<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1995
REGISTRATION NOS. 33-4410
811-4629
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 35 /X/
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 36 /X/
VAN KAMPEN AMERICAN CAPITAL TRUST
(Exact Name of Registrant as Specified in Agreement and Declaration of Trust)
One Parkview Plaza, Oakbrook Terrace, Illinois 60181
(Address of Principal Executive Offices)
(708) 684-6000
(Registrant's Telephone Number)
Ronald A. Nyberg, Esq.
Executive Vice President,
General Counsel and Secretary
Van Kampen American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Name and Address of Agent for Service)
Copies to:
Wayne W. Whalen, Esq.
Thomas A. Hale, Esq.
Skadden, Arps, Slate, Meagher & Flom
333 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: (check appropriate
box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1) of Rule 485.
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate check the following:
/X/ 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 and will file with
the Securities and Exchange Commission a Rule 24f-2 notice for its fiscal year
ending June 30, 1995 on or before August 31, 1995.
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<PAGE> 2
EXPLANATORY NOTE
This Post-Effective Amendment No. 35 to the Registration Statement contains
one Prospectus and one Statement of Additional Information describing one of the
five series of the Registrant. The Registration Statement is organized as
follows:
Facing Page
Cross Reference Sheet with respect to Van Kampen American Capital Short-
Term Global Income Fund
Prospectus Relating to Van Kampen American Capital Short-Term Global Income
Fund
Statement of Additional Information Relating to Van Kampen American Capital
Short-Term Global Income Fund
Part C Information
Exhibits
The Prospectuses and Statements of Additional Information with respect to
Van Kampen American Capital High Yield Fund and Van Kampen American Capital
Strategic Income Fund, each a series of the Registrant, included in
Post-Effective Amendment No. 30 to the Registration Statement are incorporated
herein by reference in their entirety and no changes to the Prospectuses or
Statements of Additional Information are effected by this Post-Effective
Amendment No. 35.
The Prospectus and Statement of Additional Information with respect to Van
Kampen American Capital Adjustable Rate U.S. Government Fund, a series of the
Registrant, included in Post-Effective Amendment No. 32 to the Registration
Statement are incorporated herein by reference in their entirety and no changes
to the Prospectus or Statement of Additional Information are effected by this
Post-Effective Amendment No. 35.
The Prospectus and Statement of Additional Information with respect to Van
Kampen American Capital Emerging Markets Income Fund, a series of the
Registrant, included in Post-Effective Amendment No. 27 to the Registration
Statement are incorporated herein by reference in their entirety and no changes
to the Prospectus or Statement of Additional Information are effected by this
Post-Effective Amendment No. 35.
<PAGE> 3
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND
CROSS REFERENCE SHEET
(AS REQUIRED BY ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
ITEM NUMBER OF LOCATION OR CAPTION
FORM N-1A IN PROSPECTUS
- ---------------------------------- -----------------------------------------------------------
PART A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page............. Cover Page
Item 2. Synopsis............... PROSPECTUS SUMMARY; SHAREHOLDER TRANSACTION EXPENSES;
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
Item 3. Condensed Financial
Information.......... SHAREHOLDER TRANSACTION EXPENSES; ANNUAL FUND OPERATING
EXPENSES AND EXAMPLE; FINANCIAL HIGHLIGHTS; FUND
PERFORMANCE; ADDITIONAL INFORMATION
Item 4. General Description of
Registrant........... PROSPECTUS SUMMARY; THE FUND; INVESTMENT OBJECTIVE AND
POLICIES; INVESTMENT PRACTICES DESCRIPTION OF SHARES OF THE
FUND
Item 5. Management of the
Fund................. ANNUAL FUND OPERATING EXPENSES AND EXAMPLE; INVESTMENT
PRACTICES; INVESTMENT ADVISORY SERVICES; SHAREHOLDER
SERVICES
Item 6. Capital Stock and Other
Securities........... DISTRIBUTIONS FROM THE FUND; REDEMPTION OF SHARES; THE
DISTRIBUTION AND SERVICE PLANS; TAX STATUS; SHAREHOLDER
SERVICES; ALTERNATIVE SALES ARRANGEMENTS; PURCHASE OF
SHARES; DESCRIPTION OF SHARES OF THE FUND; ADDITIONAL
INFORMATION
Item 7. Purchase of Securities
Being Offered........ SHAREHOLDER TRANSACTION EXPENSES; ALTERNATIVE SALES
ARRANGEMENTS; PURCHASE OF SHARES; THE DISTRIBUTION AND
SERVICE PLANS; PURCHASE OF SHARES; SHAREHOLDER SERVICES;
FUND PERFORMANCE
Item 8. Redemption or
Repurchase........... ALTERNATIVE SALES ARRANGEMENTS; PURCHASE OF SHARES;
REDEMPTION OF SHARES; SHAREHOLDER SERVICES
Item 9. Pending Legal
Proceedings.......... Not Applicable
</TABLE>
(i.)
<PAGE> 4
<TABLE>
<CAPTION>
LOCATION OR CAPTION
ITEM NUMBER OF IN STATEMENT OF
FORM N-1A ADDITIONAL INFORMATION
- ---------------------------------- -----------------------------------------------------------
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<S> <C> <C>
Item 10. Cover Page............. Cover Page
Item 11. Table of Contents...... Table of Contents
Item 12. General Information
and History.......... The Fund and the Trust
Item 13. Investment Objectives
and Policies......... Investment Policies and Restrictions; Additional Investment
Considerations
Item 14. Management of the
Fund................. Officers and Trustees
Item 15. Control Persons and
Principal Holders of
Securities........... Officers and Trustees
Item 16. Investment Advisory and
Other Services....... Contained in the Prospectus under captions: ALTERNATIVE
SALES ARRANGEMENTS; PURCHASE OF SHARES; INVESTMENT ADVISORY
SERVICES; THE DISTRIBUTION AND SERVICE PLANS; Investment
Advisory and Other Services; Legal Counsel; Officers and
Trustees; The Distributor; Notes to Financial Statements
Item 17. Brokerage Allocation... Portfolio Transactions and Brokerage Allocation
Item 18. Capital Stock and
Other Securities..... Contained in the Prospectus under the caption: DESCRIPTION
OF SHARES OF THE FUND
Item 19. Purchase, Redemption
and Pricing of
Securities Being
Offered.............. Contained in the Prospectus under the captions: ALTERNATIVE
SALES ARRANGEMENTS; PURCHASE OF SHARES; SHAREHOLDER
SERVICES; REDEMPTION OF SHARES
Item 20. Tax Status............. Contained in the Prospectus under captions TAX STATUS;
PURCHASE OF SHARES; Tax Status of the Fund
Item 21. Underwriters........... The Distributor; Notes to Financial Statements
Item 22. Calculation of
Performance Data..... Contained in the Prospectus under the caption: FUND
PERFORMANCE; Performance Information
Item 23. Financial Statements... Contained in the Prospectus under the caption: FINANCIAL
HIGHLIGHTS; Unaudited Financial Statements; Notes to
Unaudited Financial Statements; Independent Auditors'
Report; Audited Financial Statements; Notes to Audited
Financial Statements; Officers and Trustees
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
(ii.)
<PAGE> 5
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VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM GLOBAL INCOME FUND
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Van Kampen American Capital Short-Term Global Income Fund, formerly known as
Van Kampen Merritt Short-Term Global Income Fund (the "Fund"), is a separate
non-diversified series of the Van Kampen American Capital Trust, an open-end
management investment company commonly known as a mutual fund. The Fund's
investment objective is to seek a high level of current income, consistent with
prudent investment risk.
The Fund seeks to achieve its investment objective by investing in a global
portfolio of high-quality debt securities denominated in various currencies and
multi-national currency units and having remaining maturities of not more than
three years. The portfolio consists of high quality debt securities issued or
guaranteed by foreign governments or supranational organizations or their
agencies, instrumentalities, or subdivisions, high-quality debt securities
issued by corporations, high quality certificates of deposit or bankers
acceptances issued or guaranteed by large U.S. or foreign banks, high-quality
commercial paper and debt securities issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Investments in securities denominated in
currencies other than the U.S. dollar involve foreign currency exchange risks.
The Fund intends to engage in strategic transactions to seek to reduce or
eliminate such risks.
The Fund is designed for the investor who seeks a higher yield than a money
market fund and less fluctuation in net asset value than a longer-term global
bond fund. There is no assurance that the Fund will achieve its investment
objective.
(Continued on next page.)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION 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, 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 THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated August 30, 1995, containing
additional information about the Fund, has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
without charge by calling (800) 421-5666 or for Telecommunication Device for the
Deaf at (800) 772-8889.
------------------
VAN KAMPEN AMERICAN CAPITAL SM
------------------
THIS PROSPECTUS IS DATED AUGUST 30, 1995.
<PAGE> 6
(Continued from previous page.)
The Fund's investment adviser is Van Kampen American Capital Investment
Advisory Corp. The net asset value and yield of the Fund will fluctuate
depending on market conditions and other factors. This Prospectus sets forth
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.
The Fund currently offers three classes of shares (the "Alternative Sales
Arrangements") which may be purchased at a price equal to their net asset value
per share, plus sales charges which, at the election of the investor, may be
imposed (i) at the time of purchase (the "Class A Shares") or (ii) on a
contingent deferred basis (Class A Share accounts over $1 million, "Class B
Shares" and "Class C Shares"). The Alternative Sales Arrangements permit an
investor to choose the method of purchasing shares that is more beneficial to
the investor, taking into account the amount of the purchase, the length of time
the investor expects to hold the shares and other circumstances.
Each class of shares pays ongoing distribution and service fees at an
aggregate annual rate of (i) for Class A Shares, up to 0.25% of the Fund's
average daily net assets attributable to the Class A Shares, (ii) for Class B
Shares, up to 1.00% of the Fund's average daily net assets attributable to the
Class B Shares and (iii) for Class C Shares, up to 1.00% of the Fund's average
daily net assets attributable to the Class C Shares. Investors should understand
that the purpose and function of the deferred sales charge and the distribution
and service fees with respect to the Class A Share accounts over $1 million,
Class B Shares and Class C Shares are the same as those of the initial sales
charge and distribution and service fees with respect to the Class A Share
accounts below $1 million. Each share of the Fund represents an identical
interest in the investment portfolio of the Fund and has the same rights, except
that (i) each class of shares bears those distribution fees, service fees and
administrative expenses applicable to the respective class of shares as a result
of its sales arrangement, which will cause the different classes of shares to
have different expense ratios and to pay different rates of dividends, (ii) each
class has exclusive voting rights with respect to those provisions of the Fund's
Rule 12b-1 distribution plan which relate only to such class and (iii) the
classes have different exchange privileges. Class B Shares automatically will
convert to Class A Shares six years after the end of the calendar month in which
the investor's order to purchase was accepted, in the circumstances and subject
to the qualifications described in this Prospectus. See "Alternative Sales
Arrangements" and "Purchase of Shares".
2
<PAGE> 7
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................................. 4
Shareholder Transaction Expenses................................ 8
Annual Fund Operating Expenses and Example...................... 9
Financial Highlights............................................ 11
The Fund........................................................ 12
Investment Objective and Policies............................... 12
Investment Practices............................................ 18
Investment Advisory Services.................................... 25
Alternative Sales Arrangements.................................. 26
Purchase of Shares.............................................. 28
Shareholder Services............................................ 38
Redemption of Shares............................................ 42
The Distribution and Service Plans.............................. 45
Distributions from the Fund..................................... 47
Tax Status...................................................... 48
Fund Performance................................................ 52
Description of Shares of the Fund............................... 54
Additional Information.......................................... 55
</TABLE>
NO DEALER, SALESMAN 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.
3
<PAGE> 8
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PROSPECTUS SUMMARY
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THE FUND. Van Kampen American Capital Short-Term Global Income Fund (the
"Fund") is a separate non-diversified series of the Van Kampen American Capital
Trust (the "Trust"), which is an open-end management investment company
organized as a Delaware business trust. See "The Fund."
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 Fund's investment objective is to seek a high level
of current income, consistent with prudent investment risk.
INVESTMENT POLICIES. The Fund seeks to achieve its investment objective by
investing in a global portfolio of high-quality debt securities denominated in
various currencies and multi-national currency units and having remaining
maturities of not more than three years. In normal circumstances, at least 65%
of the Fund's total assets will be invested in obligations of or issued by
issuers located in at least three different countries, one of which may be the
United States. The Fund is designed for the investor who seeks a higher yield
than a money market fund and less fluctuation in net asset value than a
longer-term global bond fund. High quality debt securities and securities with
remaining maturities of less than three years generally have lower yields than
comparable securities of lower quality and with longer maturities. There is no
assurance that the fund will achieve its investment objective. See "Investment
Objective and Policies."
INVESTMENT RESULTS. The investment results of the Fund since its inception are
shown in table of "Financial Highlights".
ALTERNATIVE SALES ARRANGEMENTS. The Alternative Sales Arrangements permit an
investor to choose the method of purchasing shares that is more beneficial to
the investor, taking into account the amount of the purchase, the length of time
the investor expects to hold the shares and other circumstances. Investors
should consider such factors together with the amount of sales charges and
accumulated distribution and service fees with respect to each class of shares
that may be incurred over the anticipated duration of their investment in the
Fund. 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.
The Fund currently offers three classes of its shares which may be purchased
at a price equal to their net asset value per share plus sales charges which, at
the election of the investor, may be imposed either (i) at the time of the
purchase ("Class A Shares") or (ii) on a contingent deferred basis (Class A
Share accounts over $1 million, "Class B Shares" and "Class C Shares.)" Class A
Share accounts over $1 million or otherwise subject to a contingent deferred
sales charge
4
<PAGE> 9
("CDSC"), Class B Shares and Class C Shares sometimes are referred to herein
collectively as "CDSC Shares".
Class A Shares. Class A Shares are subject to an initial sales charge equal to
3.25% of the public offering price (3.36% of the net amount invested), reduced
on investments of $25,000 or more. Class A Shares are subject to ongoing
distribution and service fees at an aggregate annual rate of up to 0.25% of the
Fund's average daily net assets attributable to the Class A Shares. Certain
purchases of Class A Shares qualify for reduced or no initial sales charges and
may be subject to a CDSC.
Class B Shares. Class B Shares do not incur a sales charge when they are
purchased, but are subject to a sales charge if redeemed within three years of
purchase. Class B Shares are subject to a CDSC equal to 3.00% of the lesser of
the then current net asset value or the original purchase price on Class B
Shares redeemed during the first year after purchase, and reduced each year
thereafter. Class B Shares are subject to ongoing distribution and service fees
at an aggregate annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B Shares. Class B Shares automatically will
convert to Class A Shares six years after the end of the calendar month in which
the investor's order to purchase was accepted, in the circumstances and subject
to the qualifications described in this Prospectus.
Class C Shares. Class C Shares do not incur a sales charge when they are
purchased, but are subject to a sales charge if redeemed within the first year
after purchase. Class C Shares are subject to a CDSC equal to 1.00% of the
lesser of the then current net asset value or the original purchase price on
Class C Shares redeemed during the first year after purchase. Class C Shares are
subject to ongoing distribution and service fees at an aggregate annual rate of
up to 1.00% of the Fund's average daily net assets attributable to the Class C
Shares.
REDEMPTION. Class A Shares may be redeemed at net asset value, without charge
subject to conditions set forth herein. CDSC Shares may be redeemed at net asset
value less a deferred sales charge which will vary among each class of CDSC
Shares and with the length of time a redeeming shareholder has owned such
shares. CDSC Shares redeemed after the anniversary of the expiration of the CDSC
period applicable to the respective class of CDSC Shares will not be subject to
a deferred sales charge. See "Redemption of Shares."
INVESTMENT ADVISER. Van Kampen American Capital Investment Advisory Corp. is
the investment adviser for the Fund. See "Investment Advisory Services."
DISTRIBUTOR. Van Kampen American Capital Distributors, Inc.
DISTRIBUTIONS FROM THE FUND. Distributions from net investment income will be
declared daily and paid monthly; net realized capital gains, if any, will be
distributed annually. Distributions with respect to each class of shares will be
calculated in the same manner on the same day and will be in the same amount
except that the
5
<PAGE> 10
different distribution and service fees and administrative expenses relating to
each class of shares will be borne exclusively by the respective class of
shares. See "Distributions from the Fund."
RISK FACTORS AND SPECIAL CONSIDERATIONS. As a global fund, the Fund may invest
in United States and foreign securities. Investments in securities of foreign
entities and securities denominated in foreign currencies involve risks not
typically involved in domestic investment, including fluctuations in foreign
exchange rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign or United States
governmental laws or restrictions applicable to such investments. Since the Fund
may invest in securities denominated or quoted in currencies other than the
United States dollar, changes in foreign currency exchange rates may affect the
value of investments in the Fund's portfolio and the accrued income and
unrealized appreciation or depreciation of investments. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and the Fund's yield on
such assets. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets. These forces are, in turn, affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation, and other factors. Moreover,
individual foreign economies may differ favorably or unfavorably from the United
States economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position.
With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in such countries.
There may be less publicly available information about a foreign financial
instrument than about an United States instrument, and foreign entities may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those of United States entities. In addition, certain
foreign investments made by the Fund may be subject to foreign withholding
taxes, which would reduce the Fund's total return on such investments and the
amounts available for distribution by the Fund to its shareholders. For any
taxable year that more than 50% of the Fund's total assets at the close of such
year consist of stock or securities of foreign corporations and that the Fund
otherwise qualifies for and makes an election, the amount of foreign taxes paid
by the Fund that can be treated as foreign income taxes for United States
federal income tax purposes would be included in the income of its shareholders
and (subject to certain limitations) shareholders would be entitled to credit
their portions of these amounts against their United States federal income tax
due, if any, or to deduct their portions of these amounts from their United
States taxable income, if any. See "Tax Status." Most foreign financial markets,
while growing in volume, have, for the most part, substantially less volume than
United States markets, and securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable domestic companies.
Foreign markets
6
<PAGE> 11
also have different clearance and settlement procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are not invested and no return is earned thereon. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in the value of the portfolio security
or, if the Fund has entered into a contract to sell the security, could result
in possible liability to the purchaser. Costs associated with transactions in
foreign securities, including custodial costs and foreign brokerage commissions,
are generally higher than with transactions in United States securities. In
addition, the Fund incurs costs in connection with conversions between various
currencies. There is generally less government supervision and regulation of
exchanges, financial institutions and issuers in foreign countries than there is
in the United States.
The net asset value of the Fund's shares will be affected by changes in the
general level of interest rates. When interest rates decline, the value of a
portfolio of fixed income securities can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio of fixed income securities can be
expected to decline.
The Fund intends to engage in strategic transactions with all or a portion of
its portfolio investments through transactions in forward currency contracts,
options on foreign currencies, foreign currency swap contracts, financial
futures contracts and options on such financial futures contracts and through
the use of "cross hedges." Successful investments in such transactions are
subject to the Adviser's ability to predict correctly movements in the relevant
markets. Certain of such transactions may be illiquid.
The Fund may invest in commercial paper and certificates of deposit which are
indexed to certain specific foreign currency exchange rates. The terms of such
commercial paper or certificates of deposit provide that their principal amount
is adjusted upwards or downwards (but not below zero) at maturity to reflect
changes in the exchange rate between two currencies while the obligation is
outstanding. Such commercial paper and certificates of deposit entail the risk
of loss of principal.
The Fund is a "non-diversified" investment company, which means the Fund may,
subject to the requirements for qualification as a regulated investment company
for United States federal income tax purposes, invest more than 5% of the value
of its total assets in the securities of a single issuer. Because the Fund, as a
non-diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, an investment in the Fund may, in
certain circumstances, present greater risk to an investor than an investment in
a diversified company.
The above is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.
7
<PAGE> 12
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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
the offering price).......... 3.25%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of the offering
price)....................... None None(3) None(3)
Deferred sales charge (as a
percentage of the lesser of
the original purchase price
or redemption proceeds)...... None(2) Year 1--3.00% Year 1--1.00%
Year 2--2.00% After--None
Year 3--1.00%
After--None
Redemption fees (as a
percentage of amount
redeemed).................... None None None
Exchange fees.................. None None None
</TABLE>
- ----------------
(1) Reduced on investments of $25,000 or more. See "Purchase of Shares--Class A
Shares."
(2) Investments of $1 million or more are not subject to a sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on certain redemptions
made within one year of the purchase.
(3) CDSC Shares received as reinvested dividends are subject to a 12b-1 fee, a
portion of which may indirectly pay for the initial sales commission
incurred on behalf of the investor. See "The Distribution and Service
Plans."
