercised this reinvestment privilege with
respect to Class C shares of the Fund. Shares acquired in this manner will be
deemed to have the original cost and purchase date of the redeemed shares for
purposes of applying the CDSC -- Class C to subsequent redemptions.
(f) Redemption by Adviser
The Fund may waive the CDSC -- Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
EXCHANGE PRIVILEGE
The following supplements the discussion of "Shareholder
Services -- Exchange Privilege" in the Prospectus:
By use of the exchange privilege, the investor authorizes ACCESS to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by ACCESS to be genuine. Van Kampen American Capital and its
subsidiaries, including ACCESS, and the Fund employ procedures considered by
them to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen American Capital, ACCESS nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Van Kampen
American Capital, ACCESS and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed.
For purposes of determining the sales charge rate previously paid on Class
A shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of his securities, the security upon
which the highest sales charge rate was previously paid is deemed exchanged
first.
Exchange requests received on a business day prior to the time shares of
the funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
B-25
<PAGE> 86
A prospectus of any of these mutual funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund.
CHECK WRITING PRIVILEGE
To establish the check writing privilege for Class A shares, a shareholder
must complete the appropriate section of the application and the Authorization
for Redemption form and return both documents to ACCESS before checks will be
issued. All signatures on the authorization card must be guaranteed if any of
the signators are persons not referenced in the account registration or if more
than 30 days have elapsed since ACCESS established the account on its records.
Moreover, if the shareholder is a corporation, partnership, trust, fiduciary,
executor or administrator, the appropriate documents appointing authorized
signers (corporate resolutions, partnership or trust agreements) must accompany
the authorization card. The documents must be certified in original form, and
the certificates must be dated within 60 days of their receipt by ACCESS.
The privilege does not carry over to accounts established through exchanges
or transfers. It must be requested separately for each fund account.
TAX STATUS OF THE FUND
The Trust and any of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund intends to
qualify each year and to elect to be treated as a regulated investment company
under the Code. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its net investment income (including tax-exempt
interest, taxable income and net short-term capital gain, but not net capital
gains, which are the excess of net long-term capital gains over net short-term
capital losses) in each year, it will not be required to pay federal income
taxes on any income distributed to shareholders. The Fund intends to distribute
at least the minimum amount of net investment income necessary to satisfy the
90% distribution requirement. The Fund will not be subject to federal income tax
on any net capital gains distributed to shareholders.
FUND PERFORMANCE
The Fund's average annual total return (computed in the manner described in
the Prospectus) for Class A shares of the Fund for (i) the one year period ended
November 30, 1996 was 1.39%, (ii) the five year period ended November 30, 1996
was 6.97%, and (iii) the ten year period ended November 30, 1996 was 6.56%.
Results from inception through April 1, 1990, reflect expense reimbursement
described under "Investment Advisory Agreement." The 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 November 30, 1996 was 1.68% and (ii) the
four year, four month period ended November 30, 1996 was 6.26%. The average
annual total return (computed in the manner described in the Prospectus) for
Class C shares of the Fund for (i) the one year period ended November 30, 1996
was 4.68% and (ii) the two year, 11 1/2 month period ended November 30, 1996 was
5.74%. 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.
The following chart lists the Fund's yield and tax equivalent yield for the
30-day period ending November 30, 1996.
<TABLE>
<CAPTION>
HIGH YIELD MUNICIPAL FUND
-----------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SEC yield 5.59% 5.11% 5.11%
Tax-equivalent yield 8.73% 7.98% 7.98%
</TABLE>
B-26
<PAGE> 87
The Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by the Fund, Fund maturity and the Fund's
expenses.
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.
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 portfolios, are held by State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110, as Custodian.
SHAREHOLDER REPORTS -- Semi-annual statements are furnished to
shareholders, and annually such statements are audited by the independent
accountants.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 1201 Louisiana, Suite
2900, Houston, Texas 77002, the independent accountants for the Fund, performs
an annual audit of the Fund's financial statements.
B-27
<PAGE> 88
RATINGS OF INVESTMENTS
RATINGS OF MUNICIPAL BONDS
DESCRIPTIONS OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") MUNICIPAL BOND
RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Conditional Rating: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a midrange ranking;
and a modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Short-term Notes: The four ratings of Moody's for short-term notes are MIG
1, MIG 2, MIG 3 and MIG 4; MIG 1 denotes "best quality, enjoying strong
protection from established cash flows"; MIG 2 denotes "high quality" with
"ample margins of protection"; MIG 3 notes are of "favorable quality...but
lacking the undeniable strength of the preceding grades"; MIG 4 notes are of
"adequate quality, carrying specific risk but having protection...and not
distinctly or predominantly speculative."
B-28
<PAGE> 89
Beginning in 1985, Moody's started new rating categories for variable rate
demand obligations ("VRDO's"). VRDO's receive two ratings. The first rating,
depending on the maturity of the VRDO, is assigned either a bond or MIG rating
which represents an evaluation of the risk associated with scheduled principal
and interest payments. The second rating, designated as "VMIG," represents an
evaluation of the degree of risk associated with the demand feature. The new
VRDO's demand feature ratings and symbols are:
VMIG 1: strong protection by established cash flows, superior liquidity
support, demonstrated access to the market for refinancing.
VMIG 2: ample margins of protection, high quality.
VMIG 3: favorable quality, liquidity and cash flow protection may be
narrow, market access for refinancing may be less well established.
VMIG 4: adequate quality, not predominantly speculative but there is risk.
DESCRIPTIONS OF MOODY'S COMMERCIAL PAPER RATINGS:
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL ("S&P") DEBT RATINGS:
A S&P's municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources S&P considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information, or for other
reasons.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default -- capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the obligation in
the event of bankruptcy, reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditor's rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
B-29
<PAGE> 90
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt
in higher-rated categories.
BB-B-CCC-CC-C
Debt rated "BB", "B", "CCC", "CC" or "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "C" the highest degree
of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CI This rating is reserved for income bonds on which no interest is
being paid.
Plus (+) or Minus (-): The ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
A S&P Commercial Paper Rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. Ratings are applicable to both
taxable and tax-exempt commercial paper. The four categories are as follows:
A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designation 1, 2 and 3 to indicate the relative degree of
safety.
A-1 This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2 Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming
as for issues designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
B Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
The Commercial Paper Rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to S&P by the
issuer and obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of, such information.
B-30
<PAGE> 91
S&P ratings of certain municipal note issues with a maturity of less than
three years are:
SP-1 A very strong, or strong, capacity to pay principal and interest.
Issues that possess overwhelming safety characteristics will be given
a "+" designation.
SP-2 A satisfactory capacity to pay principal and interest.
SP-3 A speculative capacity to pay principal and interest.
S&P may continue to rate note issues with a maturity greater than three years in
accordance with the same rating scale currently employed for municipal bond
ratings.
S&P assigns dual ratings to all long-term debt issues that have a demand or
put feature. The first rating addresses the likelihood of repayment of principal
and interest as due, and the second rating addresses the demand feature alone.
Long-term debt rating symbols are used for the long-term maturity and commercial
paper rating symbols are used for the put option (for example, AAA/A-1+). For
demand notes, S&P's note rating symbols are used with the commercial paper
symbols (for example, SP-1+/a-1+).
Rating criteria described in the Prospectus are applied on the basis of the
highest rating applicable to the Municipal Security. This applies to split rated
securities (i.e. different ratings by Moody's and S&P) and dual rated securities
as described above.
B-31
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL HIGH YIELD MUNICIPAL 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 mate-
rial respects, the financial position of Van Kampen American Capital High Yield
Municipal Fund (the "Fund"), a series of the Van Kampen American Capital Tax-
Exempt Trust, at November 30, 1996, 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 "finan-
cial statements") are the responsibility of the Fund's management; our respon-
sibility 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 per-
form 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 presenta-
tion. We believe that our audits, which included confirmation of securities at
November 30, 1996 by correspondence with the custodian and brokers and the ap-
plication of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
January 15, 1997
B-32
<PAGE> 93
PORTFOLIO OF INVESTMENTS
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ALABAMA 0.3%
$ 1,540 Gulf Shores, AL Rev Quality Inn
Beachside Proj Ser 1986............... 11.000% 06/01/16 $ 1,583,243
400 Selma, AL Spl Care Fac Fin Auth Hosp
Rev Vaughan Regl Med Cent Proj Rfdg
(Prerefunded @ 06/01/97).............. 9.500 06/01/14 423,212
750 Vincent, AL Indl Dev Brd Shelby Motel
Group Inc Proj........................ 10.500 09/01/16 763,943
------------
2,770,398
------------
ALASKA 0.2%
2,250 Seward, AK Rev AK Sealife Cent Proj... 7.650 10/01/16 2,312,640
------------
ARIZONA 1.2%
500 Casa Grande, AZ Indl Dev Auth Rfdg.... 8.250 12/01/15 525,165
2,915 Chandler, AZ Indl Dev Auth Rev
Chandler Financial Cent Proj Ser 1986
(d)................................... 9.875 12/01/16 2,681,800
985 Peoria, AZ Indl Dev Auth Sierra Winds
Life Care Cmnty Proj (Var Rate Cpn)... 6.500 11/01/17 895,296
1,025 Pinal Cnty, AZ Indl Dev Auth Casa
Grande Reg Med Cent Proj Ser A........ 8.125 12/01/22 1,124,989
475 Pinal Cnty, AZ Indl Dev Auth Casa
Grande Reg Med Cent Proj Ser B........ 8.125 12/01/22 521,336
2,540 Scottsdale, AZ Indl Dev Auth Rev First
Mtg Westminster Village Proj
(Prerefunded @ 06/01/97).............. 10.000 06/01/17 2,691,892
1,035 Scottsdale, AZ Indl Dev Auth Rev First
Mtg Westminster Village Ser A Rfdg.... 8.000 06/01/11 1,096,707
2,000 Scottsdale, AZ Indl Dev Auth Rev First
Mtg Westminster Village Ser A Rfdg.... 8.250 06/01/15 2,132,880
------------
11,670,065
------------
ARKANSAS 0.0%
500 Fayetteville, AR Pub Fac Brd Rev
Butterfield Trail Village Proj B Rfdg. 9.500 09/01/14 542,125
------------
CALIFORNIA 5.2%
2,415 California Edl Fac Auth Rev Pacific
Graduate Sch of Psychology............ 8.000 11/01/21 2,456,127
3,000 California Hlth Fac Auth Rev Vly
Presbytern Hosp Proj Ser A Rfdg....... 9.000 05/01/12 3,090,000
5,440 California St Veterans Bonds Ser AY... 7.375 04/01/19 5,482,976
1,500 Colton, CA Pub Fin Auth Rev Elec Sys
Impts................................. 7.500 10/01/20 1,584,675
2,500 Corona, CA Ctfs Partn Vista Hosp Sys
Inc Ser C............................. 8.375 07/01/11 2,536,100
1,300 Emeryville, CA Impt Bond Act 1915
Assessment Dist 93-1 East Baybridge... 7.300 09/02/21 1,332,461
1,500 Folsom, CA Spl Tax Cmnty Fac Dist No 7
Rfdg.................................. 7.250 09/01/21 1,542,495
2,855 Fresno, CA Ctfs Partn Bldg Proj Fresno
Exec Plaza Inc........................ 8.500 05/01/16 3,028,498
900 Fresno, CA Jt Pwrs Fin Auth Local Agy
Ser B Rfdg............................ 7.350 09/02/12 969,003
1,500 Glendale, CA Hosp Rev Glendale Mem
Hosp & Hlth Ser A Rfdg (Prerefunded @
11/01/97)............................. 9.000 11/01/17 1,600,380
1,500 Huntington Park, CA Pub Fin Auth Loc
Agy Rev Sub Ser C..................... 7.600 09/01/18 1,615,890
1,000 Moreno Vly, CA Spl Tax Towngate Cmnty
Fac Dist 87-1......................... 7.125 10/01/23 1,044,310
1,530 Norco, CA Swr & Wtr Rev Rfdg.......... 7.200 10/01/19 1,643,006
2,000 Perris, CA Pub Fin Auth Loc Agy Rev
Ser D................................. 7.875 09/01/25 2,159,440
1,500 Rancho Cucamonga, CA Cmnty Fac Dist
Spl Tax No 88-2....................... 8.250 09/01/19 1,638,090
100 Rancho Cucamonga, CA Cmnty Fac Dist
Spl Tax No 88-2....................... 8.000 09/01/20 107,868
3,000 Reedley, CA Ctfs Partn................ 7.500 10/01/26 3,081,300
1,250 Richmond, CA Jt Pwrs Fin Auth Impt
Dists No 851 & 853 Ser A.............. 7.400 09/02/19 1,288,688
3,105 Richmond, CA Redev Agy Multi-Family
Rev Hsg Bridge Affordable Summit Ser
A..................................... 7.500 09/01/23 3,105,000
4,000 Riverside Cnty, CA Air Force Village
West Inc Ser A Rfdg................... 8.125 06/15/20 4,199,960
1,000 Riverside Cnty, CA Impt Bond Act 1915. 7.625 09/02/14 1,031,620
3,000 San Bernardino, CA Hosp Rev San
Bernardino Cmnty Hosp Rfdg............ 7.875 12/01/19 3,043,740
3,000 Santa Ana, CA Cmnty Redev Agy Tax Ser
B Rfdg................................ 7.500 09/01/16 3,079,170
1,000 Santa Rosa, CA Impt Bond Act 1915
Fountaingrove Prkwy Extension......... 7.625 09/02/19 1,031,350
------------
51,692,147
------------
COLORADO 4.7%
1,000 Arrowhead Metro Dist CO............... 8.125 12/01/11 1,071,840
1,060 Berry Creek Metro Dist CO Rfdg........ 7.300 12/01/12 1,151,669
2,400 Bowles Metro Dist CO.................. 7.750 12/01/15 2,385,864
1,500 Colorado Hlth Fac Auth Rev Christian
Living Campus Proj.................... 9.000 01/01/25 1,629,435
400 Colorado Hlth Fac Auth Rev Mile High
Transplant Bank Proj (Prerefunded @
06/01/97)............................. 8.500 06/01/07 429,152
</TABLE>
B-33
See Notes to Financial Statements
<PAGE> 94
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO (CONTINUED)
Colorado Hlth Fac Auth Rev Shalom Park
$ 2,000 Proj Rfdg & Impt........................ 7.250% 12/15/25 $ 2,024,000
2,000 Colorado Hsg Fin Auth Single Family Pgm
Sr Ser C1.............................. 7.550 11/01/27 2,212,120
1,250 Cordillera Metro Dist CO Eagle Cnty..... 8.250 12/01/13 1,393,838
3,000 Cottonwood Wtr & Santn Dist CO Ser A
Rfdg.................................... 7.750 12/01/20 3,050,340
Denver, CO City & Cnty Indl Dev Rev
1,055 Jewish Cmnty Cent Proj.................. 7.375 03/01/09 1,175,048
815 Denver, CO City & Cnty Indl Dev Rev
Jewish Cmnty Cent Proj.................. 7.875 03/01/19 903,892
Denver, CO City & Cnty Rev Indl Dev
1,130 Jewish Cmnty Cent Proj.................. 7.500 03/01/14 1,243,452
2,860 Denver, CO City & Cnty Single Family Mtg
Rev Ser A............................... 8.125 12/01/20 2,990,216
1,930 Denver, CO Urban Renewal Auth Tax
Increment Rev........................... 8.500 05/01/16 2,052,304
2,000 Eagle Cnty, CO Air Terminal Corp Rev
Arpt Proj............................... 7.500 05/01/21 2,050,060
4,000 Fairlake Metro Dist City & Cnty of
Denver, CO.............................. 9.625 12/01/10 4,493,160
2,500 Hyland Hills, CO Metro Park & Recreation
Dist CO Spl Rev Ser A................... 8.625 12/15/12 2,834,175
1,000 Landmark Metro Dist CO (Prerefunded @
06/01/00)............................... 8.750 12/01/05 1,059,930
3,000 Mountain Village Metro Dist San Miguel
Cnty, CO Rfdg (Prerefunded @ 12/01/98)
(c)..................................... 11.000 12/01/07 3,457,800
500 Panorama Metro Dist CO Ser B Rfdg....... 9.000 12/01/09 541,805
147 Skyland Metro Dist Gunnison Cnty CO Rfdg
(Var Rate Cpn).......................... 4.000 12/01/08 104,835
750 Snowmass Village, CO Multi-Family Hsg
Rev Ser A Rfdg.......................... 8.000 09/01/14 786,330
2,175 Southtech Metro Dist CO Rfdg
(Prerefunded @ 12/01/97)................ 9.500 12/01/11 2,316,593
660 Superior, CO Metro Dist No 2 Ser A Rfdg. 7.250 12/01/02 684,057
840 Superior, CO Metro Dist No 2 Ser A Rfdg. 7.750 12/01/13 892,979
1,500 Telluride, CO Hsg Auth Hsg Rev.......... 9.100 06/01/01 1,627,725
2,000 Telluride, CO Hsg Auth Hsg Rev Shandoka
Apts Proj Rfdg.......................... 7.875 06/01/17 2,096,560
------------
46,659,179
------------
CONNECTICUT 1.3%
2,391 Connecticut St Dev Auth 1st Mtg Gross
Rev Hlthcare Proj CT Baptist Homes Inc
Proj.................................... 8.750 09/01/12 2,565,041
1,500 Connecticut St Dev Auth 1st Mtg Gross
Rev Hlthcare Proj CT Baptist Homes Inc
Proj.................................... 9.000 09/01/22 1,637,295
1,225 Connecticut St Dev Auth Hlthcare Rev
Indpt Living Proj Ser B................. 8.000 07/01/17 1,274,772
1,920 Connecticut St Dev Auth Hlthcare Rev
Jerome Home Proj........................ 8.000 11/01/19 2,011,450
2,500 Connecticut St Hlth & Edl Fac Auth Rev
Tolland Cnty Hlthcare Inc Ser A......... 9.200 07/01/21 2,718,500
1,520 Manchester, CT Redev Agy Multi-Family
Mtg Rev Bennet Hsg Dev Rfdg............. 7.200 12/01/18 1,604,527
1,365 New Haven, CT Fac Rev Easter Seal
Goodwill Rehab Proj..................... 8.875 04/01/16 1,451,882
------------
13,263,467
------------
DELAWARE 0.8%
2,670 Delaware St Econ Dev Auth Indl Dev Rev
1st Mtg Dover Hlthcare Rfdg............. 7.875 04/01/08 2,785,878
400 Delaware St Econ Dev Auth Rev 1st Mtg
Gilpin Hall Proj........................ 7.375 07/01/15 410,688
2,800 Delaware St Econ Dev Auth Rev 1st Mtg
Gilpin Hall Proj........................ 7.625 07/01/25 2,873,920
975 Delaware St Econ Dev Auth Rev
Osteopathic Hosp Assn of DE Ser A
(Prerefunded @ 07/01/04)................ 9.500 01/01/22 1,207,292
300 Wilmington, DE Hosp Rev Osteopathic Hosp
Assn of DE/Riverside Hosp Ser A
(Prerefunded @ 10/01/98)................ 10.000 10/01/03 334,377
500 Wilmington, DE Hosp Rev Osteopathic Hosp
Assn of DE/Riverside Hosp Ser A
(Prerefunded @ 10/01/98)................ 10.200 10/01/18 561,235
------------
8,173,390
------------
DISTRICT OF COLUMBIA 0.6%
2,090 District of Columbia Hosp Rev Metlantic
WA Hosp Cent Ser A Rfdg................. 7.125 08/15/19 2,187,018
3,500 District of Columbia Rev Natl Pub Radio
Ser A................................... 7.700 01/01/23 3,735,515
------------
5,922,533
------------
FLORIDA 7.1%
2,085 Atlantic Beach, FL Rev Fleet Landing
Proj Ser A Rfdg & Impt.................. 7.875 10/01/08 2,323,899
1,160 Atlantic Beach, FL Rev Fleet Landing
Proj Ser A Rfdg & Impt.................. 7.500 10/01/02 1,236,885
1,500 Bay Cnty, FL Hosp Sys Rev Bay Med Cent
Proj Rfdg (Prerefunded @ 10/01/04)........ 8.000 10/01/12 1,797,705
500 Bay Cnty, FL Hosp Sys Rev Bay Med Cent
Proj Rfdg (Prerefunded @ 10/01/04)........ 8.000 10/01/19 616,095
</TABLE>
B-34
See Notes to Financial Statements
<PAGE> 95
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FLORIDA (CONTINUED)
$ 1,470 Brevard Cnty, FL Hlth Fac Auth Rev
Courtenay Springs Village Rfdg........ 7.375% 11/15/04 $ 1,562,492
2,200 Brevard Cnty, FL Hlth Fac Auth Rev
Courtenay Springs Village Rfdg........ 7.750 11/15/17 2,352,966
180 Charlotte Cnty, FL Indl Dev Auth Rev
Beverly Enterprises Rfdg.............. 10.000 06/01/11 203,758
1,650 Collier Cnty, FL Indl Dev Auth
Retirement Rental Hsg Rev............. 10.750 03/01/03 1,870,044
4,000 Escambia Cnty, FL Pollutn Ctl Rev
Champion Intl Corp Proj............... 6.900 08/01/22 4,265,360
850 Fort Walton Beach, FL Indl Dev Rev 1st
Mtg Fort Walton Beach Venton Proj..... 10.500 12/01/16 906,780
1,130 Hernando Cnty, FL Indl Dev Rev Beverly
Enterprises Rfdg...................... 10.000 09/01/11 1,284,302
3,000 Hialeah Gardens, FL Indl Dev Rev
Waterford Convalescent Ser A Rfdg..... 8.250 12/01/14 3,209,550
1,500 Homestead, FL Indl Dev Rev Brookwood
Gardens Cent Proj Ser A Rfdg.......... 8.250 12/01/14 1,604,775
1,330 Lake Bernadette, FL Cmnty Dev Dist Spl
Assmt Rev Ser A....................... 8.000 05/01/17 1,340,866
2,500 Lake Saint Charles, FL Cmnty Dev Dist
Spl Assmt Rev......................... 7.875 05/01/17 2,500,475
750 Lee Cnty, FL Indl Dev Auth Econ Rev
Encore Nursing Cent Partner Rfdg...... 8.125 12/01/07 813,308
1,300 Marion Cnty, FL Indl Dev Auth Rev
Midland Ross Corp Proj................ 11.875 08/01/11 1,313,689
2,570 North Miami, FL Hlthcare Fac Rev
Imperial Club Proj Ser A.............. 10.000 01/01/13 2,828,619
3,000 Northern Palm Beach Cnty, FL Impt Dist
Wtr Ctl & Impt Unit Dev............... 7.200 08/01/16 3,113,580
2,500 Northern Palm Beach Cnty, FL Impt Dist
Wtr Ctl & Impt Unit Dev............... 7.300 08/01/27 2,598,450
1,000 Orange Cnty, FL Hlth Fac Auth Rev 1st
Mtg Orlando Lutheran Tower............ 8.750 07/01/26 1,006,610
840 Orange Cnty, FL Hlth Fac Auth Rev 1st
Mtg Orlando Lutheran Tower Rfdg....... 8.125 07/01/06 837,967
2,035 Orange Cnty, FL Hlth Fac Auth Rev 1st
Mtg Orlando Lutheran Tower Rfdg....... 8.400 07/01/14 2,051,728
1,325 Orange Cnty, FL Hlth Fac Auth Rev 1st
Mtg Orlando Lutheran Tower Rfdg....... 8.625 07/01/20 1,337,482
2,870 Orange Cnty, FL Hlth Fac Auth Rev Aces
Pooled Hosp Ln Ser A Rfdg (FGIC Insd)
(c)................................... 7.875 12/01/25 2,982,045
2,645 Orange Cnty, FL Hsg Fin Auth Multi-
Family Rev Mtg Hands Inc Proj Ser A... 7.875 10/01/15 2,683,987
2,035 Orange Cnty, FL Hsg Fin Auth Multi-
Family Rev Mtg Hands Inc Proj Ser A... 8.000 10/01/25 2,070,022
450 Orange Cnty, FL Indl Dev Auth Rev
Beverly Enterprises Proj Rfdg......... 9.250 08/01/10 497,529
3,000 Overoaks, FL Cmnty Dev Dist Cap Impt
Rev................................... 8.250 05/01/17 3,064,170
3,400 Palm Beach Cnty, FL Hlth Fac Auth Rev
Waterford Proj Rfdg................... 7.750 10/01/15 3,456,134
750 Plantation, FL Hlth Fac Auth Rev Hlth
Fac Auth Rev Covenant Retirement
Cmntys Inc............................ 7.750 12/01/22 804,668
1,370 Plantation, FL Hlth Fac Auth Rev Hlth
Fac Auth Rev Covenant Retirement
Cmntys Inc............................ 7.625 12/01/12 1,464,996
250 Santa Rosa Cnty, FL Indl Dev Auth Rev
1st Mtg Sandy Ridge Care Cent......... 10.500 04/01/16 252,068
2,000 Sarasota Cnty, FL Hlth Fac Auth Rev
Hlthcare Manatee Jewish Rfdg.......... 7.000 07/01/16 2,007,380
1,920 Tampa Palms, FL Open Space & Transn
Cmnty Dev Dist Rev Cap Impt Area 7
Proj.................................. 8.500 05/01/17 1,916,986
710 Volusia Cnty, FL Indl Dev Auth Bishops
Glen Proj Rfdg (b).................... 7.125 11/01/06 712,492
2,000 Volusia Cnty, FL Indl Dev Auth Bishops
Glen Proj Rfdg (b).................... 7.500 11/01/16 2,007,780
2,000 Volusia Cnty, FL Indl Dev Auth Bishops
Glen Proj Rfdg (b).................... 7.625 11/01/26 2,007,740
1,775 Westchase East Cmnty, FL Dev Dist Cap
Impt Rev.............................. 7.500 05/01/17 1,772,941
------------
70,678,323
------------
GEORGIA 1.0%
3,000 Class A Ctfs relating to Atlanta, GA
Urban Residential Fin Auth Multi-
Family Hsg Rev Renaissance on
Peachtree Apts Proj Ser 85............ 8.500 04/01/26 2,850,000
375 Coweta Cnty, GA Residential Care Fac
For The Elderly Auth Rev 1st Lien
Wesley Woods Ser A.................... 7.625 10/01/06 379,879
1,500 Coweta Cnty, GA Residential Care Fac
For The Elderly Auth Rev 1st Lien
Wesley Woods Ser A.................... 8.200 10/01/16 1,521,390
1,500 Coweta Cnty, GA Residential Care Fac
For The Elderly Auth Rev 1st Lien
Wesley Woods Ser A.................... 8.250 10/01/26 1,521,330
300 Richmond Cnty, GA Dev Auth Nursing
Home Rev Beverly Enterprises GA Proj
Rfdg.................................. 8.750 06/01/11 326,898
3,000 Rockdale Cnty, GA Dev Auth Solid Waste
Disposal Rev.......................... 7.500 01/01/26 3,123,660
------------
9,723,157
------------
HAWAII 0.1%
900 Hawaii Cnty, HI Impt Dist No 17 Spl
Assessment Kaloko Subdivision......... 9.500 08/01/11 951,993
------------
ILLINOIS 7.8%
1,500 Bedford Park, IL Tax Increment Rev
Mark IV Proj.......................... 9.750 03/01/12 1,731,420
1,000 Bedford Park, IL Tax Increment Rev Sr
Lien Bedford City Proj................ 9.250 02/01/12 1,129,230
3,000 Broadview, IL Tax Increment Rev Sr
Lien.................................. 8.250 07/01/13 3,272,100
1,000 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev American Airls Inc Proj Rfdg...... 8.200 12/01/24 1,185,910
</TABLE>
B-35
See Notes to Financial Statements
<PAGE> 96
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 540 Chicago, IL O'Hare Intl
Arpt Spl Fac Rev American
Airls Inc Proj Ser A...... 7.875% 11/01/25 $ 587,439
3,500 Chicago, IL O'Hare Intl
Arpt Spl Fac Rev United
Airls Inc................. 8.500 05/01/18 3,880,240
1,500 Chicago, IL Tax Increment
(b)......................... 7.250 01/01/14 1,500,000
3,000 Crestwood, IL Tax
Increment Rev Rfdg........ 7.250 12/01/08 3,052,710
1,350 Hanover Park, IL Rev 1st
Mtg Windsor Park Manor
Proj...................... 9.500 12/01/14 1,444,919
500 Hodgkins, IL Tax
Increment................. 9.500 12/01/09 584,385
4,000 Hodgkins, IL Tax Increment
Rev Ser A Rfdg............ 7.625 12/01/13 4,118,480
3,500 Huntley, IL Increment
Alloc Rev Huntley Redev
Proj Ser A................ 8.500 12/01/15 3,563,105
2,470 Illinois Dev Fin Auth Hlth
Fac Rev Cmnty Living
Options................... 7.125 03/01/10 2,587,646
1,500 Illinois Dev Fin Auth
Pollutn Ctl Rev IL Pwr Co
Proj Ser A Rfdg........... 8.300 04/01/17 1,584,315
650 Illinois Dev Fin Auth Rev
Cmnty Fac Clinic Altgeld
Proj...................... 8.000 11/15/06 652,529
1,405 Illinois Dev Fin Auth Rev
Cmnty Fac Clinic Altgeld
Proj...................... 8.000 11/15/16 1,410,662
2,000 Illinois Dev Fin Auth Rev
Debt Restructure East
Saint Louis............... 7.375 11/15/11 2,215,100
4,000 Illinois Edl Fac Auth Rev
Peace Mem Ministries Proj. 7.500 08/15/26 4,090,840
1,475 Illinois Hlth Fac Auth Rev
Covenant Retirement Cmntys
Ser A..................... 7.600 12/01/12 1,595,360
3,000 Illinois Hlth Fac Auth Rev
Fairview Oblig Group Ser A
Rfdg...................... 7.400 08/15/23 3,048,360
510 Illinois Hlth Fac Auth Rev
Hinsdale Ser C............ 9.500 11/15/19 582,833
1,700 Illinois Hlth Fac Auth Rev
Lifelink Corp Oblig Group
Ser B..................... 8.000 02/15/25 1,792,939
4,000 Illinois Hlth Fac Auth Rev
Lutheran Home & Svcs Proj
Ser A..................... 7.500 08/15/26 4,035,000
1,250 Illinois Hlth Fac Auth Rev
Saint Elizabeth's Hosp
Chicago Rfdg.............. 7.625 07/01/10 1,373,763
1,500 Illinois Hlth Fac Auth Rev
Saint Elizabeth's Hosp
Chicago Rfdg.............. 7.750 07/01/16 1,659,735
1,500 Jackson Park Hosp Fndtn
Chicago, IL Jackson Park
Hosp (d).................. 9.000 03/01/05 1,365,000
3,270 Loves Park, IL 1st Mtg Rev
Hoosier Care Proj Ser A... 9.750 08/01/19 3,496,186
2,500 Mill Creek Wtr Reclamation
Dist IL Swr Rev........... 8.000 03/01/10 2,571,775
1,500 Mill Creek Wtr Reclamation
Dist IL Wtrwks Rev........ 8.000 03/01/10 1,543,065
3,100 Robbins, IL Res Recovery
Rev....................... 8.375 10/15/16 3,193,000
1,695 Round Lake Beach, IL Tax
Increment Rev Rfdg........ 7.200 12/01/04 1,761,834
2,500 Round Lake Beach, IL Tax
Increment Rev Rfdg........ 7.500 12/01/13 2,589,200
3,035 Saint Charles, IL Indl Dev
Rev Tri-City Proj......... 7.500 11/01/13 3,112,969
3,965 Saint Charles, IL Multi-
Family Hsg Rev Bonds
Wessel Court Proj......... 7.600 04/01/24 4,078,597
500 Sherman, IL Rev 1st Mtg
Villa Hlthcare Ser A...... 8.250 10/01/14 516,865
500 Sherman, IL Rev 1st Mtg
Villa Hlthcare Ser A...... 8.500 10/01/24 523,160
------------
77,430,671
------------
INDIANA 2.6%
500 Carmel, IN Retirement
Rental Hsg Rev Beverly
Enterprises Proj Rfdg..... 8.750 12/01/08 554,000
1,500 Indiana Hlth Fac Fin Auth
Rev Saint Anthony Home
Oblig Group............... 7.000 05/15/17 1,500,930
1,000 Indiana Hlth Fac Fin Auth
Rev Saint Anthony Home
Oblig Group............... 7.250 05/15/24 1,005,880
1,000 Indiana St Dev Fin Auth
Envir USX Corp Proj Rfdg &
Impt (b).................. 6.250 07/15/30 1,017,700
3,000 Indiana St Dev Fin Auth
Indl Dev Rev UNR Rohn Inc
Proj...................... 7.500 03/01/11 3,061,980
5,000 Indiana St Dev Fin Auth
Pollutn Ctl Rev Inland
Steel Co Proj No 13 Rfdg.. 7.250 11/01/11 5,175,200
560 Valparaiso, IN Econ Dev
Rev 1st Mtg Whispering
Pines Cent................ 7.300 01/01/02 534,626
980 Valparaiso, IN Econ Dev
Rev 1st Mtg Whispering
Pines Cent................ 7.500 01/01/07 938,262
1,405 Valparaiso, IN Econ Dev
Rev 1st Mtg Whispering
Pines Cent................ 7.750 01/01/12 1,347,634
2,045 Valparaiso, IN Econ Dev
Rev 1st Mtg Whispering
Pines Cent................ 8.000 01/01/17 1,963,732
3,675 Valparaiso, IN Econ Dev
Rev 1st Mtg Whispering
Pines Cent Rfdg
(Prerefunded @ 01/01/00).. 9.500 01/01/07 4,281,779
400 Wells Cnty, IN Hosp Auth
Rev Caylor Nickel Med Cent
Inc Rfdg.................. 8.500 04/15/03 450,684
3,600 Wells Cnty, IN Hosp Auth
Rev Caylor Nickel Med Cent
Inc Rfdg.................. 8.750 04/15/12 4,115,304
------------
25,947,711
------------
IOWA 0.3%
2,770 Iowa Fin Auth Multi-Family
Rev Hsg Park West Proj
Rfdg...................... 8.000 10/01/23 2,853,045
------------
KANSAS 0.3%
1,500 Newton, KS Hosp Rev Newton
Hlthcare Corp Ser A....... 7.375 11/15/14 1,587,750
1,000 Newton, KS Hosp Rev Newton
Hlthcare Corp Ser A....... 7.750 11/15/24 1,084,160
------------
2,671,910
------------
</TABLE>
B-36
See Notes to Financial Statements
<PAGE> 97
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
KENTUCKY 0.3%
$ 1,250 Erlanger, KY Assessment Rev Pub Impt
Proj.................................... 7.500% 08/01/18 $ 1,324,400
1,195 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A.............. 8.100 12/01/15 1,289,943
------------
2,614,343
------------
LOUISIANA 3.2%
3,510 East Baton Rouge, LA Mtg Fin Auth Single
Family Mtg Ser A (GNMA Collateralized)
(c)..................................... 7.600 02/01/20 3,637,694
4,700 Hodge, LA Util Rev...................... 9.000 03/01/10 5,101,615
1,400 Iberia Parish, LA Hosp Svc Dist No 1
Hosp Rev................................ 7.500 05/26/06 1,417,962
2,000 Iberia Parish, LA Hosp Svc Dist No 1
Hosp Rev................................ 8.000 05/26/16 2,024,840
4,000 Lake Charles, LA Harbor & Terminal Dist
Port Fac Rev Trunkline Lng Rfdg......... 7.750 08/15/22 4,574,600
665 Louisiana Pub Fac Auth Rev Indl Dev
Beverly Enterprises Rfdg................ 8.250 09/01/08 722,363
2,000 Port New Orleans, LA Indl Dev Rev
Avondale Inds Inc Proj Rfdg............. 8.250 06/01/04 2,171,940
2,000 Port New Orleans, LA Indl Dev Rev
Continental Grain Co Proj............... 14.500 01/01/02 2,014,580
3,000 Port New Orleans, LA Indl Dev Rev
Continental Grain Co Proj Rfdg.......... 7.500 07/01/13 3,239,760
2,500 Port New Orleans, LA Indl Dev Rev
Continental Grain Co Proj Ser A......... 14.500 02/01/02 2,535,925
2,500 Saint James Parish, LA Solid Waste
Disposal Rev Kaiser Aluminum Proj....... 7.750 08/01/22 2,660,050
500 West Feliciana Parish, LA Pollutn Ctl
Rev Gulf States Util Co Proj Ser A...... 7.500 05/01/15 537,565
1,000 West Feliciana Parish, LA Pollutn Ctl
Rev Gulf States Util Co Proj Ser B...... 9.000 05/01/15 1,118,810
------------
31,757,704
------------
MAINE 0.6%
3,200 Maine Fin Auth Solid Waste Disposal Rev
Boise Cascade Corp Proj................. 7.900 06/01/15 3,493,696
450 Maine Hlth & Higher Edl Fac Auth Rev
Waterville Osteopathic Hosp Ser A
(Prerefunded @ 07/01/97)................ 9.875 07/01/13 479,309
1,500 Maine Vets Homes Rev.................... 7.750 10/01/20 1,587,765
------------
5,560,770
------------
MARYLAND 1.1%
2,000 Baltimore Cnty, MD Pollutn Ctl Rev
Bethlehem Steel Corp Proj Ser A Rfdg.... 7.550 06/01/17 2,133,020
2,500 Baltimore Cnty, MD Pollutn Ctl Rev
Bethlehem Steel Corp Proj Ser B Rfdg.... 7.500 06/01/15 2,657,550
2,000 Calvert Cnty, MD Econ Dev Rev Asbury
Solomons Island Fac Proj................ 8.375 01/01/15 2,190,400
4,000 Maryland St Energy Fin Admin Ltd Oblig
Rev Cogeneration AES Warrior Run........ 7.400 09/01/19 4,239,920
------------
11,220,890
------------
MASSACHUSETTS 9.0%
1,490 Massachusetts St Hlth & Edl Fac Auth Rev
Indpt Living Ser A...................... 8.100 07/01/18 1,544,564
3,000 Massachusetts St Hlth & Edl Fac Auth Rev
Milford-Whitinsville Regl Hosp Ser B.... 7.750 07/15/17 3,167,100
1,000 Massachusetts St Hlth & Edl Fac Auth Rev
Norwood Hosp Ser E...................... 8.000 07/01/12 1,015,750
745 Massachusetts St Hlth & Edl Fac Auth Rev
Saint Annes Hosp Ser A.................. 9.250 07/01/05 753,627
2,000 Massachusetts St Hlth & Edl Fac Auth Rev
Saint Annes Hosp Ser A.................. 9.375 07/01/14 2,023,380
2,750 Massachusetts St Indl Fin Agy Hillcrest
Edl Cent Inc Proj....................... 8.450 07/01/18 2,820,758
1,000 Massachusetts St Indl Fin Agy Indl Rev
1st Hlthcare Corp Proj Ser A Rfdg....... 7.625 04/01/13 1,023,570
800 Massachusetts St Indl Fin Agy Indl Rev
Beverly Enterprises Rfdg................ 8.375 05/01/09 871,376
1,075 Massachusetts St Indl Fin Agy Indl Rev
Beverly Enterprises/Gloucester &
Lexington Projs Rfdg.................... 8.000 05/01/02 1,133,491
500 Massachusetts St Indl Fin Agy Rev 1st
Mtg Brookhaven Cmnty (Prerefunded @
01/01/98)............................... 10.250 01/01/18 546,585
1,005 Massachusetts St Indl Fin Agy Rev 1st
Mtg Evanswood Bethzatha Ser A Rfdg...... 7.400 01/15/09 1,031,351
2,000 Massachusetts St Indl Fin Agy Rev 1st
Mtg Evanswood Bethzatha Ser A Rfdg...... 7.625 01/15/14 2,051,900
2,000 Massachusetts St Indl Fin Agy Rev 1st
Mtg Evanswood Bethzatha Ser A Rfdg...... 7.875 01/15/20 2,080,320
690 Massachusetts St Indl Fin Agy Rev 1st
Mtg Loomis House & Village Proj......... 7.250 07/01/07 724,155
1,410 Massachusetts St Indl Fin Agy Rev 1st
Mtg Loomis House & Village Proj......... 7.400 07/01/12 1,474,945
1,530 Massachusetts St Indl Fin Agy Rev 1st
Mtg Loomis House & Village Proj......... 7.500 07/01/17 1,610,723
30 Massachusetts St Indl Fin Agy Rev 1st
Mtg Pioneer Vly......................... 7.000 10/01/01 28,044
500 Massachusetts St Indl Fin Agy Rev 1st
Mtg Pioneer Vly Amended................. 7.000 10/01/20 417,350
1,000 Massachusetts St Indl Fin Agy Rev 1st
Mtg Reeds Landing Proj.................. 7.750 10/01/00 1,024,870
4,300 Massachusetts St Indl Fin Agy Rev 1st
Mtg Reeds Landing Proj.................. 8.625 10/01/23 4,631,057
</TABLE>
B-37
See Notes to Financial Statements
<PAGE> 98
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 1,700 Massachusetts St Indl Fin Agy Rev 1st
Mtg Stone Institute & Newton.......... 7.700% 01/01/14 $ 1,778,285
500 Massachusetts St Indl Fin Agy Rev
Atlantic Med Cent Ser B............... 10.125 11/01/14 504,550
3,545 Massachusetts St Indl Fin Agy Rev
Boston Architectural Cent Proj........ 8.500 09/01/19 3,842,284
500 Massachusetts St Indl Fin Agy Rev
Dimmock Cmnty Hlth Cent............... 8.000 12/01/06 530,665
1,000 Massachusetts St Indl Fin Agy Rev
Dimmock Cmnty Hlth Cent............... 8.375 12/01/13 1,078,880
3,000 Massachusetts St Indl Fin Agy Rev
Dimmock Cmnty Hlth Cent............... 8.500 12/01/20 3,249,210
2,555 Massachusetts St Indl Fin Agy Rev East
Boston Neighborhood Proj.............. 7.500 07/01/16 2,587,091
2,560 Massachusetts St Indl Fin Agy Rev East
Boston Neighborhood Proj.............. 7.625 07/01/26 2,575,360
785 Massachusetts St Indl Fin Agy Rev
Evergreen Cent Inc.................... 8.000 11/01/06 829,941
1,230 Massachusetts St Indl Fin Agy Rev
Evergreen Cent Inc.................... 8.375 11/01/13 1,359,470
2,165 Massachusetts St Indl Fin Agy Rev
Evergreen Cent Inc.................... 8.500 11/01/20 2,411,031
1,760 Massachusetts St Indl Fin Agy Rev
Glenmeadow Retirement Cmnty Ser C..... 8.250 02/15/08 1,804,000
500 Massachusetts St Indl Fin Agy Rev
Glenmeadow Retirement Cmnty Ser C..... 8.625 02/15/26 510,070
3,745 Massachusetts St Indl Fin Agy Rev Gtr
Lynn Mental Hlth Assn Proj............ 8.800 06/01/14 4,132,832
420 Massachusetts St Indl Fin Agy Rev
Hillcrest Edl Cent Inc Proj........... 7.500 07/01/00 428,093
740 Massachusetts St Indl Fin Agy Rev
Hillcrest Edl Cent Inc Proj........... 8.000 07/01/05 766,255
3,380 Massachusetts St Indl Fin Agy Rev JRC
Assisted Living....................... 7.500 07/01/26 3,456,320
2,555 Massachusetts St Indl Fin Agy Rev N E
Cent For Autism....................... 9.000 11/01/05 2,766,401
4,910 Massachusetts St Indl Fin Agy Rev N E
Cent For Autism....................... 9.500 11/01/17 5,395,648
1,100 Massachusetts St Indl Fin Agy Rev N E
Cent For Autism....................... 7.000 11/01/19 1,060,840
5,000 Massachusetts St Indl Fin Agy Rev
Orchard Cove Issue.................... 9.000 05/01/22 5,463,950
7,000 Massachusetts St Indl Fin Agy Rev Rev
Emerson College Issue Ser A........... 8.900 01/01/18 7,792,610
1,190 Massachusetts St Indl Fin Agy Rev
Vinfen Corp Issue..................... 7.100 11/15/18 1,170,125
1,020 Massachusetts St Indl Fin Agy Rev
Waarc Inc Proj........................ 7.300 09/01/10 1,033,087
915 Massachusetts St Indl Fin Agy Rev
Waarc Inc Proj........................ 7.600 09/01/17 923,866
1,820 Massachusetts St Indl Fin Agy Rev
Waarc Inc Proj........................ 7.750 09/01/25 1,838,819
------------
89,264,599
------------
MICHIGAN 2.8%
440 Detroit, MI Local Dev Fin Auth Tax
Increment Ser A....................... 9.500 05/01/21 519,046
1,000 Dickinson Cnty, MI Mem Hosp Sys Hosp
Rev................................... 8.000 11/01/14 1,069,110
2,390 Meridian, MI Econ Dev Corp 1st Mtg
Burcham Hills Ser A Rfdg.............. 7.500 07/01/13 2,439,449
3,430 Meridian, MI Econ Dev Corp 1st Mtg
Burcham Hills Ser A Rfdg.............. 7.750 07/01/19 3,502,202
4,020 Michigan St Hosp Fin Auth Rev Detroit
Macomb Hosp Corp Ser A Rfdg........... 7.300 06/01/01 4,059,356
2,400 Michigan St Hosp Fin Auth Rev Gratiot
Cmnty Hosp Ser A Rfdg (Prerefunded @
10/01/98)............................. 8.750 10/01/07 2,590,464
500 Michigan St Hosp Fin Auth Rev Hosp
Genesys Hlth Sys Ser A Rfdg........... 7.500 10/01/07 545,375
1,500 Michigan St Hosp Fin Auth Rev Hosp
Genesys Hlth Sys Ser A Rfdg........... 8.100 10/01/13 1,690,365
5,790 Michigan St Hosp Fin Auth Rev Saratoga
Cmnty Hosp Rfdg....................... 8.750 06/01/10 6,526,546
1,500 Michigan St Strategic Fd Ltd Oblig Rev
Great Lakes Pulp & Fibre Proj (e)..... 10.250 12/01/16 901,830
3,500 Michigan St Strategic Fd Solid Waste
Disp Rev Genesee Pwr.................. 7.500 01/01/21 3,521,595
500 Oakland Cnty, MI Econ Dev Corp Ltd
Oblig Rev Pontiac Osteopathic Hosp
Proj.................................. 9.625 01/01/20 584,280
------------
27,949,618
------------
MINNESOTA 2.8%
1,020 Austin, MN Multi-Family Rev Hsg Cedars
of Austin Proj Rfdg................... 7.500 04/01/17 1,054,394
2,000 Austin, MN Multi-Family Rev Hsg Cedars
of Austin Proj Rfdg................... 7.500 04/01/18 2,067,440
1,955 Brooklyn Cent MN Multi-Family Hsg Rev
Four Courts Apts Proj Ser A Rfdg...... 7.400 12/01/15 1,982,878
1,220 Brooklyn Cent MN Multi-Family Hsg Rev
Four Courts Apts Proj Ser A Rfdg...... 7.500 06/01/25 1,237,312
750 Chisago City, MN Hlth Fac Rev Part
Pleasant Heights Proj Ser A Rfdg...... 7.300 07/01/25 760,853
1,200 Maplewood, MN Hlthcare Fac Rev VOA
Care Cent Proj........................ 7.450 10/01/16 1,271,736
650 Minneapolis, MN Cmnty Dev Agy
Commercial Dev Rev Std Mill Hotel Proj
(e)................................... 8.000 04/01/10 260,000
800 Minneapolis, MN Commercial Dev Rev
Holiday Inn Metrodome Proj Rfdg....... 10.500 06/01/03 815,584
</TABLE>
B-38
See Notes to Financial Statements
<PAGE> 99
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MINNESOTA (CONTINUED)
$ 1,950 Minneapolis, MN Hlthcare Fac Rev
Ebenezer Society Proj Ser A........... 7.200% 07/01/23 $ 1,994,616
1,000 Minneapolis, MN Hlthcare Fac Rev Saint
Olaf Residence Inc Proj............... 7.100 10/01/23 1,014,790
350 Minneapolis, MN Multi-Family Rev Hsg
Belmont Apts Proj..................... 7.250 11/01/16 351,911
1,320 Minneapolis, MN Multi-Family Rev Hsg
Belmont Apts Proj..................... 7.625 11/01/27 1,327,062
3,040 New Brighton, MN Rental Hsg Rev
Polynesian Village Apts Proj Ser A
Rfdg.................................. 7.500 10/01/17 3,080,949
865 New Hope Minnesota Multi-Family Rev
Hsg Broadway Lanel Proj............... 7.750 09/01/07 895,362
2,320 New Hope Minnesota Multi-Family Rev
Hsg Broadway Lanel Proj Rfdg.......... 7.750 09/01/07 2,391,572
920 North Saint Paul, MN Multi-Family Rev
Hsg Cottages North Saint Paul Rfdg.... 9.000 02/01/09 988,430
2,220 North Saint Paul, MN Multi-Family Rev
Hsg Cottages North Saint Paul Rfdg.... 9.250 02/01/22 2,383,570
1,695 Saint Paul, MN Hsg & Redev Auth
Commercial Dev Rev Beverly Enterprises
Rfdg.................................. 7.750 11/01/02 1,739,731
500 Shoreview, MN Sr Hsg Rev Shoreview Sr
Residence Proj........................ 7.250 02/01/26 499,325
2,000 Spring Lake Park, MN Multi-Family Hsg
Cottages Spring Lake Rfdg............. 8.375 01/01/22 2,037,860
------------
28,155,375
------------
MISSISSIPPI 1.9%
5,500 Claiborne Cnty, MS Pollutn Ctl Rev
Middle South Energy Inc Ser B......... 8.250 06/01/14 5,949,680
7,575 Claiborne Cnty, MS Pollutn Ctl Rev
Middle South Energy Inc Ser C......... 9.875 12/01/14 8,434,687
1,000 Lowndes Cnty, MS Hosp Rev Golden
Triangle Med Cent Rfdg................ 8.500 02/01/10 1,114,890
3,000 Ridgeland, MS Urban Renewal Rev the
Orchard Ltd Proj Ser A Rfdg........... 7.750 12/01/15 3,133,170
------------
18,632,427
------------
MISSOURI 1.8%
1,500 Chesterfield, MO Indl Dev Auth Rev
Saint Andrews Episcopal-Presbyterian
Ser A................................. 8.500 12/01/19 1,596,285
1,000 Good Shepherd Nursing Home Dist MO
Nursing Home Fac Rev.................. 7.625 08/15/15 1,027,660
3,000 Good Shepherd Nursing Home Dist MO
Nursing Home Fac Rev.................. 7.750 08/15/25 3,093,690
2,840 Jefferson Cnty, MO Indl Dev Auth Indl
Rev Cedars Hlthcare Cent Proj Ser A
Rfdg.................................. 8.250 12/01/15 2,845,652
1,115 Madison Cnty, MO Hosp Rev Ser A....... 7.700 10/01/18 1,124,299
1,490 Madison Cnty, MO Hosp Rev Ser A....... 7.900 10/01/26 1,504,572
1,075 Missouri St Hlth & Edl Fac Bethesda
Hlth Group Inc Proj A Rfdg............ 7.500 08/15/12 1,105,240
785 Perry Cnty, MO Nursing Home Rev Ser A. 7.650 03/01/16 799,562
1,745 Perry Cnty, MO Nursing Home Rev Ser A. 7.750 03/01/26 1,777,195
500 Saint Louis Cnty, MO Indl Dev Auth Rev
1st Mtg Deaconess Manor Assn.......... 7.500 06/01/16 508,810
500 Saint Louis Cnty, MO Indl Dev Auth Rev
1st Mtg Deaconess Manor Assn.......... 7.500 06/01/23 503,920
1,830 Saint Louis, MO Tax Increment Rev
Scullin Redev Area Ser A.............. 10.000 08/01/10 2,205,406
------------
18,092,291
------------
MONTANA 0.2%
2,000 Montana St Hlth Fac Auth Rev Mission
Ridge Proj Ser A...................... 7.000 08/15/26 2,006,060
------------
NEVADA 0.9%
2,000 Clark Cnty, NV Indl Dev Rev Southwest
Gas Corp Ser A........................ 6.500 12/01/33 2,019,780
1,500 Henderson, NV Local Impt Dist No T-10. 7.500 08/01/15 1,545,075
1,425 Henderson, NV Local Impt Dist No T-4
Ser B................................. 7.300 11/01/12 1,469,489
945 Las Vegas, NV Local Impt Bonds Spl
Impt Dist No 404...................... 7.300 11/01/09 972,074
985 Las Vegas, NV Spl Impt Dist No 505
Elkhorn Springs....................... 8.000 09/15/13 1,021,268
1,975 Nevada St Dept Commerce Hlth Fac Rev
Washoe Convalescent Cent Proj Rfdg.... 8.125 06/01/03 2,029,648
------------
9,057,334
------------
NEW HAMPSHIRE 4.9%
1,490 New Hampshire Higher Edl & Hlth Fac
Auth Rev 1st Mtg Odd Fellows Home
Rfdg.................................. 8.000 06/01/04 1,574,781
2,000 New Hampshire Higher Edl & Hlth Fac
Auth Rev 1st Mtg Odd Fellows Home
Rfdg.................................. 9.000 06/01/14 2,253,500
435 New Hampshire Higher Edl & Hlth Fac
Auth Rev Colby-Sawyer College Issue... 7.200 06/01/12 439,385
2,565 New Hampshire Higher Edl & Hlth Fac
Auth Rev Colby-Sawyer College Issue... 7.500 06/01/26 2,640,744
5,000 New Hampshire Higher Edl & Hlth Fac
Auth Rev Daniel Webster College Issue. 7.625 07/01/16 5,346,600
1,000 New Hampshire Higher Edl & Hlth Fac
Auth Rev Havenwood-Heritage Heights... 7.350 01/01/18 1,016,420
4,825 New Hampshire Higher Edl & Hlth Fac
Auth Rev Havenwood-Heritage Heights... 7.450 01/01/25 4,900,125
</TABLE>
B-39
See Notes to Financial Statements
<PAGE> 100
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW HAMPSHIRE (CONTINUED)
$ 2,425 New Hampshire Higher Edl & Hlth Fac
Auth Rev Hlthcare Visiting Nurse....... 7.250% 09/01/23 $ 2,362,678
1,425 New Hampshire Higher Edl & Hlth Fac
Auth Rev Monadock Cmnty Hosp Issue..... 9.125 10/01/20 1,554,846
2,000 New Hampshire Higher Edl & Hlth Fac
Auth Rev New London Hosp Assn Proj..... 7.500 06/01/05 2,204,580
3,500 New Hampshire Higher Edl & Hlth Fac
Auth Rev Vly Regl Hosp................. 7.350 04/01/23 3,361,365
4,110 New Hampshire St Bus Fin Auth Elec Fac
Rev Plymouth Cogeneration.............. 7.750 06/01/14 4,247,438
1,500 New Hampshire St Bus Fin Auth Swr &
Solid Waste Disp Rev Crown Paper Co
Proj................................... 7.875 07/01/26 1,550,640
4,435 New Hampshire St Hsg Fin Auth Single
Family Residential..................... 8.500 07/01/14 4,669,390
3,420 New Hampshire St Indl Dev Auth Rev
Pollutn Ctl Pub Svcs Co of NH Proj Ser
A...................................... 7.650 05/01/21 3,537,648
2,300 New Hampshire St Indl Dev Auth Rev
Pollutn Ctl Pub Svcs Co of NH Proj Ser
C...................................... 7.650 05/01/21 2,379,120
4,000 New Hampshire St Indl Dev Auth Rev
Pollutn Ctl Ser B...................... 10.750 10/01/12 4,281,840
------------
48,321,100
------------
NEW JERSEY 4.0%
1,000 Camden Cnty, NJ Impt Auth Lease Rev
Dockside Refrigerated.................. 8.400 04/01/24 1,020,980
750 New Jersey Econ Dev Auth 1st Mtg
Delaire Nursing Ser A Rfdg (Prerefunded
@ 11/01/99)............................ 8.750 11/01/10 868,028
500 New Jersey Econ Dev Auth 1st Mtg Gross
Rev Burnt Tavrn Convalescent Ser A
Rfdg................................... 9.000 11/15/13 537,895
1,240 New Jersey Econ Dev Auth 1st Mtg Gross
Rev Dover Residential Hlthcare Fac (e). 13.375 11/01/14 682,000
2,250 New Jersey Econ Dev Auth 1st Mtg Gross
Rev Franciscan Oaks Proj Ser A......... 8.500 10/01/23 2,401,110
840 New Jersey Econ Dev Auth 1st Mtg Gross
Rev Stone Arch Nursing Home Proj Rfdg.. 8.750 12/01/10 896,876
1,000 New Jersey Econ Dev Auth 1st Mtg Gross
Rev The Evergreens..................... 9.250 10/01/22 1,092,770
1,000 New Jersey Econ Dev Auth Econ Dev Rev
Borg Warner Corp....................... 11.200 08/01/04 1,039,920
500 New Jersey Econ Dev Auth Econ Dev Rev
Green Acres Manor Inc Ser A Rfdg....... 8.000 01/01/09 515,870
1,000 New Jersey Econ Dev Auth Econ Dev Rev
Green Acres Manor Inc Ser A Rfdg....... 8.250 01/01/17 1,032,480
4,000 New Jersey Econ Dev Auth Econ Dev Rev
Sr Mtg Holt Hauling Ser D.............. 10.250 09/15/14 4,158,440
4,365 New Jersey Econ Dev Auth Econ Dev Rev
United Methodist Homes................. 7.500 07/01/20 4,437,197
420 New Jersey Econ Dev Auth Econ Dev Rev
United Methodist Homes................. 7.500 07/01/24 426,489
500 New Jersey Econ Dev Auth Econ Dev Rev
Zirbser Greenbriar Inc Ser A Rfdg...... 7.375 07/15/03 525,395
915 New Jersey Econ Dev Auth Econ Dev Rev
Zirbser Greenbriar Inc Ser A Rfdg...... 7.750 07/15/08 959,679
1,000 New Jersey Econ Dev Auth Holt Hauling &
Warehsg Rev Ser G Rfdg................. 8.400 12/15/15 1,050,590
500 New Jersey Econ Dev Auth Rev 1st Mtg
Fellowship Village Proj Ser A.......... 8.500 01/01/10 532,270
1,000 New Jersey Econ Dev Auth Rev 1st Mtg
Fellowship Village Proj Ser A.......... 9.250 01/01/25 1,138,530
975 New Jersey Econ Dev Auth Rev 1st Mtg
Millhouse Proj Ser A................... 8.250 04/01/10 1,000,438
2,060 New Jersey Econ Dev Auth Rev 1st Mtg
Millhouse Proj Ser A................... 8.500 04/01/16 2,123,716
1,860 New Jersey Econ Dev Auth Rev 1st Mtg
Winchester Gardens Ser A............... 7.500 11/01/05 1,861,990
1,000 New Jersey Econ Dev Auth Rev 1st Mtg
Winchester Gardens Ser A............... 8.500 11/01/16 1,021,520
1,500 New Jersey Econ Dev Auth Rev 1st Mtg
Winchester Gardens Ser A............... 8.625 11/01/25 1,544,985
855 New Jersey Econ Dev Auth Rev Sr Mtg
Arbor Glen Proj Ser A.................. 8.000 05/15/02 875,358
750 New Jersey Econ Dev Auth Rev Sr Mtg
Arbor Glen Proj Ser A.................. 8.000 05/15/04 768,518
2,000 New Jersey Econ Dev Auth Rev Sr Mtg
Arbor Glen Proj Ser A.................. 8.000 05/15/12 2,038,640
2,000 New Jersey Econ Dev Auth Rev Sr Mtg
Arbor Glen Proj Ser A.................. 8.750 05/15/26 2,078,200
2,500 New Jersey Hlth Care Fac Fin Auth Rev
Raritan Bay Med Cent Issue Rfdg........ 7.250 07/01/14 2,639,350
1,000 New Jersey St Edl Fac Auth Rev Caldwell
College Ser A.......................... 7.250 07/01/25 1,057,860
------------
40,327,094
------------
NEW MEXICO 0.8%
695 Albuquerque, NM Nursing Home Rev
Albuquerque Hlthcare Rfdg.............. 9.750 12/01/14 744,849
4,555 Albuquerque, NM Retirement Fac Rev LA
Vida Llena Proj Ser A Rfdg............. 8.850 02/01/23 4,908,605
1,500 Farmington, NM Pollutn Ctl Rev San Juan
Proj Ser A Rfdg........................ 6.400 08/15/23 1,516,860
715 Santa Fe, NM Indl Rev Casa Real Nursing
Home Rfdg.............................. 9.750 01/01/13 753,052
455 Truth or Consequences, NM Nursing Home