8
<PAGE> 13
- ------------------------------------------------------------------------------
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(1) (as a percentage of average
daily net assets).............................. 0.25% 1.00% 1.00%
Other expenses (as a percentage of average daily
net assets).................................... 0.29% 0.41% 0.41%
Total expenses (as a percentage of average daily
net assets).................................... 1.09% 1.96% 1.96%
</TABLE>
- ----------------
(1) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund to the selling broker as compensation for ongoing services
rendered to investors. With respect to each class of shares, amounts in
excess of 0.25%, if any, represent an asset based sales charge. The asset
based sales charge with respect to Class C Shares includes 0.75% (as a
percentage of net asset value) paid to investors' broker-dealers as sales
compensation. As of June 30, 1995, the Board of Trustees of the Trust
reduced 12b-1 and service fees for the Fund's Class A Shares to 0.25%. See
"The Distribution and Service Plans."
9
<PAGE> 14
EXAMPLE:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an operating
expense ratio of 1.09% for Class A Shares,
1.96% for Class B Shares and 1.96% for Class
C Shares, (ii) a 5% annual return and (iii)
redemption at the end of each period:
Class A Shares............................ $43 $66 $ 91 $ 161
Class B Shares............................ 50 72 106 185*
Class C Shares............................ 30 62 106 229
You would pay the following expenses on the
same $1,000 investment assuming no
redemption at the end of each period:
Class A Shares............................ $43 $66 $ 91 $ 161
Class B Shares............................ 20 62 106 185*
Class C Shares............................ 20 62 106 229
</TABLE>
- ----------------
* Based on conversion to Class A Shares after six years.
The purpose of the foregoing tables 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. The ten
year amount with respect to Class B Shares of the Fund reflects the lower
aggregate 12b-1 and service fees applicable to such shares after conversion to
Class A Shares. Class B Shares acquired through the exchange privilege are
subject to the 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 contingent deferred sales charge. 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 LESSER THAN THOSE SHOWN. For a more
complete description of such costs and expenses, see "Investment Advisory
Services" and "The Distribution and Service Plans."
10
<PAGE> 15
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for one share outstanding throughout the period)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for each of one Class A
Share, one Class B Share and one Class C Share of the Fund outstanding
throughout the periods indicated. The financial highlights have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, for each of the
periods indicated and their report thereon appears in the Fund's related
Statement of Additional Information. This information should be read in
conjunction with the financial statements and related notes thereto included in
the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS B SHARES
CLASS A SHARES ---------------------------
----------------------------------------------------------
SEPTEMBER 28, 1990
(COMMENCEMENT
YEAR ENDED JUNE 30 INVESTMENT YEAR ENDED JUNE 30
------------------------------------- OPERATIONS) TO ---------------------------
1995 1994 1993 1992 JUNE 30, 1991 1995 1994 1993
------- ------- ------- ------- ------------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 8.15 $ 9.11 $ 9.65 $ 9.49 $ 9.70 $ 8.15 $ 9.10 $ 9.65
Net Investment Income..................... .50 .59 .71 .69 .62 .41 .54 .67
Net Realized and Unrealized Gain/Loss on
Investments and Foreign Currency........ (.45) (.89) (.46) .34 (.15) (.42) (.90) (.49)
------- ------- ------- ------- ------ ------- ------- -------
Total from Investment Operations........... .05 (.30) .25 1.03 .47 (.01) (.36) .18
------- ------- ------- ------- ------ ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income....................... .37 .35 .79 .87 .68 .34 .32 .73
Return of Capital Distribution............ .27 .31 -0- -0- -0- .24 .27 -0-
------- ------- ------- ------- ------ ------- ------- -------
Total Distributions........................ .64 .66 .79 .87 .68 .58 .59 .73
------- ------- ------- ------- ------ ------- ------- -------
Net Asset Value, End of Period............. $ 7.56 $ 8.15 $ 9.11 $ 9.65 $ 9.49 $ 7.56 $ 8.15 $ 9.10
======== ======== ======== ======== ================= ======== ======== ========
Total Return (Non-annualized).............. .69% (3.61%) 2.86% 11.35% 4.97% (.14%) (4.22%) 2.02%
Net Assets at End of Period (In
millions)................................. $ 72.5 $ 147.7 $ 205.9 $ 205.1 $ 85.4 $ 127.9 $ 271.8 $ 393.1
Ratio of Expenses to Average Net Assets
(Annualized).............................. 1.14% 1.13% 1.14% 1.32% 1.57% 1.96% 1.85% 1.85%
Ratio of Net Investment Income to Average
Net Assets (Annualized)................... 7.20% 6.64% 7.87% 8.12% 7.20% 6.42% 5.91% 7.20%
Portfolio Turnover......................... 203.92% 259.10% 141.22% 64.87% 77.89% 203.92% 259.10% 141.22%
<CAPTION>
CLASS C SHARES
------------------------
AUGUST 13,
JULY 22, 1991 1993
(COMMENCEMENT (COMMENCEMENT
OF YEAR OF
DISTRIBUTION) ENDED DISTRIBUTION)
TO JUNE 30, JUNE 30, TO JUNE 30,
1992 1995 1994
------------- -------- -------------
<S> <C<C> <C> <C>
Net Asset Value, Beginning of Period....... $ 9.43 $ 8.16 $ 9.24
Net Investment Income..................... .78 .50 .49
Net Realized and Unrealized Gain/Loss on
Investments and Foreign Currency........ .19 (.52) (1.05)
------------- -------- -------------
Total from Investment Operations........... .97 (.02) (.56)
------------- -------- -------------
Less:
Distributions from and in Excess of Net
Investment Income....................... .75 .34 .27
Return of Capital Distribution............ -0- .24 .25
------------- -------- -------------
Total Distributions........................ .75 .58 .52
------------- -------- -------------
Net Asset Value, End of Period............. $ 9.65 $ 7.56 $ 8.16
=============== ======== ===============
Total Return (Non-annualized).............. 10.47% (.27%) (6.32%)
Net Assets at End of Period (In
millions)................................. $ 241.7 $ .2 $ .2
Ratio of Expenses to Average Net Assets
(Annualized).............................. 2.08% 1.96% 1.84%
Ratio of Net Investment Income to Average
Net Assets (Annualized)................... 8.62% 6.30% 5.83%
Portfolio Turnover......................... 64.87% 203.92% 259.10%
</TABLE>
Note: Certain per share amounts and the ratio of net investment income to
average net assets have been restated to conform with Statement of
Position 93-4, "Foreign Currency Accounting and Financial Statement
Presentation for Investment Companies."
See Financial Statements and Notes Thereto
11
<PAGE> 16
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
Van Kampen American Capital Short-Term Global Income Fund (the "Fund") is a
mutual fund which pools shareholders' money to seek to achieve a specified
investment objective. The Fund is a separate non-diversified series of Van
Kampen American Capital Trust (the "Trust"), which is an open-end management
investment company organized as a Delaware business trust. Mutual funds sell
their shares to investors and invest the proceeds in a portfolio of securities.
A mutual fund allows investors to pool their money with that of other investors
in order to obtain professional investment management. Mutual funds generally
make it possible for investors to obtain greater diversification of their
investments and to simplify their recordkeeping.
Van Kampen American Capital Investment Advisory Corp. (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 a high level of current income,
consistent with prudent investment risk. The Fund seeks to achieve its
investment objective by investing in a global portfolio of high-quality debt
securities denominated in various currencies and multi-national currency units
and having remaining maturities of not more than three years. The Fund's
investment objective is fundamental and, as such, cannot be changed without the
approval of the holders of a majority (defined as the lesser of (i) 67 percent
of the voting securities present at a meeting of shareholders, if the holders of
more than 50 percent of the outstanding voting securities are present or
represented by proxy at such meeting, or (ii) more than 50 percent of the
outstanding voting securities) of the Fund's outstanding shares. The Fund is
designed for the investor who seeks a higher yield than a money market fund and
less fluctuation in net asset value than a longer-term global bond fund. High
quality debt securities and securities with remaining maturities of less than
three years generally have lower yields than comparable securities of lower
quality and with longer maturities. There can be no assurance that the Fund will
achieve its investment objective. 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.
12
<PAGE> 17
The Fund invests in debt securities denominated in multi-national currency
units and in the currencies of countries whose governments are considered stable
by the Adviser and whose currency is convertible into U.S. dollars. Such
currencies currently include, among others, the Australian Dollar, Austrian
Schilling, British Pound Sterling, Canadian Dollar, Dutch Guilder, European
Currency Unit ("ECU"), French Franc, German Mark, Italian Lira, Japanese Yen,
New Zealand Dollar, Spanish Peseta, Swedish Krona and Swiss Franc. In 1992,
non-dollar fixed income securities (i.e., those denominated in a currency other
than the U.S. dollar) comprised more than 50% of the global fixed-income market.
An issuer of debt securities purchased by the Fund may be domiciled in a country
other than the country in whose currency the instrument is denominated.
The Fund seeks to minimize credit risk by limiting its portfolio investments
to high-quality debt securities. Accordingly, the Fund may only invest in: (i)
obligations issued or guaranteed by foreign governments or supranational
organizations or their agencies, instrumentalities or subdivisions and that are
rated, at the time of investment, at least AA by Standard & Poor's Ratings Group
("S&P") or at least Aa by Moody's Investors Service, Inc. ("Moody's") or
similarly rated by another nationally recognized statistical rating organization
("NRSRO") as determined by the Adviser subject to the review of the Board of
Trustees ("High Quality Ratings") or, if unrated, determined by the Adviser to
be of comparable quality; (ii) corporate debt securities having at least one
High Quality Rating, at the time of investment, or if unrated, determined by the
Adviser to be of comparable quality; (iii) certificates of deposit and bankers'
acceptances issued or guaranteed by, or time deposits maintained at, banks
(including foreign branches of U.S. banks or U.S. or foreign branches of foreign
banks) having total assets of more than $500 million and determined by the
Adviser to be of high quality; (iv) commercial paper rated, at the time of
investment, A-1 by S&P, Prime-1 by Moody's or similarly rated by another NRSRO
as determined by the Adviser subject to the review of the Board of Trustees or,
if not rated, issued by U.S. or foreign companies having outstanding debt
securities rated at least A by S&P or Moody's or similarly rated by another
NRSRO, or determined by the Adviser to be of comparable quality; and (v) debt
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
In pursuing its investment objective, the Fund seeks to minimize fluctuations
in net asset value as a result of changes in market rates of interest by
investing only in shorter-term debt securities having remaining maturities of
not more than three years. The net asset value of the Fund's shares will change
as the general level of interest rates fluctuate. When interest rates decline,
the value of a portfolio primarily invested in debt securities can be expected
to rise. Conversely, when interest rates rise, the value of a portfolio
primarily invested in debt securities can be expected to decline. However,
shorter-term securities generally are less sensitive to changes in value as a
result of fluctuations in market rates of interest than are longer-term
securities, and it is expected that the net asset value of the Fund's shares
will fluctuate as a result of changes in market rates of interest less than that
13
<PAGE> 18
of a longer-term global bond fund. The Fund's net asset value may fluctuate as a
result of changes in foreign exchange rates, independent of fluctuations in
market rates of interest, although as described herein the Fund intends to
engage in foreign currency hedging transactions to seek to minimize such
fluctuations. Normally, a high proportion of the Fund's portfolio consists of
money market instruments. The Adviser actively manages the Fund's portfolio,
allocating portfolio assets among various types of U.S. and foreign debt
securities and adjusting the Fund's exposure to each currency based on the
Adviser's perception of the most favorable markets and issuers. In this regard,
the percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with the Adviser's
assessment of the relative yield and appreciation potential of such securities
and the relationship of a country's currency to the U.S. dollar. Fundamental
economic strength, credit quality and interest rate trends are the principal
factors considered by the Adviser in determining to increase or decrease the
emphasis placed upon a particular industry sector within the Fund's investment
portfolio. The Fund will not invest more than 25% of its total assets in debt
securities denominated in a single currency other than the U.S. dollar.
From time to time the returns available on short-term debt instruments
denominated in the currencies of certain foreign countries may be more
attractive than the corresponding returns available on U.S. dollar denominated
short-term debt instruments. However, the attractive returns which may from time
to time be available from certain short-term foreign currency denominated debt
instruments can be adversely affected by changes in currency exchange rates. The
Fund will receive much of its income and gains, if any, in currencies other than
U.S. dollars, although the Fund will make distributions in U.S. dollars. A
reduction in the value of such foreign currencies relative to the value of the
U.S. dollar would adversely affect the dollar value of the net assets (including
accrued income and unrealized appreciation or depreciation of investments) of
the Fund. The Fund will seek to maintain a portfolio of investments that is, in
the aggregate, relatively neutral to fluctuations in the value of the U.S.
dollar relative to the currencies of major industrialized nations. In addition,
the Fund intends to engage in hedging and risk management transactions in
instruments such as forward currency contracts, options on foreign currencies,
foreign currency swap agreements, financial futures contracts and options
thereon. There can be no assurance that the Fund will not be adversely affected
by fluctuations in currency exchange rates and such hedging and risk management
transactions entail risks. See "Investment Practices."
The Fund may invest without limitation in commercial paper and certificates of
deposit which are indexed to certain specific foreign currency exchange rates.
The terms of such commercial paper or certificates of deposit provide that the
principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect fluctuations in the exchange rate between two currencies
while the obligation is outstanding, depending on the terms of the specific
security. The Fund will purchase such commercial paper or certificates of
deposit with the currency in which it is denominated and, at maturity, will
receive interest and principal
14
<PAGE> 19
payments thereon in that currency, but the amount of principal payable by the
issuer at maturity will vary in proportion to the change (if any) in the
exchange rate between the two specified currencies between the date the
instrument is issued and the date the instrument matures. While such commercial
paper and certificates of deposit entail the risk of loss of principal, the
potential for realizing gains as a result of changes in foreign currency
exchange rates enables the Fund to hedge (or cross-hedge) against a decline in
the U.S. dollar value of investments denominated in foreign currencies while
providing an attractive money market rate of return. The Fund will purchase such
commercial paper and certificates of deposit for hedging purposes only, not for
speculation. The staff of the Securities and Exchange Commission (the "SEC") is
currently considering whether the Fund's purchase of this type of commercial
paper and certificates of deposit would result in the issuance of a "senior
security" within the meaning of the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund believes that such investments do not involve the
creation of such a senior security, but nevertheless undertakes, pending the
resolution of this issue by the staff, to establish a segregated account with
respect to its investments in this type of commercial paper and certificates of
deposit and to maintain in such account cash not available for investment or
U.S. government securities or other liquid high quality debt securities having a
value equal to the aggregate principal amount of outstanding commercial paper
and certificates of deposit of this type.
The Fund may invest in debt securities issued by supranational organizations
such as the World Bank, which was chartered to finance development projects in
developing member countries, and the Asian Development Bank, which is an
international development bank established to lend funds, promote investment and
provide technical assistance to member nations in the Asian and Pacific regions.
Supranational entities do not have taxing authority and are therefore dependent
on their members' support in order to meet interest and principal payments.
The Fund may invest in debt securities denominated in the ECU, which is a
"basket" consisting of specified amounts of the currencies of certain of the
twelve member states of the European Economic Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. The Fund's Adviser does not believe that such adjustments will
adversely affect holders of ECU-denominated obligations or the marketability of
such securities. European supranationals, in particular, issue ECU-denominated
obligations.
As a global fund, the Fund may invest in United States and foreign securities.
It is a policy of the Fund that, in normal circumstances, the Fund's assets will
be invested in obligations of or issued by issuers located in at least three
different countries, one of which may be the United States. Investments in
securities of foreign entities and securities denominated in foreign currencies
involve risks not typically involved in domestic investment, including
fluctuations in foreign
15
<PAGE> 20
exchange rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign or United States
governmental laws or restrictions applicable to such investments. Since the Fund
may invest in securities denominated or quoted in currencies other than the
United States dollar, changes in foreign currency exchange rates may affect the
value of investments in the portfolio and the accrued income and unrealized
appreciation or depreciation of investments. Changes in foreign currency
exchange rates relative to the U.S. dollar will affect the U.S. dollar value of
the Fund's assets denominated in that currency and the Fund's yield on such
assets. Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are, in turn, affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation, and other factors. Moreover,
individual foreign economies may differ favorably or unfavorably from the United
States economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position.
With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in those countries.
There may be less publicly available information about a foreign financial
instrument than about a United States instrument, and foreign entities may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those of United States entities. In addition, certain
foreign investments made by the Fund may be subject to foreign withholding
taxes, which would reduce the Fund's total return on such investments and the
amounts available for distributions by the Fund to its shareholders. For any
taxable year that more than 50% of the Fund's total assets at the close of such
year consist of stock or securities in foreign corporations and that the Fund
otherwise qualifies for and makes an election, the amount of foreign taxes paid
by the Fund that can be treated as foreign income taxes for United States
federal income tax purposes would be included in the income of its shareholders
and (subject to certain limitations) shareholders would be entitled to credit
their portion of these amounts against their United States federal income tax
due, if any, or to deduct their portions of these amounts from their United
States taxable income, if any. See "Tax Status." Foreign financial markets,
while growing in volume, have, for the most part, substantially less volume than
United States markets, and securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable domestic companies.
The foreign markets also have different clearance and settlement procedures and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are not invested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio
16
<PAGE> 21
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Costs associated with transactions in foreign
securities, including custodial costs and foreign brokerage commissions, are
generally higher than with transactions in United States securities. In
addition, the Fund will incur costs in connection with conversions between
various currencies. There is generally less government supervision and
regulation of exchanges, financial institutions and issuers in foreign countries
than there is in the United States.
The Fund may invest in debt securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Such securities may include
either direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes or bonds) or securities issued or guaranteed by agencies or
instrumentalities of the U.S. government (such as Federal Home Loan Bank
securities and Federal National Mortgage Association securities). Of the
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
government, some are backed by the full faith and credit of the U.S. government
and others are backed only by the rights of the issuer to borrow from the U.S.
Treasury.
The Fund has a fundamental policy which states that it may not purchase any
security which is restricted as to disposition under federal securities laws or
by contract or which is not readily marketable or is illiquid, if immediately
after such purchase more than 10% of the Fund's assets (taken at market value)
would be invested in such securities. The following are presently subject to
such policy: (a) direct placements or other securities which are subject to
legal or contractual restrictions on resale or for which there is no readily
available market (e.g., trading in the security is suspended or, in the case of
unlisted securities, market makers do not exist or will not entertain bids or
offers), (b) certain options purchased by the Fund over-the-counter on
securities other than U.S. government securities and the cover for options
written by the Fund over the counter, and (c) repurchase agreements not
terminable within seven days. See "Investment Practices."
The Fund is a "non-diversified" investment company, which means the Fund is
not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), which will relieve
the Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Tax Status." To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year (i) at least 50% of the market value of the Fund's
total assets will be invested in cash, cash items, U.S. government securities
and other securities that are, for purposes of this requirement, limited in
respect of a single issuer to an amount not greater in market value than 5% of
the market value of its total assets and to not more than 10% of the outstanding
voting securities of a single issuer and (ii) not more than 25% of the
17
<PAGE> 22
market value of the Fund's total assets will be invested in the securities
(other than U.S. government securities or the securities of other regulated
investment companies) of a single issuer or any two or more issuers that the
Fund controls and that are determined to be engaged in the same or similar
trades or businesses or related trades or businesses. Because the Fund, as a
non-diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, an investment in the Fund may,
under certain circumstances, present greater risk to an investor than an
investment in a diversified company.
- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------
In connection with the investment objectives and policies described above, the
Fund may, but is not required to, utilize various other investment strategies as
described below to earn income, facilitate portfolio management and mitigate
risk. Such strategies are generally accepted by modern portfolio managers and
are regularly utilized by many mutual funds and other institutional investors.
Although the Adviser believes that these investment practices may further the
Fund's investment objectives, no assurance can be given that these investment
practices will achieve this result.
STRATEGIC TRANSACTIONS. The Fund may purchase and sell derivative instruments
such as exchange-listed and over-the-counter put and call options on securities,
financial futures, fixed-income indices and other financial instruments,
purchase and sell financial futures contracts, enter into various interest rate
transactions such as swaps, caps, floors or collars, and enter into various
currency transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currency or currency futures.
Collectively, all the above are referred to as "Strategic Transactions."
Strategic Transactions may be used to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. The Fund may sell options on
securities the Fund owns or has the right to purchase without additional
payments, up to a maximum of 25% of the Fund's assets, for non-hedging purposes.