Rev Sierra Hlthcare Rfdg & Impt........ 9.750 12/01/14 487,432
------------
8,410,798
------------
</TABLE>
B-40
See Notes to Financial Statements
<PAGE> 101
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK 2.6%
$ 1,210 Clifton Springs, NY Hosp & Clinic Ser
A Rfdg & Impt......................... 7.650% 01/01/12 $ 1,238,435
4,800 Islip, NY Cmnty Dev Agy Cmnty Dev Rev
NY Institute of Technology Rfdg....... 7.500 03/01/26 4,985,952
2,500 New York City Indl Dev Agy Civic Fac
Rev................................... 7.500 08/01/26 2,515,625
4,170 New York City Indl Dev Agy Civic Fac
Rev Our Lady of Mercy Med Cent Pkg
Corp Proj............................. 8.500 12/30/22 4,477,579
2,500 New York City Indl Dev Agy Rev Solid
Waste Disposal Visy Paper Proj........ 7.800 01/01/16 2,656,600
5,000 New York St Energy Resh & Dev Auth
Elec Fac Rev Long Island Ltg Ser A.... 7.150 12/01/20 5,168,650
2,905 Newark Wayne Cmnty Hosp NY Rev Ser A.. 7.600 09/01/15 2,790,921
2,000 North Syracuse, NY Hsg Auth Rev Janus
Park Proj............................. 8.000 06/01/14 2,041,800
------------
25,875,562
------------
OHIO 5.2%
1,500 Athens Cnty, OH Hosp Fac Rev O'Bleness
Mem Hosp Proj......................... 7.100 11/15/23 1,487,130
3,000 Cleveland, OH Pkg Fac Rev (Prerefunded
@ 09/15/02)........................... 8.000 09/15/12 3,582,360
1,000 Cuyahoga Cnty, OH Hlthcare Fac Rev
Jennings Hall......................... 7.200 11/15/14 1,034,270
1,500 Cuyahoga Cnty, OH Hlthcare Fac Rev
Jennings Hall......................... 7.300 11/15/23 1,542,990
2,500 Cuyahoga Cnty, OH Hlthcare Fac Rev
Judson Retirement Cmnty Ser A Rfdg.... 7.250 11/15/13 2,536,825
3,000 Cuyahoga Cnty, OH Hlthcare Fac Rev
Judson Retirement Cmnty............... 7.250 11/15/18 3,025,860
2,555 Cuyahoga Cnty, OH Hlthcare Fac Rev
Judson Retirement Cmnty (Prerefunded @
11/15/99)............................. 8.875 11/15/19 2,946,273
7,625 Dayton, OH Spl Fac Rev Emery Air
Freight Corp Ser A Rfdg............... 12.500 10/01/09 8,522,005
500 Fairfield, OH Econ Dev Rev Beverly
Enterprises Proj Rfdg................. 8.500 01/01/03 539,515
1,945 Harrison, OH Harrison Ave Kmart Proj
Ser A................................. 8.125 12/01/02 2,024,278
2,000 Lorain Cnty, OH Hosp Rev Mtg Elyria
United Methodist Rfdg................. 6.875 06/01/22 2,015,640
2,500 Mount Vernon, OH Hosp Rev Knox Cmnty
Hosp Rfdg............................. 7.875 06/01/12 2,577,675
1,000 North Canton, OH Hlthcare Fac Rev
Waterford at Saint Luke Proj.......... 8.625 11/15/21 1,075,010
4,930 Ohio St Air Quality Dev Auth Rev
Pollutn Ctl Toledo Edison Ser B....... 9.875 11/01/22 5,119,164
1,036 Ohio St Indl Dev Rev 1st Mtg Swifton
Commons Proj Rfdg (e)................. 8.125 12/01/15 909,431
2,000 Ohio St Solid Waste Rev Rep Engineered
Steels Proj........................... 8.250 10/01/14 2,062,760
4,000 Ohio St Solid Waste Rev Rep Engineered
Steels Proj........................... 9.000 06/01/21 4,298,120
2,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac
Rev Collateral Toledo Edison Ser A
Rfdg.................................. 8.000 10/01/23 2,173,740
2,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac
Rev Collateral Cleveland Elec Ser A
Rfdg.................................. 8.000 10/01/23 2,173,740
2,250 Sandusky Cnty, OH Hosp Fac Rev Mem
Hosp Proj Rfdg........................ 7.750 12/01/09 2,266,155
------------
51,912,941
------------
OKLAHOMA 0.3%
1,000 Jackson Cnty, OK Mem Hosp Auth Rev
Jackson Mem (Prerefunded @ 08/01/97).. 9.000 08/01/15 1,054,780
500 Leflore Cnty, OK Hosp Auth Impt Rev... 9.400 05/01/06 538,410
555 Oklahoma Hsg Fin Agy Single Family
Class A (GNMA Collateralized)......... 7.997 08/01/18 592,923
500 Woodward, OK Muni Auth Hosp Rev....... 8.250 11/01/09 543,525
500 Woodward, OK Muni Auth Hosp Rev
(Prerefunded @ 11/01/00).............. 9.250 11/01/14 595,650
------------
3,325,288
------------
OREGON 0.2%
1,500 Salem, OR Hosp Fac Auth Rev Capital
Manor Inc............................. 7.500 12/01/24 1,568,445
------------
PENNSYLVANIA 12.1%
1,945 Allegheny Cnty, PA Hosp Dev Auth Rev
Hlth Fac Allegheny Vly Sch............ 7.500 02/01/10 1,988,821
3,120 Allegheny Cnty, PA Hosp Dev Auth Rev
Hlth Fac Allegheny Vly Sch............ 7.875 02/01/20 3,230,448
1,800 Beaver Cnty, PA Indl Dev Auth Pollutn
Ctl Collateral Cleveland Elec Proj
Rfdg.................................. 7.625 05/01/25 1,955,520
7,550 Beaver Cnty, PA Indl Dev Auth Pollutn
Ctl Rev Collateral Toledo Edison Co
Proj Rfdg............................. 7.625 05/01/20 8,202,320
4,000 Beaver Cnty, PA Indl Dev Auth Pollutn
Ctl Rev Collateral Toledo Edison Ser A
Rfdg.................................. 7.750 05/01/20 4,390,840
1,100 Beaver Cnty, PA Indl Dev Auth Pollutn
Ctl Rev OH Edison Proj Ser A Rfdg..... 7.750 09/01/24 1,162,161
1,860 Berks Cnty, PA Muni Auth Rev Phoebe
Berks Village Inc Proj Rfdg........... 7.500 05/15/13 1,911,280
1,860 Berks Cnty, PA Muni Auth Rev Phoebe
Berks Village Inc Proj Rfdg........... 7.700 05/15/22 1,880,776
2,500 Berks Cnty, PA Muni Auth Rev Phoebe
Berks Village Inc Proj Rfdg........... 8.250 05/15/22 2,655,900
1,000 Chartiers Vly, PA Indl & Commercial
Dev Auth 1st Mtg Rev.................. 7.250 12/01/11 1,023,400
</TABLE>
B-41
See Notes to Financial Statements
<PAGE> 102
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 2,000 Chartiers Vly, PA Indl & Commercial
Dev Auth 1st Mtg Rev.................. 7.400% 12/01/15 $ 2,058,020
1,000 Chartiers Vly, PA Indl & Commercial
Dev Auth 1st Mtg Rev (Prerefunded @
12/01/98)............................. 9.500 12/01/15 1,123,540
4,480 Clarion Cnty, PA Hosp Auth Hosp Rev
Clarion Hosp Proj..................... 8.100 07/01/12 4,762,822
1,000 Clarion Cnty, PA Hosp Auth Hosp Rev
Clarion Hosp Proj..................... 8.500 07/01/21 1,106,510
825 Columbia Cnty, PA Indl Dev Auth 1st
Mtg Rev 1st Str Assoc Proj Rfdg....... 9.000 05/01/14 881,323
Delaware Cnty, PA Auth Rev 1st Mtg
870 Riddle Village Proj (Prerefunded @
06/01/02)............................. 8.750 06/01/10 1,056,302
2,800 Delaware Cnty, PA Auth Rev 1st Mtg
Riddle Village Proj (Prerefunded @
06/01/02)............................. 9.250 06/01/22 3,465,420
3,645 Delaware Cnty, PA Auth Rev 1st Mtg
Riddle Village Proj Rfdg.............. 7.000 06/01/26 3,631,441
2,100 Delaware Cnty, PA Auth Rev White Horse
Village Ser A Rfdg.................... 7.500 07/01/18 2,166,234
1,350 Doylestown, PA Hosp Auth Hosp Rev Pine
Run Ser A............................. 7.200 07/01/23 1,389,434
1,250 Lebanon Cnty, PA Hlth Fac Auth Hlth
Cent Rev United Church of Christ Homes
Rfdg.................................. 7.250 10/01/19 1,256,100
250 Lehigh Cnty, PA Genl Purp Auth Rev 1st
Mtg Bible Fellowship Proj............. 7.150 12/15/08 258,073
2,315 Lehigh Cnty, PA Genl Purp Auth Rev 1st
Mtg Bible Fellowship Proj............. 8.000 12/15/23 2,388,756
4,785 Lehigh Cnty, PA Indl Dev Auth Rev
Rfdg.................................. 8.000 08/01/12 5,009,991
2,000 Luzerne Cnty, PA Indl Dev Auth 1st Mtg
Gross Rev Rfdg........................ 7.875 12/01/13 2,102,920
3,000 Luzerne Cnty, PA Indl Dev Auth Exmpt
Fac Rev PA Gas & Wtr Co Proj Ser A
Rfdg.................................. 7.200 10/01/17 3,226,500
500 Montgomery Cnty, PA Higher Ed & Hlth
Auth Rev Retirement Cmnty GDL Farms A. 9.500 01/01/20 582,240
Montgomery Cnty, PA Indl Dev Auth Rev
1,550 1st Mtg The Meadowood Corp Proj Ser A. 9.250 12/01/00 1,815,128
2,025 Montgomery Cnty, PA Indl Dev Auth Rev
1st Mtg The Meadowood Corp Proj Ser A
(Prerefunded @ 12/01/00).............. 10.000 12/01/19 2,458,370
2,500 Montgomery Cnty, PA Indl Dev Auth Rev
1st Mtg The Meadowood Corp Proj Ser A
Rfdg.................................. 10.250 12/01/20 2,769,325
500 Montgomery Cnty, PA Indl Dev Auth Rev
1st Mtg The Meadowood Corp Rfdg....... 7.000 12/01/10 508,740
1,500 Montgomery Cnty, PA Indl Dev Auth Rev
1st Mtg The Meadowood Corp Rfdg....... 7.250 12/01/15 1,505,400
4,000 Montgomery Cnty, PA Indl Dev Auth Rev
1st Mtg The Meadowood Corp Rfdg....... 7.400 12/01/20 3,999,080
3,780 Montgomery Cnty, PA Indl Dev Auth Rev
Assisted Living Ser A................. 8.250 05/01/23 3,978,601
3,595 Montgomery Cnty, PA Indl Dev Auth Rev
Hlthcare Adv Geriatric Ser A.......... 8.375 07/01/23 3,803,977
805 Montgomery Cnty, PA Indl Dev Auth Rev
Pennsburg Nursing & Rehab Cent........ 7.625 07/01/18 835,654
2,660 Montgomery Cnty, PA Indl Dev Auth Rev
Wordsworth Academy.................... 7.750 09/01/14 2,761,772
750 Northampton Cnty, PA Indl Dev Auth Rev
1st Mtg Kirkland Village Proj......... 7.375 12/15/18 751,125
750 Northampton Cnty, PA Indl Dev Auth Rev
1st Mtg Kirkland Village Proj......... 7.500 12/15/23 751,470
1,000 Pennsylvania Econ Dev Fin Auth Exempt
Fac Rev MacMillan Ltd Partnership
Proj.................................. 7.600 12/01/20 1,123,460
1,500 Pennsylvania Econ Dev Fin Auth
Recycling Rev Ponderosa Fibres Proj
Ser A................................. 9.250 01/01/22 1,412,610
2,000 Philadelphia, PA Auth for Indl Dev
Coml Philadelphia Arpt Rev Rfdg....... 7.750 12/01/17 2,158,940
1,170 Philadelphia, PA Auth for Indl Dev Rev
1st Mtg RHA/Care Pavilion Proj........ 10.250 02/01/18 1,208,598
1,500 Philadelphia, PA Auth for Indl Dev Rev
Cathedral Village..................... 7.250 04/01/15 1,513,305
5,835 Philadelphia, PA Auth for Indl Dev Rev
Long-Term Care Maplewood.............. 8.000 01/01/24 6,048,444
2,000 Philadelphia, PA Auth for Indl Dev Rev
Long-Term Care Maplewood.............. 8.000 01/01/14 2,076,120
1,000 Philadelphia, PA Auth for Indl Dev Rev
Lutheran Retire Ser B (Var Rate Cpn).. 5.000 01/01/17 730,060
1,875 Philadelphia, PA Hosps & Higher Ed Fac
Auth Hosp Rev......................... 7.250 03/01/24 1,836,563
500 Philadelphia, PA Pkg Auth Rev East
Market................................ 8.750 03/01/05 503,010
1,785 Philadelphia, PA Pkg Auth Rev East
Market................................ 8.875 03/01/10 1,795,371
3,000 Scranton-Lackawanna, PA Hlth & Welfare
Allied Auth Rev Svcs Rehab Hosp Proj
Ser A................................. 7.375 07/15/08 3,132,570
3,000 Somerset Cnty, PA Hosp Auth Rev
Somerset Cmnty Hosp Proj.............. 7.500 03/01/17 3,173,610
250 Warren Cnty, PA Indl Dev Auth Beverly
Enterprises Rfdg...................... 9.000 11/01/12 274,718
2,300 Washington Cnty, PA Hosp Auth Rev
Canonsburg Genl Hosp Rfdg............. 7.350 06/01/13 2,242,615
------------
120,035,728
------------
SOUTH CAROLINA 1.0%
750 Charleston Cnty, SC Hlth Fac Rev 1st
Mtg Episcopal Proj Rfdg (Prerefunded @
04/01/01)............................. 9.750 04/01/16 919,028
1,500 Charleston Cnty, SC Hlth Fac Rev 1st
Mtg Roper Geriatric Cent Inc Proj Rfdg
(Prerefunded @ 05/01/99).............. 7.750 05/01/17 1,646,220
390 McCormick Cnty, SC Hosp Fac Rev
McCormick Hlthcare Cent Proj.......... 10.500 03/01/18 399,984
</TABLE>
B-42
See Notes to Financial Statements
<PAGE> 103
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOUTH CAROLINA (CONTINUED)
$ 3,000 Piedmont Muni Pwr Agy South Carolina
Elec Rev Rfdg......................... 6.550% 01/01/16 $ 3,021,750
3,000 Piedmont Muni Pwr Agy South Carolina
Elec Rev Rfdg......................... 6.600 01/01/21 3,016,650
750 South Carolina Jobs Econ Dev Auth Hlth
Fac Rev 1st Mtg Lutheran Homes SC
Proj.................................. 8.000 10/01/22 778,598
250 South Carolina Jobs Econ Dev Auth Hlth
Fac Rev 1st Mtg Lutheran Homes SC
Proj.................................. 7.750 10/01/12 259,303
------------
10,041,533
------------
SOUTH DAKOTA 0.1%
1,000 South Dakota St Hlth & Edl Fac Auth
Rev Huron Regl Med Cent............... 7.250 04/01/20 1,058,940
------------
TENNESSEE 0.4%
500 Smith Cnty, TN Hlth & Edl Fac 1st
Hlthcare Corp Proj Rfdg............... 7.400 04/01/13 508,945
3,000 Springfield, TN Hlth & Edl Fac Brd
Hosp Rev Jesse Holman Jones Hosp Proj. 8.250 04/01/12 3,228,300
------------
3,737,245
------------
TEXAS 5.1%
4,850 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj............... 7.500 12/01/29 5,218,988
11,150 Alliance Arpt Auth Inc TX Spl Fac Rev
Fed Express Corp Proj................. 6.375 04/01/21 11,316,024
1,380 Amarillo, TX Hlth Fac Corp Rev
Panhandle Retirement Ser B............ 7.000 08/15/15 1,382,650
3,000 Amarillo, TX Hlth Fac Corp Rev
Panhandle Retirement Ser B............ 7.750 08/15/18 3,037,400
1,035 Bell Cnty, TX Hlth Fac Dev Corp Rev
Hosp Proj............................. 9.250 07/01/08 1,139,732
500 Dallas-Fort Worth, TX Intl Arpt Fac
Impt Corp Rev American Airls Inc...... 7.500 11/01/25 537,945
1,500 Dallas-Fort Worth, TX Intl Arpt Fac
Impt Corp Rev American Airls Inc...... 7.250 11/01/30 1,625,220
1,250 Dallas-Fort Worth, TX Intl Arpt Fac
Impt Corp Rev Delta Airls Inc......... 7.625 11/01/21 1,365,263
2,665 De Soto, TX Hlth Fac Dev Corp Rev Park
Manor Sr Care......................... 7.750 12/01/16 2,622,760
210 Harris Cnty, TX Hsg Fin Corp Single
Family Hsg Rev........................ 9.875 03/15/14 210,714
245 Harris Cnty, TX Hsg Fin Corp Single
Family Hsg Rev Ser 1983 Ser A......... 10.125 07/15/03 245,245
1,455 Harris Cnty, TX Hsg Fin Corp Single
Family Hsg Rev Ser 1983 Ser A......... 10.375 07/15/14 1,450,638
3,075 Houston, TX Hsg Fin Corp Single Family
Mtg Rev Ser B......................... 10.375 12/15/13 3,083,795
790 Montgomery Cnty, TX Hlth Fac Dev Corp
Hosp Mtg Rev Woodlands Med Cent Proj
Rfdg.................................. 8.850 08/15/14 853,089
1,250 Northeast Hosp Auth TX Rev Northeast
Med Cent Hosp Ser B................... 7.250 07/01/22 1,333,225
4,505 Port Corpus Christi, TX Indl Dev Corp
Rev Valero Refining & Mktg Co Ser A... 10.250 06/01/17 4,760,704
500 Port Corpus Christi, TX Indl Dev Corp
Rev Valero Refining & Mktg Co Ser B... 10.625 06/01/08 530,565
3,255 Rusk Cnty, TX Hlth Fac Corp Hosp Rev
Henderson Mem Hosp Proj............... 7.750 04/01/13 3,424,618
500 San Antonio, TX Hlth Fac Dev Corp Rev
Encore Nursing Cent Partner........... 8.250 12/01/19 539,320
2,000 San Antonio, TX Hsg Fin Corp Multi-
Family Hsg Rev Marbach Manor Apts Proj
Ser A................................. 8.125 06/01/27 2,046,480
1,500 Tarrant Cnty, TX Hlth Fac Dev Corp Rev
Mtg Cumberland Rest Ser A Rfdg........ 7.000 08/15/19 1,501,500
1,401 Texas Genl Svcs Comm Partn Interests
Office Bldg & Land Aquisition Proj.... 7.000 08/01/24 1,442,991
790 Weslaco, TX Hlth Fac Dev Corp Hosp Rev
Welasco Hlth Fac Proj Ser B
(Prerefunded @ 06/01/98).............. 10.375 06/01/16 870,209
------------
50,539,075
------------
UTAH 0.4%
500 Hildale, UT Elec Rev Gas Turbine Elec
Fac Proj.............................. 7.600 09/01/06 509,035
1,000 Hildale, UT Elec Rev Gas Turbine Elec
Fac Proj.............................. 7.800 09/01/15 1,000,520
2,345 Utah St Hsg Fin Agy Single Family Mtg
Ser C2 (FHA Gtd)...................... 7.950 07/01/20 2,413,755
------------
3,923,310
------------
VERMONT 0.1%
700 Vermont Edl & Hlth Bldgs Fin Agy Rev
Northwestern Med Cent Ser A
(Prerefunded @ 09/01/98).............. 9.750 09/01/18 780,451
------------
VIRGINIA 1.6%
2,955 Alexandria, VA Indl Dev Auth Rev Saint
Coletta Sch Proj...................... 7.750 10/15/26 2,979,674
870 Covington-Alleghany Cnty, VA Indl Dev
Beverly Enterprises Proj Rfdg......... 9.375 09/01/01 966,118
3,000 Fairfax Cnty, VA Redev & Hsg Auth
Multi-Family Hsg Rev.................. 7.600 10/01/36 3,000,000
1,500 Hopewell, VA Indl Dev Auth Res
Recovery Rev Stone Container Corp Proj
Rfdg.................................. 8.250 06/01/16 1,635,075
1,000 Pittsylvania Cnty, VA Indl Dev Auth
Rev Exempt Fac Ser A.................. 7.450 01/01/09 1,051,800
6,000 Richmond, VA Redev & Hsg Auth Multi-
Family Rev Ser A Rfdg (Var Rate Cpn).. 8.000 12/15/21 5,977,440
------------
15,610,107
------------
</TABLE>
B-43
See Notes to Financial Statements
<PAGE> 104
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WASHINGTON 0.1%
$ 1,500 Port Walla Walla, WA Pub Corp Solid
Waste Recycling Rev Ponderosa Fibres
Proj.................................. 9.125% 01/01/26 $ 1,392,060
------------
WEST VIRGINIA 0.2%
500 Randolph Cnty, WV Bldg Commission
Davis Mem Hosp Proj Ser A Rfdg & Impt. 7.650 11/01/21 537,235
1,040 Weirton, WV Pollutn Ctl Rev Weirton
Steel Proj Rfdg....................... 8.625 11/01/14 1,091,605
------------
1,628,840
------------
WISCONSIN 0.8%
795 Wisconsin St Hlth & Edl Fac Auth Rev
Hess Mem Hosp Assn.................... 7.200 11/01/05 794,833
2,000 Wisconsin St Hlth & Edl Fac Auth Rev
Hess Mem Hosp Assn.................... 7.875 11/01/22 2,013,320
2,500 Wisconsin St Hlth & Edl Fac Auth Rev
Natl Regency of New Berlin Proj....... 8.000 08/15/25 2,548,600
3,000 Wisconsin St Hlth & Edl Milwaukee
Catholic Home Proj.................... 7.500 07/01/26 3,076,890
------------
8,433,643
------------
U. S. VIRGIN ISLANDS 0.3%
1,210 University of Virgin Islands Pub Fin
Auth Ser A............................ 7.500 10/01/09 1,337,667
1,965 University of Virgin Islands Pub Fin
Auth Ser A............................ 7.650 10/01/14 2,181,405
------------
3,519,072
------------
TOTAL LONG-TERM INVESTMENTS 98.3%
(Cost $945,075,401)........................................... 978,015,397
SHORT-TERM INVESTMENTS AT AMORTIZED COST 0.1%.................. 700,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.6%..................... 16,017,108
------------
NET ASSETS 100.0%.............................................. $994,732,505
------------
</TABLE>
(a) At November 30, 1996, for federal income tax purposes, cost is
$945,080,571; the aggregate gross unrealized appreciation is $39,681,346
and the aggregate gross unrealized depreciation is $6,746,520, resulting
in net unrealized appreciation of $32,934,826.
(b) Securities purchased on a when-issued or delayed-delivery basis.
(c) Assets segregated as collateral for when-issued or delayed-delivery
purchase commitments.
(d) Interest is accruing for this security at less than the stated coupon.
(e) Non-Income producing security.
B-44
See Notes to Financial Statements
<PAGE> 105
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $945,075,401)
(Note 1)....................................................... $ 978,015,397
Short-Term Investments (Note 1)................................ 700,000
Cash........................................................... 82,152
Receivables:
Interest...................................................... 23,057,606
Securities Sold............................................... 4,515,866
Fund Shares Sold.............................................. 1,451,676
Other.......................................................... 4,131
--------------
Total Assets.................................................. 1,007,826,828
--------------
LIABILITIES:
Payables:
Securities Purchased.......................................... 7,248,217
Income Distributions.......................................... 3,031,741
Fund Shares Repurchased....................................... 1,571,081
Distributor and Affiliates (Note 2)........................... 609,253
Investment Advisory Fee (Note 2).............................. 452,766
Accrued Expenses............................................... 142,607
Deferred Compensation and Retirement Plans (Note 2)............ 38,658
--------------
Total Liabilities............................................. 13,094,323
--------------
NET ASSETS..................................................... $ 994,732,505
--------------
NET ASSETS CONSIST OF:
Capital (Note 3)............................................... $ 986,396,208
Net Unrealized Appreciation on Securities...................... 32,939,996
Accumulated Undistributed Net Investment Income................ 113,411
Accumulated Net Realized Loss on Securities.................... (24,717,110)
--------------
NET ASSETS..................................................... $ 994,732,505
--------------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $620,960,577 and 55,746,099 shares of beneficial
interest issued and outstanding).............................. $ 11.14
Maximum sales charge (4.75%* of offering price)............... .56
--------------
Maximum offering price to public.............................. $ 11.70
--------------
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $323,811,217 and 29,077,037 shares of beneficial
interest issued and outstanding).............................. $ 11.14
--------------
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $49,960,711 and 4,490,533 shares of beneficial
interest issued and outstanding).............................. $ 11.13
--------------
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
B-45
See Notes to Financial Statements
<PAGE> 106
STATEMENT OF OPERATIONS
For the Year Ended November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $65,971,253
-----------
EXPENSES:
Investment Advisory Fee (Note 2)................................... 4,757,392
Distribution (12b-1) and Service Fees (Attributed to Classes A, B
and C of
$1,380,920, $2,708,233 and $389,676, respectively) (Note 5)....... 4,478,829
Shareholder Services (Note 2)...................................... 888,765
Accounting Services (Note 2)....................................... 208,513
Legal (Note 2)..................................................... 46,103
Trustees Fees and Expenses (Note 2)................................ 41,035
Other.............................................................. 670,060
-----------
Total Expenses.................................................... 11,090,697
Less Expenses Reimbursed (Note 2)................................. 17,000
-----------
Net Expenses...................................................... 11,073,697
-----------
NET INVESTMENT INCOME.............................................. $54,897,556
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments................................... $ 2,092,011
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period........................................... 36,755,483
End of the Period:
Investments..................................................... 32,939,996
-----------
Net Unrealized Depreciation on Securities During the Period........ (3,815,487)
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES..................... $(1,723,476)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......................... $53,174,080
-----------
</TABLE>
B-46
See Notes to Financial Statements
<PAGE> 107
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, 1996 November 30, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................... $ 54,897,556 $ 45,949,732
Net Realized Gain/Loss on Securities..... 2,092,011 (11,171,506)
Net Unrealized Appreciation/Depreciation
on Securities............................ (3,815,487) 56,699,702
------------ ------------
Change in Net Assets from Operations..... 53,174,080 91,477,928
------------ ------------
Distributions from Net Investment Income:
Class A Shares.......................... (36,684,070) (32,309,178)
Class B Shares.......................... (15,919,679) (12,327,837)
Class C Shares.......................... (2,289,094) (1,507,847)
------------ ------------
Total Distributions..................... (54,892,843) (46,144,862)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................... (1,718,763) 45,333,066
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................ 301,612,850 222,380,164
Net Asset Value of Shares Issued Through
Dividend Reinvestment.................... 23,613,873 19,652,888
Cost of Shares Repurchased............... (110,086,181) (91,773,703)
------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................. 215,140,542 150,259,349
------------ ------------
TOTAL INCREASE IN NET ASSETS............. 213,421,779 195,592,415
NET ASSETS:
Beginning of the Period.................. 781,310,726 585,718,311
------------ ------------
End of the Period (Including
undistributed net investment income of
$113,411 and $26,781, respectively)..... $994,732,505 $781,310,726
------------ ------------
</TABLE>
See Notes to Financial Statements
B-47
<PAGE> 108
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the
Fundoutstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------------------
Class A Shares 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period. $11.18 $10.44 $11.19 $10.95 $10.78
------- ------ ------ ------ ------
Net Investment Income................... .735 .74 .76 .8132 .815
Net Realized and Unrealized Gain/Loss on
Securities............................. (.041) .7475 (.744) .2303 .195
------- ------ ------ ------ ------
Total from Investment Operations......... .694 1.4875 .016 1.0435 1.01
Less Distributions from Net Investment
Income................................... .735 .7475 .766 .8035 .84
------- ------ ------ ------ ------
Net Asset Value, End of the Period ...... $11.139 $11.18 $10.44 $11.19 $10.95
------- ------ ------ ------ ------
Total Return (a)......................... 6.47% 14.65% .10% 9.65% 9.77%
Net Assets at End of the Period (In
millions)................................ $621.0 $516.3 $411.1 $408.0 $309.5
Ratio of Expenses to Average Net Assets
(b)...................................... 1.01% .98% 1.02% 1.03% 1.07%
Ratio of Net Investment Income to Average
Net Assets (b)........................... 6.64% 6.81% 6.98% 7.13% 7.45%
Portfolio Turnover....................... 23% 26% 33% 27% 24%
</TABLE>
(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of expenses was less than 0.01%.
B-48
See Notes to Financial Statements
<PAGE> 109
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 20, 1992
Year Ended November 30, (Commencement
-------------------------------- of Distribution) to
Class B Shares 1996 1995 1994 1993(a) November 30, 1992(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period. $ 11.18 $ 10.43 $11.18 $10.96 $11.08
------- ------- ------ ------ ------
Net Investment Income.. .653 .66 .68 .6919 .27
Net Realized and
Unrealized Gain/Loss
on Securities......... (.046) .7535 (.748) .2476 (.1122)
------- ------- ------ ------ ------
Total from Investment
Operations.............. .607 1.4135 (.068) .9395 .1578
Less Distributions from
Net Investment Income.. .651 .6635 .682 .7195 .2778
------- ------- ------ ------ ------
Net Asset Value, End of
the Period.............. $11.136 $11.18 $10.43 $11.18 $10.96
------- ------- ------ ------ ------
Total Return (b) ....... 5.67% 13.89% (.76%) 8.84% 1.45%*
Net Assets at End of the
Period (In millions)... $323.8 $233.9 $159.3 $104.8 $21.0
Ratio of Expenses to
Average Net Assets (c).. 1.77% 1.73% 1.77% 1.77% 1.71%
Ratio of Net Investment
Income to Average Net
Assets (c)............. 5.88% 6.03% 6.19% 6.15% 5.88%
Portfolio Turnover...... 23% 26% 33% 27% 24%
</TABLE>
*Non-Annualized
(a) Based on average month-end 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) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of expenses was less than 0.01%.
B-49
See Notes to Financial Statements
<PAGE> 110
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the
Fundoutstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 10, 1993
(Commencement
Year Ended Year Ended of Distribution) to
Class C Shares November 30, 1996 November 30, 1995 November 30, 1994(a)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of the Period. $ 11.17 $ 10.42 $ 11.29
------- ------- -------
Net Investment Income.. .652 .66 .63
Net Realized and
Unrealized Gain/Loss
on Investments........ (.045) .7535 (.8363)
------- ------- -------
Total from Investment
Operations.............. .607 1.4135 (.2063)
Less Distributions from
Net Investment Income... .651 .6635 .6637
------- ------- -------
Net Asset Value, End of
the Period.............. $11.126 $ 11.17 $ 10.42
------- ------- -------
Total Return (b) ....... 5.68% 13.79% (1.80%)*
Net Assets at End of the
Period (In millions).... $50.0 $31.1 $15.3
Ratio of Expenses to
Average Net Assets (c).. 1.77% 1.72% 1.75%
Ratio of Net Investment
Income to Average Net
Assets (c)............. 5.86% 5.98% 6.07%
Portfolio Turnover...... 23% 26% 33%
</TABLE>
*Non-Annualized
(a) Based on average month-end 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) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of expenses was less than 0.01%.
B-50
See Notes to Financial Statements
<PAGE> 111
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital High Yield Municipal Fund (the "Fund") is organized
as a series of the Van Kampen American Capital Tax-Exempt Trust, a Delaware
business trust, and is registered as a diversified open-end management invest-
ment company under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to provide as high a level of interest income exempt
from federal income tax as is consistent with investing in medium- to lower-
rated high yielding municipal securities. The Fund commenced investment opera-
tions on January 2, 1986. The distribution of the Fund's Class B and Class C
shares commenced on July 20, 1992 and December 10, 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 VALUATIONS-Municipal bonds are valued at the most recently quoted
bid prices furnished by an independent pricing service or dealers. Securities
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Trustees of the Fund. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
The Fund's investments include lower-rated and unrated debt securities which
may be more susceptible to adverse economic conditions than investment grade
holdings. These securities are often subordinated to the prior claims of other
senior lenders and uncertainties exist as to an issuer's ability to meet
principal and interest payments. Securities rated below investment grade and
comparable unrated securities represented approximately 86% of the Fund's
investment portfolio at the end of the period.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date ba-
sis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggre-
gate value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
The Fund invests 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 bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are collateralized by the underlying debt securities. The
Fund will make payment for such securities only upon physical delivery or evi-
dence 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. INVESTMENT INCOME-Interest income is recorded on an accrual basis. Bond pre-
mium and original issue discount are amortized over the life of each applicable
security. Market discounts are recognized at the time of sale as realized gains
for book purposes and ordinary income for tax purposes.
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.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At
B-51
<PAGE> 112
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
November 30, 1996, the Fund had an accumulated capital loss carryforward for
tax purposes of $24,474,967 which expires between November 30, 1997 and Novem-
ber 30, 2003. Of this amount, $2,674,127 will expire in 1997. Net realized loss
differs for financial reporting and tax purposes primarily as a result of the
deferral of post October 31 losses which are not recognized for tax purposes
until the first day of the following fiscal year.
E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are distrib-
uted annually. Permanent book and tax basis differences relating to the expira-
tion of a portion of the capital loss carryforward totaling $4,412,954 were
reclassified from net realized gain/loss on securities to capital. Permanent
differences relating to the recognition of expenses associated with the consol-
idation of the VKAC open-end fund complex totaling $76,482 were reclassified
from accumulated undistributed net investment income to capital. Additionally,
permanent differences relating to the recognition of market discount on bonds
totaling $5,435 were reclassified from net realized gain/loss on securities to
accumulated undistributed net investment income.
For the year ended November 30, 1996, 99.96% of the income distributions made
by the Fund were exempt from federal income taxes. In January, 1997, the Fund
will provide tax information to shareholders for the 1996 calendar year.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------------------
<S> <C>
First $300 million.................................................. .60 of 1%
Next $300 million................................................... .55 of 1%
Over $600 million................................................... .50 of 1%
</TABLE>
The Adviser has agreed to reimburse the Fund for certain trustees' compensa-
tion in connection with the July, 1995 increase in the number of trustees of
the Fund. This reimbursement is expected to continue through December 31, 1996.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended November 30, 1996, the Fund recognized expenses of approx-
imately $208,500 representing Van Kampen American Capital Distributors, Inc.'s
or its affiliates' (collectively "VKAC") cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
shareholder servicing agent for the Fund. For the year ended November 30, 1996,
the Fund recognized expenses of approximately $728,600, representing ACCESS'
cost of providing transfer agency and shareholder services plus a profit.
Additionally, for the year ended November 30, 1996, the Fund reimbursed VKAC
approximately $76,500 related to the direct cost of consolidating the VKAC
open-end fund complex. Payment was contingent upon the realization by the Fund
of cost efficiencies in shareholder services resulting from the consolidation.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Clas-
ses A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
B-52
<PAGE> 113
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within six years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales ar-
rangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
First....................................................... 4.00% 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 November 30, 1996, VKAC, as distributor for the Fund, re-
ceived net commissions on sales of the Fund's Class A shares of approximately
$588,200 and CDSC on the redeemed shares of Classes B and C of approximately
$558,400. Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and reorganization and restructuring
costs, were $420,555,572 and $198,036,929, respectively.
5. 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% for Class A net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the year ended November 30, 1996, are payments to VKAC of approxi-
mately $2,430,000.
B-53
<PAGE> 114
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<S> <C> <C>
1.1 -- First Amended and Restated Agreement and Declaration of
Trust incorporated herein by reference to Form N-1A of
Registrant's Post-Effective Amendment No. 17, filed on March
29, 1996.
1.2 -- Certificate of Amendment incorporated herein by reference to
Form N-1A of Registrant's Post-Effective Amendment No. 17,
filed on March 29, 1996.
1.3 -- Amended and Restated Certificate of Designation.
2 -- Amended and Restated Bylaws incorporated herein by reference
to Form N-1A of Registrant's Post-Effective Amendment No.
17, filed on March 29, 1996.
3 -- Inapplicable.
4.1 -- Specimen Class A Share Certificate incorporated herein by
reference to Form N-1A of Registrant's Post-Effective
Amendment No. 17, filed on March 29, 1996.
4.2 -- Specimen Class B Share Certificate incorporated herein by
reference to Form N-1A of Registrant's Post-Effective
Amendment No. 17, filed on March 29, 1996.
4.3 -- Specimen Class C Share Certificate incorporated herein by
reference to Form N-1A of Registrant's Post-Effective
Amendment No. 17, filed on March 29, 1996.
5.1 -- Investment Advisory Agreement.
5.2 -- Subadvisory Agreement.
6.1 -- Distribution and Service Agreement.
6.2 -- Form of Dealer Agreement.
6.3 -- Form of Broker Fully Disclosed Selling Agreement.
6.4 -- Form of Bank Fully Disclosed Selling Agreement.
7 -- Inapplicable.
8.1 -- Custodian Contract.
8.2 -- Transfer Agency and Service Agreement incorporated herein by
reference to Form N-1A of Registrant's Post-Effective
Amendment No. 17, filed on March 29, 1996.
9 -- Data Access Services Agreement.
10 -- Opinion of Counsel.
11 -- Consent of Independent Accountants.
12 -- Inapplicable.
13 -- Investment Letter incorporated herein by reference (Exhibit
13 to Form N-1A of Registrant, Registration No. 2-96030,
Pre-Effective Amendment No. 4, filed on December 6, 1985).
14 -- Inapplicable.
15.1 -- Plan of Distribution Pursuant to Rule 12b-1.
15.2 -- Service Plan.
15.3 -- Form of Shareholder Assistance Agreement.
15.4 -- Form of Administrative Services Agreement.
16 -- Computation of Performance Information.
</TABLE>
C-1
<PAGE> 115
17.1 -- List of Certain Investment Companies in
Response to Item
29(a).
17.2 -- List of Officers and Directors of Van Kampen
American
Capital Distributors, Inc. in Response to
Item 29(b).
18 -- Amended Multi-class Plan.
19 -- Power of Attorney.
27 -- Financial Data Schedules.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
AS OF MARCH 14 1997
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
Shares of Beneficial Interest, $0.01 par value
Class A shares 17,257
Class B shares 10,000
Class C shares 1,391
</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
thereof to which such person would otherwise be subject by reason of (i) not
acting in good faith in the reasonable belief that such person's actions were
not in the best interests of the Trust, (ii) willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office, (iii) for a criminal proceeding, not having a reasonable
cause to believe that such conduct was unlawful (collectively, "Disabling
Conduct"). Absent a court determination that an officer or trustee seeking
indemnification was not liable on the merits or guilty of Disabling Conduct in
the conduct of his or her office, the decision by the Registrant to indemnify
such person must be based upon the reasonable determination of independent
counsel or non-party independent trustees, after review of the facts, that such
officer or trustee is not guilty of Disabling Conduct in the conduct of his or
her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers 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
C-2
<PAGE> 116
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by the trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the Adviser. For information as to the business, profession,
vocation and employment of a substantial nature of directors and officers of the
Adviser, reference is made to the Adviser's current Form ADV (File No. 801-1669)
filed under the Investment Advisers Act of 1940, as amended, incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17.1 incorporated by
reference herein.
(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
officers thereof are set forth in Exhibit 17.2. Except as disclosed under the
heading, "Trustees and Officers" in Part B of this Registration Statement, none
of such persons has any position or office with Registrant.
(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, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the Adviser, will
be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181; and (iii) by the Distributor, the principal underwriter, will be
maintained at its offices located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
There are no management related services contracts not discussed in Part A.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to furnish to each person to whom a Prospectus
is delivered a copy of the Registrants'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 for the
purpose of voting upon the question of removal of a trustee or trustees and to
assist in communication with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
C-3
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Van Kampen American Capital
Tax-Exempt Trust, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Oakbrook Terrace, and the State of Illinois, on the
28th day of March, 1997.
VAN KAMPEN AMERICAN CAPITAL
TAX-EXEMPT TRUST
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 March 28, 1997 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
Principal Executive Officer:
/s/ DENNIS J. McDONNELL* President and Trustee
- -----------------------------------------------------
(Dennis J. McDonnell)
Principal Financial Officer:
/s/ EDWARD C. WOOD III* Vice President and Chief Financial
- ----------------------------------------------------- Officer
(Edward C. Wood III)
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- -----------------------------------------------------
(J. Miles Branagan)
/s/ LINDA H. HEAGY* Trustee
- -----------------------------------------------------
(Linda Hutton Heagy)
/s/ R. CRAIG KENNEDY* Trustee
- -----------------------------------------------------
(R. Craig Kennedy)
/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------
(Jack E. Nelson)
/s/ JEROME L. ROBINSON* Trustee
- -----------------------------------------------------
(Jerome L. Robinson)
/s/ FERNANDO SISTO* Trustee
- -----------------------------------------------------
(Fernando Sisto)
/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------
(Wayne W. Whalen)
- ------------
* Signed pursuant to a power of attorney filed herewith.
/s/ RONALD A. NYBERG
- -----------------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
C-4
<PAGE> 118
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
INDEX TO EXHIBITS TO AMENDMENT NO. 18 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON MARCH 28, 1997
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.3 -- Amended and Restated Certificate of Designation.
5.1 -- Investment Advisory Agreement.
5.2 -- Subadvisory Agreement.
6.1 -- Distribution and Service Agreement.
6.2 -- Form of Dealer Agreement.
6.3 -- Form of Broker Fully Disclosed Selling Agreement.
6.4 -- Form of Bank Fully Disclosed Selling Agreement.
8.1 -- Custodian Contract.
9 -- Data Access Services Agreement.
10 -- Opinion of Counsel.
11 -- Consent of Independent Accountants.
15.1 -- Plan of Distribution Pursuant to Rule 12b-1.
15.2 -- Service Plan.
15.3 -- Form of Shareholder Assistance Agreement.
15.4 -- Form of Administrative Services Agreement.
16 -- Computation of Performance Information.
17.1 -- List of Certain Investment Companies in Response to Item
29(a).
17.2 -- List of Officers and Directors of Van Kampen American
Capital Distributors, Inc. in Response to Item 29(b).
18 -- Amended Multi-class Plan.
19 -- Power of Attorney.
27 -- Financial Data Schedules.
</TABLE>
C-5
<PAGE> 1
EXHIBIT 1.3
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
Amended and Restated Certificate of Designation
of
Van Kampen American Capital High Yield Municipal Fund
The undersigned, being the Secretary of Van Kampen American Capital Tax-Exempt
Trust, 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 establish and
designate as a Series of the Trust the Van Kampen American Capital High Yield
Municipal Fund (the "Fund") with the following rights, preferences and
characteristics:
1. Shares. The beneficial interest in the Fund 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 Fund. 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 Fund 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
Fund
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 Fund's prospectus.
4. Conversion. Each Class B Share and certain Class C shares of the Fund
shall be converted automatically, and without any action or choice on the part
of the Shareholder thereof, into Class A Shares of the Fund at such times and
pursuant to such terms, conditions and restrictions as may be established by
the Trustees and as set forth in the Fund'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.
6. Special Meetings. A special meeting of Shareholders of a Class of the Fund
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
1
<PAGE> 2
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 Fund 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 Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, 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.
December 12, 1996
/s/ RONALD A. NYBERG
- -------------------------
Ronald A. Nyberg,
Secretary
2
<PAGE> 1
EXHIBIT 5.1
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (hereinso called) made this 31st day of October, 1996, by and between
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST, a Delaware business trust,
hereinafter referred to as the "TRUST," and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC., a Delaware corporation, hereinafter referred to as the
"ADVISER".
The TRUST and the ADVISER agree as follows:
1. Appointment
a. The TRUST hereby appoints the ADVISER to act as investment adviser to the
TRUST'S Van Kampen American Capital High Yield Municipal Fund ("Initial Fund"),
for the period and on the terms set forth in this Agreement. The ADVISER
accepts such appointment and agrees to furnish the services herein set forth
for the compensation herein provided.
b. In the event that the TRUST establishes one or more portfolios other than
the Initial Fund with respect to which it desires to retain the ADVISER to act
as investment adviser hereunder, it shall notify the ADVISER in writing. If the
ADVISER is willing to render such services it shall notify the TRUST in writing
whereupon such portfolio shall become a Fund hereunder and the compensation
payable by such new portfolio to the ADVISER will be as agreed in writing at
the time.
2. Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of the TRUST's
Trustees and in conformity with applicable laws, the TRUST's Agreement and
Declaration of Trust (Declaration of Trust"), Bylaws, registration statement,
prospectus and the stated investment objectives, policies and restrictions of
the Fund, shall:
a. manage the investment and reinvestment of the TRUST's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the TRUST's Fund, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the account of the Fund of the TRUST with brokers or
dealers selected by the ADVISER;
c. conduct and manage the day-to-day operations of the TRUST including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing of
legal services except for services provided by outside counsel to the TRUST
selected by the Trustees, and the supervision of the TRUST's Treasurer and the
personnel working under his direction; and
<PAGE> 2
d. furnish to the TRUST office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each TRUST trustee and TRUST officer who is an
affiliated person of the ADVISER, except the compensation of the TRUST's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the TRUST and the Fund the most favorable
price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the TRUST's Trustees of appropriate policies and procedures, the ADVISER may,
to the extent authorized by law, cause the TRUST to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized by
law the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.
Except as otherwise agreed, or as otherwise provided herein, the TRUST shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
TRUST shall include (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase and sale of portfolio investments;
(iii) compensation of its trustees and officers other than those who are
affiliated persons of the ADVISER; (iv) compensation of its Treasurer,
compensation of personnel working under the Treasurer's direction, and expenses
of office space, facilities, and equipment used by the Treasurer and such
personnel in the performance of their normal duties for the TRUST which consist
of maintenance of the accounts, books and other documents which constitute the
record forming the basis for the TRUST's financial statements, preparation of
such financial statements and other TRUST documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the TRUST's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the TRUST selected by the Trustees; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the TRUST and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the TRUST; (xi) all other expenses incidental to holding meetings of the
TRUST's shareholders including proxy solicitations therefor; (xii) expenses for
2
<PAGE> 3
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the TRUST's membership in
trade associations approved by the Trustees; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits, or
proceedings to which the TRUST is a party and the legal obligation which the
TRUST may have to indemnify its officers and trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the TRUST
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.
3. Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the TRUST are not impaired.
Except as otherwise required by the Investment Company Act of l940 any of the
shareholders, trustees, officers and employees of the TRUST may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the ADVISER, and in any person controlled by or under common control with the
ADVISER, and the ADVISER, and any person controlled by or under common control
with the ADVISER, may have an interest in the TRUST.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the
part of the ADVISER, the ADVISER shall not be subject to liability to the
TRUST, or to any shareholder of the TRUST, for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
4. Compensation Payable to ADVISER
The TRUST shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, with respect to the
Fund a monthly fee computed at the following annual rates:
.60% on the first $300 million of the TRUST's average daily net assets; .55% on
the next $300 million of the TRUST's average daily net assets; and .50% of any
excess over $600 million.
For purposes of this calculation, assets of the Fund shall be combined
in calculating the investment advisory fee. The Fund shall bear its pro rata
share of such fee based upon its average daily net assets.
Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month, calculated in the
manner provided in the TRUST's Declaration of Trust. Such fee shall be payable
for each calendar month as soon as practicable after the end of that month.
3
<PAGE> 4
The fees payable to the ADVISER by the TRUST pursuant to this Section 4 shall
be reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the TRUST, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with each of the TRUST's portfolio
transactions and shall advise the Trustees of any other commissions, fees,
brokerage or similar payments which may be possible for the ADVISER or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to
receive in connection with the TRUST's portfolio transactions or other
arrangements which may benefit the TRUST.
In the event that the ordinary business expenses of the TRUST for any fiscal
year should exceed .95% of average daily net assets, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess. The
ADVISER's compensation shall be so reduced by a reduction or a refund thereof,
at the time such compensation is payable after the end of each calendar month
during such fiscal year of the TRUST, and if such amount should exceed such
monthly compensation, the ADVISER shall pay the TRUST an amount sufficient to
make up the deficiency, subject to readjustment during the TRUST's fiscal year.
For purposes of this paragraph, all ordinary business expenses of the TRUST
include the investment advisory fee and other operating expenses paid by the
TRUST except (i) for interest and taxes; (ii) brokerage commissions; (iii) as a
result of litigation in connection with a suit involving a claim for recovery
by the TRUST; (iv) as a result of litigation involving a defense against a
liability asserted against the TRUST, provided that, if the ADVISER made the
decision or took the actions which resulted in such claim, it acted in good
faith without negligence or misconduct; (v) any indemnification paid by the
TRUST to its officers and trustees and the ADVISER in accordance with
applicable state and federal laws as a result of such litigation; (vi) amounts
paid to Van Kampen American Capital Distributors, Inc., the distributor of the
TRUST's shares, in connection with a distribution plan adopted by the TRUST's
Trustees pursuant to Rule 12b-1 under the Investment Company Act of 1940; and
(vii) insurance premiums paid by the Fund to insure the timely payment of
principal and interest on its portfolio obligations.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
5. Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the TRUST are the
property of the TRUST and further agrees to surrender promptly to the TRUST any
of such records upon the TRUST's request.
4
<PAGE> 5
The ADVISER further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the Act.
6. Duration and Termination
This Agreement will become effective with respect to the initial Funds
on the date hereof, and with respect to any additional Funds, on the date of
receipt by the TRUST of notice from the ADVISER in accordance with Section 1(b)
hereof that the ADVISER is willing to serve as investment adviser with respect
to such Fund, provided that this Agreement (as supplemented by the terms
specified in any notice and agreement pursuant to Section 1(b) hereof) shall
have been approved by the shareholders of each Fund subject to this Agreement,
in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall remain in full force until May 30, 1997.
Thereafter, if not terminated, this Agreement shall continue in effect as to a
particular Fund for successive periods of twelve months each, provided such
continuance is specifically approved at least annually, (a) by the vote of a
majority of those members of the TRUST's Trustees who are not interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the TRUST's Trustees or by
vote of a majority of the outstanding voting securities of such Fund. Not
withstanding the foregoing, this Agreement may be terminated as to any Fund at
any time, without the payment of any penalty, by the TRUST (by vote of the
TRUST's Trustees or by vote of a majority of the outstanding voting securities
of such Fund), or by the ADVISER, on sixty days' written notice. This Agreement
will immediately terminate in the event of its assignment.
7. Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of l940 (the "1940 Act") and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted to either the ADVISER or
the TRUST by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said Act, and
the term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of l934 and the Rules and Regulations thereunder.
It is understood and agreed that the ADVISER may engage a subadviser to assist
it in the performance of its duties hereunder. The execution of this Agreement
has been authorized by the TRUST's Trustees and by the sole shareholder. This
Agreement is executed on behalf of the TRUST or the Trustees of the TRUST as
Trustees and not individually and that the obligations of this Agreement are
not binding upon any of the Trustees, officers or shareholders of the TRUST
individually but are binding only upon the assets and
5
<PAGE> 6
property of the TRUST. The TRUST is composed of one fund. All obligations of
the TRUST under this Agreement shall apply only on a Fund by Fund basis and the
assets of one Fund shall not be liable for the obligations of any other Fund.
A Certificate of Trust in respect of the TRUST is on file with the Secretary of
the State of Delaware.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
By /s/ DENNIS J. MCDONNELL
--------------------------------------
Name: Dennis J. McDonnell
-----------------------------------
Its: President
------------------------------------
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By /s/ PETER W. HEGEL
--------------------------------------
Name: Peter W. Hegel
-----------------------------------
Its: Executive Vice President
-----------------------------------
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EXHIBIT 5.2
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST -
HIGH YIELD MUNICIPAL FUND
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this 31st day of October, 1996, by and between VAN KAMPEN
AMERICAN CAPITAL ASSET MANAGEMENT, INC., a Delaware corporation (the "Adviser")
and VAN KAMPEN AMERICAN CAPITAL ADVISORS, INC., a Delaware corporation (the
"Subadviser").
WHEREAS, Van Kampen American Capital Tax-Exempt Trust (the "Trust") is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end, diversified management investment company, consisting of multiple
series of investment portfolios;
WHEREAS, the Adviser is registered under the Investment Advisers Act of 1940,
as amended, as an investment adviser and engages in the business of acting as
an investment adviser;
WHEREAS, the Subadviser is registered under the Investment Advisers Act of
1940, as amended, as an investment adviser;
WHEREAS, the Agreement and Declaration of Trust authorizes the Trustees of the
Trust to classify or reclassify authorized but unissued shares of the Trust,
and as of the date of this Agreement, the Trust's Trustees have authorized the
issuance of one series of shares representing interests in one investment
portfolio--the Van Kampen American Capital High Yield Municipal Fund (the
"Fund") (such portfolios and any other portfolios hereafter added to the Trust
being referred to collectively herein as the "Funds");
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated
October 31, 1996 with the Trust (the "Investment Advisory Agreement"), pursuant
to which the Adviser shall act as investment adviser with respect to the
Fund; and
WHEREAS, the securities sought for the investment portfolio of the Fund are
sold in a highly specialized market and the Adviser is desirous to engage a
subadviser in an effort to improve its access to that market and enhance its
ability to acquire investment securities that meet the Fund's investment
objectives;
WHEREAS, the Adviser wishes to retain the Subadviser for purposes of rendering
such advisory services to the Adviser in connection with the Fund upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment of Subadviser. The Adviser hereby appoints the
<PAGE> 2
Subadviser to render investment research and advisory services to the Adviser
with respect to the Fund, under the supervision of the Adviser and subject to
the approval and direction of the Trust's Trustees, and the Subadviser hereby
accepts such appointment, all subject to the terms and conditions contained
herein.
2. Investment Analysis. The duties of the Subadviser shall include:
a. obtaining and evaluating pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund or
the activities in which such issuers engage, or with respect to securities
which the Subadviser considers desirable for inclusion in the Fund's investment
portfolio;
b. determining which issuers and securities shall be represented in the Fund's
investment portfolio and regularly reporting thereon to the Adviser and, at the
request of the Adviser, to the Trust's Trustees; and
c. formulating and implementing continuing programs for the purchases and
sales of the securities of such issuers and regularly reporting thereon to the
Adviser and, at the request of the Adviser, to the Trust's Trustees.
3. Control by Trustees. Any investment program undertaken by the Subadviser
pursuant to this Agreement, as well as any other activities undertaken by the
Subadviser with respect to the Fund, shall at all times be subject to any
directives of the Trust's Trustees.
4. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Subadviser shall at all times conform to:
a. all applicable provisions of the Act and any rules and regulations adopted
thereunder;
b. the provisions of the registration statement of the Trust, as the same may
be amended from time to time, under the Securities Act of 1933 and the Act;
c. the provisions of the Investment Advisory Agreement;
d. the provisions of the Agreement and Declaration of Trust of the Trust, as
the same may be amended from time to time;
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e. the provisions of the by-laws of the Trust, as the same may be amended from
time to time; and
f. any other applicable provisions of state or federal law.
5. Compensation. The Adviser shall pay the Subadviser, as compensation for
services rendered hereunder, an annual fee, payable monthly, which for the
initial one-year term of this Agreement shall be paid according to the
following fee schedule: 0.40% of the first $20 million of the Fund's average
daily net assets, 0.25% of the next $30 million of the Fund's average daily net
assets and 0.15% of the excess over $50 million of the Fund's average daily net
assets. The average daily net assets of the Fund shall be determined by taking
the average of the net assets for each business day during a given calendar
month, calculated in the manner provided in the Trust's Agreement and
Declaration of Trust. After the termination of the initial term of this
Agreement, such fee schedule shall be subject to annual adjustment concurrently
with renewal of this Agreement for an additional one-year term. Each annual
renewal shall be deemed to be at the fee schedule in effect immediately prior
to the expiration of the most recent term unless a new fee schedule is set
prior to renewal in writing signed by the Adviser and the Subadviser, in which
case the renewal will be deemed to be at the fee schedule set forth in such
writing.
6. Expenses of the Fund. All of the ordinary business expenses incurred in the
operations of the Fund and the offering of its shares shall be borne by the
Fund unless specifically provided otherwise in the Investment Advisory
Agreement.
7. Non-Exclusivity. The services of the Subadviser to the Adviser with respect
to the Trust and the Fund are not to be deemed to be exclusive, and the
Subadviser shall be free to render investment advisory and administrative or
other services to others (including other investment companies) and to engage
in other activities. It is understood and agreed that officers or directors of
the Subadviser may serve as officers or directors/trustees of the Adviser or of
the Trust, and that officers or directors/trustees of the Adviser or of the
Trust may serve as officers or directors of the Subadviser to the extent
permitted by law; and that the officers and directors of the Subadviser are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
8. Term and Approval. This Agreement shall have an initial term through May
30, 1997, and may be continued from year to year thereafter provided that the
continuation of the Agreement is specifically approved at least annually:
a. (i) by the Trust's Trustees or (ii) by the vote of "a majority
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<PAGE> 4
of the outstanding voting securities" of the Fund (as defined in Section
2(a)(42) of the Act); and
b. by the affirmative vote of a majority of the trustees who are not parties
to this Agreement or "interested persons" (as defined in the Act) of a party to
this Agreement (other than as Trustees of the Trust), by votes cast in person
at a meeting specifically called for such purpose.