Any or all of these investment techniques may be used at any time and there is
no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for
18
<PAGE> 23
bona fide hedging, risk management or portfolio management purposes and not for
speculative purposes.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale of portfolio securities at inopportune times or for prices
other than at current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the
contemplated use of these futures contracts and options thereon should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.
The Fund may engage in currency transactions in order to hedge the value of
currencies against fluctuations in relative value. Currency transactions include
forward currency contracts, exchange listed currency futures, exchange listed
and OTC options on currencies, and currency swaps. A forward currency contract
involves a privately negotiated obligation to purchase or sell (with delivery
generally required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. A currency swap is an agreement to
exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap. The Fund may enter
into currency transactions with persons rated A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
options) are determined to be of equivalent credit quality by the Adviser. The
Fund's dealings in forward currency contracts and
19
<PAGE> 24
other currency transactions such as futures, options, options on futures and
swaps will be limited to hedging involving either specific transactions or
portfolio positions. The Fund will not enter into a transaction to hedge
currency exposure to an extent greater, after netting all transactions intended
to wholly or partially offset other transactions, than the aggregate market
value (at the time of entering into the transaction) of the securities held in
its portfolio that are denominated or generally quoted in or currently
convertible into such currency other than with respect to proxy hedging as
described below.
The Fund may cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which the Fund has or in which Fund expects to have
portfolio exposure. To attempt to reduce the effect of currency fluctuations on
the value of existing or anticipated holdings of portfolio securities, the Fund
also may engage in proxy hedging. Proxy hedging is often used when the currency
to which the Fund's portfolio is exposed is difficult to hedge or to hedge
against the dollar. Proxy hedging entails entering into a forward contract to
sell a currency whose changes in value are generally considered to be linked to
a currency or currencies in which some or all of the Fund's portfolio securities
are or are expected to be denominated, and to buy U.S. dollars. The amount of
the contract would not exceed the value of the Fund's securities denominated in
linked currencies. For example, if the Adviser considers the Austrian schilling
to be linked to the German deutschemark (the "D-mark"), the Fund holds
securities denominated in Austrian schillings and the Adviser believes that the
value of schillings will decline against the U.S. dollar, the Adviser may enter
into a contract to sell D-marks and buy dollars. Proxy hedging involves some of
the same risks and considerations as other transactions with similar
instruments. Currency transactions can result in losses to the Fund if the
currency being hedged fluctuates in value to a degree or in a direction that is
not anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.
Currency transactions are subject to some risks different from other
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions imposed
by governments. These can result in losses to the Fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could also
cause hedges it has entered into to be rendered useless, resulting in full
currency exposure as well as incurring transaction costs. Buyers and sellers of
currency futures are subject to the same risks that apply to the use of futures
generally. Further, settlement of a currency futures contract for the purchase
of most currencies must occur at a bank based in the issuing nation. Trading
options on currency futures is relatively new, and the ability to establish and
close out positions on such options is subject to the
20
<PAGE> 25
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
When conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lower
trading volume and liquidity.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in securities the
disposition of which is subject to substantial legal or contractual restrictions
or the markets for which are illiquid. The sale of restricted and illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the over-the-counter
markets. Restricted securities may sell at a price lower than similar securities
that are not subject to restrictions on resale. Restricted securities salable
among qualified institutional buyers without restriction pursuant to Rule 144A
under the Securities Act of 1933 that are determined to be liquid by the Adviser
under guidelines adopted by the Board of Trustees of the Trust (under which
guidelines the Adviser will consider factors such as trading activities and the
availability of price quotations), will not be treated as restricted securities
by the Fund pursuant to such rules.
"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Fund may also purchase
and sell portfolio securities on a "when issued" and "delayed delivery" basis.
No income accrues to the Fund on securities in connection with such purchase
transactions prior to the date the Fund actually takes delivery of such
securities. These transactions are subject to market fluctuation; the value of
the securities at delivery may be more or less than their purchase price, and
yields generally available on comparable securities when delivery occurs may be
higher or lower than yields on the securities obtained pursuant to such
transactions. Because the Fund relies on the buyer or seller, as the case may
be, to consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. When the Fund is the buyer in such a
transaction, however, it will maintain, in a segregated account with its
custodian, cash or high-grade portfolio securities having an aggregate value
equal to the amount of such purchase commitments until payment is made. The Fund
will make commitments to purchase securities on such basis only with the
intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such
21
<PAGE> 26
sale is considered to be advisable. No specific limitation exists as to the
percentage of the Fund's assets which may be used to acquire securities on a
"when issued" or "delayed delivery" basis. To the extent the Fund engages in
"when issued" and "delayed delivery" transactions, it will do so for the purpose
of acquiring securities for the Fund's portfolio consistent with the Fund's
investment objective and policies and not for the purposes of investment
leverage.
LENDING OF PORTFOLIO HOLDINGS. The Fund has a fundamental policy which states
that the Fund may not make loans, except to the extent the obligations the Fund
may invest in are considered to be loans, through loans of portfolio securities
or the acquisition of securities subject to repurchase agreements. Consistent
therewith, the Fund may seek to increase its income by lending financial
instruments in its portfolio in accordance with present regulatory policies,
including those of the Board of Governors of the Federal Reserve System and the
SEC. Such loans may be made, without limit, to brokers, dealers, banks or other
recognized institutional borrowers of financial instruments and are required to
be secured continuously by collateral, including cash, cash equivalents or U.S.
Treasury bills maintained on a current basis at an amount at least equal to the
market value of the financial instruments loaned. The Fund would have the right
to call a loan and obtain the financial instruments loaned at any time on five
days' notice. For the duration of a loan, the Fund would continue to receive the
equivalent of the interest paid by the issuer on the financial instruments
loaned and also would receive compensation from the investment of the
collateral. The Fund would not have the right to vote any financial instruments
having voting rights during the existence of the loan, but the Fund could call
the loan in anticipation of an important vote to be taken among holders of the
financial instruments or in anticipation of the giving or withholding of their
consent on a material matter affecting the financial instruments. As with other
extensions of credit, risks of delay in recovery or even loss of rights in the
collateral exist should the borrower of the financial instruments fail
financially. However, the loans would be made only to firms deemed by the
Adviser to be of good standing and when, in the judgment of the Adviser, the
consideration which can be earned currently from loans of this type justifies
the attendant risk. The creditworthiness of firms to which the Fund lends its
portfolio holdings will be monitored on an ongoing basis by the Adviser pursuant
to procedures adopted and reviewed, on an ongoing basis, by the Board of
Trustees of the Trust. No specific limitation exists as to the percentage of the
Fund's assets which the Fund may lend.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks and broker-dealers, under which the Fund purchases securities and agrees
to resell the securities at an agreed upon time and at an agreed upon price.
Under the 1940 Act, repurchase agreements may be considered collateralized loans
by the Fund, and the difference between the amount the Fund pays for the
securities and the amount it receives upon resale is accrued as interest and
reflected in the Fund's net income. When the Fund enters into repurchase
agreements, it relies on the seller to repurchase the securities. Failure to do
so may result in a loss for the Fund if the market value of the securities is
less than the repurchase price. At the time
22
<PAGE> 27
the Fund enters into a repurchase agreement, the value of the underlying
security including accrued interest will be equal to or exceed the value of the
repurchase agreement and, for repurchase agreements that mature in more than one
day, the seller will agree that the value of the underlying security including
accrued interest will continue to be at least equal to the value of the
repurchase agreement. In determining whether to enter into a repurchase
agreement with a bank or broker-dealer, the Fund will take into account the
creditworthiness of such party. In the event of default by such party, the Fund
may not have a right to the underlying security and there may be possible delays
and expenses in liquidating the security purchased, resulting in a decline in
its value and loss of interest. The Fund will use repurchase agreements as a
means of making short-term investments, and may invest in repurchase agreements
of duration of seven days or less without limitation. The Fund's ability to
invest in repurchase agreements that mature in more than seven days is subject
to an investment restriction that limits the Fund's investment in "illiquid"
securities, including such repurchase agreements, to 10% of the Fund's net
assets.
OTHER PRACTICES. The Fund has a fundamental policy which states that it may
not borrow money, except from banks for temporary purposes and then in amounts
not in excess of 5% of the total asset value of the Fund, or mortgage, pledge,
or hypothecate any assets except in connection with a borrowing and in amounts
not in excess of 10% of the total asset value of the Fund. Borrowings may not be
made for investment leverage, but only to enable the Fund to satisfy redemption
requests where liquidation of portfolio securities is considered disadvantageous
or inconvenient. In this connection, the Fund will not purchase portfolio
securities during any period that such borrowings, including the Fund's
commitments pursuant to reverse repurchase agreements, exceed 5% of the total
asset value of the Fund (after giving effect to the amount borrowed).
Notwithstanding this policy, the Fund may enter into when issued and delayed
delivery transactions as described in this Prospectus.
INVESTMENT RESTRICTIONS. The Fund is subject to certain investment
restrictions which constitute fundamental policies. Fundamental policies cannot
be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act. See "Investment
Policies and Restrictions" in the Statement of Additional Information.
PORTFOLIO TURNOVER. The Fund may engage in active short-term trading to
benefit from yield disparities among different issuers of securities, to seek
short-term profits during periods of fluctuating interest rates, or for other
reasons. Such trading will increase the Fund's rate of turnover and the
incidence of short-term capital gain taxable as ordinary income. Management
anticipates that the annual portfolio turnover in the Fund will not be in excess
of 200%. Portfolio turnover is calculated by dividing the lesser of purchases or
sales of portfolio securities by the monthly average value of the securities in
the portfolio during the year. Securities, including options, whose maturity or
expiration date at the time of acquisition were one year or less are excluded
from such calculation. A high rate of portfolio turnover involves
23
<PAGE> 28
correspondingly greater expenses than a lower rate, which expenses must be borne
by the Fund and its shareholders. High portfolio turnover also may result in the
realization of substantial net short-term capital gains. The Fund's ability to
engage in active short-term trading may be limited by the general requirements
for qualification as a regulated investment company for federal tax purposes
that less than 30% of the annual gross income of the Fund be derived from the
sale or disposition of securities and certain other assets held by the Fund for
less than three months. See "Tax Status."
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. The Adviser is responsible
for decisions to buy and sell securities for the Fund, the selection of brokers
and dealers to effect the transactions and the negotiation of prices and any
brokerage commissions. The U.S. securities in which the Fund invests are traded
principally in the over-the-counter market. In the over-the-counter market,
securities generally are traded on a net basis with dealers acting as principal
for their own accounts without a stated commission, although the price of the
security usually includes a mark-up to the dealer. Securities purchased in
underwritten offerings generally include, in the price, a fixed amount of
compensation for the managers, underwriters and dealers. The Fund may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid. Purchases and sales of bonds on a stock
exchange are effected through brokers who charge a commission for their
services.
The Adviser is responsible for effecting securities transactions of the Fund
and will do so in a manner deemed fair and reasonable to shareholders of the
Fund and not according to any formula. The Adviser's primary considerations in
selecting the manner of executing securities transactions for the Fund will be
prompt execution of orders, the size and breadth of the market for the security,
the reliability, integrity and financial condition and execution capability of
the firm, the size of and difficulty in executing the order, and the best net
price. There are many instances when, in the judgment of the Adviser, more than
one firm can offer comparable execution services. In selecting among such firms,
consideration is given to those firms which supply research and other services
in addition to execution services. However, it is not the policy of the Adviser,
absent special circumstances, to pay higher commissions to a firm because it has
supplied such services. The Fund also will purchase and sell securities in
foreign financial markets, which markets present certain risks. See "Investment
Objective and Policies."
In effecting purchases and sales of the Fund's portfolio securities, the
Adviser and the Fund may place orders with and pay brokerage commissions to
brokers, including brokers which may be affiliated with the Fund, the Adviser
and the Distributor or dealers participating in the offering of the Fund's
shares. In addition, in selecting among firms to handle a particular
transaction, the Adviser and the Fund may take into account whether the firm has
sold or is selling shares of the Fund. See "Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information for more information.
24
<PAGE> 29
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------
THE ADVISER. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") is the investment adviser for the Fund. 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 over $50 billion under management or supervision.
Van Kampen American Capital's more than 40 open-end and 38 closed-end funds and
more than 2,700 unit investment trusts are professionally distributed by leading
financial advisers nationwide.
Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. Van Kampen American Capital Distributors, Inc., the distributor of the Fund
and the sponsor of the funds mentioned above, is also a wholly-owned subsidiary
of Van Kampen American Capital. VK/AC Holding, Inc. is controlled, through an
ownership of a substantial majority of its common stock, by The Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("C & D L.P."), a
Connecticut limited partnership. C & D L.P. is managed by Clayton, Dubilier &
Rice, Inc. Clayton & Dubilier Associates IV Limited Partnership ("C & D
Associates L.P.") is the general partner of C & D L.P. The general partners of C
& D Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital and its subsidiaries (some of whom are officers or trustees of
the Fund) own, in the aggregate, not more than 7% of the common stock of VK/AC
Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 11% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of such options, no officer
or trustee of the Fund owns or would own 5% or more of the common stock of VK/AC
Holding, Inc. The address of the Adviser is One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.
ADVISORY AGREEMENT. The business and affairs of the Fund will be managed under
the direction of the Board of Trustees of the Trust, of which the Fund is a
series. Subject to the Trustees' authority, the Adviser and the officers of the
Fund will supervise and implement the Fund's investment activities and will be
responsible for overall management of the Fund's business affairs. The Fund will
pay the Adviser an annual fee equal to 0.55% of the average daily net assets of
the Fund.
Under its investment advisory agreement with the Adviser, the Fund has agreed
to assume and pay the charges and expenses of the Fund's operations, including:
the compensation of the Trustees (other than those who are affiliated persons,
as defined in the 1940 Act, of the Adviser, the Distributor or Van Kampen
American Capital), the charges and expenses of independent accountants, legal
counsel, any
25
<PAGE> 30
transfer or dividend disbursing agent and the custodian (including fees for
safekeeping of securities); costs of calculating net asset value; costs of
acquiring and disposing of portfolio securities; interest (if any) on
obligations incurred by the Fund; costs of share certificates; membership dues
in the Investment Company Institute or any similar organization; reports and
notices to shareholders; costs of registering shares of the Fund under the
federal securities laws; miscellaneous expenses and all taxes and fees to
federal, state or other governmental agencies, excluding state securities
registration expenses.
PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit trustees/directors, officers and
employees to buy and sell securities for their personal accounts subject to
procedures designed to prevent conflicts of interest including, in some
instances, preclearance of trades.
PORTFOLIO MANAGEMENT. Thomas J. Slefinger, First Vice President of the
Adviser, is primarily responsible for the day to day management of the Fund's
portfolio. Mr. Slefinger has been employed by the Adviser for the last 5 years.
- ------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor, taking into account
the amount of the purchase, the length of time the investor expects to hold the
shares, whether the investor wishes to receive dividends in cash or to reinvest
them in additional shares of the Fund, and other circumstances. Investors should
consider such factors together with the amount of sales charges and aggregate
distribution and service fees with respect to each class of shares that may be
incurred over the anticipated duration of their investment in the Fund.
The Fund offers three classes of shares, designated Class A Shares, Class B
Shares and Class C Shares. Shares of each class are offered at a price equal to
their net asset value per share plus a sales charge which, at the election of
the purchaser, may be imposed (a) at the time of purchase ("Class A Shares") or
(b) on a contingent deferred basis (Class A Share accounts over $1 million,
"Class B Shares" and "Class C Shares"). Class A Share accounts over $1 million
or otherwise subject to a contingent deferred sales charge ("CDSC"), Class B
Shares and Class C Shares sometimes are referred to herein collectively as
"Contingent Deferred Sales Charge Shares" or "CDSC Shares."
The minimum initial investment with respect to each class of shares is $500.
The minimum subsequent investment with respect to each class of shares is $25.
It is presently the policy of the Distributor not to accept any order for Class
B Shares or Class C Shares in an amount of $1 million or more because it
ordinarily will be
26
<PAGE> 31
more advantageous for an investor making such an investment to purchase Class A
Shares.
An investor should carefully consider the sales charges applicable to each
class of shares and the estimated period of their investment to determine which
class of shares is more beneficial for the investor to purchase. For example,
investors who would qualify for a significant purchase price discount from the
maximum sales charge on Class A Shares may determine that payment of such a
reduced front-end sales charge is superior to electing to purchase Class B
Shares or Class C Shares, each with no front-end sales charge but subject to a
CDSC and a higher aggregate distribution and service fee. However, because
initial sales charges are deducted at the time of purchase of Class A Shares
accounts under $1 million, a purchaser of such Class A Shares would not have all
of his or her funds invested initially and, therefore, would initially own fewer
shares than if Class B Shares or Class C Shares had been purchased. On the other
hand, an investor whose purchase would not qualify for price discounts
applicable to Class A Shares and intends to remain invested until after the
expiration of the applicable CDSC period may wish to defer the sales charge and
have all his or her funds initially invested in Class B Shares or Class C
Shares. If such an 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 wish to acquire Class C Shares (discussed below). 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 Class C Shares
which, in the aggregate, eventually would exceed the aggregate amount of the
initial sales charge and distribution and service expenses applicable to Class A
Shares irrespective of the fact that a CDSC would eventually not apply to a
redemption of such Class C Shares.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except each class of shares (i)
bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, (ii) has exclusive voting rights with respect to those provisions
of the Fund's Rule 12b-1 distribution plan which relate only to such class and
(iii) has a different exchange privilege. Only the Class B Shares are subject to
a conversion feature (discussed below). Generally, a class of shares subject to
a higher ongoing distribution fee, service fee or, where applicable, the
conversion feature will have a higher expense ratio and pay lower dividends than
a class of shares subject to a lower ongoing distribution fee, service fee or
not subject to the conversion feature. The per share net asset values of the
different classes of shares are expected to be substantially the same; from time
to time, however, the per share net asset values of the classes may differ. The
net asset value per share of each class of shares of the Fund will be determined
as described in this Prospectus under "Purchase of Shares -- Net Asset Value."
The administrative expenses that may be allocated to a specific class of
shares may consist of (i) transfer agency expenses attributable to a specific
class of shares, which expenses typically will be higher with respect to classes
of shares subject to
27
<PAGE> 32
the conversion feature; (ii) printing and postage expenses related to preparing
and distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of a specific class; (iii) SEC registration
fees incurred by a class of shares; (iv) the expense of administrative personnel
and services as required to support the shareholders of a specific class; (v)
Trustees' fees or expense incurred as a result of issues relating to one class
of shares; (vi) accounting expenses relating solely to one class of shares; and
(vii) any other incremental expenses subsequently identified that should be
properly allocated to one or more classes of shares that shall be approved by
the SEC pursuant to an amended exemptive order. All such expenses incurred by a
class will be borne on a pro rata basis by the outstanding shares of such class.
All allocations of administrative expenses to a particular class of shares will
be limited to the extent necessary to preserve the Fund's qualification as a
regulated investment company under the Code.
- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------
The Fund has designated three classes of shares for sale to the public on a
continuous basis through Van Kampen American Capital Distributors, Inc. (the
"Distributor"), as principal underwriter, which is located at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181. Shares are also offered through members
of the National Association of Securities Dealers, Inc. ("NASD") acting as
securities dealers ("dealers") and NASD members acting as brokers for investors
("brokers") or eligible non-NASD members acting as agents for investors
("financial intermediaries"). The Fund reserves the right to suspend or
terminate the continuous public offering at any time and without prior notice.
The Fund's shares are offered at the net asset value per share next computed
after an investor places an order to purchase directly with the investor's
broker, dealer or financial intermediary or with the Distributor plus any
applicable sales charge. Sales personnel of brokers, dealers and financial
intermediaries distributing the Fund's shares may receive differing compensation
for selling different classes of shares. It is the responsibility of the
investor's broker, dealer or financial intermediary to transmit the order to the
Distributor. Because the Fund generally will determine net asset value once each
business day as of the close of business, purchase orders placed through an
investor's broker, dealer or financial intermediary must be transmitted to the
Fund by such broker, dealer or financial intermediary prior to such time in
order for the investor's order to be fulfilled on the basis of the net asset
value to be determined that day. Any change in the purchase price due to the
failure of the Fund to receive a purchase order prior to such time must be
settled between the investor and the broker, dealer or financial intermediary
submitting the order. The public offering price is equal to the net asset value
plus a sales charge which is a variable percentage of the offering price
depending upon the amount of the sale. Investors will be entitled to begin
receiving dividends on such shares on the next business day after the Fund
receives good funds for such order.
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<PAGE> 33
The Distributor may from time to time implement programs under which a broker,
dealer or financial intermediary's sales force may be eligible to win nominal
awards for certain sales efforts or under which the Distributor will reallow to
any broker, dealer or financial intermediary 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
broker, dealer or financial intermediaries at the public offering price during
such programs. Other programs provide, among other things and subject to certain
conditions, for certain favorable distribution arrangements for shares of the
Fund. Also, the Distributor in its discretion may from time to time, pursuant to
objective criteria established by the Distributor, pay fees to, and sponsor
business seminars for, qualifying brokers, dealers or financial intermediaries
for certain services or activities which are primarily intended to result in
sales of shares of the Fund. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Such fees paid
for such services and activities with respect to the Fund will not exceed in the
aggregate 1.25% of the average total daily net assets of the Fund on an annual
basis. The Distributor may provide additional compensation to Edward D. Jones &
Co. or an affiliate thereof based on a combination of its sales of shares and
increases in assets under management. All of the foregoing payments to brokers,
dealers and financial intermediaries for sales contests, other sales programs
and seminars are made by the Distributor out of its own assets. These programs
will not change the price an investor will pay for shares or the amount that a
Fund will receive from such sale.
CLASS A SHARES
The public offering price of Class A Shares is equal to the net asset value
per share plus an initial sales charge which is a variable percentage of the
offering price depending upon the amount of the sale. The table below shows
total sales charges and dealer concessions reallowed to dealers and agency
commissions paid to brokers with respect to sales of Class A Shares. The sales
charge is allocated between an investor's broker, dealer or financial
intermediary and the Distributor. As indicated previously, at the discretion of
the Distributor, the entire sales charge may be reallowed to such broker, dealer
or financial intermediary. The staff of the SEC has taken the position that
brokers, dealers or financial intermediaries who receive more
29
<PAGE> 34
than 90% or more of the sales charge may be deemed to be "underwriters" as that
term is defined in the Securities Act of the 1933.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
COMMISSION
TOTAL SALES CHARGE ----------
------------------------- PERCENTAGE
PERCENTAGE PERCENTAGE OF
SIZE OF TRANSACTION OF OFFERING OF NET OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000....................... 3.25% 3.36% 3.00%
$25,000 but less than $250,000.......... 2.75 2.83 2.50
$250,000 but less than $500,000......... 1.75 1.78 1.50
$500,000 but less than $1,000,000....... 1.50 1.52 1.25
$1,000,000 or more...................... * * *
</TABLE>
- ------------------------------------------------------------------------------
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1.00% on redemptions made within one year of the
purchase. A commission will be paid to dealers who initiate and are
responsible for purchases of $1 million or more as follows: 1.00% on sales to
$2 million, plus 0.80% on the next million, plus 0.20% on the next $2 million
and 0.08% on the excess over $5 million. See "Purchase of Shares -- Deferred
Sales Charge Alternatives" for additional information with respect to
contingent deferred sales charges.
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 brokers, dealers or financial intermediaries, 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 broker,
dealer or financial intermediary or the Distributor.
As used herein, "any person" eligible for a reduced sales charge includes an
individual, their spouse and minor children (and any trust or custodial accounts
for their benefit) and any corporation, partnership, or sole proprietorship
which is 100% owned, either alone or in combination, by any of the foregoing; a
trustee or other fiduciary purchasing for a single fiduciary account; or a
"company" as defined is section 2(a)(8) of the 1940 Act.
As used herein, "Participating Funds" refers to all open-end investment
companies distributed by the Distributor other than Van Kampen American Capital
Money Market Fund ("Money Market Fund"), Van Kampen American Capital
30
<PAGE> 35
Tax Free Money Fund ("Tax Free Money Fund"), Van Kampen American Capital Reserve
Fund ("Reserve Fund") and The Govett Funds, Inc.
VOLUME DISCOUNTS. The size of investment shown in the preceding table applies
to the total dollar amount being invested by any person at any one time in Class
A Shares of the Fund alone, or in combination with other 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
table may also be determined by combining the amount being invested in Class A
Shares of the Fund with other shares of the Fund and shares of Participating
Funds plus the current offering price of all shares of the Fund and other
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 amount being invested over a
13-month period to determine the sales charge as outlined in the preceding
table. The size of investment shown in the preceding table includes the amount
of intended purchases of Class A Shares of the Fund with other shares of the
Fund and shares of the Participating Funds plus the value of all shares of the
Fund and other Participating Funds previously purchased during such 13-month
period 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 trades not initially made under a
Letter of Intent subsequently qualify for a lower sales charge through the
90-day back-dating provision, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower charge. If the goal is not
achieved within the 13-month period, the investor must pay the difference
between the charges applicable to the purchases made and the charges previously
paid. When an investor signs a Letter of Intent, shares equal to at least 5% of
the total purchase amount of the level selected will be restricted from sale or
redemption by the investor until the Letter of Intent is satisfied or any
additional sales charges have been paid; if the Letter of Intent is not
satisfied by the investor and any additional sales charges are not paid,
sufficient restricted shares will be redeemed by the Fund to pay such charges.
Additional information is contained in the application accompanying this
Prospectus.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced initial sales charges
in connection with unit trust reinvestment programs and purchases by registered
representatives of selling firms or purchases by persons affiliated with the
Fund or the Distributor. The Fund reserves the right to modify or terminate
these arrangements at any time.
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<PAGE> 36
UNIT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund with no minimum initial or subsequent investment requirement, and
with a lower sales charge 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 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 broker, dealer or
financial intermediary, 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 broker, dealer or financial intermediary or the Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide the Fund's transfer agent with
appropriate backup data for each participating investor in a computerized format
fully compatible with the transfer agent's processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently.
NAV PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by the Fund,
by:
(1) Current or retired Trustees/Directors of funds advised by the Adviser, Van
Kampen American Capital Asset Management, Inc. or John Govett & Co.
Limited and such persons' families and their beneficial accounts.
(2) Current or retired directors, officers and employees of VK/AC Holding,
Inc. and any of its subsidiaries, Clayton, Dubilier & Rice, Inc.,
employees of an investment subadviser to any fund described in (1) above
or an affiliate of such subadviser; and such persons' families and their
beneficial accounts.
(3) Directors, officers, employees and registered representatives of financial
institutions that have a selling group agreement with the Distributor and
their spouses and minor children when purchasing for any accounts they
beneficially own, or, in the case of any such financial institution, when
purchasing for retirement plans for such institution's employees.
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<PAGE> 37
(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 Class A Shares of the Fund alone, or in
any combination of shares of the Fund and shares of other Participating
Funds as described herein under "Purchase of Shares -- Class A Shares --
Quantity Discounts," during the 13-month period commencing with the first
investment pursuant hereto equals at least $1 million. The Distributor may
pay brokers, dealers or financial intermediaries through which purchases
are made an amount up to 0.50% of the amount invested, over a twelve-month
period following such transaction.
(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $10 million or more. The
Distributor may pay commissions of up to 1.00% for such purchases.
(6) Accounts as to which a broker, dealer or financial intermediary charges an
account management fee ("wrap accounts"), provided the broker, dealer or
financial intermediary 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) Full service participant directed profit sharing and money purchase plans,
full service 401(k) plans, or similar full service recordkeeping programs
made available through Van Kampen American Capital Trust Company with at
least 50 eligible employees or investing at least $250,000 in the
Participating Funds, Money Market Fund, Tax Free Money Fund or Reserve
Fund. For such investments the Fund imposes a contingent deferred sales
charge of 1.00% in the event of redemptions within one year of the
purchase other than redemptions required to make payments to participants
under the terms of the plan. The contingent deferred sales charge incurred
upon certain redemptions is paid to the Distributor in reimbursement for
distribution-related expenses. A commission will be paid to dealers who
initiate and are responsible for such purchases as follows: 1.00% on sales
to $5 million, plus 0.50% on the next $5 million, plus 0.25% on the excess
over $10 million.
The term "families" includes a person's spouse, minor children and
grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly with the Fund's transfer agent, the investment adviser, trust company
or bank trust department, provided that the Fund's transfer agent receives
federal funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized broker, dealer or financial
intermediary may charge a
33
<PAGE> 38
transaction fee for placing an order to purchase shares pursuant to this
provision or for placing a redemption order with respect to such shares. The
Fund may terminate, or amend the terms of, offering shares of the Fund at net
asset value to such groups at any time.
DEFERRED SALES CHARGE ALTERNATIVES
Investors choosing the deferred sales charge alternative may purchase Class A
Shares in an amount of $1 million or more, Class B Shares and Class C Shares.
The public offering price of a CDSC Share is equal to the net asset value per
share without the imposition of a sales charge at the time of purchase. CDSC
Shares are sold without an initial sales charge so that the Fund may invest the
full amount of the investor's purchase payment. The Distributor will compensate
brokers, dealers and financial intermediaries participating in the continuous
public offering of the CDSC Shares out of its own assets, and not out of the
assets of the Fund, at a percentage rate of the dollar value of the CDSC Shares
purchased from the Fund by such brokers, dealers and financial intermediaries,
which percentage rate will be equal to (i) with respect to Class A Shares, 1.00%
on sales to $2 million, plus 0.80% on the next million, plus 0.20% on the next
$2 million and 0.08% on the excess over $5 million; (ii) 3.00% with respect to
Class B Shares and (iii) 1.00% with respect to Class C Shares. Such compensation
will not change the price an investor will pay for CDSC Shares or the amount
that the Fund will receive from such sale.
CDSC Shares redeemed within a specified period of time generally will be
subject to a CDSC at the rates set forth below. The amount of the CDSC will vary
depending on (i) the class of CDSC Shares to which such shares belong and (ii)
the number of years from the time of payment for the purchase of the CDSC Shares
until the time of their redemption. The charge will be assessed on an amount
equal to the lesser of the then current market value or the original purchase
price of the CDSC Shares being redeemed. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial purchase price. In
addition, no CDSC will be assessed on CDSC Shares derived from reinvestment of
dividends or capital gains distributions. Solely for purposes of determining the
number of years from the time of any payment for the purchase of CDSC Shares,
all payments during a month will be aggregated and deemed to have been made on
the last day of the month.
Proceeds from the CDSC applicable to a class of CDSC Shares are paid to the
Distributor and are used by the Distributor to defray its expenses related to
providing distribution related services to the Fund in connection with the sale
of shares of such class of CDSC Shares, such as the payment of compensation to
selected dealers and agents for selling such shares. The combination of the CDSC
and the distribution fee facilitates the ability of the Fund to sell such CDSC
Shares without a sales charge being deducted at the time of purchase.
In determining whether a CDSC is applicable to a redemption of CDSC Shares, it
will be assumed that the redemption is made first of any CDSC Shares acquired
34
<PAGE> 39
pursuant to reinvestment of dividends or distributions, second of CDSC Shares
that have been held for a sufficient period of time such that the CDSC no longer
is applicable to such shares, third of Class A Shares of the Fund in the
shareholder's account, that have converted from Class B Shares, if any, and
fourth of CDSC Shares held longest during the period of time that a CDSC is
applicable to such CDSC Shares. The charge will not be applied to dollar amounts
representing an increase in the net asset value per share since the time of
purchase.
To provide an example, assume an investor purchased 100 Class B Shares (as set
forth below) at $10 per share (at a cost of $1,000) and in the second year after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional Class B Shares upon dividend reinvestment.
If at such time the investor makes his 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 will be
charged at a rate of 2.00% (the applicable rate in the second year after
purchase).
CLASS A SHARE PURCHASES OF $1 MILLION OR MORE. No sales charge is payable at
the time of purchase on investments in Class A Shares 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 dealers who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales to $2 million, plus 0.80% on the next million, plus 0.20% on the
next $2 million and 0.08% on the excess over $5 million.
CLASS B SHARES. Class B Shares redeemed within three years of purchase
generally will be subject to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- -------------------- -------------------
<S> <C> <C>
First................................................ 3.00%
Second............................................... 2.00%
Third................................................ 1.00%
Fourth and after..................................... 0.00%
</TABLE>
The CDSC generally is waived on redemptions of Class B Shares made pursuant to
the Systematic Withdrawal Plan. See "Shareholder Services -- Systematic
Withdrawal Plan".
Conversion Feature. Six years after the end of the month in which a
shareholder's order to purchase a Class B Share of the Fund was accepted, such
Class B Share automatically will convert to a Class A Share and will no longer
be subject to the higher aggregate distribution and service fees applicable to
Class B Shares. The
35
<PAGE> 40
purpose of the conversion feature is to relieve the holders of Class B Shares
that have been outstanding for a period of time sufficient for the Distributor
to have been compensated for distribution expenses related to the Class B Shares
from most of the burden of such distribution and service expenses.
For purposes of conversion to Class A Shares, Class B Shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
Shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's account (other
than those in the sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B Shares in the sub-account also will convert to Class A
Shares. The holding period applicable to Class B Shares acquired through the use
of the exchange privilege (discussed below) shall be the holding period
applicable to a Class B Share of such Fund acquired other than through use of
the exchange privilege. For purposes of calculating the holding period
applicable to a Class B Share of the Fund prior to conversion, a Class B Share
of the Fund issued in connection with an exercise of the exchange privilege, or
a series of exchanges, shall be deemed to have been issued on the date on which
the investor's order to purchase the exchanged Class B Share was accepted or, in
the case of a series of exchanges, when the investor's order to purchase the
original Class B Share was accepted.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution and service fees and transfer agency costs
with respect to Class B Shares does not result in the Fund's dividends or
distributions constituting "preferential dividends" under the Code, and (ii)
that the conversion of Class B Shares does not constitute a taxable event under
federal income tax law. The conversion of Class B Shares to Class A Shares may
be suspended if such an opinion is no longer available. In that event, no
further conversions of Class B Shares would occur, and Class B Shares might
continue to be subject to the higher aggregate distribution and service fees for
an indefinite period.
CLASS C SHARES. Class C Shares redeemed within the first twelve months of
purchase generally will be subject to a CDSC of 1.00% of the dollar amount
subject thereto. Class C Shares redeemed thereafter will not be subject to a
CDSC. Class C Shares of the Fund do not convert to Class A Shares.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC is waived on redemptions
of Class B Shares and Class C Shares (i) following the death or disability (as
defined in the Code) of a shareholder, (ii) in connection with certain
distributions from an IRA or other retirement plan, (iii) pursuant to the Fund's
systematic withdrawal plan but limited to 12% annually of the initial value of
the account, and (iv) effected pursuant to the right of the Fund to liquidate a
shareholder's account as described herein under "Redemption of Shares." The CDSC
is also waived on redemptions of Class C Shares as it relates to the
reinvestment of redemption proceeds in shares of the same class of the Fund
within 120 days after redemption.
36
<PAGE> 41
See "Shareholder Services" and "Redemption of Shares" for further discussion of
the waiver provisions.
NET ASSET VALUE
The net asset value per share of the Fund will be determined separately for
each class of shares. The net asset value per share of a given class of shares
of the Fund is determined by calculating the total value of the Fund's assets
attributable to such class of shares, deducting its total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class outstanding. The net asset value for the Fund is computed
once daily as of 5:00 p.m. Eastern time Monday through Friday, except on
customary business holidays, or except on any day on which no purchase or
redemption orders are received, or there is not a sufficient degree of trading
in the Fund's portfolio securities such that the Fund's net asset value per
share might be materially affected. The Fund reserves the right to calculate the
net asset value and to adjust the public offering price based thereon more
frequently than once a day if deemed desirable. The net asset value per share of
the different classes of shares are expected to be substantially the same; from
time to time, however, the per share net asset value of the different classes of
shares may differ.
Securities and other portfolio investments traded in the OTC or interbank
market are valued at the last available bid price or yield equivalents obtained
from one or more dealers in the OTC or interbank market prior to the time of
valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based on the last asked price in the
case of exchange-traded options or, in the case of options traded in the OTC
market, the average of the last asked price as obtained from one or more
dealers. Options purchased by the Fund are valued at their last bid price in the
case of exchange-traded options or in the case of options traded in the OTC
market, the average of the last bid price as obtained from two or more dealers.
Portfolio securities which are traded on stock exchanges are valued at the last
sale price on the principal market on which such securities are traded, as of
the close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Short-term securities with maturities of
less than 60 days are valued at amortized cost when amortized cost is determined
in good faith by or under the direction of the Board of Trustees of the Trust to
be representative of the fair value at which it is expected such securities may
be resold. Other investments, including futures contracts and related options,
are stated at market value or otherwise at the fair value at which it is
expected they may be resold, as determined in good faith by or under the
direction of the Board of Trustees of the Trust, of which the Fund is a series.
Any assets or liabilities expressed in terms of foreign currencies are
translated into United States dollars at the prevailing market rates as obtained
from one or more dealers.
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<PAGE> 42
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Trustees of the Trust. Such valuations and procedures will be reviewed
periodically by the Trustees.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. Unless otherwise described below, each of these
services may be modified or terminated by the Fund at any time.
SHAREHOLDER SERVICES APPLICABLE TO ALL CLASSES
INVESTMENT ACCOUNT. ACCESS Investor Services, Inc. ("ACCESS"), transfer agent
for the Fund and a wholly-owned subsidiary of Van Kampen American Capital,
performs bookkeeping, data processing and administration services related to the
maintenance of shareholder accounts. Each shareholder has an investment account
under which shares are held by ACCESS. Except as described herein, after each
share transaction in an account, the shareholder receives a statement showing
the activity in the account. Each shareholder will receive statements at least
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 brokers, dealers or financial intermediaries 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 to 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 replacement certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date of such dividend or distribution. Unless the shareholder
instructs
38
<PAGE> 43
otherwise, the reinvestment plan is automatic. This instruction may be made by
telephone by calling (800) 421-5666 ((800) 772-8889 for the hearing impaired) or
in writing to ACCESS. 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. For further information, see
"Distributions from the Fund."
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 the Fund. Additional information is
available from the Distributor or authorized brokers, dealers or financial
intermediaries.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; and pension and profit sharing plans; 401(k) plans; or
Section 403(b)(7) plans in the case of employees of public school systems and
certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. American
Capital Trust Company serves as custodian under the IRA, 403(b)(7) and Keogh
plans. Details regarding fees, as well as full plan administration for profit
sharing, pension and 401(k) plans, are available from the Distributor.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanied by 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 Fund, Money Market Fund, Tax Free Money Fund or Reserve Fund so
long as a pre-existing account for such class of shares exists for such
shareholder.
If the 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 only if shares of such selected fund have been registered for sale
in the investor's state.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged with shares of another
Participating Fund, the Money Market Fund, the Tax Free Money Fund or the
Reserve Fund, subject to certain limitations herein or in such other fund's
prospectus. Before effecting an exchange, shareholders in the Fund should obtain
and read a current prospectus of the fund into which the exchange is to be made.
SHAREHOLDERS MAY ONLY EXCHANGE INTO SUCH OTHER FUNDS AS ARE LEGALLY AVAILABLE
FOR SALE IN THEIR STATE.
In general, shares of the Fund must have been registered in the shareholder's
name for at least 15 days prior to an exchange. Shares of the Fund registered in
a shareholder's name for less than 15 days may only be exchanged upon receipt of
prior approval of the Adviser; however, under normal circumstances, it is the
policy of the
39
<PAGE> 44
Adviser not to approve such requests. Upon 60 days after the date of this
prospectus, the Fund will increase the number of days shares must be registered
in a shareholder's name prior to an exchange to 30 days.
Exchanges of Class A Shares of the Fund that have been charged a sales charge
lower than the sales charge applicable to the other fund will have the sales
charge differential imposed upon the exchange into such fund. Similarly,
exchanges of any Class A Shares of other funds that have been charged a sales
charge lower than the sales charge applicable to the Fund will have the sales
charge differential imposed upon exchange into the Fund. Shares of other funds
which have not previously been charged a sales charge (except for shares
purchased via the reinvestment option) will be charged the sales charge
differential applicable to Class A Shares of the Fund upon exchange into the
Fund.
No sales charge is imposed upon the exchange of Class B Shares and Class C
Shares. Upon redemption of Class B Shares and Class C Shares from the Van Kampen
American Capital family of funds, Class B Shares and Class C Shares which have
been exchanged are subject to the contingent deferred sales charge imposed by
the initial Van Kampen American Capital fund purchased by the investor prior to
any exchanges. The holding period requirements for the contingent deferred sales
charge, and the conversion privilege for Class B Shares of the Fund, are
determined by the date of purchase into the initial Van Kampen American Capital
fund purchased by the investor prior to any exchanges.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is 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 ((800) 772-8889 for the hearing impaired). A shareholder automatically
has telephone exchange privileges unless otherwise designated in the application
form accompanied by this Prospectus. The exchange will take place at the
relative net asset values of the shares next determined after receipt of such
request with adjustment for any additional sales charge. Any shares exchanged
begin earning dividends on the next business day after the exchange is affected.