9. Termination. This Agreement may be terminated as to the Fund at any time,
without the payment of any penalty, by vote of the Trust's Trustees or by vote
of a majority of the Fund's outstanding voting securities, or by the Adviser,
or by the Subadviser on sixty (60) days' written notice to the other party and
to the Trust. The notice provided for herein may be waived by either party.
This Agreement shall automatically terminate in the event of its assignment,
the term "assignment" for purposes of this paragraph having the meaning defined
in Section 2(a)(4) of the Act.
10. Liability of Subadviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on
the part of the Subadviser or any of its officers, directors or employees, the
Subadviser shall not be subject to liability to the Adviser for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
11. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to such address as may be designated for
the receipt of such notice, with a copy to the Trust. Until further notice, it
is agreed that the address of (i) the Trust shall be One Parkview Plaza,
Oakbrook Terrace, Illinois,60181; (ii) that of the Adviser shall be 2800 Post
Oak Blvd. Houston, Texas 77056; and (iii) that of the Subadviser shall be 40
Broad Street, Suite 828, Boston, Massachusetts 02110.
12. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to the Act. In addition, where the effect of a requirement of
the Act reflected in any provision of the Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
13. Miscellaneous Provisions
The execution of this Agreement has been authorized by the Trust's Trustees and
by the sole shareholder. This Agreement is executed
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on behalf of the Trust or the Trustees of the TRUST as Trustees and not
individually and that the obligations of this Agreement are not binding upon
any of the Trustees, officers or shareholders of the TRUST individually but are
binding only upon the assets and property of the TRUST. A Certificate of Trust
in respect of the Fund is on file with the Secretary of State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ DENNIS J. MCDONNELL
-------------------------------------
Name: Dennis J. McDonnell
-----------------------------------
Its: President
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VAN KAMPEN AMERICAN CAPITAL ADVISORS, INC.
By: /s/ PETER W. HEGEL
-------------------------------------
Name: Peter W. Hegel
-----------------------------------
Its: Executive Vice President
------------------------------------
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EXHIBIT 6.1
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of July 26, 1996 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST - VAN
KAMPEN AMERICAN CAPITAL HIGH YIELD MUNICIPAL FUND (the "Fund"), and VAN KAMPEN
AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations
of front-end sales charges, distribution fees, service fees and contingent
deferred sales charges. Classes of shares, if any, subject to a front-end
sales charge and a distribution and/or service fee are referred to herein as
"FESC Classes" and the Shares of such classes are referred to herein as "FESC
Shares." Classes of shares, if any, subject to a contingent-deferred sales
charge and a distribution and/or a service fee are referred to herein as "CDSC
Classes" and Shares of such classes are referred to herein as "CDSC Shares."
Classes of shares, if any, subject to a front-end sales charge, a
contingent-deferred sales charge and a distribution and/or service fee are
referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares." The Fund reserves the right to
refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.
The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.
The Distributor agrees that it will not take any long or short
positions in the Shares, except for long positions in those Shares purchased by
the Distributor in accordance with any systematic sales plan described in the
then current Prospectus of the Fund and except as permitted by Section 2
hereof, and that so far as it can control the situation, it will prevent any of
its trustees, officers or shareholders from taking any long or short positions
in the Shares, except for legitimate investment purposes.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of
Trustees; (c) upon the exercise of purchase or subscription rights granted to
the holders of Shares on a pro rata basis; (d) in connection with the automatic
reinvestment of dividends and distributions from the Fund; or (e) in connection
with the issue and sale of Shares to trustees, officers and employees of the
Fund; to directors, officers and employees of the investment adviser of the
Fund or any principal underwriter (including the Distributor) of the Fund; to
retirees of the Distributor that purchased shares of any mutual fund
distributed by the Distributor prior to retirement; to directors, officers and
employees of Van Kampen American Capital, Inc. (formerly The Van Kampen Merritt
Companies, Inc.) (the parent of the Distributor), VK/AC Holding, Inc. (formerly
VKM Holdings, Inc.)(the parent of The Van Kampen Merritt Companies, Inc.) and
to the subsidiaries of VK/AC Holding, Inc.; and to any trust, pension,
profit-sharing or other benefit plan for any of the aforesaid persons as
permitted by Rule 22d-1 under the Investment Company Act of 1940 (the "1940
Act").
The Distributor shall have the right to buy from the Fund the Shares needed,
but not more than the Shares needed (except for reasonable allowances for
clerical errors, delays and errors of transmission and cancellation of orders)
to fill unconditional orders for Shares received by the Distributor from
dealers, agents and investors during each period when particular net asset
values and public offering prices are in
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<PAGE> 2
effect as provided in Section 3 hereof; and the price which the Distributor
shall pay for the Shares so purchased shall be the respective net asset
value used in determining the public offering price on which such orders were
based. The Distributor shall notify the Fund at the end of each such period,
or as soon thereafter on that business day as the orders received in such
period have been compiled, of the number of Shares of each class that the
Distributor elects to purchase hereunder.
3. Public Offering Price. The public offering price per Share shall
be determined in accordance with the then current Prospectus of the Fund. In
no event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess
of the applicable maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as in effect
from time to time. The net asset value per share for each class of Shares,
respectively, shall be determined in the manner provided in the Declaration of
Trust and By-Laws of the Trust as then amended, the Certificate of Designation
with respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the
exemptive order with respect to the Fund (Release No. IC-19600) issued by the
Securities and Exchange Commission on July 28, 1993, as it may be amended from
time to time or succeeded by other exemptive orders or rules promulgated by the
Securities and Exchange Commission under the 1940 Act. The Fund will cause
immediate notice to be given to the Distributor of each change in net asset
value as soon as it is determined. Discounts to dealers purchasing FESC Shares
from the Distributor for resale and to brokers and other eligible agents making
sales of FESC Shares to investors and compensation payable from the Distributor
to dealers, brokers and other eligible agents making sales of CDSC Shares and
Combination Shares shall be set forth in the selling agreements between the
Distributor and such dealers or agents, respectively, as from time to time
amended, and, if such discounts and compensation are described in the then
current Prospectus for the Fund, shall be as so set forth.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund
Shares, the Distributor will in all respects duly comply with all state and
federal laws relating to the sale of such securities and with all applicable
rules and regulations of all regulatory bodies, including without limitation
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and all applicable rules and regulations of the Securities and Exchange
Commission under the 1940 Act, and will indemnify and save the Fund harmless
from any damage or expense on account of any unlawful act by the Distributor or
its agents or employees. The Distributor is not, however, to be responsible
for the acts of other dealers or agents, except to the extent that they shall
be acting for the Distributor or under its direction or authority. None of the
Distributor, any dealer, any agent or any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus heretofore or hereafter
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") (as any such Registration Statement and
Prospectus may have been or may be amended from time to time), covering the
Shares, and in any supplemental information to any such Prospectus approved by
the Fund in connection with the offer or sale of Shares. None of the
Distributor, any dealer, any broker or any other person is authorized to act as
agent for the Fund in connection with the offering or sale of Shares to the
public or otherwise. All such sales shall be made by the Distributor as
principal for its own account.
In selling Shares to investors, the Distributor will adopt and comply
with certain standards, as set forth in Exhibit III attached hereto as to when
each respective class of Shares may appropriately be sold to particular
investors. The Distributor will require every broker, dealer and other
eligible agent participating in the offering of the Shares to agree to adopt
and comply with such standards as a condition precedent to their participation
in the offering.
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<PAGE> 3
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of
Shares under the federal securities laws, and the Fund
will exercise its best efforts to obtain said
registration and qualification;
(ii) all expenses in connection with the printing of any
notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any
other notice or communication sent to shareholders
in connection with any meeting of the shareholders or
otherwise, any annual, semiannual or other reports or
communications sent to the shareholders, and the
expenses of sending prospectuses relating to the Shares
to existing shareholders;
(iii) all expenses of any federal or state original-issue tax
or transfer tax payable upon the issuance, transfer or
delivery of Shares from the Fund to the Distributor;
and
(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent Shares.
(b) The Distributor will also permit its officers and employees
to serve without compensation as trustees and officers of the Fund if duly
elected to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket
costs and expenses actually incurred by it in connection with distribution of
each class of Shares respectively in accordance with the terms of a plan (the
"12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as
such 12b-1 Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder with respect to a
class of Shares unless and until this Agreement shall have been approved for
each such class by a majority of the Board of Trustees of the Fund and by a
majority of the "Disinterested Trustees" (as such term is defined in such 12b-1
Plan) by vote cast in person at a meeting called for the purpose of voting on
this Agreement. A copy of such 12b-1 Plan as in effect on the date of this
Agreement is attached as Exhibit I hereto. The Fund reserves the right to
terminate such 12b-1 Plan with respect to a class of Shares at any time, as
specified in the Plan. The persons authorized to direct the payment of funds
pursuant to this Agreement and the 12b-1 Plan shall provide to the Fund's Board
of Trustees, and the Trustees shall review, at least quarterly, a written
report with respect to each of the classes of Shares of the amounts so paid and
the purposes for which such expenditures were made for each such class of
Shares.
(d) The Fund shall compensate the Distributor for providing
services to, and the maintenance of, shareholder accounts in the Fund
(including prepaying service fees to eligible brokers, dealers and financial
intermediaries and expenses incurred in connection therewith) and the
Distributor may pay as agent for and on behalf of the Fund a service fee with
respect to each class of Shares to brokers, dealers and financial
intermediaries for the provision of shareholder services and the maintenance of
shareholder accounts in the Fund in the amount with respect to each class of
Shares set forth from time to time in the Fund's prospectus. The Fund shall
compensate the Distributor for such expenses in accordance with the terms of a
service plan (the "Service Plan"), as such Service Plan may be in effect from
time to time; provided, however, that no service fee payments shall be due or
paid to the Distributor hereunder with respect to a class of Shares unless and
until this Agreement shall have been approved for each such class by a majority
of the Board of Trustees of the Fund and by a majority of the Disinterested
Trustees by vote cast in person at a meeting called for the purpose of voting
on this Agreement. A copy of such Service Plan as in effect on the date of
this Agreement is attached as Exhibit II hereto. The Fund reserves the right
to terminate such Service Plan with respect to a class of Shares at any time,
as specified in the Plan. The persons authorized to direct the payment of
funds pursuant to this Agreement and the Service Plan shall provide to the
Fund's Board of Trustees, and the Trustees shall
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<PAGE> 4
review, at least quarterly, a written report with respect to each of the
classes of Shares of the amounts paid as service fees for each such class of
Shares.
6. Redemption of Shares. In connection with the Fund's redemption of
its Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal
and state legislation, any applicable rules of the National Association of
Securities Dealers, Inc., and any applicable rules and regulations of the
Securities and Exchange Commission under the 1940 Act, the Distributor may
accept offers of holders of Shares to resell such Shares to the Fund on such
terms and conditions and at such prices as described and provided for in the
then current Prospectus of the Fund.
(b) The Distributor agrees to notify the Fund at such times as
the Fund may specify of the number of each class of Shares, respectively,
repurchased for the Fund's account and the time or times of such repurchases,
and the Fund shall notify the Distributor of the prices and, in the case of a
class of CDSC Shares or Combination Shares, of the deferred sales charge as
described below, if any, applicable to repurchases of Shares of such class.
(c) The Fund shall have the right to suspend or revoke the
foregoing authorization at any time; unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by telegraph or by written instrument from any of the Fund's officers.
In the event that the Distributor's authorization is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of
the Board of Trustees of the Fund.
(d) The Distributor agrees that all repurchases of Shares made
by the Distributor shall be made only as agent for the Fund's account and
pursuant to the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to
pay, for the Fund's account, the repurchase price (together with any applicable
contingent deferred sales charge) of any Shares so repurchased for the Fund
against the authorized transfer of book shares from an open account and against
delivery of any other documentation required by the Board of Trustees of the
Fund or, in the case of certificated Shares, against delivery of the
certificates representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other
compensation in respect of any repurchases of FESC Shares for the Fund under
the foregoing authorization and appointment as agent. With respect to any
repurchase of CDSC Shares or Combination Shares, the Distributor shall receive
the deferred sales charge, if any, applicable to the respective class of Shares
that have been held for less than a specified period of time with respect to
such class as set forth from time to time in the Fund's Prospectus. The
Distributor shall receive no other commission or other compensation in respect
of any repurchases of CDSC Shares or Combination Shares for the Fund under the
foregoing authorization and appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms
of this Agreement are redeemed or repurchased by the Fund or by the Distributor
as agent or are tendered for redemption within seven business days after the
date of the Distributor's confirmation of the original purchase by the
Distributor, the Distributor shall forfeit the amount above the net asset value
received by it in respect of such Shares, provided that the portion, if any, of
such amount re-allowed by the Distributor to dealers or agents shall be
repayable to the Fund only to the extent recovered by the Distributor from the
dealer or agent concerned. The Distributor shall include in agreements with
such dealers and agents a corresponding provision for the forfeiture by them of
their concession with respect to FESC Shares
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<PAGE> 5
purchased by them or their principals and redeemed or repurchased by the Fund
or by the Distributor as agent within seven business days after the date of the
Distributor's confirmation of such initial purchases.
7. Indemnification. The Fund agrees to indemnify and hold harmless
the Distributor and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground
that the registration statement, Prospectus, shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading under the 1933 Act or any other statute or the common law. However,
the Fund does not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund by or on behalf of the
Distributor. In no case (i) is the indemnity of the Fund in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its securityholders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this Section with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or any such person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any such
person (or after the Distributor or the person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund shall
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them.
If the Fund does not elect to assume the defense of any suit, it will reimburse
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of the
Shares.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of its trustees and officers and each person,
if any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the 1933 Act
or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor. In no
case (i) is the indemnity of the Distributor in favor of the Fund or any person
indemnified to be deemed to protect the Fund or any such person against any
liability to which the Fund or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligation and duties
under this Amended Agreement, or (ii) is the Distributor to be liable under its
5
<PAGE> 6
indemnity agreement contained in this paragraph with respect to any claim made
against the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the Fund or
person (or after the Fund or such person shall have received notice of service
on any designated agent). However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and trustees and to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
Fund or controlling persons, defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the Distributor does
not elect to assume the defense of any suit, it will reimburse the Fund,
officers and trustees or controlling person or persons, defendant or defendants
in the suit, for the reasonable fees and expenses of any counsel retained by
them. The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Shares.
8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.
9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
10. Notice. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party or at such other address as such party shall have
designated in writing.
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11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Secretary
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
7
<PAGE> 1
EXHIBIT 6.2
-------------------------------------------------------
DEALER AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
-------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to sell to you shares
of any of the Van Kampen American Capital open-end investment companies (the
"Open-End Funds" or, individually, an "Open-End Fund") and Van Kampen American
Capital closed-end investment companies (the "Closed-End Funds" or,
individually, a "Closed-End Fund") distributed by Van Kampen American Capital
Distributors, Inc. ("VKAC") pursuant to the terms and conditions contained
herein. Collectively, the Open-End Funds and Closed-End Funds sometimes are
referred to herein as the "Funds" or, individually, as a "Fund".
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to sell to you
shares of each Open-End Fund and each Closed-End Fund prior to the Effective
Date (as defined herein) of each Fund's Registration Statement (as defined
herein) (the "Initial Offering Period") and after the Effective Date of each
Fund's Registration Statement (the "Continuous Offering Period") (if any) as
described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the registration statement for the fund on the effective date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any preliminary Statement of Additional Information included at
any time as a part of the registration statement for any Fund prior to the
effective date and which is authorized by VKAC for use in connection with the
offering of shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a broker-dealer registered with the Securities and
Exchange Commission (the "SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or, in the alternative,
that you are a foreign dealer or bank, not required to be registered as a
broker-dealer with the SEC and not required or eligible for membership in the
NASD. If you are such an NASD member, you agree that in making sales of shares
of the one or more classes of shares of each Fund you will comply with all
applicable rules of the NASD, including without limitation rules pertaining to
the opening, approval, supervision and monitoring of customer accounts, the
NASD's Interpretation with Respect to Free-Riding and Withholding and Sections
8, 24 and 36 of Article III of the NASD's Rules of Fair Practice. If you are
such an unregistered foreign dealer or bank, you agree not to offer or sell, or
to agree to offer or sell, directly or indirectly, except through VKAC, any
shares to any party to whom such shares may not be sold unless you are so
registered and a member of the NASD, and in making sales of such shares you
agree to comply with the NASD's Interpretation with Respect to Free-Riding and
Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules of
Fair Practice as though you were a member in
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<PAGE> 2
good standing of the NASD and to comply with Section 25 of such Article III as
it applies to a nonmember broker or dealer in a foreign country. You and we
agree to abide by all other Rules and Regulations of the NASD, including
Section 26 of its Rules of Fair Practice, and all applicable state and Federal
laws, rules and regulations. Your acceptance also constitutes a representation
that you have been duly authorized by proper corporate or partnership action to
enter into this Agreement and to perform your obligations hereunder. You will
not accept any orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. In all sales of shares of the Funds to the public you
shall act as dealer for your own account, and you shall have no authority in
any transaction to act as agent for the Fund or for VKAC.
3. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the "Registration
Statement") on the SEC Form applicable to the respective Fund. The date on
which the Registration Statement is declared effective by the SEC is referred
to herein as the "Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you expressly
acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) in any state prior to the Effective Date of the
Registration Statement with respect thereto or (ii) in any state in which such
offer or sale would be unlawful prior to registration or qualification under
the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus. You agree that you will distribute to the
public only (a) the Preliminary Prospectus, the Prospectus and any amendment or
supplement thereto and (b) sales literature or other documents expressly
authorized for such distribution by VKAC.
(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, you will be
responsible for confirming such indications of interest with your customers
following the Effective Date. Indications of interest with respect to shares
of a class of a Fund's shares transmitted to VKAC prior to the Effective Date
will be conditioned upon the occurrence of the Effective Date and the
registration or qualification of the respective class of shares in the
respective state.
(d) Indications of interest with respect to shares
of a class of a Fund's shares which are not canceled by you prior to the latter
of the Effective Date and the registration or qualification of the respective
class of the Fund's shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for shares of such class of shares of the Fund.
(e) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Prospectus
and this Agreement.
4. After the Effective Date, you will not offer shares of a
class of the Fund's shares for sale in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state or where you
are not qualified to act as a dealer, except for states in which they are
exempt from qualification.
5. In the event that you offer shares of the Fund for sale
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
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<PAGE> 3
6. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to sell the shares in such jurisdiction shall be solely your responsibility.
7. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
8. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion.
9. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance or transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the sale or, at its option, to sell the shares
ordered back to the Fund, and in either case, VKAC may hold you responsible for
any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
10. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
11. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
12. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done
so, (ii) notify the Fund of the request so that the Fund can fulfill the
request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VKAC, to bring all subsequent changes to
such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus (and not the Statement of Additional Information) for such Fund
filed pursuant to Rule 497 under the Securities Act of 1933, as amended.
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<PAGE> 4
13. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares of Funds sold to you shall be issued only if
specifically requested.
14. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
15. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
16. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
17. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
18. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
19. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE ONLY TO OPEN-END FUNDS
20. Each of the Open-End Fund's is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
21.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. The dealer discount
applicable to any sale of shares of a class of FESC Shares of an Open-End Fund
shall be a percentage of the applicable public offering price for such shares
as provided for in the then-current Prospectus of such Open-End Fund or, if not
so provided, as provided to you from time to time in writing by VKAC.
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. The dealer
sales compensation payable by VKAC applicable to any sale of shares of a class
of CDSC Shares of an Open-End Fund shall be the percentage of the applicable
public offering price for such shares as provided for in the then-current
Prospectus of such Open-End Fund or, if not so provided, as provided to you
from time to time in writing by VKAC.
22. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.
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<PAGE> 5
23. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately sell the various classes of shares
of the Open-End Funds to investors and that you will sell such shares only in
accordance therewith.
24.(a) You agree to purchase shares of an Open-End Fund only
from VKAC or from your customers. If you purchase shares of an Open-End Fund
from VKAC, you agree that all such purchases shall be made only: (i) to cover
orders already received by you from your customers or (ii) for your own bona
fide investment. If you purchase shares of an Open-End Fund from your
customers, you agree to pay such customers not less than the applicable
repurchase price for such shares as established by the then-current Prospectus
for such Open-End Fund. VKAC in turn agrees that it will not purchase any
shares from an Open-End Fund except for the purpose of covering purchase orders
that it has already received.
(b) With respect to shares of a class of CDSC Shares
of an Open-End Fund purchased from your customers, you additionally agree to
resell such shares only to VKAC as agent for the Fund at the repurchase price
for such shares as established by the then-current Prospectus of such Open-End
Fund. You acknowledge and understand that shares of a class of CDSC Shares of
an Open-End Fund may be subject to a CDSC payable to VKAC as set forth in the
Prospectus for such Open-End Fund in effect at the time of the original
purchase of such shares from the Open-End Fund and that the repurchase price
for such shares that will be paid by VKAC will reflect the imposition of any
applicable CDSC.
25.(a) You shall sell shares of a class of shares of an
Open-End Fund only: (i) to customers at the applicable public offering price
or (ii) to VKAC as agent for the Open-End Fund at the repurchase price in the
then-current Prospectus of such Open-End Fund. In such a sale to VKAC, you may
act either as principal for your own account or as agent for your customer. If
you act as principal for your own account in purchasing shares of a class of
shares of an Open-End Fund for resale to VKAC, you agree to pay your customer
not less than the price that you receive from VKAC. If you act as agent for
your customer in selling shares of a class of shares of an Open-End Fund to
VKAC, you agree not to charge your customer more than a fair commission for
handling the transaction. You acknowledge and understand that CDSC Shares of
an Open-End Fund may be subject to a CDSC payable to VKAC as set forth in the
Prospectus of such Open-End Fund in effect at the time of the original purchase
of such CDSC Shares and that the repurchase price that will be paid by VKAC for
such CDSC Shares will reflect the imposition of any such CDSC.
26. If any shares of a class of FESC Shares of an Open-End
Fund sold to or by you under the terms of this Agreement are repurchased by the
Fund or by VKAC as agent for the Fund or are tendered for redemption within
seven business days after the date of VKAC's confirmation of the original
purchase, it is agreed that you shall forfeit your right to any dealer discount
received by you on such FESC Shares. VKAC will notify you of any such
repurchase or redemption within ten business days from the date on which the
repurchase or redemption order in proper form is delivered to VKAC or to the
Fund, and you shall forthwith refund to VKAC the full dealer discount allowed
to you on such sale. VKAC agrees, in the event of any such repurchase or
redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the discount allowed to you, to pay
such refund forthwith to the Fund.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
27. No Closed-End Fund will issue fractional shares.
28. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers and dealers participating in the Initial Offering
Period or among brokers, dealers and banks in the Continuous Offering Period,
as the case may be, on other than a pro rata basis, which may result in
5
<PAGE> 6
certain brokers, dealers and banks not being allocated the full amount of
shares of such fund sold by them while certain other brokers, dealers and banks
may receive their full allocation.
29. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during the Initial
Offering Period to VKAC within the time period as specified in such Closed-End
Fund's Prospectus (or in the time period as extended by VKAC in writing). You
also agree to transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public offering price for
such Closed-End Fund is next determined after your receipt of such order as set
forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
30. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VKAC for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VKAC will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later that
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you in the Initial Offering Period or the Continuous
Offering Period are resold in the open market or otherwise during the
Forfeiture Period, VKAC reserves the right to require you to forfeit any sales
concessions and other additional compensation with respect to such shares. In
the event of a forfeiture, VKAC may withhold any forfeited sales concessions
and other additional compensation that has not yet been paid or from other
amounts yet to be paid to you (whether or not payable with respect to such
shares) and you agree to repay to VKAC, promptly upon demand, any forfeited
sales concessions and other compensation that has been paid. Determinations of
the amounts to be paid to you or by you to VKAC shall be made by VKAC and shall
be conclusive.
31. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time), and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
32. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
33. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
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<PAGE> 7
34. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
sell shares of the Prime Rate Fund is subject to further terms and conditions
in addition to those set forth above as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC, and
that no secondary market for the shares of the Prime Rate Fund exists
currently, or is expected to develop. You also expressly acknowledge and agree
that, in the event your customer cancels their order for shares after
confirmation, such shares may not be repurchased, remarketed or otherwise
disposed of by or through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund which have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Dealer Agreement,
keeping a copy for your files and returning the original to us.
Accepted and Agreed to:
(PRINT OR TYPE)
Dated: ________________________________________ By:
Its:
________________________________________
Broker-Dealer Name
________________________________________
Broker-Dealer Taxpayer ID Number
VAN KAMPEN AMERICAN CAPITAL
________________________________________ DISTRIBUTORS, INC.
Address
________________________________________
City, State, Zip
By: ________________________________________
Signature
________________________________________
Name
________________________________________
Title
_________________________________________
Phone
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<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
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<PAGE> 1
EXHIBIT 6.3
---------------------------------------------------------
BROKER FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
---------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to
you shares of any of the Van Kampen American Capital open-end investment
companies (the "Open-End Funds" or, individually, an "Open-End Fund") and Van
Kampen American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen American
Capital Distributors, Inc. ("VKAC") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a broker-dealer that desires to make available shares of such Funds to
your customers on a fully disclosed basis wherein VKAC would confirm
transactions of your customers in a Fund directly to them.
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to make available
to you shares of each Open-End Fund and each Closed-End Fund, prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (the
"Initial Offering Period") and after the Effective Date of each Fund's
Registration Statement (as defined herein) (the "Continuous Offering Period")
(if any) as described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the registration statement for the fund on the effective date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any preliminary Statement of Additional Information included at
any time as a part of the registration statement for any Fund prior to the
effective date and that is authorized by VKAC for use in connection with the
offering of shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a securities broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"). You agree
to abide by the laws, rules and regulations of the SEC and NASD, including
without limitation rules pertaining to the opening, approval, supervision and
monitoring of customer accounts, the NASD's Interpretation with Respect to
Free-Riding and Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice. You and we agree to abide by all other Rules
and Regulations of the NASD, including Section 26 of its Rules of Fair
Practice. Your acceptance also constitutes a representation that you have been
duly authorized by proper corporate or partnership action to enter into this
Agreement and to perform your obligations hereunder. You will not accept any
orders from any broker, dealer or financial institution who is purchasing from
you with a view toward distribution unless you have obtained such person's or
entity's written consent to be bound by the terms of this Agreement.
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<PAGE> 2
2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities Investor's
Protection Act, your customers will be considered customers of VKAC and not of
your firm. VKAC has been granted an exemption from the NASD rules of Fair
Practice, Article III Section 45 requirements to send customer statements and
thus will not due so. Customer statements showing account activity and
balances will be mailed to the customer by the Funds each time a financial
transaction occurs in their account and on a monthly basis. Nothing herein
shall cause your firm's customers to be interpreted as customers of VKAC for
any other purpose, or to negate the intent of any other section of this
agreement, including, but not limited to, the delineation of responsibilities
as set forth elsewhere in this agreement.
3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent for the Fund
or for VKAC.
4. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the "Registration
Statement") on the SEC form applicable to the respective Fund. The date on
which the Registration Statement is declared effective by the SEC is referred
to herein as the "Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you expressly
acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the Registration
Statement or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus.
(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, upon your
instruction VKAC will send confirmation of such indications of interest
directly to your customers in writing, together with copies of the Preliminary
Prospectus for the Fund, and send copies of the confirmations to you.
Indications of interest with respect to shares of a class of a Fund's shares
transmitted to VKAC prior to the Effective Date are subject to acceptance or
rejection by VKAC in its sole discretion and are conditioned upon the
occurrence of (i) the Effective Date and (ii) the registration or qualification
of the respective class of shares in the respective state.
(d) Indications of interest with respect to shares
of a class of a Fund's shares not cancelled by you prior to or on the later of
(i) the Effective Date and (ii) the registration or qualification of the
respective class of shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for Shares.
(e) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together with copies of
the Prospectus for the Fund, and send copies of the confirmations to you.
(f) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies that
you discover and will promptly bring to VKAC's attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(g) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or rejection by
VKAC in its sole discretion.
5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state, except for
states in which they are exempt from qualification.
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<PAGE> 3
6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to make the shares available in such jurisdiction shall be solely your
responsibility.
8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (a)
the Preliminary Prospectus, the Prospectus and any amendment or supplement
thereto and (b) sales literature or other documents expressly authorized for
such distribution by VKAC.
10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VKAC of any errors
or discrepancies that you discover and shall promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance of transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VKAC may hold you responsible
for any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done
so, (ii) notify the Fund of the request so that the Fund can fulfill the
request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates,
3
<PAGE> 4
number of copies and persons to whom sent) of copies of any Preliminary
Prospectus (and any Statement of Additional Information) and/or Prospectus (and
any Statement of Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VKAC, to bring all
subsequent changes to such Preliminary Prospectus or Prospectus to the
attention of anyone to whom such material shall have been distributed. You
further agree to furnish to persons who receive a confirmation of sale of
shares of any Fund a copy of the Prospectus for such Fund filed pursuant to
Rule 497 under the Securities Act of 1933, as amended. Upon your request, VKAC
will furnish to such persons a copy of the Prospectus for such Fund filed
pursuant to Rule 497 under the Securities Act of 1993, as amended.
15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except for servicing and
informational mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers only if
specifically requested.
17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
22. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
24.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. On each order for shares of
a class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. You will remit
payment of the aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to receive the
applicable selling compensation for such shares as
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<PAGE> 5
provided for in the then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by VKAC.
25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.
26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately make available the various classes
of shares of the Open-End Funds to investors and that you will make available
such shares only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering price, (ii) from
VKAC and (iii) to cover orders already received by you from your customers.