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, a shareholder agrees that
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. If
40
<PAGE> 45
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 options) and
broker, dealer or financial intermediary 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 dividend
diversification options for the new account, an exchanging shareholder must file
a specific written request. The Fund reserves the right to reject any order to
acquire its shares through exchange. In addition, the Fund may restrict or
terminate the exchange privilege at any time on 60 days' notice to its
shareholders of any termination or material amendment.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. This plan provides for the orderly use of the entire account,
not only the income but also the capital, if necessary. Each withdrawal
constitutes a redemption of shares on which taxable gain or loss will be
recognized. The plan holder may arrange for monthly, quarterly, semi-annual, or
annual checks in any amount not less than $25. Such a systematic withdrawal plan
may also be maintained by an investor purchasing shares for a retirement plan
established on a form made available by the Fund. See "Shareholder Services --
Retirement Plans."
Holders of Class B Shares and Class C Shares who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a contingent deferred sales charge. Initial account balance
means the amount of the shareholder's investment in the Fund at the time the
election to participate in the plan is made. See "Purchase of Shares -- Deferred
Sales Charge Alternatives -- Waiver of Contingent Deferred Sales Charge."
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 purchases of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. The Fund reserves the right to amend or terminate the systematic
withdrawal program on thirty days' notice to its shareholders.
SHAREHOLDER SERVICES APPLICABLE TO CLASS A SHAREHOLDERS ONLY
CHECK WRITING PRIVILEGE. Holders of Class A Shares of the Fund for which
certificates have not been issued and which are in a non-escrow status may
appoint ACCESS as agent by completing the Authorization for Redemption by Check
41
<PAGE> 46
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 the agent, a supply of checks drawn on State Street Bank and Trust
Company ("State Street Bank") will be sent to such shareholder. These checks may
be made payable by the holder of Class A Shares 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 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 Class A Shares is a taxable event. See "Redemption of
Shares."
Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A Share account, the check
will be returned and the shareholder may be subject to additional charges.
Holders of Class A Shares 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. Retirement plans and accounts that are subject to
backup withholding are not eligible for the privilege. A "stop payment" system
is not available on these checks.
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.
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REDEMPTION OF SHARES
- ------------------------------------------------------------------------------
Shareholders may redeem for cash some or all of their shares without charge by
the Fund (other than, with respect to CDSC Shares, the applicable contingent
deferred sales charge) at any time by sending a written request in proper form
directly to ACCESS, P. O. Box 418256, Kansas City, Missouri 64141-9256, by
placing the redemption request through an authorized dealer or by calling the
Fund.
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<PAGE> 47
WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent directly
to ACCESS, the redemption request should indicate the number of shares to be
redeemed, the class designation of such shares, the account number and be signed
exactly as the shares are registered. Signatures must conform exactly to the
account registration. If the proceeds of the redemption would 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. If certificates are held for the shares being redeemed, such
certificates must be endorsed for transfer or accompanied by an endorsed stock
power and sent with 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. The
redemption price is the net asset value per share next determined after the
request is received by ACCESS in proper form. Payment for shares redeemed (less
any sales charge, if applicable) will ordinarily be made by check mailed within
three business days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payments may be postponed or the right
of redemption suspended as provided by the rules of the SEC. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check until it confirms that the purchase check has cleared, usually
a period of up to 15 days. Any gain or loss realized on the redemption of shares
is a taxable event.
DEALER REDEMPTION REQUESTS. Shareholders may sell shares through their
securities dealer, who will telephone the request to the Distributor. Orders
received from 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 a 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 dealers to transmit redemption requests
received by them to the Distributor so they will be received prior to such time.
Any change in the redemption price due to failure of the Distributor to receive
a sell order prior to such time must be settled between the shareholder and
dealer. Shareholders must submit a written redemption request in proper form (as
described above under "Written Redemption Requests") to the dealer within three
business days after calling the dealer with the sell order. Payment for shares
redeemed (less any sales charge, if applicable) will ordinarily be made by check
mailed within three business days to the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such
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<PAGE> 48
privilege, a shareholder must complete the appropriate section of the
application form accompanying this Prospectus or call the Fund at (800) 421-5666
((800) 772-8889 for the hearing impaired) 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, a shareholder agrees that neither VKAC nor the Fund
will be liable for following 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 other redemption
procedures previously described. Requests received by ACCESS prior to 4:00 p.m.,
New York time, on a regular business day will be processed at the net asset
value per share determined that day. These privileges are available for all
accounts other than retirement accounts. The telephone redemption privilege is
not available for shares represented by certificates. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check or wiring redemption proceeds until it confirms that the
purchase check has cleared, usually a period of up to 15 days. 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 sent to the shareholders'
address of record and amounts of at least $1,000 and up to $1 million may be
redeemed daily if the proceeds are to be paid by wire sent to the shareholder's
bank account of record. The proceeds must be payable to the shareholder(s) of
record. Proceeds from redemptions to be paid by check will ordinarily be mailed
within three business days to the shareholder's address of record. Proceeds from
redemptions to be paid by wire will ordinarily be wired on the next business day
to the shareholder's bank account of record. This privilege is not available if
the address of record has been changed within 30 days prior to a telephone
redemption request. The Fund reserves the right at any time to terminate, limit
or otherwise modify this telephone redemption privilege.
REDEMPTION UPON DISABILITY. The Fund will waive the contingent deferred sales
charge on redemptions following the disability of holders of Class B Shares and
Class C Shares. 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
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<PAGE> 49
long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of disability before it determines to waive the
contingent deferred sales charge on Class B Shares and Class C Shares.
In cases of disability, the contingent deferred sales charges on Class B
Shares and Class C Shares will be waived where the disabled person is either an
individual shareholder or owns the shares as a joint tenant with right of
survivorship or is the beneficial owner of a custodial or fiduciary account, and
where the redemption is made within one year of the initial determination of
disability. This waiver of the contingent deferred sales charge on Class B
Shares and Class C Shares applies to a total or partial redemption, but only to
redemptions of shares held at the time of the initial determination of
disability.
GENERAL REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with a net asset value on the date of the notice of redemption less than the
minimum investment as specified by the Trustees. 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 contingent deferred sales charge will be deducted from the proceeds
of this redemption. Any involuntary redemption may only occur if the shareholder
account is less than the minimum investment due to shareholder redemptions.
REINSTATEMENT PRIVILEGE. Holders of Class A Shares or Class B Shares who have
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. Holders of Class C Shares who
have redeemed shares of the Fund may reinstate any portion or all of the net
proceeds of such redemption in Class C Shares of the Fund with credit given for
any contingent deferred sales charge paid upon such redemption. Such
reinstatement is made at the net asset value next determined after the order is
received, which must be within 120 days after the date of the redemption. See
"Purchase of Shares -- Waiver of Contingent Deferred Sales Charge."
Reinstatement at net asset value is also offered to participants in those
eligible retirement plans held or administered by Van Kampen American Capital
Trust Company for repayment of principal (and interest) on their borrowings on
such plans.
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THE 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 the distribution of the
respective class of shares and in
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<PAGE> 50
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 and 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 of 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 the Service Plan. From such amount, the
Fund may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class A Shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts. The Fund pays
the Distributor the lesser of the balance of the 0.25% not paid to such brokers,
dealers or financial intermediaries or the amount of the Distributor's actual
distribution related expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B Shares of the Fund pursuant to the
Distribution Plan. In addition the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B Shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C Shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C Shares up to 0.75% of the Fund's average daily
net assets attributable to Class C Shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of the 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.
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<PAGE> 51
The Distributor's actual expenses with respect to a class of CDSC Shares for
any given year may exceed the amounts payable to the Distributor with respect to
such class of CDSC Shares under the Distribution Plan, the Service Plan and
payments received pursuant to the contingent deferred sales charge. In such
event, with respect to any such class of CDSC 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 CDSC Share may be greater
or less than the amount of the initial commission (including carrying cost) paid
by the Distributor with respect to such CDSC Share. In such circumstances, a
shareholder of such CDSC Share may be deemed to incur expenses attributable to
other shareholders of such class. As of June 30, 1995, there were $7,661,445 and
$1,763 of unreimbursed distribution expenses with respect to Class B Shares and
Class C Shares respectively, representing 3.82% and less than 0.01% of the
Fund's total net assets. If the Distribution Plan was terminated or not
continued, the Fund would not be contractually obligated to pay the Distributor
for any expenses not previously reimbursed by the Fund or recovered through
contingent deferred sales charges.
Because the Fund is a series of the Trust, amounts paid to the Distributor as
reimbursement for expenses of one series of the Trust may indirectly benefit the
other funds which are series of the Trust. The Distributor will endeavor to
allocate such expenses among such funds in an equitable manner. The Distributor
will not use the proceeds from the contingent deferred sales charge applicable
to a particular class of CDSC Shares to defray distribution related expenses
attributable to any other class of CDSC Shares. Various federal and state laws
prohibit national banks and some state-chartered commercial banks from
underwriting or dealing in the Fund's shares. In addition, state securities laws
on this issue may differ from the interpretations of federal law, and banks and
financial institutions may be required to register as dealers pursuant to state
law. In the unlikely event that a court were to find that these laws prevent
such banks from providing such services described above, the Fund would seek
alternate providers and expects that shareholders would not experience any
disadvantage.
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DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------
The Fund's present policy,which may be changed at any time by the Board of
Trustees, is to declare daily and pay monthly distributions of all or a portion
of net investment income of the Fund attributable to each class of shares. Net
investment income consists of all interest income, dividends, other ordinary
income earned by the Fund on its portfolio assets and net short-term capital
gains, less all expenses of the Fund attributable to the class of shares in
question. Expenses of the Fund are
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<PAGE> 52
accrued each day. Net realized long-term capital gains, if any, are expected to
be distributed, to the extent permitted by applicable law, to shareholders at
least annually. Distributions cannot be assured, and the amount of each monthly
distribution may vary.
Distributions with respect to each class of shares will be calculated in the
same manner on the same day and will be in the same amount, except that the
different distribution and service fees and any incremental administrative
expenses relating to each class of shares will be borne exclusively by the
respective class and may cause the distributions relating to the different
classes of shares to differ. Generally, distributions with respect to a class of
shares subject to a higher distribution fee, service fee, or, where applicable,
the conversion feature will be lower than distributions with respect to a class
of shares subject to a lower distribution fee, service fee, or not subject to
the conversion feature.
Investors will be entitled to begin receiving dividends on their shares on the
business day after the Fund's transfer agent receives payments for such shares.
However, shares become entitled to dividends on the day the Fund's transfer
agent receives payment for the shares either through a fed wire or NSCC
settlement. Shares remain entitled to dividends through the day such shares are
processed for payment on redemption.
Distribution checks may be sent to parties other than the shareholder in whose
name the account is registered. Shareholders wishing to utilize this service
should complete the appropriate section of the accompanying account application
or available from Van Kampen American Capital Funds, c/o ACCESS P.O. Box 418256,
Kansas City, MO 64141-9256. After ACCESS receives this completed form,
distribution checks will be sent to the bank or other person so designated by
such shareholder.
PURCHASE OF ADDITIONAL SHARES WITH DISTRIBUTIONS. The Fund automatically will
credit monthly distributions and any annual net long-term capital gain
distributions to a shareholder's account in additional shares of the same class
valued at net asset value, without a sales charge. Unless a shareholder
instructs otherwise, the reinvestment plan is automatic. This instruction may be
made by telephone by calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired) or in writing to ACCESS.
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TAX STATUS
- ------------------------------------------------------------------------------
TAXATION OF THE FUND
The Fund intends to qualify each year and to elect to be treated as a
regulated investment company under Subchapter M of the Code. To qualify as a
regulated investment company, the Fund must comply with certain requirements of
the Code relating to, among other things, the source of its income and the
diversification of its
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<PAGE> 53
assets. Included among such requirements is the requirement that the Fund must
derive at least 90% of its gross income from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stocks, securities or foreign currencies or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stocks, securities or currencies.
For purposes of this requirement, the Treasury Department is authorized to issue
(but has not yet issued) regulations excluding from qualifying income foreign
currency gains that are not directly related to a regulated investment company's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities). The Fund expects that all of its foreign
currency gains will be directly related to its principal business of investing
in securities.
If the Fund qualifies as a regulated investment company and distributes to its
shareholders at least 90% of its net investment income (which includes net
short-term capital gains, 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 distribution requirement. The Fund
will not be subject to federal income tax on any net capital gains distributed
to its 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 for such year and
at least 98% of its capital gains net income (the latter of which 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 gains 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 satisfy the 90% distribution requirement or otherwise
failed to qualify as a regulated investment company in any taxable year, the
Fund would be taxed as an ordinary corporation on all of 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
would be required to distribute to shareholders its earnings and profits
attributable to non-regulated investment company years (less any interest charge
described below) and may be required to pay an interest charge on 50% of such
amount. 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 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.
49
<PAGE> 54
Some of the Fund's investment practices, including those involving certain
risk management transactions and foreign currency transactions, may be subject
to special provisions of the Code that, among other things, 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 closed out), which may cause the
Fund to recognize income without receiving cash with which to make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
federal income and excise taxes. Thus, these provisions could affect the amount,
timing and character of distributions to shareholders. 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 liquidate portfolio securities may be limited by the
requirement for qualification as a regulated investment company that the Fund
derive less than 30% of its annual gross income from the sale or disposition of
any of the following assets held for less than three months: (i) stocks or
securities; (ii) options, futures or forward contracts (other than options,
futures or forward contracts on foreign currencies); (iii) foreign currencies
(or options, futures or forward contracts on foreign currencies), but only if
such currencies (or such options, futures or forward contracts) are not directly
related to the Fund's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities).
DISTRIBUTIONS
Distributions of the Fund's net investment income are taxable to shareholders
as ordinary income, whether paid in cash or reinvested in additional shares.
Distributions of the Fund's net capital gains ("capital gain dividends"), if
any, are taxable to a shareholder as long-term capital gains regardless of the
length of time the shares have been held by such holder. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of
the shares held by the shareholders and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such shareholders (assuming
such shares are held as a capital asset).
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 a 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 having been paid by the Fund
(except for purposes of the 4% excise tax) during such taxable year. In such
case, shareholders will be treated as
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<PAGE> 55
having received such dividends in the taxable year in which the distribution is
actually made.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Distributions from
the Fund will not be eligible for the dividends received deduction for
corporations. Shareholders receiving distributions in the form of additional
shares issued by the Fund will be treated for federal income tax purposes as
receiving a distribution in an amount equal to the fair market value of the
shares received, determined as of the distribution date.
FOREIGN TAXES
It is expected that a portion of the interest earned by the Fund from non-U.S.
resident issuers and in certain circumstances gains realized by the Fund will be
subject to foreign withholding taxes. The tax rate to which such interest and
gains will be subject will vary depending on the country or countries having
taxing jurisdiction over a particular non-U.S. resident issuer and may be
affected by the existence of an income tax treaty with the United States. If
more than 50% of the value of the Fund's total assets at the close of any
taxable year consists of stocks or securities of "foreign corporations," the
Fund may elect and currently intends to elect, for United States federal income
tax purposes, to treat any foreign taxes paid by the Fund that can be treated as
foreign income taxes under United States federal income tax principles as paid
by its shareholders. The Fund expects that it will be able to treat some, but
not necessarily all, of the foreign taxes it will have to pay as foreign income
taxes for United States federal income tax purposes. In addition, the Fund
currently intends to treat investments in securities that are issued by, or that
are treated under relevant United States federal income tax principles as issued
by, foreign governments as not constituting securities of "foreign corporations"
for purposes of meeting the 50% test described above. Accordingly, the Fund may
not qualify for this election in all of its taxable years. For any year that the
Fund so qualifies and makes such an election, the amount of foreign taxes paid
by the Fund that can be treated as foreign income taxes for United States
federal income tax purposes would be included in the income of its shareholders
(in addition to other taxable dividends received) and (subject to certain
limitations) shareholders would be entitled to credit their portions of these
amounts against their United States federal income tax due, if any, or to deduct
their portions from their United States taxable income, if any. A shareholder
who does not itemize deductions may not claim a deduction for foreign taxes. The
Fund will notify each shareholder within 60 days after the close of the Fund's
taxable year as to whether the foreign income taxes paid by the Fund will
qualify for "pass-through" treatment for that year and, if so, such notification
will designate (i) each shareholder's pro rata portion of the foreign income
taxes paid and (ii) the portion of distributions that represents income derived
from foreign sources.
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Generally, a foreign tax credit is subject to the limitation that it may not
exceed the shareholder's United States tax (before the credit) attributable to
the shareholder's total taxable income from foreign sources. For this purpose,
the shareholder's proportionate share of dividends paid by the Fund that
represent income derived from foreign sources will be treated as foreign source
income. The Fund's gains and losses from the sale of securities and certain
currency gains and losses generally will be treated as derived from United
States sources. The limitation on the foreign tax credit applies separately to
specific categories of foreign source income, including "passive income," a
category that includes the portion of dividends received from the Fund that
qualifies as foreign source income. The foregoing limitation may prevent a
shareholder from claiming a credit for the full amount of his proportionate
share of the foreign income taxes paid by the Fund.
SALE OF SHARES
Redeeming shareholders will recognize gain or loss in an amount equal to the
difference between the basis in their redeemed 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.
GENERAL
The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own advisors regarding the
specific federal tax consequences of holding and disposing of shares, as well as
the effects of state, local and foreign tax laws and any proposed tax law
changes.
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FUND PERFORMANCE
- ------------------------------------------------------------------------------
From time to time advertisements and other sales materials for the Fund may
include information concerning the historical performance of the Fund. Any such
information will include the average total return of the Fund calculated on a
compounded basis for specified periods of time. 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. In lieu of or in addition to total return and
yield calculations, such information may include performance rankings and
similar information from independent organizations such as Lipper Analytical
Services, Inc., Business Week, Forbes or other industry publications.
The Fund's yield quotation is determined on a monthly basis with respect to
the immediately preceding 30 day period, and is computed by dividing the Fund's
net
52
<PAGE> 57
investment income per share of a given class earned during such period by the
Fund's maximum offering price (including, with respect to the Class A Shares,
the maximum initial sales charge) per share of such class on the last day of
such period. The Fund's net investment income per share is determined by taking
the interest attributable to a given class of shares earned by the Fund during
the period, subtracting the expenses attributable to such class of shares
accrued for the period (net of any reimbursements), and dividing the result by
the average daily number of the shares of such class outstanding during the
period that were entitled to receive dividends. The yield calculation formula
assumes net investment income is earned and reinvested at a constant rate and
annualized at the end of a six month period. Yield will be computed separately
for each class of the Fund's shares. Class B Shares redeemed during the first
three years after their issuance may be subject to a contingent deferred sales
charge in a maximum amount equal to 3% of the lesser of the then current net
asset value of the shares redeemed or their initial purchase price from the
Fund. Yield quotations do not reflect the imposition of a contingent deferred
sales charge, and if any such contingent deferred sales charge imposed at the
time of redemption were reflected, it would reduce the performance quoted.
The Fund calculates average compounded total return by determining the
redemption value (less any applicable contingent deferred sales charge) at the
end of specified periods (after adding back all dividends and other
distributions made during the period) of a $1,000 investment in a given class of
shares of the Fund (less the maximum initial sales charge, if any) at the
beginning of the period, annualizing the increase or decrease over the specified
period with respect to such initial investment and expressing the result as a
percentage. Average compounded total return will be computed separately for each
class of shares.
Total return figures utilized by the Fund are based on historical performance
and are not intended to indicate future performance. Total return and net asset
value per share of a given class can be expected to fluctuate over time, and
accordingly upon redemption a shareholder's shares may be worth more or less
than their original cost.
The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative total return is calculated by measuring the value of an initial
investment in a given class of shares of the Fund at a given time, deducting the
maximum initial sales charge, if any, determining the value of all subsequent
reinvested distributions, and dividing the net change in the value of the
investment as of the end of the period by the amount of the initial investment
and expressing the result as a percentage. Non-standardized total return will be
calculated separately for each class of shares. Non-standardized total return
calculations do not reflect the imposition of a contingent deferred sales
charge, and if any such contingent deferred sales charge with respect to the
CDSC Shares imposed at the time of redemption were reflected, it would reduce
the performance quoted.