VKAC in turn agrees that it will not purchase any shares from an Open-End Fund
except for the purpose of covering purchase orders that it has already
received.
28.(a) If any shares of a class of FESC Shares of an Open-End
Fund sold to your customers under the terms of this Agreement are repurchased
by the Fund or by VKAC as agent for the Fund or are tendered for redemption
within seven business days after the date of VKAC's confirmation of the
original purchase, it is agreed that you shall forfeit your right to any agency
commission received by you on such FESC Shares. VKAC will notify you of any
such repurchase or redemption within ten business days from the date on which
the repurchase or redemption order in proper form is delivered to VKAC or to
the Fund, and you shall forthwith refund to VKAC the full agency commission
allowed to you on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the agency commission allowed to
you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by the Fund or
by VKAC as agent for the Fund or are tendered for redemption within seven
business days after the date of VKAC's confirmation of the original purchase,
it is agreed that you shall forfeit your right to any sales compensation
received by you on such CDSC Shares. We will notify you of any such repurchase
or redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the Fund, and you
shall forthwith refund to VKAC the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, if permitted by applicable laws,
banks participating in the Initial Offering Period or among brokers, dealers
and banks in the Continuous Offering Period, as the case may be, on other than
a pro rata basis, which may result in certain brokers, dealers and banks not
being allocated the full amount of shares of such Fund sold by them while
certain other brokers, dealers and banks may receive their full allocation.
31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during the Initial
Offering Period to VKAC within the time period as specified in such Closed-End
Fund's Prospectus (or in the time period as extended by VKAC in writing). You
also agree to transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public offering price for
such Closed-End Fund is next determined after your receipt of such order, as
set forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements
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<PAGE> 6
of such programs are satisfied). In no event will any Closed-End Fund
reimburse VKAC for any such sales concessions or other additional compensation
or pay any such concession or other additional compensation or allowance
directly to you. VKAC will specify for each Closed-End Fund a period after the
date that the shares of such Closed-End Fund are listed on the New York Stock
Exchange, the American Stock Exchange or another national securities market
system (which period will end no later than the first dividend payment date
with respect to such Closed-End Fund) during which sales concessions and other
additional compensation are subject to forfeiture as provided in the following
sentence (the "Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing shares will be
required to transfer ownership of such shares. In the event that any shares of
a Closed-End Fund sold through an order received from you in the Initial
Offering Period or the Continuous Offering Period are resold in the open market
or otherwise during the Forfeiture Period, VKAC reserves the right to require
you to forfeit any sales concessions and other additional compensation with
respect to such shares. In the event of a forfeiture, VKAC may withhold any
forfeited sales concessions and other additional compensation that has not yet
been paid or from other amounts yet to be paid to you (whether or not payable
with respect to such shares), and you agree to repay to VKAC, promptly upon
demand, any forfeited sales concessions and other compensation that has been
paid. Determinations of the amounts to be paid to you or by you to VKAC shall
be made by VKAC and shall be conclusive.
33. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time) and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and, (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
make available to you shares of the Prime Rate Fund is subject to further terms
and conditions in addition to those set out above, as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC and
that no secondary market for the shares of the Prime Rate Fund exists currently
or is expected to develop. You also expressly acknowledge and agree that, in
the event your customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed of by or
through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund that have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
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<PAGE> 7
THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE
FUND'S CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Broker Fully
Disclosed Clearing Agreement, keeping a copy for your files and returning the
original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated: ___________________________________________ By:
___________________________________________ Its:
VAN KAMPEN AMERICAN CAPITAL
__________________________________________ DISTRIBUTORS, INC.
Broker-Dealer Name
________________________________________
Broker-Dealer Taxpayer ID Number
________________________________________
Address
________________________________________
City, State, Zip
By: ________________________________________
Signature
________________________________________
Name
________________________________________
Title
________________________________________
Phone
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<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
8
<PAGE> 1
EXHIBIT 6.4
----------------------------------------------------------------------
BANK FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
REGARDING VAN KAMPEN AMERICAN CAPITAL
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
-----------------------------------------------------------------------
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to
you shares of any of the Van Kampen American Capital open-end investment
companies (the "Open-End Funds" or, individually, an "Open-End Fund") and Van
Kampen American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen American
Capital Distributors, Inc. ("VKAC") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a bank that desires to make available shares of such Funds to your
customers on a fully disclosed basis wherein VKAC would confirm transactions of
your customers in a Fund directly to them. You agree not to make available
shares of such Funds during any fixed price offering of such shares.
VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for each Fund with
respect to its offering of one or more classes of shares as described in each
Fund's Prospectus. Pursuant to this Agreement, VKAC offers to make available
to you shares of each Open-End Fund and each Closed-End Fund prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (as
defined herein) (the "Initial Offering Period"), to the extent permitted by
applicable law, and after the Effective Date of each Fund's Registration
Statement (the "Continuous Offering Period") (if any) as described in such
Closed-End Fund's Prospectus.
As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of Additional Information
included in the Registration Statement for the Fund on the Effective Date and
as from time to time thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any preliminary
prospectus and any Statement of Additional Information included at any time as
a part of the Registration Statement for any Fund prior to the Effective Date
and that is authorized by VKAC for use in connection with the offering of
shares.
In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the terms of the
Agreement are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a
representation that you are a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, and have been duly authorized to
enter into this Agreement and perform your obligations hereunder. This
Agreement as well as your authority to make shares available to your customers
will automatically terminate if you shall cease to be a bank as defined above.
You agree not to offer or sell shares of any Fund except through VKAC. You
will not accept any orders from any broker, dealer or financial institution who
is purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities Investor's
Protection Act, your customers will be considered customers of VKAC and not of
your firm. VKAC has been granted an exemption from the NASD rules of Fair
Practice, Article III Section 45 requirements to send customer statements and
thus will not due so. Customer statements showing account activity and
balances will be mailed to the customer by the Funds each time a financial
transaction occurs in their account and on a monthly basis. Nothing herein
shall cause your firm's customers to be interpreted as customers of VKAC for
any other purpose, or to negate
1
<PAGE> 2
the intent of any other section of this agreement, including, but not limited
to, the delineation of responsibilities as set forth elsewhere in this
agreement.
3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent for the Fund
or for VKAC. The customers in question are for all purposes your customers and
not customers of VKAC. We will clear transactions for each of your customers
only upon your authorization, it being understood in all cases that (a) you are
acting as the agent for the customer; (b) the transactions are without recourse
against you by the customer except to the extent that your failure to transmit
orders in a timely fashion results in a loss to your customer; (c) as between
you and the customer, the customer will have full beneficial ownership of the
Fund shares; (d) each transaction is initiated solely upon the order of the
customer; and (e) each transaction is for the account of the customer and not
for your account.
4. Each Fund has filed with the Securities and Exchange
Commission (the "SEC") and the securities commissions of one or more states a
Registration Statement (the "Registration Statement") on the SEC form
applicable to the respective Fund. The date on which the Registration
Statement is declared effective by the SEC is hereinafter referred to as the
"Effective Date". Prior to the Effective Date of the Registration Statement
with respect to a particular Fund, you expressly acknowledge and understand
that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the Registration
Statement or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such state.
(b) Except to the extent permitted by law, you will
not solicit or transmit to VKAC any indications of interest to purchase shares
during any fixed-price offering.
(c) The Fund's Preliminary Prospectus, together with
any sales material distributed for use in connection with the offering of
shares of such Fund, does not constitute an offer to sell or the solicitation
of an offer to buy shares of such Fund and is subject to completion and
modification by the Prospectus.
(d) In the event and to the extent permitted by
applicable law you transmit indications of interest to VKAC for accumulation
prior to the Effective Date, upon your instruction VKAC will send confirmation
of such indications of interest directly to your customers in writing, together
with copies of the Preliminary Prospectus for the Fund, and send copies of the
confirmations to you. Indications of interest with respect to shares of a
class of a Fund's shares transmitted to VKAC prior to the Effective Date are
subject to acceptance or rejection by VKAC in its sole discretion and are
conditioned upon the occurrence of (i) the Effective Date and (ii) the
registration or qualification of the respective class of shares in the
respective state.
(e) Indications of interest with respect to shares
of a class of a Fund's shares not canceled by you prior to or on the later of
(i) the Effective Date and (ii) the registration or qualification of the
respective class of shares in the respective state, and accepted by VKAC will
be deemed by VKAC to be orders for Shares solely to the extent permitted by
applicable law.
(f) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together with copies of
the Prospectus for the Fund, and send copies of the confirmations to you.
(g) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies that
you discover and will promptly bring to VKAC's attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(h) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or rejection by
VKAC in its sole discretion.
2
<PAGE> 3
5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are not qualified
for sale under the "blue sky" laws and regulations of such state, except for
states in which they are exempt from qualification.
6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the applicable laws, rules
and regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been qualified for
sale under the respective securities or "blue sky" laws of such jurisdictions.
VKAC understands and agrees that qualification of any shares of a Fund for sale
in such jurisdictions shall be solely VKAC's responsibility and that you assume
no responsibility or obligation with respect to such eligibility. You
understand and agree that your compliance with the requirements of the
securities or "blue sky" laws in each jurisdiction with respect to your right
to make the shares available in such jurisdiction shall be solely your
responsibility.
8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained in the Fund's
current Preliminary Prospectus or Prospectus, as the case may be. In
purchasing shares from us you shall rely solely on the representations
contained in such Prospectus. VKAC will furnish additional copies of a Fund's
current Prospectus and sales literature issued by VKAC in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (i)
the Prospectus and any amendment or supplement thereto and (ii) sales
literature or other documents expressly authorized for such distribution by
VKAC.
10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified in the
then-current Fund Prospectus. The minimum dollar purchase of any shares of
each Fund by any person shall be the applicable minimum dollar amount described
in the then-current Fund Prospectus for that class of shares, and no order for
less than such amount will be accepted hereunder. The procedures relating to
the handling of orders shall be subject to instructions that VKAC shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VKAC of any errors
or discrepancies that you discover and shall promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office of VKAC's
clearing agent, by check payable to the order of the Fund which reserves VKAC's
right to delay issuance or transfer of shares until such check has cleared. If
such payment is not received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VKAC may hold you responsible
for any loss suffered by the Fund. You agree that in transmitting investors'
funds, you will comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.
12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended, as it relates to the distribution
of Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive
3
<PAGE> 4
a Statement of Additional Information, you will (i) provide such person with a
Statement of Additional Information without charge and notify the Fund that you
have done so, (ii) notify the Fund of the request so that the Fund can fulfill
the request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VKAC, to bring all subsequent changes to
such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus for such Fund filed pursuant to Rule 497 under the Securities Act of
1933, as amended. Upon your request, VKAC will furnish to such persons a copy
of the Prospectus for such Fund filed pursuant to Rule 497 Under the Securities
Act of 1993, as amended.
15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except for servicing and
informational mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers only if
specifically requested.
17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this Agreement.
18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund Department.
Any notice to you shall be duly given if sent to you at the address specified
by you below or such other address as you may designate to VKAC in writing.
19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between VKAC and you.
20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the choice-of-law principles
thereof.
21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend or withdraw
the offering of any shares of a Fund entirely. VKAC reserves the right,
without notice, to amend, modify or cancel the Agreement. The Agreement may
not be assigned by either party without prior written consent of the other
party.
22. This Agreement may be terminated at any time by either
party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as described in such
Fund's then-current Prospectus pursuant to which the Open-End Fund may sell
multiple classes of its shares with varying combinations of front-end service
charges (each a "FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion rights, voting
rights, expenses allocations and investment requirements. As used herein,
classes of shares of a Fund subject to a FESC will be referred to as FESC
Shares, and classes of shares of a Fund subject to a CDSC will be referred to
as CDSC Shares.
24. (a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares shall be the net
asset value per share plus a FESC, expressed as a percentage of the applicable
public offering price, as determined and effective as of the time specified in
the then-current Prospectus of such Open-End Fund. On each order for shares of
a class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
4
<PAGE> 5
(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares shall be
the net asset value per share as determined and effective as of the time
specified in the then-current Prospectus of such Open-End Fund. You will remit
payment of the aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to receive the
applicable selling compensation for such shares as provided for in the
then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VKAC.
25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund pursuant to Rule
12b-1 ("Rule 12b-1 Plan") under the Investment Company Act of 1940, as amended,
or the Service Plan with respect to a class of shares, it is understood that
you must be approved by the Board of Directors of such Open-End Fund and
execute an Administrative Service Agreement.
26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt policies and
procedures to comply with Rule 18f-3 under the Investment Company Act of 1940,
with respect to when you may appropriately make available the various classes
of shares of the Open-End Funds to investors and that you will make available
such shares only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering price, (ii) from
VKAC and (iii) to cover orders already received by you from your customers.
VKAC in turn agrees that it will not purchase any shares from an Open-End Fund
except for the purpose of covering purchase orders that it has already
received.
28. (a) If any shares of a class of FESC Shares of an
Open-End Fund sold to your customers under the terms of this Agreement are
repurchased by the Fund or by VKAC as agent for the Fund or are tendered for
redemption within seven business days after the date of VKAC's confirmation of
the original purchase, it is agreed that you shall forfeit your right to any
agency commission received by you on such FESC Shares. VKAC will notify you of
any such repurchase or redemption within ten business days from the date on
which the repurchase or redemption order in proper form is delivered to VKAC or
to the Fund, and you shall forthwith refund to VKAC the full agency commission
allowed to you on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount allowed to VKAC
and, upon receipt from you of the refund of the agency commission allowed to
you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by the Fund or
by VKAC as agent for the Fund or are tendered for redemption within seven
business days after the date of VKAC's confirmation of the original purchase,
it is agreed that you shall forfeit your right to any sales compensation
received by you on such CDSC Shares. We will notify you of any such repurchase
or redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the Fund, and you
shall forthwith refund to VKAC the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, to the extent permitted by
applicable law, banks participating in the Initial Offering Period or among
brokers, dealers and banks participating in the Continuous Offering Period, as
the case may be, on other than a pro rata basis, which may result in certain
brokers, dealers and banks not being allocated the full amount of shares of
such Fund sold by them while certain other brokers, dealers and banks may
receive their full allocation.
31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received, to the extent
permitted by applicable law, during the Initial Offering Period to VKAC within
the time period as specified in such Closed-End Fund's Prospectus (or in the
time period as extended by VKAC in writing). You also agree to transmit any
customer order received during the
5
<PAGE> 6
Continuous Offering Period to VKAC prior to the time that the public offering
price for such Closed-End Fund is next determined after your receipt of such
order, as set forth in the Closed-End Fund's Prospectus. There is no assurance
that each Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VKAC's own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VKAC for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VKAC will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later than
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you, to the extent permitted by applicable law, in the
Initial Offering Period or the Continuous Offering Period are resold in the
open market or otherwise during the Forfeiture Period, VKAC reserves the right
to require you to forfeit any sales concessions and other additional
compensation with respect to such shares. In the event of a forfeiture, VKAC
may withhold any forfeited sales concessions and other additional compensation
that has not yet been paid or from other amounts yet to be paid to you (whether
or not payable with respect to such shares), and you agree to repay to VKAC,
promptly upon demand, any forfeited sales concessions and other compensation
that has been paid. Determinations of the amounts to be paid to you or by you
to VKAC shall be made by VKAC and shall be conclusive.
33. During the Initial Offering Period or any Continuous
Offering Period for any Closed-End Fund, you agree to supply VKAC, not less
frequently than once a week by Friday, 5:00 p.m. Eastern Time, during such
Closed-End Fund's Initial Offering Period, a list setting forth by state and in
the aggregate all indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during such week (or
lesser period of time) and a list setting forth by name and location each
registered representative making said sales and indicating the amount of all
sales per Closed-End Fund to date.
34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the Closed-End Funds
(other than through tender offers from time to time, if any) or by VKAC and
that no secondary market for such shares is expected to develop until the
shares have begun trading on a national exchange or national market system.
You hereby covenant that, until notified by VKAC that the distribution of such
shares has been completed or that the Forfeiture Period has ended, you (a) will
not make a secondary market in any shares of such a Closed-End Fund, (b) will
not purchase or hold shares of such Closed-End Fund in inventory for the
purpose of resale in the open market or to your customers and, (c) without
VKAC's consent, will not repurchase shares of such Closed-End Fund in the open
market or from your customers for any account in which you have a beneficial
interest.
36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen American Capital Prime Rate
Income Trust (the "Prime Rate Fund") may continue indefinitely. The offer to
make available to you shares of the Prime Rate Fund is subject to further terms
and conditions in addition to those set out above, as follows:
(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime Rate
Fund (other than through tender offers from time to time, if any) or VKAC and
that no secondary market for the shares of the Prime Rate Fund exists currently
or is expected to develop. You also expressly acknowledge and agree that, in
the event your
6
<PAGE> 7
customer cancels their order for shares after confirmation, such shares may not
be repurchased, remarketed or otherwise disposed of by or through VKAC.
(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering for all
or a portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VKAC will be imposed on most shares accepted for tender by the Prime
Rate Fund that have been held for less than five years, as set forth in the
Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Bank Fully
Disclosed Clearing Agreement, keeping a copy for your files and returning the
original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated: ________________________________________ By:
Its:
________________________________________
Bank Name VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
________________________________________
Bank Taxpayer ID Number
________________________________________
Address
________________________________________
City, State, Zip
________________________________________
Phone
________________________________________
Signature
________________________________________
Name
________________________________________
Title
7
<PAGE> 8
EXHIBIT A
POLICIES AND PROCEDURES
WITH RESPECT TO SALES UNDER THE
ALTERNATIVE DISTRIBUTION PLAN
As certain Van Kampen American Capital open-end investment
companies (the "funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred sales charges
("CDSC Shares"), it is important for an investor not only to choose the Fund
that best suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the selling firm) are
instituting the following policy.
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million is subject to approval by [appropriate selling firm supervisor], who
must approve the purchase order ticket for the appropriate class of shares in
light of the relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
his shares; and
(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of Intent or a Quantity
Discount.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would qualify for a
significant purchase price discount from the maximum sales charge on shares of
a class of FESC Shares that has such purchase price discounts may determine
that payment of such a reduced front-end sales charge is superior to electing
to purchase shares of a class of CDSC Shares with no front-end service charge
but subject to a higher aggregate distribution and service fee. On the other
hand, an investor whose order would not qualify for such purchase price
discounts and intends to remain invested until after the expiration of the
applicable CDSC may wish to defer the sales charge and have all his funds
invested in Class B Shares initially. In addition if such investor
anticipates that he or she will redeem such shares prior to the expiration of
the CDSC period applicable to Class B Shares the investor may, depending on the
amount of his purchase, wish to acquire Class C Shares. However, investors who
intend to hold their shares for a significantly long time may not wish to
continue to bear the ongoing distribution and service expenses of shares of
Class C Shares, irrespective of the fact that a contingent deferred sales
charge would eventually not apply to a redemption of such shares.
[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of shares from funds
subject to Van Kampen American Capital Distributors, Inc.'s alternative
distribution plan advise the investor of the available alternative distribution
methods offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling firm supervisor]
to discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan.
Questions relating to this policy should be directed to
[appropriate selling firm supervisor].
8
<PAGE> 1
EXHIBIT 8.1
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By
It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . 5
2.7 Payment of Fund Moneys . . . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . 7
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in Securities System . . . . . . . 8
2.11 Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . 10
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Fund Securities . . . . . . . . 11
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States . . . . . . . . . . . . 11
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . 11
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . . . 11
3.3 Foreign Securities Systems . . . . . . . . . . . . . . . . 12
3.4 Agreements with Foreign Banking Institutions . . . . . . . 12
3.5 Access of Independent Accountants of the Fund . . . . . . 12
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . . . 12
3.7 Transactions in Foreign Custody Account . . . . . . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . . . 13
3.9 Liability of Custodian . . . . . . . . . . . . . . . . . . 13
3.10 Reimbursement for Advances . . . . . . . . . . . . . . . . 14
3.11 Monitoring Responsibilities . . . . . . . . . . . . . . . 14
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.13 Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . 15
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . 16
6. Actions Permitted Without Express Authority . . . . . . . . . . . 16
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . 17
8. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10. Opinion of Fund's Independent Accountants . . . . . . . . . . . . 18
11. Reports to Fund by Independent Public Accountants . . . . . . . . 18
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 18
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 18
14. Effective Period, Termination and Amendment . . . . . . . . . . . 19
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 20
16. Interpretive and Additional Provisions . . . . . . . . . . . . . . 21
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 22
19. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. Shareholder Communications . . . . . . . . . . . . . . . . . . . . 22
21. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on
Appendix A which evidences its agreement to be bound hereby by executing a copy
of this Contract (each such fund is individually hereafter referred to as
the "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets
of the Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities") pursuant to the
provisions of the Fund's governing documents. The Fund agrees to deliver to
the Custodian all securities and cash of the Fund, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, beneficial
interest or partnership interest, as applicable, of the Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property of a Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Fund from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of the Fund, and provided
that the Custodian shall have no more or less responsibility or liability to
the Fund on account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian. The Custodian may
employ as sub-custodian for the Fund's foreign securities the foreign banking
institutions and foreign securities depositories designated in Schedule A
hereto but only in accordance with the provisions of Article 3.
1
<PAGE> 5
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, to be held by it
in the United States including all domestic securities owned by such
Fund, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian (the "Direct Paper System") pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee
2
<PAGE> 6
name of any agent appointed pursuant to Section 2.9 or into
the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
3
<PAGE> 7
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board or of the
Executive Committee of the Fund signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Fund to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
4
<PAGE> 8
Article 1. All securities accepted by the Custodian under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund ,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for a
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited with
each such bank or trust company shall on behalf of each applicable
Fund be approved by vote of a majority of the Board of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to such Fund
as of specified times agreed upon from time to time by the Fund and
the Custodian in the amount of checks received in payment for Shares
of such Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when
5
<PAGE> 9
due on securities held hereunder. Income due each Fund on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of a Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of
a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case
of repurchase agreements entered into between the Fund and
the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
6
<PAGE> 10
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
7
<PAGE> 11
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice
and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
8
<PAGE> 12
5) The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, required by Article 14
hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Fund for any loss or damage to the Fund resulting from use of
the Securities System by reason of any negligence, misfeasance
or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may
have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or
damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund ;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
9
<PAGE> 13
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated account
or accounts for and on behalf of each such Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund , the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund , a certified copy of a
resolution of the Board or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Fund held by it
and in connection with transfers of securities.
10
<PAGE> 14
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board,
the Custodian and the Fund may agree to amend Schedule A hereto from
time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt
of Proper Instructions, the Fund may instruct the Custodian to cease
the employment of any one or more such sub-custodians for maintaining
custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in
11
<PAGE> 15
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
the Fund will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
the Fund will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Fund;
(d) officers of or auditors employed by, or other representatives of
the Custodian, including to the extent permitted under applicable law
the independent public accountants for the Fund, will be given access
to the books and records of the foreign banking institution relating
to its actions under its agreement with the Custodian; and (e) assets
of the Fund held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund securities and other assets and
advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking
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<PAGE> 16
institution for the Custodian on behalf of the Fund indicating, as to
securities acquired for a Fund, the identity of the entity having
physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this
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<PAGE> 17
paragraph 3.9, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to the
Fund for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Fund
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable Fund shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that the
Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the
subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Fund's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of
14
<PAGE> 18
said Act. The appointment of any such branch as a sub-custodian shall
be governed by paragraph 1 of this Contract. (b) Cash held for each
Fund in the United Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Fund such payments as are received for Shares of that Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of
payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares of
a Fund, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by
a holder of Shares, which checks have been furnished by the Fund to the holder
of Shares, when presented to the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time between the Fund and
the Custodian.
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<PAGE> 19
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of the Fund
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the Board of the
Fund accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for the
Funds' assets. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund ;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of the
Fund.
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<PAGE> 20
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of the Fund as conclusive evidence (a) of the authority of any person to
act in accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the governing documents of the Fund as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if the Custodian and the Fund execute the
applicable Price Source Authorization (the "Authorization"), the Custodian
shall keep such books of account and/or compute such net asset value per share
pursuant to the terms of the Authorization and the attachments thereto. If so
directed, the Custodian shall also calculate daily the net income of the Fund
as described in the Fund's currently effective Prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Fund shall be made at the time or times described from
time to time in the Fund's currently effective Prospectus.
9. Records
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Fund and held by the Custodian and shall, when requested to
17
<PAGE> 21
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in
18
<PAGE> 22
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United states (except as specifically provided in Article 3.9)
and regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S.
bank, as contemplated by paragraph 3.12 hereof, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from
or caused by, the direction or authorization by the Fund to maintain custody of
any securities or cash of the Fund in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of
some other form, the Fund, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the
Fund assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30)
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<PAGE> 23
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Fund act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of the Fund has approved the initial use of a
particular Securities System by such Fund and the receipt of a certificate of
the Secretary or an Assistant Secretary that the Board has reviewed any
subsequent change regarding the use by such Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a Fund act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of the
Fund has reviewed the use by such Fund of the Direct Paper System; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund may at any
time by action of its Board (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund shall be appointed by the Board
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of the Fund then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of the
Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such
20
<PAGE> 24
termination shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of the
Fund and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of the Fund and to transfer
to an account of such successor custodian all of the securities of the Fund
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the governing documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
17. Additional Funds
In the event that Van Kampen American Capital Distributors , Inc.
establishes any funds in addition to the Funds listed on Appendix A with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references herein to
the "Fund" are to each of the Funds listed on Appendix A individually, as if
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<PAGE> 25
this Contract were between each such individual Fund and the Custodian. With
respect to any Fund which issues shares in separate classes or series, each
class or series of such Fund shall be treated as a separate Fund hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Funds and the Custodian relating to the custody of
the Fund's assets.
20. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund. For the Fund's protection, the Rule prohibits the requesting company
from using the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consent or object by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name,
address, and share positions of each Fund listed on
Exhibit A.
NO [X] The Custodian is not authorized to release the name,
address, and share positions of each Fund listed on
Exhibit A.
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21. Limitation of Liability.
The execution of this Contract has been authorized by each Fund's
Board. This Contract is executed on behalf of each Fund or the trustees of
such Fund as trustees and not individually and the obligations of the Fund
under this Contract are not binding upon any of the Fund's trustees, officers
or shareholders individually but are binding only upon the assets and property
of the Fund. A Certificate of Trust in respect of each Fund is on file with
the Secretary of State of Delaware.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 21st day of June, 1995.
ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A
/s/ HUEY P. FALGOUT, JR. By: /s/ NORI L. GABERT
- ------------------------ -----------------------------------
Nori L. Gabert, Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------ -----------------------------------
Executive Vice President
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APPENDIX A
FUND NAMES
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Common Stock Fund
Domestic Strategic Income Fund
Emerging Growth Fund
Global Equity Fund
Government Fund
Money Market Fund
Multiple Strategy Fund
Real Estate Securities Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Municipal Bond Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Insured Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Utilities Income Fund
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
24
<PAGE> 1
EXHIBIT 9
DATA ACCESS SERVICES AGREEMENT
This Data Access Services Agreement is a supplement to that certain
Custodian Contract dated June 21, 1995 between the undersigned each of the
Funds listed on Appendix A of the Custodian Contract (the "Customer") and State
Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, the Customer desires the ability to access certain
Customer-related data ("Customer Data") maintained by State Street on data
bases under the control and ownership of State Street ("Data Access Services");
and
WHEREAS, State Street agrees to grant the Customer such access to the
Customer Data as is consistent with the policy and standards issued from time
to time by State Street.
NOW THEREFORE, the parties agree as follows:
1. Services
A. State Street maintains Customer Data within its proprietary data
base system. State Street agrees to provide the Customer with certain Data
Access Services as provided herein and in the Data Access operating procedures
as may be issued from time to time.
B. Customer agrees to use the Data Access Services solely for its
internal use and benefit and not for resale or other transfer or disposition
to, or use by or for the benefit of any other person or organization without
the prior written approval of State Street. Customer agrees to comply with user
identification and other password control requirements and other security
procedures as may be issued from time to time by State Street.
2. Proprietary Information
Customer acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to Customer by State Street as part of the Data Access
Services constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to State Street.
Customer agrees to treat all Proprietary Information as proprietary to State
Street and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, Customer agrees for itself and its employees and agents:
(1) to access Customer Data solely from locations as may be designated
in writing by State Street and solely in accordance with State Street's
applicable user documentation;
(2) to refrain from copying or duplicating in any way the Proprietary
Information;
(3) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform State Street in a timely manner of such fact and dispose of
such information in accordance with State Street's instructions;
<PAGE> 2
(4) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility or
other location, except with the prior written consent of State Street;
(5) that the Customer shall have access only to those authorized
transactions agreed upon by the parties;
(6) to honor all reasonable written requests made by State Street to
protect at State Street's expense the rights of State Street in
Proprietary Information at common law, under federal copyright law and
under other federal or state law.
Customer's obligation to maintain the confidentiality of the
Proprietary Information shall not apply where such:
(1) was already in Customer's possession prior to disclosure by State
Street, and such was received by Customer without obligation of
confidence;
(2) is or becomes publicly available without breach of this Agreement;
(3) is rightly received by Customer from a third party, who is not a
current or former employee, officer, director or agent of State Street,
without obligation of confidence;
(4) is disclosed by Customer with the written consent of State Street;
or
(5) is released in accordance with a valid order of a court or
governmental agency.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this section 2. The obligations of this section
shall survive any earlier termination of this agreement.
3. Warranties
If Customer notifies State Street that any of the Data Access Services
do not operate in material compliance with the most recently issued user
documentation for such services, State Street shall endeavor in a timely
manner to correct such failure. Organizations from which State Street may
obtain certain data included in the Data Access Services are solely responsible
for the contents of such data and Customer agrees to make no claim against
State Street arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED
ON AN AS IS, AS AVAILABLE BASIS. STATE STREET EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
4. Limitation of Liability
State Street shall not be liable to the Customer for any loss or damage
claimed to have resulted from the use of the Data Access Services except for
the direct loss or damage resulting from the negligence or willful conduct of
State
-2-
<PAGE> 3
Street. STATE STREET SHALL NOT BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES) IN ANY WAY DUE TO OR ARISING IN CONNECTION WITH CUSTOMER'S USE
OF THE DATA ACCESS SERVICES OR THE PERFORMANCE OF OR FAILURE TO PERFORM STATE
STREET'S OBLIGATIONS UNDER THIS AGREEMENT. This disclaimer applies without
limitation to claims (i) arising from the provision of the Data Access
Services, the delivery, installation, use, maintenance, or removal of State
Street provided equipment, or any failure or delay in connection with any of
the foregoing; (ii) regardless of the form of action, whether in contract, tort
(including negligence), strict liability, or otherwise; and (iii) regardless of
whether such damages are foreseeable. Further, in no event shall State Street be
liable for any claims that arise more than one (1) year prior to the
institution of suit therefor or any claim arising from causes beyond State
Street's control.
5. Force Majeure
State Street shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Customer as a result of
work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility of
performance.
6. Exclusive Remedy
In consideration of the fees charged for Data Access Services, if any,
Customer's exclusive recovery with respect to Data Access Services regardless
of the basis of the claims asserted by it against State Street shall not exceed
six (6) times the average monthly fees billed to Customer hereunder and
computed by averaging the monthly billing for each of the twelve months
preceding the month in which the damage or injury is alleged to have occurred,
but if this agreement has not been in effect for twelve months preceding such
date, then by averaging the monthly billings for each of the preceding months
that this agreement has been in effect.
7. Indemnification
The Customer agrees to indemnify and hold State Street free and
harmless from any expense, loss, damage or claim including reasonable
attorney's fees, (collectively "costs") suffered by State Street and caused by
or resulting from (i) the negligence or willful misconduct in the use by the
Customer, its employees or agents, of the Data Access Services or the
application software systems supporting such services, including any costs
incurred by State Street resulting from a security breach at the Customer's
location or committed by its former or present employees or agents and (ii)
claims resulting from incorrect Customer Originated Electronic Financial
Instruction.
8. Customer Originated Electronic Financial Instruction ("COEFI")
If the transactions available to Customer include the ability to
originate electronic instructions to State Street in order to (i) effect the
transfer or movement of cash or securities held under custody or (ii) transmit
accounting or other information (such transactions constituting a "COEFI"),
then in such event State Street shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is
-3-
<PAGE> 4
undertaken in conformity with security procedures established by State Street
from time to time.
9. Injunctive Relief
In the event of a breach or threatened breach by Customer of Section 1
or 2 hereof, State Street shall be entitled to obtain injunctive relief in
addition to any other remedies available at law or equity.
10. General
10.1 Term of Agreement. This agreement is effective from the date
it is accepted by State Street and shall remain in full force
and effect until terminated as hereinafter provided. Either
party may terminate this agreement for any reason by giving the
other party at least thirty days prior written notice of
termination. In addition, either party may terminate this
agreement immediately for failure of the other party to comply
with any material term and condition by giving the other party
written notice of termination. This agreement shall in any
event terminate contemporaneously with the Custodian Contract
applicable hereto.
10.2 Charges. Charges, if any, for Data Access Services shall be
as agreed upon between the parties from time to time.
10.3 Assignment; Successors. This Agreement shall not be assigned
by either party without the prior written consent of the other
party, except that either party may assign to a successor of
all or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such
party.
10.4 Survival. All provisions regarding indemnification,
warranty, liability and limits thereon, and confidentiality
and/or protection of proprietary rights and trade secrets shall
survive the termination of this agreement.
10.5 Consent to Breach not Waiver. No term or provision hereof
shall be deemed waived and no breach excused, unless such
waiver or consent shall be in writing and signed by the party
claimed to have waived or consented. Any consent by any party
to, or waiver of, a breach by the other, whether express or
implied, shall not constitute a consent to, waiver of, or
excuse for any other different or subsequent breach.
11. Signatory
The individual signing the agreement represents that he or she is an
authorized officer of the Customer (and, if identified below or on an attached
schedule, such investment manager or other party as may use Data Access
Services with respect to the Customer) so as to cause this agreement to be a
valid and binding obligation upon the Customer (and, if applicable, such other
parties as may be identified on the signature line below or on an attached
schedule).
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement.
STATE STREET BANK AND EACH OF THE VAN KAMPEN
TRUST COMPANY AMERICAN CAPITAL FUNDS
LISTED ON APPENDIX A OF
THE CUSTODIAN CONTRACT
By: [Illegible]
---------------------------
Title: Executive Vice President By: /s/ NORI L. GABERT
------------------------ --------------------
Nori L. Gabert
Date:
------------------------- Title: Vice President
-----------------
Date: June 21, 1995
------------------
<PAGE> 1
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]
EXHIBIT 10
March 28, 1997
Van Kampen American Capital
Tax-Exempt Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Tax-Exempt Trust
Registration Statement on Form N-1A
(File Nos. 2-96030 and 811-4746)
Ladies and Gentlemen:
We have acted as counsel to Van Kampen American Capital Tax-Exempt Trust
(the "Trust"), a Delaware business trust, in connection with the preparation of
Post-Effective Amendment No.18 to the Trust's Registration Statement on Form
N-1A (as amended, the "Registration Statement") to be filed under the Securities
Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of
1940, as amended (the "1940 Act"), with the Securities and Exchange Commission
(the "Commission") on or about March 28, 1997. The Registration Statement
relates to the registration under the 1933 Act and 1940 Act of an indefinite
number of each of Class A Shares of beneficial interest, par value $.01 per
share, Class B Shares of beneficial interest, par value $.01 per share, and
Class C Shares of beneficial interest, par value $.01 per share, of Van Kampen
American Capital High Yield Municipal Fund, a series of the Trust
(collectively, the "Shares").
This opinion is delivered in accordance with the requirements of Item
24(b)(10) of Form N-1A under the 1933 Act and the 1940 Act.
In connection with this opinion, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Certificate of Trust filed with the Secretary of State of Delaware, (ii)
<PAGE> 2
Van Kampen American Capital
Tax-Exempt Trust
March 28, 1997
Page 2
the Agreement and Declaration of Trust and By-Laws of the Trust, each as
amended to date (the "Declaration of Trust" and "By-Laws", respectively), (iii)
the Certificate of Designation establishing the series of the Trust,
(iv) the resolutions adopted by the Board of Trustees of the Trust relating to
the authorization, issuance and sale of the Shares, the filing of the
Registration Statement and any amendments or supplements thereto and related
matters and (v) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In such examination we have assumed the legal capacity of natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed, photostatic, or other copies
and the authenticity of the originals of such latter documents. As to any
facts material to such opinion which were not independently established, we
have relied on statements or representations of officers and other
representatives of the Trust or others.
Members of our firm are admitted to the practice of law in the State
of Illinois, and we do not express any opinion as to the laws of any other
jurisdiction other than matters relating to the Delaware business
organizational statutes (including statutes relating to Delaware business
trusts) and the federal laws of the United States of America to the extent
specifically referred to herein.
Based upon and subject to the foregoing, we are of the opinion that the
issuance and sale of Shares by the Trust have been validly authorized and,
assuming certificates therefor have been duly executed, countersigned,
registered and delivered or the shareholders' accounts have been duly credited
and the Shares represented thereby have been fully paid for, such Shares will
be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 10 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Counsel" in the Registration Statement. In
giving this consent, we do not hereby
<PAGE> 3
Van Kampen American Capital
Tax-Exempt Trust
March 28, 1997
Page 3
admit that we are in the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom (Illinois)
<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. 18, Amendment No. 22 to
the registration statement on Form N-1A (the "Registration Statement") of our
report dated January 15, 1997, relating to the financial statements and
financial highlights of Van Kampen American Capital Tax-Exempt Trust -- Van
Kampen American Capital High Yield Municipal Fund (the "Fund"), which appears in
such Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in such Prospectus and to the
reference to us under the heading "Independent Accountants" in such Statement of
Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
March 27, 1997
<PAGE> 1
Exhibit 15.1
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST - VAN KAMPEN AMERICAN
CAPITAL HIGH YIELD MUNICIPAL FUND
The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL
TAX-EXEMPT TRUST - VAN KAMPEN AMERICAN CAPITAL HIGH YIELD MUNICIPAL FUND (the
"Fund"). This Distribution Plan describes the material terms and conditions
under which assets of the Fund may be used in connection with financing
distribution related activities with respect to each of its classes of shares of
beneficial interest (the "Shares"), each of which is offered and sold subject to
a different combination of front-end sales charges, distribution fees, service
fees and contingent deferred sales charges.1 Classes of shares, if any, subject
to a front-end sales charge and a distribution and/or service fee are referred
to herein as "Front-End Classes" and the Shares of such classes are referred to
herein as "Front-End Shares." Classes of shares, if any, subject to a
contingent-deferred sales charge and a distribution and/or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and Shares of such
class are referred to herein as "Combination Shares."
The Fund has adopted a service plan (the "Service Plan") pursuant to
which the Fund is authorized to expend on an annual basis a portion of its
average net assets attributable to any or each class of Shares in connection
with the provision by the principal underwriter (within the meaning of the 1940
Act) of the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has
entered into a distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Inc. (the "Distributor"),
pursuant to which the Distributor acts as the principal underwriter with
respect to each class of Shares and provides services to the Fund and acts as
agent on behalf of the Fund in connection with the implementation of the
Service Plan. The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement the
Distribution and Services Agreement, the Service Plan and this Distribution
Plan.
1. The Fund hereby is authorized to pay the Distributor a distribution
fee with respect to each class of its Shares to compensate the Distributor for
activities which are primarily intended to result in the sale of such Shares
("distribution related activities") performed by the Distributor with respect
to the respective class of Shares of the Fund. Such distribution related
activities include without limitation: (a) printing and distributing copies of
any prospectuses and annual and interim reports of the Fund (after the Fund has
prepared and set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing or otherwise
manufacturing and distributing any other literature or materials of any nature
used by such Distributor in connection with promoting, distributing or offering
the Shares; (c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the provision of
information programs and shareholder services intended to enhance the
attractiveness of investing in the Fund; (e) incurring initial outlay expenses
in connection with compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal services to
shareholders and the maintenance of
____________________
1 The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
shareholder accounts of all classes of Shares, including paying interest on and
incurring other carrying costs on funds borrowed to pay such initial outlays;
and (f) acting as agent for the Fund in connection with implementing this
Distribution Plan pursuant to the Selling Agreements.
2. The amount of the distribution fee hereby authorized with respect to
each class of Shares of the Fund shall be as follows:
a. With respect to Class A Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.15% of the Fund's average daily net
assets attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The
Fund may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.15% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by
the Fund pursuant to the Service Plan and (ii) the actual amount of
distribution related expenses incurred by the Distributor with respect to Class
A Shares.
b. With respect to Class B Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.90% of the Fund's average daily net
assets attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class B
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.
c. With respect to Class C Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.90% of the Fund's average daily net
assets attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class C Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class C
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class C Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class C Shares.
3. Payments pursuant to this Distribution Plan shall not be made more
often than monthly upon receipt by the Fund of a separate written expense
report with respect to each class of Shares setting forth the expenses
qualifying for such reimbursement allocated to each class of Shares and the
purposes thereof.
4. In the event that amounts payable hereunder with respect to shares of
a Front-End Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of such class, there
is no carryforward of reimbursement obligations to succeeding years. In the
event the amounts payable hereunder with respect to shares of a CDSC Class or a
Combination Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of the respective
class, such unreimbursed distribution expenses will be carried forward and paid
by the Fund hereunder in future years so long as this Distribution Plan remains
in effect, subject to applicable laws
2
<PAGE> 3
and regulations. Reimbursements for distribution related expenses payable
hereunder with respect to a particular class of Shares may not be used to
subsidize the sale of Shares of any other class of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect
to such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Trust and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries as
compensation for the above-mentioned activities and services. Such
reallocation shall be in an amount as set forth from time to time in the Fund's
prospectus. Such Selling Agreements shall provide that the Financial
Intermediaries shall provide the Distributor with such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be
paid only pursuant to written agreements between the Fund and such other person
the terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
8. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Distribution Plan, the Service
Plan and the agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Trustees or the
Disinterested Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.
9. This Distribution Plan shall become effective upon its approval by (a)
a majority of the Board of Trustees and a majority of the Disinterested
Trustees by vote cast separately with respect to each class of Shares cast in
person at a meeting called for the purpose of voting on this Distribution Plan,
and (b) with respect to each class of Shares, a "majority of the outstanding
voting securities" (as such phrase is defined in the 1940 Act) of such class of
Shares voting separately as a class.
10. This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
11. This Distribution Plan may be terminated with respect to a class of
Shares without penalty at any time by a majority of the Disinterested Trustees
or by a "majority of the outstanding voting securities" of the respective
class of Shares of the Fund.
12. This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material
3
<PAGE> 4
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Distribution Plan to changes in the Rule or
to other changes in the 1940 Act or the rules and regulations thereunder shall
not be deemed to be material amendments.
13. To the extent any service fees paid by the Fund pursuant to the
Service Plan are deemed to be payments for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the meaning of the Rule, the terms and provisions of such plan and any payments
made pursuant to such plan hereby are authorized pursuant to this Distribution
Plan in the amounts and for the purposes authorized in the Service Plan without
any further action by the Board of Trustees or the shareholders of the Fund.
To the extent the terms and provisions of the Service Plan conflict with the
terms and provisions of this Distribution Plan, the terms and provisions of the
Service Plan shall prevail with respect to amounts payable pursuant thereto.
This paragraph 13 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued
by the Fund within the meaning of the Rule.
14. The Trustees of the Trust have adopted this Distribution Plan as
trustees under the Declaration of Trust of the Fund and the policies of the
Fund adopted hereby are not binding upon any of the Trustees or shareholders
of the Fund individually, but bind only the trust estate.
4
<PAGE> 1
Exhibit 15.2
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST - VAN KAMPEN AMERICAN
CAPITAL HIGH YIELD MUNICIPAL FUND
SERVICE PLAN
The plan set forth below (the "Service Plan") for the VAN KAMPEN
AMERICAN CAPITAL TAX-EXEMPT TRUST - VAN KAMPEN AMERICAN CAPITAL HIGH YIELD
MUNICIPAL FUND (the "Fund") describes the material terms and conditions under
which assets of the Fund may be used to compensate the Fund's principal
underwriter, within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), brokers, dealers and other financial intermediaries
(collectively "Financial Intermediaries") for providing personal services to
shareholders and/or the maintenance of shareholder accounts with respect to each
of its Class A Shares of beneficial interest (the "Class A Shares"), its Class B
Shares of beneficial interest (the "Class B Shares"), and its Class C Shares of
beneficial interest (the "Class C Shares") The Class A Shares, Class B Shares
and Class C Shares sometimes are referred to herein collectively as the
"Shares." Each class of Shares is offered and sold subject to a different
combination of front-end sales charges, distribution fees, service fees and
contingent deferred sales charges.1 Classes of shares, if any, subject to a
front-end sales charge and a distribution and/or service fee are referred to
herein as "Front-End Classes" and the Shares of such classes are referred to
herein as "Front-End Shares." Classes of shares, if any, subject to a
contingent-deferred sales charge and a distribution and or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and Shares of such
class are referred to herein as "Combination Shares."
The Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to which the Fund is authorized to expend on an annual basis a portion
of its average net assets attributable to each class of Shares in connection
with financing distribution related activities. The Fund also has entered into
a distribution and services agreement (the "Distribution and Services
Agreement") with Van Kampen American Capital Distributors, Inc. (the
"Distributor"), pursuant to which the Distributor acts as agent on behalf of
the Fund in connection with the implementation of the Service Plan and acts as
the principal underwriter with respect to each class of Shares. The
Distributor may enter into selling agreements (the "Selling Agreements") with
brokers, dealers and other financial intermediaries ("Financial
Intermediaries") in order to implement the Distribution Agreement, the
Distribution Plan and this Service Plan.
1. The Fund hereby is authorized to pay a service fee with respect to its
Class A Shares, Class B Shares and Class C Shares to any person who sells such
Shares and provides personal services to shareholders and/or maintains
shareholder accounts in an annual amount not to exceed 0.15% of the average
annual net asset value of the Shares maintained in the Fund by such person that
were sold on or after the date on which this Service Plan was first
implemented. The aggregate annual amount of all such payments with respect to
each such class of Shares may not exceed 0.15% of the Fund's average annual net
assets attributable to the respective class of Shares sold on or after the date
on which this Service Plan was first implemented and maintained in the Fund
more than one year.
2. Payments pursuant to this Service Plan may be paid or prepaid on
behalf of the Fund by the Distributor acting as the Fund's agent.
____________________
1 The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
3. Payments by the Fund to the Distributor pursuant to this Service Plan
shall not be made more often than monthly upon receipt by the Fund of a
separate written expense report with respect to each class of Shares setting
forth the expenses qualifying for such reimbursement allocated to each class of
Shares and the purposes thereof.
4. In the event that amounts payable hereunder with respect to a class of
Shares do not fully reimburse the Distributor for pre-paid service fees, such
unreimbursed service fee expenses will be carried forward and paid by the Fund
hereunder in future years so long as this Service Plan remains in effect,
subject to applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular class of Shares
may not be used to subsidize services provided with respect to any other class
of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
service related expenses incurred with respect to a class of Shares prior to
the later of (a) the implementation of this Service Plan with respect to such
class of Shares or (b) the date that such Financial Intermediary enters into a
Selling Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Fund and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. Such Selling Agreements shall provide that
the Financial Intermediaries shall provide the Distributor with such
information as is reasonably necessary to permit the Distributor to comply with
the reporting requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Service Agreement, the Fund is
hereby authorized to pay a service fee to any person that is not an "affiliated
person" or "interested person" of the Fund or its "investment adviser" or
"principal underwriter" (as such terms are defined in the 1940 Act) who
provides any of the foregoing services for the Fund. Such fee shall be paid
only pursuant to written agreements between the Fund and such other person the
terms of which permit payments to such person only in accordance with the
provisions of this Service Agreement and which have the approval of a majority
of the Disinterested Trustees by vote cast separately with respect to each
class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
8. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Service Plan and the
agreements contemplated hereby, the purposes for which such payments were made
and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.
9. This Service Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.
10. This Service Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at
a meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.
2
<PAGE> 3
11. This Service Plan and any agreement contemplated hereby shall continue
in effect beyond the first anniversary of its adoption by the Board of Trustees
of the Fund only so long as (a) its continuation is approved at least annually
in the manner set forth in clause (a) of paragraph 10 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
12. This Service Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund. This Service Plan may not be amended in any material
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Service Plan to changes in Rule 12b-1 under
the 1940 Act, the rules and regulations thereunder or the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. shall not be
deemed to be material amendments.
13. The Trustees of the Fund have adopted this Service Plan as trustees
under the Declaration of Fund of the Fund and the policies of the Fund
adopted hereby are not binding upon any of the Trustees or shareholders of the
Fund individually, but bind only the trust estate.
3
<PAGE> 1
EXHIBIT 15.3
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
SHAREHOLDER ASSISTANCE AGREEMENT
This Agreement is entered into as of the ___ day of _________, 19__, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
Merritt, Inc.) (the "Company") and the undersigned (the "Broker-Dealer").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, the Broker-Dealer is registered as a broker-dealer with the
National Association of Securities Dealers, Inc.; and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") and a service plan (the "Service Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), relating to such Fund, the Distribution Plans being described in
the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution assistance agreements such as this Agreement with
broker-dealers selected by the Company, and the Broker-Dealer has been so
selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such broker-dealer on or after the effective date
of this Agreement, as determined pursuant to Section 4 hereof, and held at the
close of each day in accounts of clients or customers of a particular
broker-dealer, such amount being referred to herein as the "Holding Level"; for
purposes of calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing prior to such
effective date shall be deemed to have been shares sold prior to such effective
date to the extent of the number of shares held in such account immediately
after the close of business on the day prior to such effective date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Broker-Dealer agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Broker-Dealer shall be entitled distribution fee and
service fee to payments, if any, to be paid by the Company at the annual
percentage rate of the Holding Level set forth from time to time in the then
current Prospectus of the Fund on a quarterly basis (prorated for any portion
of such period during which this Agreement is in effect for less than the full
amount of such period); it is understood and agreed that the Company may make
final and binding determinations as to whether such continuing compliance and
as to whether or not any Fund shares are to be considered in determining the
Holding Level of any particular broker-dealer and what Fund shares, if any, are
to be attributed to such purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to the
Broker-Dealer named above and portions of the payments may be, in the
discretion of the Broker-Dealer, paid over to individual registered
representatives of said Broker-Dealer to whom there have been
1
<PAGE> 2
assigned accounts of clients or customers of the Broker-Dealer with respect to
which the respective Holding Level was determined.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Broker-Dealer shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be), and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act), of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Broker-dealer, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
----------------------------
Broker-dealer Firm Name
By:
- ------------------------ -------------------------
Firm Address Senior Vice President
By:
---------------------
Title:
------------------
2
<PAGE> 3
SCHEDULE 1
1. For Class A Shares, Class B Shares and Class C Shares:
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund
Van Kampen American Capital Ohio Tax Free Income Fund
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Utility Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
<PAGE> 4
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
2. For Class A Shares Only:
Van Kampen American Capital Tax Free Money Fund
<PAGE> 1
EXHIBIT 15.4
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is entered into as of the ___ day of _________, 19__, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
American Capital, Inc.) (the "Company") and the undersigned (the
"Intermediary").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and a Service Plan (the
"Service Plan") relating to such Fund, the Distribution Plans being described
in the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution services agreements such as this Agreement with
certain financial intermediaries selected by the Company, and the Intermediary
has been so selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such financial intermediary on or after the
effective date of this Agreement, as determined pursuant to Section 4 hereof,
and held at the close of each day in accounts of clients or customers of
particular intermediary, such amount being referred to herein as the "Holding
Level"; for purposes of calculating the Holding Level, shares of such Fund
which are redeemed or otherwise disposed of from any account existing prior to
such effective date shall be deemed to have been shares sold prior to such
effective date to the extent of the number of shares held in such account
immediately after the close of business on the day prior to such effective
date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Intermediary agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Intermediary shall be entitled to distribution fee and
service fee payments, if any, to be paid by the Company with respect to each
class of the Fund's shares at the annual percentage rate of the Holding Level
set forth from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during which this
Agreement is in effect for less than the full amount of such period); it is
understood and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as to whether or
not any Fund shares are to be considered in determining the Holding Level of
any particular financial intermediary and what Fund shares, if any, are to be
attributed to such purpose to a particular financial intermediary, to a
different financial intermediary or to no financial intermediary.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
1
<PAGE> 2
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Intermediary shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Intermediary may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the Fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the
Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be) and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Intermediary, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By:
- ------------------ ----------------------
Intermediary Senior Vice President
- ------------------
Address
By:
---------------
Title
2
<PAGE> 3
SCHEDULE 1
1. For Class A Shares, Class B Shares and Class C Shares:
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund
Van Kampen American Capital Ohio Tax Free Income Fund
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Utility Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
<PAGE> 4
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Small Capitalization Fund
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
2. For Class A Shares Only:
Van Kampen American Capital Tax Free Money Fund
<PAGE> 1
EXHIBIT 16
HIGH YIELD MUNICIPAL FUND -- CLASS A SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,013.87 = ERV
One year period ended 11/30/96.............................. 1 = (n)
TOTAL RETURN FOR THE PERIOD................................. 1.39% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,064.71 = ERV
One year period ended 11/30/96.............................. 1 = (n)
TOTAL RETURN FOR THE PERIOD................................. 6.47% = T
TOTAL RETURN CALCULATION FIVE YEARS ENDED NOVEMBER 30, 1996
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,400.62 = ERV
Five years ended 11/30/96................................... 5 = (n)
TOTAL RETURN FOR THE PERIOD................................. 6.97% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,470.79 = ERV
Five years ended 11/30/96................................... 5 = (n)
TOTAL RETURN FOR THE PERIOD................................. 8.02% = T
</TABLE>
<PAGE> 2
HIGH YIELD MUNICIPAL FUND -- CLASS A SHARES
TOTAL RETURN CALCULATION TEN YEARS ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,888.39 = ERV
Ten years ended 11/30/96.................................... 10 = (n)
TOTAL RETURN FOR THE PERIOD................................. 6.56% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,982.24 = ERV
Ten years ended 11/30/96.................................... 10 = (n)
TOTAL RETURN FOR THE PERIOD................................. 7.08% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH NOVEMBER 30, 1996
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $2,070.52 = ERV
Inception through 11/30/96.................................. 10.91 = (n)
TOTAL RETURN FOR THE PERIOD................................. 6.90% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $2,173.06 = ERV
Inception through 11/30/96.................................. 10.91 = (n)
TOTAL RETURN FOR THE PERIOD................................. 7.37% = T
</TABLE>
<PAGE> 3
HIGH YIELD MUNICIPAL FUND -- CLASS A SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... ERV-P = T
-----
P
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $2,070.52 = ERV
TOTAL RETURN FOR THE PERIOD................................. 107.05% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $2,173.06 = ERV
TOTAL RETURN FOR THE PERIOD................................. 117.31% = T
</TABLE>
HIGH YIELD MUNICIPAL FUND
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
Formula Total Income - Total Expenses
Class A Shares --------------------------------------------------- = SEC Yield
Average Dividend Shares X Public Offering Price
[((((
) )+1)(6))-1)*2]
$3,583,697 - $613,192
Class A Shares --------------------------------------------------- = 5.59%
55,166,161 X $11.14
[((((
) )+1)(6))-1)*2]
</TABLE>
<PAGE> 4
HIGH YIELD MUNICIPAL FUND -- CLASS B SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,016.84 = ERV
One year period ended 11/30/96.............................. 1 = (n)
TOTAL RETURN FOR THE PERIOD................................. 1.68% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,056.70 = ERV
One year period ended 11/30/96.............................. 1 = (n)
TOTAL RETURN FOR THE PERIOD................................. 5.67% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH NOVEMBER 30, 1996
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,303.63 = ERV
Inception through 11/30/96.................................. 4.37 = (n)
TOTAL RETURN FOR THE PERIOD................................. 6.26% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,318.63 = ERV
Inception through 11/30/96.................................. 4.37 = (n)
TOTAL RETURN FOR THE PERIOD................................. 6.53% = T
</TABLE>
<PAGE> 5
HIGH YIELD MUNICIPAL FUND -- CLASS B SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... ERV-P = T
-----
P
Including Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,303.63 = ERV
TOTAL RETURN FOR THE PERIOD................................. 30.36% = T
Excluding Payment of the Sales Charge
Net Asset Value............................................. $11.14
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,318.63 = ERV
TOTAL RETURN FOR THE PERIOD................................. 31.86% = T
</TABLE>
HIGH YIELD MUNICIPAL FUND
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
Formula Total Income - Total Expenses
Class B Shares --------------------------------------------------- = SEC Yield
Average Dividend Shares X Public Offering Price
[((((
) )+1)(6))-1)*2]
$1,881,916 - $521,091
Class B Shares --------------------------------------------------- = 5.11%
28,966,137 X $11.14
[((((
) )+1)(6))-1)*2]
</TABLE>
<PAGE> 6
HIGH YIELD MUNICIPAL FUND -- CLASS C SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the CDSC
Net Asset Value............................................. $11.13
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,046.82 = ERV
One year period ended 11/30/96.............................. 1 = (n)
TOTAL RETURN FOR THE PERIOD................................. 4.68% = T
Excluding Payment of the CDSC
Net Asset Value............................................. $11.13
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,056.78 = ERV
One year period ended 11/30/96.............................. 1 = (n)
TOTAL RETURN FOR THE PERIOD................................. 5.68% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH NOVEMBER 30, 1996
Formula..................................................... P(1+T)(n) = ERV
Including Payment of the CDSC