53
<PAGE> 58
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. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of, such investments during a stated
period. Distribution rate is, therefore, not intended to be a complete measure
of the Fund's performance. Distribution rate may sometimes be greater than yield
since, for instance, it may not include the effect of amortization of bond
premiums, and may include non-recurring short-term capital gains and premiums
from futures transactions engaged in by the Fund. Distribution rates will be
computed separately for each class of the Fund's shares.
From time to time the Fund may compare its performance to certain securities
and unmanaged indices which may have different risk/reward characteristics than
the Fund. Such characteristics may include, but are not limited to, tax
features, guarantees, insurance and the fluctuation of principal and/or return.
In addition, from time to time sales materials and advertisements for the Fund
may include hypothetical information.
Further information about the Fund's performance is contained in the Fund's
Annual Report and the Fund's Statement of Additional Information, each of which
can be obtained without charge by calling (800) 421-5666 ((800) 772-8889 for the
hearing impaired).
- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------
The Fund is a series of the Van Kampen American Capital Trust, a Delaware
business trust organized as of May 10, 1995 (the "Trust"). The Fund was
originally organized in 1990 under the name Van Kampen Merritt Short-Term Global
Income Fund as a sub-trust of Van Kampen Merritt Trust, a Massachusetts business
trust. The Fund was reorganized as a series of the Trust as of July 31, 1995.
Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series.
The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, $0.01 par value, divided into classes. The Fund
currently offers three classes, designated Class A Shares, Class B Shares and
Class C Shares. 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. See "The Distribution and Service Plans."
Pursuant to an order of the SEC, the Fund is permitted to issue an unlimited
number of shares. Each class of share is equal as to earnings, assets and voting
54
<PAGE> 59
privileges, except as noted above, and each class bears the expenses related to
the distribution of its shares. There are no conversion, preemptive or other
subscription rights, except with respect to the conversion of Class B Shares
into Class A Shares as described above. In the event of liquidation, each of the
shares of the Fund is entitled to its portion of all of the Fund's net assets
after all debt and expenses of the Fund have been paid. Since Class B Shares and
Class C Shares pay higher distribution expenses, the liquidation proceeds to
holders of Class B Shares and Class C Shares are likely to be lower than to
other shareholders.
The Trust 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 Trust 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 Trust is set forth in the
Statement of Additional Information.
- ------------------------------------------------------------------------------
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 Fund's fiscal year ends on June 30. The Fund sends to its shareholders at
least semi-annually reports showing the Fund's portfolio and other information.
An annual report, containing financial statements audited by the Fund's
independent auditors, 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 Van Kampen American Capital
Short-Term Global Income 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.
55
<PAGE> 60
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666.
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666.
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS, OR
REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666.
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889.
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 421-5666.
VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM
GLOBAL INCOME FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
---------------
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
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 Funds
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital Funds
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, IL 60606
Independent Auditors
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 61
SHORT-TERM GLOBAL
INCOME FUND
------------------------------------------------------------------------------
P R O S P E C T U S
AUGUST 30, 1995
- ------ ------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 62
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND
Van Kampen American Capital Short-Term Global Income Fund, formerly known as
Van Kampen Merritt Short-Term Global Income Fund (the "Fund"), is a
non-diversified separate series of an open-end management investment company.
The Fund's investment objective is to seek a high level of current income,
consistent with prudent investment risk.
The Fund seeks to achieve its investment objective by investing in a global
portfolio of high-quality debt securities denominated in various currencies and
multi-national currency units and having remaining maturities of not more than
three years. The portfolio will consist of debt securities issued by foreign
governments or supranational organizations or their agencies, instrumentalities
or subdivisions, high-quality debt securities issued by corporations,
certificates of deposit or bankers acceptances issued or guaranteed by large
U.S. or foreign banks, high-quality commercial paper and debt securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities.
Investments in securities denominated in currencies other than the U.S. dollar
involve foreign currency exchange risks. The Fund may engage in hedging and risk
management transactions to seek to reduce or eliminate such risks.
The Fund is designed for the investor who seeks a higher yield than a money
market fund and less fluctuation in net asset value than a longer-term global
bond fund. There is no assurance that the Fund will achieve its investment
objective. The Fund is a separate series of Van Kampen American Capital Trust, a
Delaware business trust (the "Trust"). The Fund's portfolio is managed by Van
Kampen American Capital Investment Advisory Corp. (the "Adviser").
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Prospectus for the Fund dated August 30, 1995 (the
"Prospectus"). This Statement of Additional Information does not include all
information that a prospective investor should consider before purchasing shares
of the Fund, and investors should obtain and read the Prospectus prior to
purchasing shares. A copy of the Prospectus may be obtained without charge, by
calling (800) 421-5666 ((800) 772-8889 for the hearing impaired). This Statement
of Additional Information incorporates by reference the entire Prospectus.
The Prospectus and this Statement of Additional Information omit certain of
the information contained in the registration statement filed with the
Securities and Exchange Commission, Washington, D.C. (the "SEC"). These items
may be obtained from the SEC upon payment of the fee prescribed, or inspected at
the SEC's office at no charge.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Fund and the Trust................................................................. B-2
Investment Policies and Restrictions................................................... B-2
Additional Investment Considerations................................................... B-4
Description of Securities Ratings...................................................... B-11
Officers and Trustees.................................................................. B-16
Legal Counsel.......................................................................... B-21
Investment Advisory and Other Services................................................. B-21
Custodian and Independent Auditors..................................................... B-23
Portfolio Transactions and Brokerage Allocation........................................ B-23
Tax Status of the Fund................................................................. B-24
The Distributor........................................................................ B-24
Performance Information................................................................ B-25
Independent Auditors' Report........................................................... B-27
Financial Statements................................................................... B-28
Notes to Financial Statements.......................................................... B-34
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED AUGUST 30, 1995.
B-1
<PAGE> 63
THE FUND AND THE TRUST
The Fund is a separate non-diversified series of the Trust, an open-end
management investment company. At present, the Fund, Van Kampen American Capital
High Yield Fund, Van Kampen American Capital Adjustable Rate U.S. Government
Fund, Van Kampen American Capital Strategic Income Fund and Van Kampen American
Capital Emerging Markets Income Fund, each a diversified separate series of the
Trust, are the only series of the Trust, although other series may be organized
and offered in the future. The Fund was originally organized in 1990 under the
name Van Kampen Merritt Short-Term Global Income Fund as a sub-trust of Van
Kampen Merritt Trust, a Massachusetts business trust. The Fund was reorganized
as a series of the Trust as of July 31, 1995.
The Trust is an unincorporated business trust established under the laws of
the State of Delaware by an Agreement and Declaration of Trust (the "Declaration
of Trust") dated May 10, 1995. The Declaration of Trust permits the Trustees to
create one or more separate investment portfolios and issue a series of shares
for each portfolio. The trustees can further sub-divide each series of shares
into one or more classes of shares for each portfolio. The Trust can issue an
unlimited number of full and fractional shares, par value $0.01 (prior to July
31, 1995, the shares had no par value). Each share represents an equal
proportionate interest in the assets of the series with each other share in such
series and no interest in any other series. No series is subject to the
liabilities of any other series. The Declaration of Trust provides that
shareholders are not liable for any liabilities of the Trust or any of its
series, requires inclusion of a clause to that effect in every agreement entered
into by the Trust or any of its series and indemnifies shareholders against any
such liability.
Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon by shareholders of only the series involved. Shares do not have cumulative
voting rights, preemptive rights or any conversion or exchange rights. The Trust
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 Trustees may amend the Declaration of Trust (including with respect to any
series) in any manner without shareholder approval, except that the Trustees may
not adopt any amendment adversely affecting the rights of shareholders of any
series without approval by a majority of the shares of each affected series
present at a meeting of shareholders (or such higher vote as may be required by
the Investment Company Act of 1940, as amended (the "1940 Act"), or other
applicable law) and except that the Trustees cannot amend the Declaration of
Trust to impose any liability on shareholders, make any assessment on shares or
impose liabilities on the Trustees without approval from each affected
shareholder or Trustee, as the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
INVESTMENT POLICIES AND RESTRICTIONS
The investment objective of the Fund is set forth in the Prospectus under the
caption "Investment Objectives and Policies." There can be no assurance that the
Fund will achieve its investment objective.
Fundamental investment restrictions limiting the investments of the Fund
provide that the Fund may not:
1. Purchase any securities (other than obligations issued or guaranteed by
the United States Government or by its agencies or instrumentalities), if
as a result more than 5% of the Fund's total assets would then be invested
in securities of a single issuer or if as a result the Fund would hold
more than 10% of the outstanding voting securities of any single issuer;
provided that, with respect to 50% of the Fund's assets, the Fund may
invest up to 25% of its assets in the securities of any one issuer.
2. Borrow money, except from banks for temporary purposes and then in amounts
not in excess of 5% of the total asset value of the Fund, or mortgage,
pledge, or hypothecate any assets except in connection with a borrowing
and in amounts not in excess of 10% of the total asset value of the Fund.
Borrowings may not be made for investment leverage, but only to enable the
Fund to satisfy redemption requests
B-2
<PAGE> 64
where liquidation of portfolio securities is considered disadvantageous or
inconvenient. In this connection, the Fund will not purchase portfolio
securities during any period that such borrowings, including the Fund's
commitments pursuant to reverse repurchase agreements, exceed 5% of the
total asset value of the Fund (after giving effect to the amount
borrowed). Notwithstanding this investment restriction, the Fund may enter
into when issued and delayed delivery transactions as described in the
Prospectus.
3. Make loans, except to the extent the obligations the Fund may invest in
are considered to be loans, through loans of portfolio securities or the
acquisition of securities subject to repurchase agreements.
4. Buy any securities "on margin." Neither the deposit of initial or
maintenance margin in connection with transactions described under the
caption "Investment Practices" in the Prospectus nor short term credits in
connection with the clearance of transactions are considered the purchase
of a security on margin.
5. Sell any securities "short," write, purchase or sell puts, calls or
combinations thereof, or purchase or sell financial futures contracts or
related options, except to the extent that the hedging transactions
described under the heading "Investment Practices" in the Prospectus would
be deemed to be any of the foregoing transactions.
6. Act as an underwriter of securities, except to the extent the Fund may be
deemed to be an underwriter in connection with the sale of securities held
in its portfolio.
7. Make investments for the purpose of exercising control or participation in
management.
8. Invest in securities of other investment companies, except as part of a
merger, consolidation or other acquisition and except that the Fund may
invest up to 10% of its assets in investment companies that invest in
securities comparable to those in which the Fund may invest so long as the
Fund does not own more than 3% of the outstanding voting stock of any
investment company or securities of any investment company aggregating in
value more than 5% of the total assets of the Fund.
9. Invest in oil, gas or mineral leases or in equity interests in oil, gas or
other mineral exploration or development programs.
10. Purchase or sell real estate, commodities or commodities contracts except
to the extent that hedging instruments the Fund may invest in are
considered to be commodities or commodities contracts.
The Fund may not change any of these investment restrictions or any other
fundamental policy as they apply to the Fund without the approval of the lesser
of (i) more than 50% of the Fund's outstanding shares or (ii) 67% of the Fund's
outstanding shares present at a meeting at which the holders of more than 50% of
the outstanding shares are present in person or by proxy. As long as the
percentage restrictions described above are satisfied at the time of the
investment or borrowing, the Fund will be considered to have abided by those
restrictions even if, at a later time, a change in values or net assets causes
an increase or decrease in percentage beyond that allowed.
The Fund may invest up to 15% of its total assets in illiquid securities,
securities the disposition of which is subject to substantial legal or
contractual restrictions on resale and securities that are not readily
marketable. The sale of restricted and illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Restricted securities salable among qualified
institutional buyers without restriction pursuant to Rule 144A under the
Securities Act of 1933, as amended, that are determined to be liquid by the
Adviser under guidelines adopted by the Board of Trustees of the Trust (under
which guidelines the Adviser will consider factors such as trading activities
and the availability of price quotations), will not be treated as restricted
securities by the Fund pursuant to such rules. The Fund may, from time to time,
adopt a more restrictive limitation with respect to investment in illiquid and
restricted securities in order to comply with the most restrictive state
securities law, currently 10%. This policy does not include restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, which the Board of Trustees or the Fund's investment adviser
has determined under Board-approved guidelines to be liquid. The Fund's policy
with respect to investment in illiquid and restricted
B-3
<PAGE> 65
securities is not a fundamental policy and may be changed by the Board of
Trustees, in consultation with the adviser, without obtaining shareholder
approval.
In connection with certain state securities law requirements, the Fund has a
policy of limiting its investment in warrants, valued at the lower of cost or
market, to not more than 5.0% of the value of the Fund's net assets and, within
such amount, to not more than 2.0% of the value of its net assets in warrants
not listed on the New York Stock Exchange or on the American Stock Exchange;
provided however, that warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.
ADDITIONAL INVESTMENT CONSIDERATIONS
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements with respect to debt
obligations which could otherwise be sold by the Fund. A reverse repurchase
agreement is an instrument under which the Fund may sell an underlying debt
instrument and simultaneously obtain the commitment of the purchaser (a
commercial bank or a broker or dealer) to sell the security back to the Fund at
an agreed upon price on an agreed upon date. The value of underlying securities
will be at least equal at all times to the total amount of the resale
obligation, including the interest factor. The Fund receives payment for such
securities only upon physical delivery or evidence of book entry transfer by its
custodian. Regulations of the SEC require either that securities sold by the
Fund under a reverse repurchase agreement be segregated pending repurchase or
that the proceeds be segregated on the Fund's books and records pending
repurchase. Reverse repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities. An
additional risk is that the market value of securities sold by the Fund under a
reverse repurchase agreement could decline below the price at which the Fund is
obligated to repurchase them. Reverse repurchase agreements will be considered
borrowings by the Fund and as such would be subject to the restrictions on
borrowing described under "Investment Policies and Restrictions" in the
Statement of Additional Information. The Fund will not hold more than 5% of the
value of its total assets in reverse repurchase agreements.
OTHER INVESTMENT STRATEGIES
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates and currency exchange rates), to manage the effective maturity or duration
of securities or portfolios or to enhance potential gain. Such strategies are
generally accepted by modern portfolio managers and are regularly utilized by
many mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.
STRATEGIC TRANSACTIONS. In the course of pursuing these investment strategies,
the Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
interest rate indices and other financial instruments, purchase and sell
financial futures contracts, enter into various interest rate transactions such
as swaps, caps, floors or collars, and enter into various currency transactions
such as currency forward contracts, currency futures contracts, currency swaps
or options on currency or currency futures (collectively, all the above are
called "Strategic Transactions"). Strategic Transactions may be used to attempt
to protect against possible changes in the market value of securities held in or
to be purchased for the Fund's portfolio resulting from securities markets or
currency exchange rate fluctuations, to protect the Fund's unrealized gains in
the value of its portfolio securities, to facilitate the sale of such securities
for investment purposes, to manage the effective maturity or duration of the
Fund's portfolio, or to establish a position as a temporary substitute for
purchasing or selling particular securities. The Fund may sell options on
securities the Fund owns or has the right to purchase without additional
payments, up to a maximum of 25% of the Fund's net assets, for non-hedging
purposes.
Any or all of these investment techniques may be used at any time and there is
no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of the Fund to utilize these Strategic
B-4
<PAGE> 66
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale of portfolio securities at inopportune times or for prices
other than current market values, limit the amount of appreciation the Fund can
realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the
contemplated use of these futures contracts and options thereon should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized.
GENERAL CHARACTERISTICS OF OPTIONS. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail below. In addition, many Strategic Transactions
involving options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price. The Fund's purchase of a call option on a security, financial future,
index, currency or other instrument might be intended to protect the Fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. The Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as a paradigm, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, to the extent the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently,
B-5
<PAGE> 67
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guaranties and security, are set by negotiation of the parties. The
Fund will only enter into OTC options that have a buy-back provision permitting
the Fund to require the Counterparty to buy back the option at a formula price
within seven days. The Fund expects generally to enter into OTC options that
have cash settlement provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of the option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with United
States government securities dealers recognized by the Federal Reserve Bank in
New York as "primary dealers", broker dealers, domestic or foreign banks or
other financial institutions which have received a short-term credit rating of
A-1 from Standard & Poor's Ratings Group ("S&P") or P-1 from Moody's Investor
Services, Inc. ("Moody's") or any equivalent rating from any other nationally
recognized statistical rating organization ("NRSRO"). The staff of the SEC
currently takes the position that the amount of the Fund's obligation pursuant
to an OTC option is illiquid, and is subject to the Fund's limitation on
investing no more than 10% of its assets in illiquid instruments.
If the Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell for hedging purposes call options on U.S.
Treasury and agency securities, foreign sovereign debt, mortgage-backed
securities, corporate debt securities and foreign debt securities that are
traded on U.S. and foreign securities exchanges and in the over-the-counter
markets and related futures on such securities other than futures on individual
corporate debt securities. All calls sold by the Fund must be "covered" or must
meet the asset segregation requirements described below as long as the call is
outstanding (i.e., the Fund must own the securities or futures contract subject
to the call). Even though the Fund will receive the option premium to help
protect it against loss, a call sold by the Fund exposes the Fund during the
term of the option to possible loss of opportunity to realize appreciation in
the market price of the underlying security and may require the Fund to hold a
security which it might otherwise have sold. The Fund may sell
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options on securities the Fund owns or has the right to purchase without
additional payments, up to a maximum of 25% of the Fund's net assets, for
non-hedging purposes.
The Fund may purchase and sell for hedging purposes put options that relate to
U.S. Government Securities, Mortgage-Backed Securities, corporate debt
securities, foreign sovereign debt and foreign debt securities (whether or not
it holds the above securities in its portfolio) or futures on such securities
other than futures on individual corporate debt and individual equity
securities. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above the
market price.
GENERAL CHARACTERISTICS OF FUTURES. The Fund may purchase and sell financial
futures contracts or purchase put and call options on such futures as a hedge
against anticipated interest rate, currency market changes, for duration
management and for risk management purposes. Futures generally are bought and
sold on the commodities exchanges where they are listed with payment of initial
and variation margin as described below. The sale of a futures contract creates
a firm obligation by the Fund, as seller, to deliver the specific type of
financial instrument called for in the contract at a specific future time for a
specified price (or, with respect to index futures and Eurodollar instruments,
the net cash amount). Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract.
The Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the Commodity Futures Trading Commission and will be entered
into only for bona fide hedging, risk management (including duration management)
or other portfolio management purposes. Typically, maintaining a futures
contract or selling an option thereon requires the Fund to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 5% of
the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of options on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position will be offset prior
to settlement and that delivery will not occur.
The Fund will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of the Fund's total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures and options thereon are
described below.
OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and, in so doing can achieve many of the same objectives it would
achieve through the sale or purchase of options on individual securities or
other instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
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CURRENCY TRANSACTIONS. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties rated A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
options) are determined to be of equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended to wholly or partially
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency
other than with respect to proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which Fund expects to
have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Adviser considers the Austrian schilling is
linked to the German deutschemark (the "D-mark"), the Fund holds securities
denominated in Austrian schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may enter into a
contract to sell D-marks and buy dollars, hedging involves some of the same
risks and considerations as other transactions with similar instruments.
Currency transactions can result in losses to the Fund if the currency being
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.
RISKS OF CURRENCY TRANSACTIONS. Currency transactions are subject to risks
different from other transactions. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be
negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance
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of a liquid market which may not always be available. Currency exchange rates
may fluctuate based on factors extrinsic to that country's economy.
COMBINED TRANSACTIONS. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions (including forward currency contracts) and any combination
of futures, options and currency transactions ("component" transactions),
instead of a single Strategic Transaction, as part of a single or combined
strategy when, in the opinion of the Adviser, it is in the best interests of the
Fund to do so. A combined transaction will usually contain elements of risk that
are present in each of its component transactions. Although combined
transactions are normally entered into based on the Adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio management
objective.
SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into which
the Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. The Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
The Fund may enter into swaps, caps, floors or collars on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities, and will usually enter into swaps on a net basis,
i.e., the two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps, floors and collars are entered into for good faith hedging
purposes, the Adviser and the Fund believe such obligations do not constitute
senior securities under the 1940 Act and, accordingly, will not treat them as
being subject to its borrowing restrictions. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from an NRSRO or is determined to be of equivalent credit quality by the
Adviser. If there is a default by the Counterparty, the Fund will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the
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imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lower trading volume and
liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate liquid high
grade assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or an amount of
cash or liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the custodian. The segregated assets cannot
be sold or transferred unless equivalent assets are substituted in their place
or it is no longer necessary to segregate them. For example, a call option
written by the Fund will require the Fund to hold the securities subject to the
call (or securities convertible into the needed securities without additional
consideration) or to segregate liquid high-grade assets sufficient to purchase
and deliver the securities if the call is exercised. A call option sold by the
Fund on an index will require the Fund to own portfolio securities which
correlate with the index or to segregate liquid high grade assets equal to the
excess of the index value over the exercise price on a current basis. A put
option written by the Fund requires the Fund to segregate liquid, high grade
assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or sale
of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate liquid high grade assets equal to the amount of the Fund's
obligation.
OTC options entered into by the Fund, including those on securities, currency,
financial instruments or indices, OCC issued and exchange listed index options,
swaps, caps, floors and collars will generally provide for cash settlement. As a
result, with respect to these instruments the Fund will only segregate an amount
of assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a put, or the in-the-money
amount in the case of a call. In addition, when the Fund sells a call option on
an index at a time when the in-the-money amount exceeds the exercise price, the
Fund will segregate, until the option expires or is closed out, cash or cash
equivalents equal in value to such excess. Other OCC issued and exchange listed
options sold by the Fund other than those above generally settle with physical
delivery, and the Fund will segregate an amount of assets equal to the full
value of the option. OTC options settling with physical delivery, if any, will
be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
assets sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index-based
futures contract. Such assets may consist of cash, cash equivalents, liquid debt
or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
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The Fund's activities involving Strategic Transactions may be limited by the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended,
for qualification as a regulated investment company. See "Tax Status" in the
Prospectus.
DESCRIPTION OF SECURITIES RATINGS
STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable
Standard & Poor's Ratings Group (S&P) rating symbols and their meanings (as
published by S&P) follows:
1. DEBT
An S&P corporate or 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 it 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 based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. 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;
2. Nature of and provisions of the obligation;
3. 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 creditors's rights;
INVESTMENT GRADE
<TABLE>
<S> <C>
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
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 in higher rated categories.
</TABLE>
SPECULATIVE GRADE
<TABLE>
<S> <C>
BB Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly
B speculative characteristics with respect to capacity to pay interest and repay
CCC principal. 'BB' indicates the least degree of speculation and 'C' the highest.
CC While such debt will likely have some quality and protective characteristics,
C these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
</TABLE>
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<PAGE> 73
<TABLE>
<S> <C>
B Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.
CCC Debt rated 'CCC' has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
CC The rating 'CC' typically is applied to debt subordinated to senior debt that is
assigned an actual or implied 'CCC' rating.
C The rating 'C' typically is applied to debt subordinated to senior debt which is
assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI The rating 'CI' is reserved for income bonds on which no interest is being paid.
D Debt rated 'D'; is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
C The letter 'c' indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in the
tender option documents.
I The letter 'i' indicates the rating is implied. Such ratings are assigned only
on request to entities that do not have specific debt issues to be rated. In
addition, implied ratings are assigned to governments that have not requested
explicit ratings for specific debt issues. Implied ratings on governments
represent the sovereign ceiling or upper limit for ratings on specific debt
issues of entities domiciled in the country.
L The letter 'L' indicates that the rating pertains to the principal amount of
these bonds in the extent that the undersigning deposit collateral is federally
insured and interest is adequately collateralized. In the case of certificates
of deposit, the letter 'L' indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and accrued pre-default interest up to the federal insurance limits
within 30 days after closing of the insured institution or, in the event that
the deposit is assumed by a successor insured institution, upon maturity.
P The letter 'p' indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
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.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and cash
flows.
NR Not rated
</TABLE>
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<PAGE> 74
Debt Obligations of Issuers outside the United States and its
territories are rated on the same basis as domestic corporate
and municipal issues. The ratings measure the creditworthiness of
the obligor but do not take into account currency exchange and
related uncertainties.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated
in the top four categories ("AAA," "AA," "A," and "BBB")
(commonly known as "investment grade" ratings) are generally
regarded as eligible for bank investment. In addition, the laws of
various states governing legal investments impose certain rating
or other standards for obligations eligible for investment by
savings banks, trust companies, insurance companies, and
fiduciaries generally.
2. COMMERCIAL PAPER
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings are graded into several categories, ranging from 'A-1' for the highest
quality obligations to 'D' for the lowest. These categories are as follows:
<TABLE>
<S> <C>
A-1 This highest category indicates that the degree of safety regarding timely payment
is strong. Those issues determined to possess extremely safe characteristics are
denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
'A-1'.
A-3 Issues carrying this designation have adequate capacity for timely payment. They
are, however, 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 a speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful capacity
for payment.
D Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
</TABLE>
A commercial paper 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 to
S&P by the issuer or obtained by S&P from other sources it 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 based on other circumstances.
3. VARIABLE RATE DEMAND BONDS
S&P assigns "dual" ratings to all debt issues that have a put or demand
feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, 'AAA/A-1+'). With short-term demand debt, S&P's note rating symbols are
used with the commercial paper rating symbols (for example, 'SP-1+/A-1+').
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<PAGE> 75
MOODY'S INVESTORS SERVICE, INC.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:
1. LONG-TERM BONDS
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 Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are 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 payment 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.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate 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 mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
B-14
<PAGE> 76
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
2. SHORT-TERM DEBT
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issues:
Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings,
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternative liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
3. COMMERCIAL PAPER
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 supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- Board margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
B-15
<PAGE> 77
Issuers rated PRIME-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
OFFICERS AND TRUSTEES
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" or "Adviser"), Van Kampen American
Capital Asset Management, Inc. (the "AC Adviser"), Van Kampen American Capital
Management, Inc., McCarthy, Crisanti & Maffei, Inc., MCM Asia Pacific Company,
Limited, Van Kampen American Capital Distributors, Inc. (the "Distributor"), Van
Kampen American Capital, Inc. ("Van Kampen American Capital") or VK/AC Holding,
Inc. For purposes hereof, the term "Van Kampen American Capital Funds" includes
each of the open-end investment companies advised by the VK Adviser (excluding
the Van Kampen Merritt Series Trust) and each of the open-end investment
companies advised by the AC Adviser.
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
2300 205th Street President of MDT Corporation, a company which develops
Torrance, CA 90501 manufactures, markets and services medical and scientific
Age: 63 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Richard E. Caruso.................. Founder, Chairman and Chief Executive Officer, Integra
Two Randor Station, Suite 314 Life Sciences Corporation, a firm specializing in life
King of Prussia Road sciences. Trustee of Susquehanna University and First
Radnor, PA 19087 Vice President, The Baum School of Art; Founder and
Age: 52 Director of Uncommon Individual Foundation, a youth
development foundation. Director of International Board
of Business Performance Group, London School of
Economics. Formerly, Director of First Sterling Bank, and
Executive Vice President and a Director of LFC Financial
Corporation, a provider of lease and project financing.
Trustee of each of the Van Kampen American Capital Funds.
Philip P. Gaughan.................. Prior to February, 1989, Managing Director and Manager of
9615 Torresdale Avenue Municipal Bond Department, W. H. Newbold's Sons & Co.
Philadelphia, PA 19114 Trustee of each of the Van Kampen American Capital Funds.
Age: 66
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of the Van
Lyme, CT 06371 Kampen American Capital Funds.
Age: 75
R. Craig Kennedy................... President and Director, German Marshall Fund of the
1341 E. 50th Street United States. Formerly, advisor to the Dennis Trading
Chicago, IL 60615 Group Inc. Prior to 1992, President and Chief Executive
Age: 43 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.
</TABLE>
B-16
<PAGE> 78
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Dennis J. McDonnell*............... President, Chief Operating Officer and a Director of the
One Parkview Plaza VK Adviser, the AC Adviser and Van Kampen American
Oakbrook Terrace, IL 60181 Capital Management, Inc. Director of VK/AC Holding, Inc,
Age: 53 Van Kampen American Capital, and McCarthy, Crisanti &
Maffei, Inc. Chairman and a Director of MCM Asia Pacific
Company, Ltd. President, Chief Executive Officer and
Trustee of each of the funds advised by the VK Adviser.
Prior to December, 1991, Senior Vice President of Van
Kampen Merritt Inc.
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Age: 75 Trust Company of Chicago and Continental Illinois
Corporation. Trustee of each of the Van Kampen American
Capital Funds and Chairman of the Board of each of the
open-end funds (except the Van Kampen Merritt Series
Trust) advised by the VK 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
Age: 59 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.
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital.
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of the
Age: 55 Distributor, the VK Adviser, the AC Adviser and Van
Kampen American Capital Management, Inc. Director,
President and Chief Executive Officer of Van Kampen
American Capital Advisers, Inc. and Van Kampen American
Capital Exchange Corp. Director and Executive Vice
President of Advantage Capital Corporation, ACCESS
Investor Services, Inc., Van Kampen American Capital
Services, Inc. and Van Kampen American Capital Trust
Company. Director of McCarthy, Crisanti & Maffei, Inc.
President and Director, Trustee or Managing General
Partner of each of the funds advised by the AC Adviser
and Trustee of each of the funds advised by the VK
Adviser. He is also Chairman of the Board of the Van
Kampen Merritt Series Trust and closed-end investment
companies advised by the VK Adviser.
David Rees......................... Contributing Columnist and, prior to 1995, Senior Editor
1601 Country Club Drive of Los Angeles Business Journal. A director of Source
Glendale, CA 91208 Capital, Inc., a closed-end investment company
Age: 71 unaffiliated with Van Kampen American Capital, a director
and the second vice president of International Institute
of Los Angeles. 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
Age: 72 software programming company specializing in white collar
productivity. Director of Panasia Bank. Trustee of each
of the Van Kampen American Capital Funds.
</TABLE>
B-17
<PAGE> 79
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Lawrence J. Sheehan*............... Of Counsel to and formerly Partner (from 1969 to 1994) of
1999 Avenue of the Stars the law firm of O'Melveny & Myers, legal counsel to the
Suite 700 funds advised by the AC Adviser. Director, FPA Capital
Los Angeles, CA 90067 Fund, Inc.; FPA New Income Fund, Inc.; FPA Perennial
Age: 63 Fund, Inc.; Source Capital, Inc.; and TCW Convertible
Security Fund, Inc. Trustee of each of the Van Kampen
American Capital Funds.
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995, Dean
Stevens Institute of Graduate School and Chairman, Department of Mechanical
of Technology Engineering, Stevens Institute of Technology. Director of
Castle Point Station Dynalysis of Princeton, a firm engaged in engineering
Hoboken, NJ 07030 research. Trustee of each of the Van Kampen American
Age: 70 Capital Funds and Chairman of the Board of each of the
open-end funds advised by the AC Adviser.
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom, legal counsel to funds advised by the VK Adviser.
Chicago, IL 60606 Trustee of each of the Van Kampen American Capital Funds.
Age: 55 He also is a Trustee of the Van Kampen Merritt Series
Trust and closed-end investment companies advised by the
VK Adviser.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Age: 73 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>
OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND IN PAST 5 YEARS
- --------------------- -------------------------- ---------------------------------------------
<S> <C> <C>
Peter W. Hegel....... Vice President Executive Vice President and Portfolio
Age: 39 Manager of the Adviser. Executive Vice
President of the AC Adviser. Vice President
of each of the Van Kampen American Capital
Funds and closed-end funds advised by the VK
Adviser.
</TABLE>
B-18
<PAGE> 80
<TABLE>
<CAPTION>
POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND IN PAST 5 YEARS
- --------------------- -------------------------- ---------------------------------------------
<S> <C> <C>
Ronald A. Nyberg..... Vice President and Executive Vice President, General Counsel and
Age: 41 Secretary Secretary of Van Kampen American Capital.
Executive Vice President and a Director of
the VK Adviser and the Distributor. Executive
Vice President of the AC Adviser. Vice
President and Secretary of each of the Van
Kampen American Capital Funds and closed-end
funds advised by the VK Adviser. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to March 1990,
Secretary of Van Kampen Merritt Inc., the VK
Adviser and McCarthy, Crisanti & Maffei, Inc.
Edward C. Wood III... Vice President, Treasurer Senior Vice President of the VK Adviser. Vice
Age: 39 and Chief Financial President, Treasurer and Chief Financial
Officer Officer of each of the Van Kampen American
Capital Funds and closed-end funds advised by
the VK Adviser.
Nicholas Dalmaso..... Assistant Secretary Assistant Vice President and Attorney of Van
Age: 30 Kampen American Capital. Assistant Secretary
of each of the Van Kampen American Capital
Funds and closed-end funds advised by the VK
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
Scott E. Martin...... Assistant Secretary Senior Vice President, Deputy General Counsel
Age: 38 and Assistant Secretary of Van Kampen
American Capital. Senior Vice President,
Deputy General Counsel and Secretary of the
VK Adviser and the Distributor. Assistant
Secretary of each of the Van Kampen American
Capital Funds and closed-end funds advised by
the VK Adviser.
Weston B. Assistant Secretary Vice President, Associate General Counsel and
Wetherell.......... Assistant Secretary of Van Kampen American
Age: 39 Capital, the VK Adviser and the Distributor.
Assistant Secretary of McCarthy, Crisanti &
Maffei, Inc. Assistant Secretary of each of
the Van Kampen American Capital Funds and
closed-end funds advised by the VK Adviser.
John L. Sullivan..... Controller First Vice President of the VK Adviser.
Age: 39 Controller of each of the Van Kampen American
Capital Funds and closed-end funds advised by
the VK Adviser.
Steven M. Hill....... Assistant Treasurer Assistant Vice President of the VK Adviser.
Age: 30 Assistant Treasurer of each of the Van Kampen
American Capital Funds and closed-end funds
advised by the VK Adviser.
</TABLE>
- ---------------
* Such Trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Messrs. Powell and McDonnell are interested persons of the
VK Adviser and the Fund by reason of their positions with the VK Adviser. Mr.
Sheehan is an interested person of the VK Adviser and the Fund by reason of
his firm having acted as legal counsel to the VK Adviser. Mr. Whalen is an
interested person of the Fund by reason of his firm acting as legal counsel
for the Fund.
B-19
<PAGE> 81
Messrs. Powell and McDonnell own, or have the opportunity to purchase, an
equity interest in VK/AC Holding, Inc., the parent company of Van Kampen
American Capital, and have entered into employment contracts (for a term of five
years) with Van Kampen American Capital.
The Fund will pay trustees who are not affiliated persons of the VK Adviser,
the Distributor or Van Kampen American Capital an annual retainer of $2,500 per
year and $125 per regular quarterly meeting of the Fund, plus expenses. No
additional fees are proposed at the present time to be paid for special
meetings, committee meetings or to the chairman of the board. The trustees have
approved an aggregate annual compensation cap from the combined fund complex of
$84,000 per trustee (excluding any retirement benefits) until December 31, 1996,
based upon the current net assets and the current number of Van Kampen American
Capital funds (except that Mr. Whalen, who is also a trustee of the closed-end
funds advised by the VK Adviser would receive additional compensation for
serving as a trustee of such funds). In addition, the VK Adviser has agreed to
reimburse the Fund through December 31, 1996, for any increase in the aggregate
trustees' compensation over the aggregate compensation paid by the Fund in its
1994 fiscal year.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM REGISTRANT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF BENEFITS UPON COMPLEX PAID TO
NAME FROM REGISTRANT(2) FUND EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
- ------------------------------- -------------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C>
R. Craig Kennedy............... $ 8,580 $ 102 $2,500 $62,362
Philip G. Gaughan.............. 11,726 1,853 2,500 63,250
Donald C. Miller............... 8,268 2,545 2,500 62,178
Jack A. Nelson................. 8,580 1,038 2,500 62,362
Jerome L. Robinson............. 8,346 1,873 2,500 58,475
Wayne W. Whalen................ 11,502 626 2,500 49,875
</TABLE>
- ---------------
(1) Messrs. McDonnell and Powell, trustees of the Trust, are affiliated persons
of the VK Adviser and are not eligible for compensation or retirement
benefits from the Trust. Messrs. Branagan, Caruso, Hilsman, Rees, Sheehan,
Sisto and Woodside were elected as trustees of the Trust at a shareholders
meeting held July 21, 1995 and thus received no compensation or retirement
benefits from the Trust during its fiscal year ended June 30, 1995.
(2) The Registrant is Van Kampen American Capital Trust (the "Trust") which
currently is comprised of 5 operating series, including the Fund. The
amounts shown in this column are accumulated from the Aggregate Compensation
of each of these 5 series during such series' fiscal year ended June 30,
1995. Beginning in October 1994 each Trustee, except Messrs. Gaughan and
Whalen, began deferring his entire aggregate compensation. The total
combined amount of deferred compensation (including interest) accrued with
respect to each trustee from the Fund Complex (as defined herein) as of
December 31, 1994 is as follows: Mr. Kennedy $14,737; Mr. Miller $14,553;
Mr. Nelson $14,737 and Mr. Robinson $13,725.
(3) The Retirement Plan commenced as of August 1, 1994 for the Fund. The amounts
in this column are the retirement benefits accrued during the Fund's fiscal
year ended June 30, 1995.
(4) This is the estimated annual benefits payable per year for the 10-year
period commencing in the year of such Trustee's retirement by a Fund
assuming: the Trustee has 10 or more years of service on the Board of the
Fund and retires at or after attaining the age of 60. Trustees retiring
prior to the age of 60 or with fewer than 10 years of service for the Fund
may receive reduced retirement benefits from such Fund.
(5) As of December 31, 1994, the Fund Complex consisted of 20 mutual funds
advised by the VK Adviser which had the same members on each funds' Board of
Trustees. The amounts shown in this column are accumulated from the
Aggregate Compensation of each of these 20 mutual funds in the Fund Complex
during the calendar year ended December 31, 1994. The VK Adviser also serves
as investment adviser for other investment companies; however, with the
exception of Messrs. Powell, McDonnell and Whalen, such investment companies
do not have the same trustees as the Fund Complex. Combining the Fund
Complex
B-20
<PAGE> 82
with other investment companies advised by the VK Adviser, Mr. Whalen received
Total Compensation of $161,850.
As of August 18, 1995, the trustees and officers as a group owned less than 1%
of the shares of the Fund.
As of August 18, 1995, the following person owned of record or beneficially 5%
or more of the Fund's Class A Shares: Xerox Financial Services Life Insurance
Company, 1 Tower Lane #3000, Villa Park, IL 60181-4644, 14%.
To the knowledge of the Fund, as of August 18, 1995, no person owned of record
or beneficially 5% or more of the Fund's Class B Shares.
As of August 18, 1995, the following persons owned of record or beneficially
5% or more of the Fund's Class C Shares: Principal Financial Cust. FBO, Mary A.
Murphy, P.O. Box 508, Dallas, TX 75221-0508, 45%; Principal Financial IRA Cust.
FBO, Mary Alice Murphy, P.O. Box 215132, Dallas, TX 75221-5132, 16%; Edward D.
Jones & Co. F/A/O, Gaines Electric Co. Inc., EDJ# 306-05079-1-4, P.O. Box 2500,
Maryland Heights, MO 63043-8500, 14%; Raymond James & Assoc. Inc. CSDN, Hugh D.
McPherson IRA, 1217 Denton Road, Winter Park, FL 32792-2774, 9%; and Matthew
Chapman, 5771 Royal Ave., Eugene, OR 97402-9335, 6%.
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom, Chicago,
Illinois.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT.
Van Kampen American Capital Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser. The Adviser was incorporated as a Delaware
corporation in 1982 (and through December 31, 1987 transacted business under the
name of American Portfolio Advisory Service Inc.). The Adviser's principal
office is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. The
Adviser is a wholly-owned subsidiary of Van Kampen American Capital, which in
turn is a wholly-owned subsidiary of VK/AC Holding, Inc.
VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital own, in the aggregate, not more than 7% of the common stock of
VK/AC Holding, Inc. and have the right to acquire, upon exercise of options,
approximately an additional 11% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of stock options, no officer
or trustee of the Fund owns or would own 5% or more of the common stock of VK/AC
Holding, Inc.
The investment advisory agreement between the Adviser and the Fund provides
that the Adviser will supply investment research and portfolio management,
including the selection of securities for the Fund to purchase, hold or sell and
the selection of brokers through whom the Fund's portfolio transactions are
executed. The Adviser also administers the business affairs of the Fund,
furnishes offices, necessary facilities and equipment, provides administrative
services, and permits its officers and employees to serve without compensation
as trustees of the Trust and officers of the Fund if duly elected to such
positions.