Net Asset Value............................................. $11.13
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,180.92 = ERV
Inception through 11/30/96.................................. 2.98 = (n)
TOTAL RETURN FOR THE PERIOD................................. 5.74% = T
Excluding Payment of the CDSC
Net Asset Value............................................. $11.13
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,180.92 = ERV
Inception through 11/30/96.................................. 2.98 = (n)
TOTAL RETURN FOR THE PERIOD................................. 5.74% = T
</TABLE>
<PAGE> 7
HIGH YIELD MUNICIPAL FUND -- CLASS C SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
Formula..................................................... ERV-P = T
-----
P
Including Payment of the CDSC
Net Asset Value............................................. $11.13
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,180.92 = ERV
TOTAL RETURN FOR THE PERIOD................................. 18.09% = T
Excluding Payment of the CDSC
Net Asset Value............................................. $11.13
Initial Investment.......................................... $1,000.00 = P
Ending Redeemable Value..................................... $1,180.92 = ERV
TOTAL RETURN FOR THE PERIOD................................. 18.09% = T
</TABLE>
HIGH YIELD MUNICIPAL FUND
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
Formula Total Income - Total Expenses
Class C Shares --------------------------------------------------- = SEC Yield
Average Dividend Shares X Public Offering Price
[((((
) )+1)(6))-1)*2]
$289,481 - $80,446
Class C Shares --------------------------------------------------- = 5.11%
4,458,279 X $11.13
[((((
) )+1)(6))-1)*2]
</TABLE>
<PAGE> 8
HIGH YIELD MUNICIPAL FUND
CALCULATION OF DISTRIBUTION RATE
PERIOD ENDED SEPTEMBER 30, 1996
CURRENT ANNUAL INCOME PER SHARE
CURRENT OFFERING PRICE
<TABLE>
<S> <C> <C> <C>
$.735
Class A Shares.............................................. ------ = 6.28%
$11.70
$.651
Class B Shares.............................................. ------ = 5.84%
$11.14
$.651
Class C Shares.............................................. ------ = 5.85%
$11.13
</TABLE>
<PAGE> 9
HIGH YIELD MUNICIPAL FUND
CALCULATION OF TAXABLE EQUIVALENT SEC YIELD
<TABLE>
<S> <C> <C> <C>
SEC Yield
Formula..................................................... ------------
1-Tax Rate
5.59%
Class A Shares.............................................. ------ = 8.73%
1-36%
5.11%
Class B Shares.............................................. ------ = 7.98%
1-36%
5.11%
Class C Shares.............................................. ------ = 7.98%
1-36%
</TABLE>
CALCULATION OF TAXABLE EQUIVALENT DISTRIBUTION RATE
<TABLE>
<S> <C> <C> <C>
Distribution Rate
Formula..................................................... -----------------
1-Tax Rate
6.28%
Class A Shares.............................................. ------ = 9.81%
1-36%
5.84%
Class B Shares.............................................. ------ = 9.13%
1-36%
5.85%
Class C Shares.............................................. ------ = 9.14%
1-36%
</TABLE>
<PAGE> 1
EXHIBIT 17.1
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
March 24, 1997
Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Fund Portfolio
Van Kampen American Capital Global Equity Fund Portfolio
Van Kampen American Capital Government Portfolio
<PAGE> 2
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust................................. Series 1
Insured Municipals Income Trust......................................... Series 1 through 387
Insured Municipals Income Trust (Discount).............................. Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term)............... Series 1 through 106
1009 Insured Municipals Income Trust (Intermediate Term)................ Series 5 through 89
Insured Municipals Income Trust (Limited Term).......................... Series 9 through 86
Insured Municipals Income Trust (Premium Bond Series)................... Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity)........ Series 1 and 2
Insured Tax Free Bond Trust............................................. Series 1 through 6
Insured Tax Free Bond Trust (Limited Term).............................. Series 1
Investors' Quality Tax-Exempt Trust..................................... Series 1 through 93
Investors' Quality Tax-Exempt Trust-Intermediate........................ Series 1
Investors' Corporate Income Trust....................................... Series 1 through 12
Investors' Governmental Securities Income Trust......................... Series 1 through 7
Van Kampen Merritt International Bond Income Trust...................... Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust............................. Series 1
Alabama Insured Municipals Income Trust................................. Series 1 through 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Arizona Investors' Quality Tax-Exempt Trust............................. Series 1 through 16
Arizona Insured Municipals Income Trust................................. Series 1 through 18
Arkansas Insured Municipals Income Trust................................ Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust............................ Series 1
California Insured Municipals Income Trust.............................. Series 1 through 164
California Insured Municipals Income Trust (Premium Bond Series)........ Series 1
California Insured Municipals Income Trust (1st Intermediate Series).... Series 1 through 3
California Investors' Quality Tax-Exempt Trust.......................... Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered)...... Series 1 through 22
Colorado Insured Municipals Income Trust................................ Series 1 through 83
Colorado Investors' Quality Tax-Exempt Trust............................ Series 1 through 18
Connecticut Insured Municipals Income Trust............................. Series 1 through 34
Connecticut Investors' Quality Tax-Exempt Trust......................... Series 1
Delaware Investor's Quality Tax-Exempt Trust............................ Series 1 and 2
Florida Insured Municipal Income Trust -- Intermediate.................. Series 1 and 2
Florida Insured Municipals Income Trust................................. Series 1 through 113
Florida Investors' Quality Tax-Exempt Trust............................. Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered)......... Series 1 through 13
Georgia Insured Municipals Income Trust................................. Series 1 through 83
Georgia Investors' Quality Tax-Exempt Trust............................. Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust.............................. Series 1
Indiana Insured Municipals Income Trust ................................ Series 1
Investors' Quality Municipals Trust (AMT)............................... Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust.............................. Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust............................ Series 1 through 59
Louisiana Insured Municipals Income Trust............................... Series 1 through 17
Maine Investor's Quality Tax-Exempt Trust............................... Series 1
Maryland Investors' Quality Tax-Exempt Trust............................ Series 1 through 81
Massachusetts Insured Municipals Income Trust........................... Series 1 through 34
Massachusetts Insured Municipals Income Trust (Premium Bond Series)..... Series 1
Michigan Financial Institutions Trust................................... Series 1
Michigan Insured Municipals Income Trust................................ Series 1 through 143
Michigan Insured Municipals Income Trust (Premium Bond Series).......... Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series)...... Series 1 through 33
Michigan Investors' Quality Tax-Exempt Trust............................ Series 1 through 30
Michigan Select Trust................................................... Series 1
Minnesota Insured Municipals Income Trust............................... Series 1 through 60
Minnesota Investors' Quality Tax-Exempt Trust........................... Series 1 through 21
Mississippi Insured Municipals Income Trust............................. Series 1
Missouri Insured Municipals Income Trust................................ Series 1 through 100
Missouri Insured Municipals Income Trust (Premium Bond Series).......... Series 1
Missouri Investors' Quality Tax-Exempt Trust............................ Series 1 through 15
Missouri Insured Municipals Income Trust (Intermediate Laddered
Maturity)............................................................. Series 1
Nebraska Investors' Quality Tax-Exempt Trust............................ Series 1 through 9
New Mexico Insured Municipals Income Trust.............................. Series 1 through 18
New Jersey Insured Municipals Income Trust.............................. Series 1 through 118
New Jersey Investors' Quality Tax-Exempt Trust.......................... Series 1 through 22
New Jersey Insured Municipals Income Trust (Intermediate Laddered
Maturity)............................................................. Series 1 and 4
New York Insured Municipals Income Trust-Intermediate................... Series 1 through 6
New York Insured Municipals Income Trust (Limited Term)................. Series 1
New York Insured Municipals Income Trust................................ Series 1 through 140
New York Insured Tax-Free Bond Trust.................................... Series 1
New York Insured Municipals Income Trust (Intermediate Laddered
Maturity)............................................................. Series 1 through 17
New York Investors' Quality Tax-Exempt Trust............................ Series 1
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
North Carolina Investors' Quality Tax-Exempt Trust...................... Series 1 through 92
Ohio Insured Municipals Income Trust.................................... Series 1 through 106
Ohio Insured Municipals Income Trust (Premium Bond Series).............. Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term)................ Series 1
Ohio Insured Municipals Income Trust (Intermediate Laddered Maturity)... Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust................................ Series 1 through 16
Oklahoma Insured Municipal Income Trust................................. Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust.............................. Series 1 through 53
Pennsylvania Insured Municipals Income Trust -- Intermediate............ Series 1 through 6
Pennsylvania Insured Municipals Income Trust............................ Series 1 through 228
Pennsylvania Insured Municipals Income Trust (Premium Bond Series)...... Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust........................ Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust...................... Series 1 through 85
Stepstone Growth Equity and Treasury Securities Trust................... Series 1
Tennessee Insured Municipals Income Trust............................... Series 1-3 and 5-39
Texas Insured Municipals Income Trust................................... Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder).............. Series 1
Virginia Investors' Quality Tax-Exempt Trust............................ Series 1 through 76
Van Kampen American Capital Equity Opportunity Trust.................... Series 1 through 54
Van Kampen American Capital Utility Income Trust........................ Series 1 through 8
Van Kampen American Capital Insured Income Trust........................ Series 1 through 64
Van Kampen American Capital Insured Income Trust (Intermediate Term).... Series 1 through 62
Van Kampen Merritt Select Equity Trust.................................. Series 1
Van Kampen Merritt Select Equity and Treasury Trust..................... Series 1
Washington Insured Municipals Income Trust.............................. Series 1
West Virginia Insured Municipals Income Trust........................... Series 1 through 7
Principal Financial Institutions Trust.................................. Series 1
Internet Trust.......................................................... Series 1 through 5
Michigan Real Estate Income and Growth Trust............................ Series 1
Strategic Ten Trust, United States...................................... Series 1 through 14
Strategic Ten Trust, United Kingdom..................................... Series 1 through 12
Strategic Ten Trust, Hong Kong.......................................... Series 1 through 12
Strategic Five Trust, United States..................................... Series 1 through 8
Global Fifteen Trust.................................................... Series 1 through 2
Global Thirty Trust..................................................... Series 1 through 3
Great International Firms Trust......................................... Series 1 through 3
Undervalued Growth Opportunities Trust.................................. Series 1
Emerging Growth and Treasury............................................ Series 1
Global Blue Chip Trust.................................................. Series 1
Renaissance Trust....................................................... Series 1
Blue Chip Opportunity and Treasury Trust................................ Series 1 through 4
Wheat First Strategic Opportunity Unit Trust............................ Series 1
Baby Boomer Opportunity Trust........................................... Series 1 through 2
Global Energy Trust..................................................... Series 1 through 2
Latin American Trust.................................................... Series 1
Brand Name Equity Trust................................................. Series 1 through 3
Global Health Care Trust ............................................... Series 1
Global Precious Metals Trust............................................ Series 1
</TABLE>
<PAGE> 1
EXHIBIT 17.2
OFFICERS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------------- ---------------------------------- --------------------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX
William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer
Ronald A. Nyberg Executive Vice President & General Oakbrook Terrace, IL
Counsel
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL
Timothy K. Brown 1st Vice President Laguna Niguel, CA
James S. Fosdick 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President San Francisco, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Thomas M. Byron Vice President Oakbrook Terrace, IL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
Richard J. Charlino Vice President Houston, TX
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Houston, TX
Tracey M. DeLusant Vice President Lynbrook, NY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
David B. Dibo Vice President Oakbrook Terrace, IL
Howard A. Doss Vice President Tampa, FL
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhaven Vice President Denver, CO
Charles Friday Vice President Gibsonia, PA
Erich P. Gerth Vice President Dallas, TX
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
Gregory Heffington Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Robert S. Hunt Vice President Baltimore, MD
Lowell Jackson Vice President Norcross, GA
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
S. William Lehew III Vice President Charlotte, NC
Robert C. Lodge Vice President Philadelphia, PA
Walter Lynn Vice President Flower Mound, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Ruth L. McKeel Vice President Oakbrook Terrace, IL
John Mills Vice President Kenner, LA
Robert Muller, Jr. Vice President Houston, TX
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Boston, MA
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
James D. Stevens Vice President Boston, MA
William C. Strafford Vice President Granger, IN
David A. Tabone Vice President Phoenix, AZ
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Jeff Warland Vice President Oakbrook Terrace, IL
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
James R. Yount Vice President Seattle, WA
Patrick M. Zacchea Vice President New York, NY
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Brian P. Arcara Asst. Vice President Philadelphia, PA
Christopher M. Bisaillon Asst. Vice President Oakbrook Terrace, IL
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Robert C. Brooks Asst. Vice President Manchester, MA
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL
Deanna Margaret Chiaro Asst. Vice President San Jose, CA
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Daniel R. DeJong Asst. Vice President Oakbrook Terrace, IL
Melissa B. Epstein Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Scott F. Heyer Asst. Vice President Tampa, FL
Jeffrey S. Kinney Asst. Vice President Oakbrook Terrace, IL
Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Patricia D. Lathrop Asst. Vice President Tampa, FL
Tony E. Leal Asst. Vice President Houston, TX
Ivan R. Lowe Asst. Vice President Houston, TX
Linda S. MacAyeal Asst. Vice President Oakbrook Terrace, IL
Ann Therese McGrath Asst. Vice President Laguna, CA
Stuart R. Moehlman Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
Gregory S. Parker Asst. Vice President Houston, TX
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Jeffrey S. Rourke Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Traci T. Sorensen Asst. Vice President Oakbrook Terrace, IL
Gary Steele Asst. Vice President Philadelphia, PA
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Robert A. Watson Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
Gina Grippo Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
Francis McGarvey Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ---------------------------------
<S> <C> <C>
Don G. Powell Chairman & CEO 2800 Post Oak Blvd.
Houston, TX 77056
William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181
William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT 18
AMENDED
MULTI-CLASS PLAN
FOR
VAN KAMPEN AMERICAN CAPITAL FAMILY OF FUNDS
This Plan is adopted pursuant to Rule 18f-3 under the Act to provide
for the issuance and distribution of multiple classes of shares by each of the
Funds in accordance with the terms, procedures and conditions set forth below.
A majority of the Trustees of the Funds, including a majority of the Trustees
who are not interested persons of the Funds within the meaning of the Act,
found this Multi-Class Plan, including the expense allocations, to be in the
best interest of each Fund and each Class of Shares of each Fund. The Fund
adopted this Plan on January 26, 1996 and amended the Plan as of January 1,
1997.
A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
1. The Act - Investment Company Act of 1940, as amended.
2. CDSC - contingent deferred sales charge.
3. CDSC Period - the period of years following acquisition during
which Shares are assessed a CDSC upon redemption.
4. Class - a class of Shares of a Fund.
5. Class A Shares - shall have the meaning ascribed in Section B. 1.
6. Class B Shares - shall have the meaning ascribed in Section B. 1.
7. Class C Shares - shall have the meaning ascribed in Section B. 1.
8. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of
Shares as defined in a Plan of Distribution and/or board
resolutions.
9. Distribution Fee - a fee paid by a Fund to the Distributor in
reimbursement of Distribution Expenses.
10. Distributor - Van Kampen American Capital Distributors, Inc.
11. Fund - an investment company listed on Exhibit A hereto and each
series thereof.
12. Money Market Fund - Van Kampen American Capital Reserve Fund or
Van Kampen American Capital Tax Free Money Market Fund.
<PAGE> 2
13. Plan of Distribution - Any plan adopted under Rule 12b-1 under the
Act with respect to payment of a Distribution Fee.
14. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders and/or
the maintenance of shareholder accounts.
15. Share - a share of beneficial interest in a Fund.
16. Trustees - the trustees of a Fund.
B. Classes. Each Fund may offer three Classes as follows:
1. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Trustees and set forth in the Funds' prospectus,
which may be reduced or eliminated for Money Market Funds,
larger purchases, under a combined purchase privilege, under a
right of accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act
and as set forth in the Fund's prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing, may be subject to a CDSC for the CDSC Period set forth
in Section D.1. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with Rule
22c-1 and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service
Fees approved from time to time by the Trustees and set forth in
the Funds' prospectus. Although shares of Van Kampen American
Capital Tax Free Money Market Fund are not designated as "Class A"
they are substantially similar to Class A Shares as defined herein
and shall be treated as Class A shares for the purposes of this
Plan.
2. Class B Shares. Class B Shares shall be (1) offered at net asset
value, (2) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares three to ten years after the calendar month in which the
shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.
3. Class C Shares. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC Period set forth
in Section D. 1. , (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) prior to January 1,
1997, converted to Class A Shares eight to fifteen years after
the calendar month in which the shareholder's order to purchase
was accepted, which number of years shall be as approved from
time to time by the Trustees and set forth in the respective
Fund's prospectus.
<PAGE> 3
C. Rights and Privileges of Classes. Each Class of each Fund will
represent an interest in the same portfolio of investments of that
Fund and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except as
described otherwise herein.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class
B Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be one year. The CDSC Period for Class B Shares shall be at
least three but not more than ten years as recommended by the
Distributor and approved by the Trustees.
2. CDSC Rate. The CDSC rate shall be recommended by the Distributor
and approved by the Trustees. If a CDSC is imposed for a period
greater than one year the CDSC rate must decline during the CDSC
Period such that (a) the CDSC rate is less in the last year of the
CDSC Period than in the first and (b) in each succeeding year the
CDSC rate shall be less than or equal to the CDSC rate in the
preceding year.
3. Disclosure and Changes. The CDSC rates and CDSC Period shall be
disclosed in a Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved as set forth in Section L.
4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current market value or the cost of
the Shares being redeemed. No sales charge shall be imposed on
increases in the net asset value of the Shares being redeemed above
the initial purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares and Class C
Shares are to be redeemed when not all of such Shares would be
subject toa CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares under circumstances
previously approved by the Trustees and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of Shares subject
to a CDSC shall be computed in accordance with Rule 22c-1 and
Section 22(d) of the Act and the rules and regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of
a Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in
<PAGE> 4
connection with the sale of Shares subject to a CDSC and
Distribution Expenses to the extent of such commissions and
Distribution Expenses eligible for reimbursement and approved by
the Trustees.
E. Service and Distribution Fees. Class A Shares shall be subject to a
Service Fee and Class B and Class C Shares shall be subject to a
Service Fee and a Distribution Fee. The Service Fee applicable to any
class shall not exceed 0.25% per annum of the average daily net assets
of the Class and the Distribution Fee shall not exceed 0.75% per annum
of the average daily net assets of the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees shall be
governed by the plans adopted by the Fund with respect to such fees
and Rule 12b-1 of the Act.
F. Conversion. Shares purchased through the reinvestment of dividends
and distributions paid on Shares subject to conversion shall be
treated as if held in a separate sub-account . Each time any Shares
in a Shareholder's account (other than Shares held in the sub-
account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset
values of the two Classes without the imposition of any sales load or
other charge. So long as any Class of Shares converts into Class A
Shares, the Distributor shall waive or reimburse each Fund, or take
such other actions with the approval of the Trustees as may be
reasonably necessary, to ensure the expenses, including payments
authorized under a Plan of Distribution, applicable to the Class A
Shares are not higher than the expenses, including payments authorized
under the Plan of Distribution, applicable to the class of shares
converting into Class A Shares.
G. Allocation of Expenses, Income and Gains Among Classes.
1. Expenses applicable to a particular class. Each Class of each
Fund shall pay any Service Fee, Distribution Fee and CDSC
applicable to that Class. Other expenses applicable to a
particular Class such as incremental transfer agency fees, but not
including advisory or custodial fees or other expenses related to
the management of the Fund's assets, shall be allocated between
Classes in different amounts if they are actually incurred in
different amounts by the Classes or the Classes receive services
of a different kind or to a different degree than other Classes.
2. Distribution Expenses. Distribution Expenses actually
attributable to the sale of all Classes shall be allocated to each
Class based upon the ratio which sales of each Class bears to the
sales of all Shares of the Fund. For this purpose, Shares issued
upon reinvestment of dividends or distributions, upon conversion
from Class B Shares or Class C Shares to Class A Shares or upon
stock splits will not be considered sales.
3. Income, capital gains and losses, and other expenses applicable to
all Classes. Income, realized and unrealized capital gains and
losses, and expenses such as advisory fees applicable to all
Classes shall be allocated to each Class on the basis of the net
asset value of that Class in relation to the net asset value of
the Fund.
<PAGE> 5
4. Determination of nature of expenses. The Trustees shall determine
in their sole discretion whether any expense other than those
listed herein is properly treated as attributed to a particular
Class or all Classes.
H. Exchange Privilege. Exchanges of Shares shall be permitted between
Funds as follows.
1. General. Shares of one Fund may be exchanged for Shares of the
same Class of another Fund at net asset value and without sales
charge, provided that
a. The Distributor may specify that certain Funds may not be
exchanged within a designated period, which shall not exceed
90 days, after acquisition without prior Distributor approval.
b. Class A Shares of a Money Market Fund that were not acquired
in exchange for Class B or Class C Shares of a Fund may be
exchanged for Class A Shares of another Fund only upon payment
of the excess, if any, of the sales charge rate applicable to
the Shares being acquired over the sales charge rate
previously paid.
c. Shares of a Money Market Fund acquired through an exchange of
Class B Shares or Class C Shares may be exchanged only for the
same Class of another Fund as the Class they were acquired in
exchange for or any Class into which those shares were
converted.
2. Target Fund. Shares of Van Kampen American Capital Government
Target Fund may be exchanged for Class A Shares of a Fund.
3. CDSC Computation. The acquired Shares will remain subject to the
CDSC rate schedule and CDSC Period for the original Fund upon the
redemption of the Shares from the Van Kampen American Capital
complex of funds. For purposes of computing the CDSC payable on a
disposition of the new Shares, the holding period for the
original Shares shall be added to the holding period of the new
Shares.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on
any matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that
a. If any amendment is proposed to the plan under which Service
Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by Class A
Shares under that plan, then no Class B Shares or Class C
Shares shall convert into Class A Shares of that Fund until
the holders of Class B Shares and Class C Shares of that Fund
have also approved the proposed amendment.
<PAGE> 6
b. If the holders of either the Class B Shares and/or Class C
Shares referred to in subparagraph a. do not approve the
proposed amendment, the Trustees of the Fund and the
Distributor shall take such action as is necessary to ensure
that the Class voting against the amendment shall convert into
another Class identical in all material respects to Class A
Shares of the Fund as constituted prior to the amendment.
2. Shareholders shall have separate voting rights on any matter
submitted to shareholders in which the interest of one Class
differs from the interests of any other Class.
J. Dividends. Dividends paid by a Fund with respect to each Class, to
the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in substantially
the same amount, except any Distribution Fees,Service Fees or
incremental expenses relating to a particular Class will be borne
exclusively by that Class.
K. Reports to Trustees. The Distributor shall provide to the Trustees of
each Fund quarterly and annual statements concerning distribution and
Shareholder servicing expenditures complying with paragraph (b)(3)(ii)
of Rule 12b-1 of the Act, as it may be amended from time to time. The
Distributors also shall provide the Trustees such information as the
Trustees may from time to time deem to be reasonably necessary to
evaluate this Plan.
L. Amendment. Any material amendment to this Plan shall be approved by
the affirmative vote of a majority of the Trustees of a Fund,
including the affirmative vote of the trustees of the Fund
who are not interested persons of the Fund, except that any amendment
that increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares of the
affected Class. The Distributor shall provide the Trustees such
information as may be reasonably necessary to evaluate any amendment
to this Plan.
<PAGE> 7
EXHIBIT A
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL PACE FUND
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST
<PAGE> 1
POWER OF ATTORNEY EXHIBIT 19
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open-End Trusts, as indicated on Schedule 1 attached hereto
and incorporated by reference, each a Delaware business trust, except for the
Van Kampen American Capital Pennsylvania Tax Free Income Fund, being a
Pennsylvania business trust (individually, a "Trust"), do hereby, in the
capacities shown below, individually appoint Dennis J. McDonnell and Ronald A.
Nyberg, each of Oakbrook Terrace, Illinois, and each of them, as the agents and
attorneys-in-fact with full power of substitution and resubstitution, for each
of the undersigned, to execute and deliver, for and on behalf of the
undersigned, any and all amendments to the Registration Statement filed by each
Trust with the Securities and Exchange Commission pursuant to the provisions of
the Securities Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Dated: March 1, 1996
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/ s / Fernando Sisto, Sc.D Trustee
- ----------------------------------------------
Fernando Sisto, Sc.D.
/ s / Donald C. Miller Trustee
- ----------------------------------------------
Donald C. Miller
/ s / Don G. Powell Trustee
- ----------------------------------------------
Don G. Powell
/ s / Dennis J. McDonnell Trustee
- ----------------------------------------------
Dennis J. McDonnell
/ s / J. Miles Branagan Trustee
- ----------------------------------------------
J. Miles Branagan
/ s / Linda Hutton Heagy Trustee
- ----------------------------------------------
Linda Hutton Heagy
/ s / Roger Hilsman, Ph.D. Trustee
- ----------------------------------------------
Roger Hilsman, Ph.D.
/ s / William Stewart Woodside Trustee
- ----------------------------------------------
William Stewart Woodside
/ s / R. Craig Kennedy Trustee
- ----------------------------------------------
R. Craig Kennedy
/ s / Jack E. Nelson Trustee
- ----------------------------------------------
Jack E. Nelson
/ s / Wayne W. Whalen Trustee
- ----------------------------------------------
Wayne W. Whalen
/ s / Jerome L. Robinson Trustee
- ----------------------------------------------
Jerome L. Robinson
/ s / Edward C. Wood III Vice President and
- ----------------------------------------------
Edward C. Wood III Chief Financial Officer
</TABLE>
<PAGE> 2
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
3. VAN KAMPEN AMERICAN CAPITAL TRUST
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
8. VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
9. VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
10. VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
11. VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
12. VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
13. VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
14. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
15. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
16. VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
17. VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
18. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
19. VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
20. VAN KAMPEN AMERICAN CAPITAL PACE FUND
21. VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
22. VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
23. VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND
24. VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
25. VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
26. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
27. VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 011
[NAME] VKAC HIGH YIELD MUNICIPAL FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1996
[PERIOD-START] DEC-01-1995
[PERIOD-END] NOV-30-1996
[INVESTMENTS-AT-COST] 945775401
[INVESTMENTS-AT-VALUE] 978715397
[RECEIVABLES] 29025148
[ASSETS-OTHER] 2431
[OTHER-ITEMS-ASSETS] 83852
[TOTAL-ASSETS] 1007826828
[PAYABLE-FOR-SECURITIES] 7248217
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5846106
[TOTAL-LIABILITIES] 13094323
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 618328415
[SHARES-COMMON-STOCK] 55746099
[SHARES-COMMON-PRIOR] 46185017
[ACCUMULATED-NII-CURRENT] 113411
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (24717110)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 32939996
[NET-ASSETS] 620960577
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 65971253
[OTHER-INCOME] 0
[EXPENSES-NET] (11073697)
[NET-INVESTMENT-INCOME] 54897556
[REALIZED-GAINS-CURRENT] 2092011
[APPREC-INCREASE-CURRENT] (3815487)
[NET-CHANGE-FROM-OPS] 53174080
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (36684070)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 15132127
[NUMBER-OF-SHARES-REDEEMED] (6981065)
[SHARES-REINVESTED] 1410020
[NET-CHANGE-IN-ASSETS] 104664025
[ACCUMULATED-NII-PRIOR] 26781
[ACCUMULATED-GAINS-PRIOR] (31216640)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4757392
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 11090697
[AVERAGE-NET-ASSETS] 552367910
[PER-SHARE-NAV-BEGIN] 11.18
[PER-SHARE-NII] 0.735
[PER-SHARE-GAIN-APPREC] (0.41)
[PER-SHARE-DIVIDEND] (0.735)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.139
[EXPENSE-RATIO] 1.01
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 012
[NAME] VKAC HIGH YIELD MUNICIPAL FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1996
[PERIOD-START] DEC-01-1995
[PERIOD-END] NOV-30-1996
[INVESTMENTS-AT-COST] 945775401
[INVESTMENTS-AT-VALUE] 978715397
[RECEIVABLES] 29025148
[ASSETS-OTHER] 2431
[OTHER-ITEMS-ASSETS] 83852
[TOTAL-ASSETS] 1007826828
[PAYABLE-FOR-SECURITIES] 7248217
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5846106
[TOTAL-LIABILITIES] 13094323
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 319327477
[SHARES-COMMON-STOCK] 29077037
[SHARES-COMMON-PRIOR] 20927094
[ACCUMULATED-NII-CURRENT] 113411
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (24717110)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 32939996
[NET-ASSETS] 323811217
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 65971253
[OTHER-INCOME] 0
[EXPENSES-NET] (11073697)
[NET-INVESTMENT-INCOME] 54897556
[REALIZED-GAINS-CURRENT] 2092011
[APPREC-INCREASE-CURRENT] (3815487)
[NET-CHANGE-FROM-OPS] 53174080
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (15919679)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 9807767
[NUMBER-OF-SHARES-REDEEMED] (2265184)
[SHARES-REINVESTED] 607360
[NET-CHANGE-IN-ASSETS] 89942688
[ACCUMULATED-NII-PRIOR] 26781
[ACCUMULATED-GAINS-PRIOR] (31216640)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4757392
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 11090697
[AVERAGE-NET-ASSETS] 270823251
[PER-SHARE-NAV-BEGIN] 11.18
[PER-SHARE-NII] 0.653
[PER-SHARE-GAIN-APPREC] (0.46)
[PER-SHARE-DIVIDEND] (0.651)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.136
[EXPENSE-RATIO] 1.77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 013
[NAME] VKAC HIGH YIELD MUNICIPAL FUND - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1996
[PERIOD-START] DEC-01-1995
[PERIOD-END] NOV-30-1996
[INVESTMENTS-AT-COST] 945775401
[INVESTMENTS-AT-VALUE] 978715397
[RECEIVABLES] 29025148
[ASSETS-OTHER] 2431
[OTHER-ITEMS-ASSETS] 83852
[TOTAL-ASSETS] 1007826828
[PAYABLE-FOR-SECURITIES] 7248217
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5846106
[TOTAL-LIABILITIES] 13094323
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 48740316
[SHARES-COMMON-STOCK] 4490533
[SHARES-COMMON-PRIOR] 2789400
[ACCUMULATED-NII-CURRENT] 113411
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (24717110)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 32939996
[NET-ASSETS] 49960711
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 65971253
[OTHER-INCOME] 0
[EXPENSES-NET] (11073697)
[NET-INVESTMENT-INCOME] 54897556
[REALIZED-GAINS-CURRENT] 2092011
[APPREC-INCREASE-CURRENT] (3815487)
[NET-CHANGE-FROM-OPS] 53174080
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2289094)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2297440
[NUMBER-OF-SHARES-REDEEMED] (714617)
[SHARES-REINVESTED] 118310
[NET-CHANGE-IN-ASSETS] 18815066
[ACCUMULATED-NII-PRIOR] 26781
[ACCUMULATED-GAINS-PRIOR] (31216640)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4757392
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 11090697
[AVERAGE-NET-ASSETS] 38967575
[PER-SHARE-NAV-BEGIN] 11.17
[PER-SHARE-NII] 0.652
[PER-SHARE-GAIN-APPREC] (0.45)
[PER-SHARE-DIVIDEND] (0.651)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.126
[EXPENSE-RATIO] 1.77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