B-21
<PAGE> 83
The agreement provides that the Adviser shall not be liable for any error of
judgment or of law, or for any loss suffered by the Fund in connection with the
matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
The Adviser's activities are subject to the review and supervision of the
trustees to whom the Adviser renders periodic reports of the Fund's investment
activities.
The investment advisory agreement will remain in effect from year to year if
specifically approved by the trustees of the Trust, of which the Fund is a
separate series (or by the Fund's shareholders), and by the disinterested
trustees in compliance with the requirements of the 1940 Act. The agreement may
be terminated without penalty upon 60 days' written notice by either party
thereto and will automatically terminate in the event of assignment.
The Adviser has undertaken to reimburse the Fund for annual expenses of the
Fund which exceed the most stringent limit prescribed by any state in which the
Fund's shares are offered for sale. Currently, the most stringent limit in any
state would require such reimbursement to the extent that aggregate operating
expenses of the Fund (excluding interest, taxes and other expenses which may be
excludable under applicable state law) exceed in any fiscal year 2 1/2% of the
average annual net assets of the Fund up to $30 million, 2% of the average
annual net assets of the Fund of the next $70 million, and 1 1/2% of the
remaining average annual net assets of the Fund. In addition to making any
required reimbursements, the Adviser may in its discretion, but is not obligated
to, waive all or any portion of its fee or assume all or any portion of the
expenses of the Fund.
For the years ended June 30, 1995, 1994 and 1993, the Fund recognized advisory
expenses of $1,616,498, $3,008,248 and $3,207,882, respectively.
OTHER AGREEMENTS.
SUPPORT SERVICES AGREEMENT. Under a support services agreement with the
Distributor which terminated as of July 10, 1995 concurrent with the Fund's
change in transfer agent, the Fund received support services for shareholders,
including the handling of all written and telephonic communications, except
initial order entry and other distribution related communications. Payment by
the Fund for such services was made on cost basis for the employment of the
personnel and the equipment necessary to render the support services. At such
time, the Fund, and the other Van Kampen American Capital mutual funds
distributed by the Distributor, shared such costs proportionately among
themselves based upon their respective net asset values.
For the years ended June 30, 1995, 1994 and 1993, the Fund recognized expenses
of approximately $126,400, $278,000 and $248,700, respectively, representing the
Distributor's cost of providing certain support services.
FUND ACCOUNTING AGREEMENT. The Fund has also entered into an accounting
services agreement pursuant to which the Adviser provides accounting services
supplementary to those provided by the Custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund shares together with the other Van Kampen American Capital mutual funds
advised by the Adviser and distributed by the Distributor in the cost of
providing such services, with 25% of such costs shared proportionately based on
the respective number of classes of securities issued per fund and the remaining
75% of such cost based proportionally on their respective net assets per fund.
For the years ended June 30, 1995, 1994 and 1993, the Fund recognized expenses
of approximately $9,900, $21,000 and $11,000, respectively, representing the
Adviser's cost of providing accounting services.
LEGAL SERVICES AGREEMENT. The Fund and each of the other Van Kampen American
Capital Funds advised by the Adviser and distributed by the Distributor have
entered into Legal Services Agreements pursuant to which Van Kampen American
Capital provides legal services, including without limitation: accurate
maintenance of the funds' minute books and records, preparation and oversight of
the funds' regulatory reports, and other information provided to shareholders,
as well as responding to day-to-day legal issues on behalf of the funds. It is
expected that Van Kampen American Capital can render such legal services on a
more cost effective basis than other providers of such services. Payment by the
Fund for such services is made
B-22
<PAGE> 84
on a cost basis for the employment of personnel as well as the overhead and the
equipment necessary to render such services. Other funds distributed by the
Distributor also receive legal services from Van Kampen American Capital. Of the
total costs for legal services provided to funds distributed by the Distributor,
one half of such costs are allocated equally to each fund and the remaining one
half of such costs are allocated to specific funds based on monthly time
records.
For the years ended June 30, 1995, 1994 and 1993, the Fund recognized expenses
of approximately $15,800, $17,000 and $16,500, respectively, representing Van
Kampen American Capital's cost of providing legal services.
CUSTODIAN AND INDEPENDENT AUDITORS
State Street Bank and Trust Company, 225 Franklin Street, P.O. Box 1713,
Boston, MA 02105-1713, is the custodian of the Fund and has custody of all
securities and cash of the Fund. The custodian, among other things, attends to
the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by the Fund.
The independent auditors for the Fund are KPMG Peat Marwick LLP, Chicago,
Illinois. The selection of independent auditors will be subject to ratification
by the shareholders of the Fund at any annual meeting of shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser will place orders for portfolio transactions for the Fund with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services. These services include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund or the Adviser, including quotations necessary
to determine the value of the Fund's net assets. Any research benefits derived
are available for all clients of the Adviser. Since statistical and other
research information is only supplementary to the research efforts of the
Adviser to the Fund and still must be analyzed and reviewed by its staff, the
receipt of research information is not expected to materially reduce its
expenses.
If it is believed to be in the best interests of the Fund, the Adviser may
place portfolio transactions with brokers who provide the types of research
service described above, even if it means the Fund will have to pay a higher
commission (or, if the broker's profit is part of the cost of the security, will
have to pay a higher price for the security), than would be the case if no
weight were given to the broker's furnishing of those research services. This
will be done, however, only if, in the opinion of the Adviser, the amount of
additional commission or increased cost is reasonable in relation to the value
of such services.
In selecting among the firms believed to meet the criteria for handling a
particular transaction, the Adviser may take into consideration that certain
firms (i) provide market, statistical or other research information such as set
forth above to the Fund and Adviser, (ii) have sold or are selling shares of the
Fund and (iii) may select firms that are affiliated with the Fund, its
investment adviser or its distributor and other principal underwriters. If
purchases or sales of securities of the Fund and of one or more other investment
companies or clients supervised by the Adviser are considered at or about the
same time, transactions in such securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by the
Adviser, taking into account the respective sizes of the Fund and other
investment companies and clients and the amount of securities to be purchased or
sold. Although it is possible that in some cases this procedure could have a
detrimental effect on the price or volume of the security as far as the Fund is
concerned, it is also possible that the ability to participate in volume
transactions and to negotiate lower brokerage commissions will be beneficial to
the Fund.
While the Adviser will be primarily responsible for the placement of the
Fund's business, the policies and practices in this regard must be consistent
with the foregoing and will at all times be subject to review by the trustees of
the Trust, of which the Fund is a separate series.
B-23
<PAGE> 85
The trustees have adopted certain policies incorporating the standards of Rule
17e-1 issued by the SEC under the 1940 Act which requires that the commissions
paid to the Distributor and other affiliates of the Fund must be reasonable and
fair compared to the commissions, fees or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. The rule and procedures
also contain review requirements and require the Adviser to furnish reports to
the trustees and to maintain records in connection with such reviews. After
consideration of all factors deemed relevant, the trustees will consider from
time to time whether the advisory fee for the Fund will be reduced by all or a
portion of the brokerage commission given to affiliated brokers.
State securities laws may differ from the interpretations of federal law
expressed herein, and banks and financial institutions may be required to
register as dealers pursuant to state law.
TAX STATUS OF THE FUND
The Trust and each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund will be subject
to tax if it fails to distribute net capital gains, or if its annual
distributions, as a percentage of its income, are less than the distributions
required by tax laws.
THE DISTRIBUTOR
The Distributor 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. Van Kampen American Capital's roots in money
management extend back to 1926. Today, Van Kampen American Capital manages or
supervises more than $50 billion in mutual funds, closed-end funds and unit
investment trusts--assets which have been entrusted to Van Kampen American
Capital in more than 2 million investor accounts. Van Kampen American Capital
has one of the largest research terms (outside of the rating agencies) in the
country, with 86 analysts devoted to various specializations.
Shares of the Fund are offered through the Distributor, One Parkview Plaza,
Oakbrook Terrace, IL 60181. The Distributor is a wholly owned subsidiary of Van
Kampen American Capital, which is a subsidiary of VK/AC Holding, Inc., a
Delaware corporation that is controlled through an ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C & D L.P."), a Connecticut limited partnership. In
addition, certain officers, directors and employees of Van Kampen American
Capital, Inc., and its subsidiaries own, in the aggregate not more than 7% of
the common stock of VK/AC Holding, Inc. and have the right to acquire, upon the
exercise of options, approximately an additional 11% of the common stock of
VK/AC Holding, Inc. C & D L.P. is managed by Clayton, Dubilier & Rice, Inc.
Clayton & Dubilier Associates IV Limited Partnership ("C & D Associates L.P.")
is the general partner of C & D L.P. Pursuant to a distribution agreement with
the Fund, the Distributor will purchase shares of the Fund for resale to the
public, either directly or through securities dealers and brokers, and is
obligated to purchase only those shares for which it has received purchase
orders. A discussion of how to purchase and redeem shares of the Fund and how
such shares are priced is contained in the Prospectus.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans." The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Plans are being implemented through an agreement (the
"Distribution and Service Agreement") with the Distributor and sub-agreements
between the Distributor and members of the NASD acting as securities dealers and
NASD members or eligible non-members acting as brokers or agents (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
B-24
<PAGE> 86
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."
Under the Distribution and Service Agreement and the Selling Agreements,
financial intermediaries that sold shares prior to July 1, 1987, or prior to the
beginning of the calendar quarter in which the Selling Agreement between the
Fund and such financial intermediary was approved by the Fund's Board of
Trustees (an "Implementation Date") are not eligible to receive compensation
pursuant to such Distribution and Service Agreement and/or Selling Agreement. To
the extent that there remain outstanding shares of the Fund that were purchased
prior to all Implementation Dates, the percentage of the total average daily net
asset value of a class of shares that may be utilized pursuant to the
Distribution and Service Agreement will be less than the maximum percentage
amount permissible with respect to such class of shares under the Distribution
and Service Agreement.
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 Plans 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 either
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 either class of shares at any time
by a vote of a majority of the disinterested Trustees or by a vote of a majority
of the outstanding voting shares of such class.
For the year ended June 30, 1993, the Fund recognized expenses under the Plans
of $630,704 and $3,730,193 for the Class A Shares and Class B Shares,
respectively, of which $499,923 and $906,055 represent payments to financial
intermediaries under the Selling Agreements for Class A Shares and Class B
Shares, respectively. For the year ended June 30, 1993, the Fund has reimbursed
the Distributor $11,413 and $18,294 for advertising expenses, and $91,515 and
$125,871 for compensation of the Distributor's sales personnel for the Class A
Shares and Class B Shares, respectively.
For the year ended June 30, 1994, the Fund has recognized expenses under the
Plans of $540,613, $3,563,969 and $1,364 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $471,049 and $872,003 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares and Class B Shares, respectively. For the year ended June 30, 1994, the
Fund has reimbursed the Distributor $48,070 and $90,367 for advertising
expenses, and $21,958 and $26,247 for compensation of the Distributor's sales
personnel for the Class A Shares and Class B Shares, respectively.
For the year ended June 30, 1995, the Fund recognized expenses under the Plans
of $263,818, $1,899,931 and $1,918 for the Class A Shares, Class B Shares and
Class C Shares, respectively, of which $256,375, $469,537 and $672 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares, Class B Shares and Class C Shares, respectively. For the year ended June
30, 1995, the Fund has reimbursed the Distributor $39,387, $63,700 and $0 for
advertising expenses, and $3,453, $5,441 and $0 for compensation of the
Distributor's sales personnel for the Class A Shares, Class B Shares and Class C
Shares, respectively.
PERFORMANCE INFORMATION
CLASS A SHARES
The Fund's yield with respect to the Class A Shares for the 30-day period
ending June 30, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 8.91%. In determining the Fund's net
investment income for a stated 30 day period, the Fund calculates yield to
B-25
<PAGE> 87
maturity on each portfolio security on a daily basis. The Fund's current
distribution rate with respect to the Class A Shares for the 30-day period
ending June 30, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 7.68%.
The Fund's average total return with respect to the Class A Shares for the (i)
the one year period ended June 30, 1995 was (2.59%), and (ii) the approximately
57 month period from September 28, 1990 (the commencement of the sale of Class A
Shares) through June 30, 1995 was 2.58%.
The Fund's cumulative non-standardized total return with respect to the Class
A Shares from September 21, 1990 (the commencement of the sale of Class A
Shares) through June 30, 1995 (as calculated in the manner described in the
Prospectus under the heading "Fund Performance") was 16.68%.
CLASS B SHARES
The Fund's yield with respect to the Class B Shares for the 30-day period
ending June 30, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 8.45%. In determining the Fund's net
investment income for a stated 30 day period, the Fund calculates yield to
maturity on each portfolio security on a daily basis. The Fund's current
distribution rate with respect to the Class B Shares for the 30-day period
ending June 30, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 7.21%.
The Fund's average total return with respect to the Class B Shares for (i) the
one year period ended June 30, 1995 was (2.92%), and (ii) the approximately 48
month period from July 22, 1991 (the commencement of the sale of Class B Shares)
through June 30, 1995 was 1.89%.
The Fund's cumulative non-standardized total return with respect to the Class
B Shares from July 22, 1991 (the commencement of the sale of Class B Shares)
through June 30, 1995 (as calculated in the manner described in the Prospectus
under the heading "Fund Performance") was 7.80%.
CLASS C SHARES
The Fund's yield with respect to the Class C Shares for the 30-day period
ending June 30, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 8.45%. In determining the Fund's net
investment income for a stated 30 day period, the Fund calculates yield to
maturity on each portfolio security on a daily basis. The Fund's current
distribution rate with respect to the Class C Shares for the 30-day period
ending June 30, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 7.21%.
The Fund's average total return with respect to the Class C Shares for (i) the
one year period ended June 30, 1995 was (1.20%), and (ii) the approximately 23
month period from August 13, 1993 (the commencement of the sale of Class C
Shares) through June 30, 1995 was (3.49%).
The Fund's cumulative non-standardized total return with respect to the Class
C Shares from August 13, 1993 (the commencement of the sale of Class C Shares)
through June 30, 1995 (as calculated in the manner described in the Prospectus
under the heading "Fund Performance") was (6.58%).
B-26
<PAGE> 88
Independent Auditors' Report
The Board of Trustees and Shareholders of
Van Kampen Merritt Short-Term Global Income Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Merritt Short-Term Global Income Fund (the "Fund"), including the
portfolio of investments, as of June 30, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Merritt Short-Term Global Income Fund as of June 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 15, 1995
B-27
<PAGE> 89
Portfolio of Investments
June 30,1995
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
In Local
Currency
(000) Description Coupon Maturity U.S.$ Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australia 5.3% AU$
Government/Agency 5.3%
8,000 Queensland Treasury Corp ........... 8.000% 05/14/97 $ 5,693,817
6,500 Treasury Corp of Victoria .......... 12.500 09/15/97 5,021,400
------------
10,715,217
------------
Canada 9.5% CA$
Government/Agency 9.5%
10,000 Canadian Government <F2> ........... 6.500 08/01/96 7,247,907
5,000 Canadian Wheat Bond <F2> ........... 7.500 12/29/97 3,649,800
10,800 Ontario Province CDA <F2> .......... 8.750 04/16/97 8,052,695
------------
18,950,402
------------
Denmark 4.6% Kroner
Government/Agency 4.6%
35,000 Kingdom of Denmark (Bullets) <F2> ... 6.250 02/10/97 6,408,944
15,000 Kingdom of Denmark (Bullets) ....... 7.000 08/15/97 2,763,077
------------
9,172,021
------------
Germany 5.2% Mark
Government/Agency 5.2%
13,800 Republic of Germany <F2> ............ 8.000 03/20/97 10,430,581
------------
Ireland 4.1% Pound
Government/Agency 4.1%
5,000 Republic of Ireland ................. 8.750 07/27/97 8,297,872
------------
Italy 10.2% Lira
Government/Agency 5.9%
19,500,000 Republic of Italy .................... 10.000 08/01/96 11,774,485
Corporate 4.3%
15,000,000 Vermilion International Trust-BTPS ... 9.160 12/01/97 8,732,544
------------
Total Italian Securities .............................. 20,507,029
------------
Netherlands 1.2% Guilder
Government/Agency 1.2%
3,500 Kingdom of Netherlands ................ 6.500 08/15/96 2,303,291
------------
New Zealand 3.7% NZ$
Government/Agency 3.7%
4,500 New Zealand Government ............... 8.000 11/15/95 2,999,534
6,500 New Zealand Government ............... 10.000 07/15/97 4,495,420
------------
7,494,954
------------
</TABLE>
See Notes to Financial Statements
B-28
<PAGE> 90
Portfolio of Investments (Continued)
June 30,1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
In Local
Currency
(000) Description Coupon Maturity U.S.$ Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPAIN 8.0% PESETA
Government/Agency 8.0%
600,000 Kingdom of Spain ................... 9.000% 02/28/97 $ 4,815,851
800,000 Kingdom of Spain ................... 11.000 06/15/97 6,603,426
600,000 Kingdom of Spain ................... 7.300 07/30/97 4,621,177
------------
16,040,454
------------
SWEDEN 2.5% KRONA
Government/Agency 2.5%
40,000 Swedish Treasury Bill .............. * 04/17/96 5,094,019
------------
UNITED KINGDOM 4.9%POUND
Government/Agency 4.9%
6,000 U.K. Treasury <F2> ................ 8.750 09/01/97 9,746,302
------------
UNITED STATES 20.7% US$
Government/Agency 4.9%
10,000 U.S. Treasury Note <F2> ........... 4.750 02/15/97 9,832,813
Currency Indexed Debt Obligations 15.8%
Argentinian Peso Indexed 1.7%
1,500 Citibank Time Deposit .............. 20.500 08/09/95 1,502,550
2,000 Citibank Time Deposit .............. 25.000 10/20/95 2,002,200
Chilean Peso Indexed 2.6%
5,000 Citibank Time Deposit .............. 11.500 11/06/95 5,287,000
Indian Rupee Indexed 0.5%
1,000 Citibank Time Deposit .............. 12.000 10/31/95 996,900
Indonesian Rupiah Indexed 3.9%
5,000 Citibank Time Deposit .............. 14.750 12/05/95 4,828,500
1,500 JP Morgan CD ........................ 15.300 05/01/96 1,490,931
1,500 MGT of Singapore CD ................ * 08/10/95 1,480,630
Polish Zloty Indexed 2.2%
2,000 JP Morgan CD ........................ * 07/26/95 1,984,000
430 JP Morgan CD ........................ * 10/19/95 401,735
2,000 Merrill Lynch CD .................... 25.500 08/16/95 1,987,000
</TABLE>
See Notes to Financial Statements
B-29
<PAGE> 91
Portfolio of Investments (Continued)
June 30,1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
In Local
Currency
(000) Description Coupon Maturity U.S.$ Market Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES (CONTINUED)
Thai Baht Indexed 4.9%
4,500 JP Morgan CD ........................ *% 10/19/95 $ 4,355,257
2,500 JP Morgan CD ........................ * 11/09/95 2,406,065
2,000 JP Morgan CD ........................ 12.800 10/28/96 2,039,636
1,000 JP Morgan CD ........................ 10.600 12/02/96 1,008,246
------------
Total United States Securities................ 41,603,463
------------
REPURCHASE AGREEMENT 22.5%
UBS Securities, U.S. Treasury Note, $30,390,000 par, 12% coupon,
due 08/15/13, dated 06/30/95, to be sold on 07/03/95 at $45,160,945. 45,138,000
------------
TOTAL INVESTMENTS 102.4%
(Cost $205,234,791) <F1> ........................................... 205,493,605
LIABILITIES IN EXCESS OF OTHER ASSETS (2.4%) ...................... (4,869,781)
------------
Net Assets 100.0% ................................................ $200,623,824
<FN> ============
*Zero coupon bond
<F1> At June 30, 1995, cost for federal income tax purposes is $205,234,791; the
aggregate gross unrealized appreciation is $2,638,590 and the aggregate gross
unrealized depreciation is $22,933,084, resulting in net unrealized depreciation
on investments, foreign currency translation of other assets and liabilities,
forward currency contracts, option and swap transactions of $20,294,494.
<F2> Assets segregated as collateral for currency indexed securities, forward
currency contracts, option and swap transactions.
</FN>
</TABLE>
The following table summarizes the portfolio composition at June 30, 1995, based
upon quality ratings issued by Standard & Poor's. For securities not rated by
Standard & Poor's, the Moody's rating is used.
PORTFOLIO COMPOSITION BY CREDIT QUALITY
<TABLE>
<CAPTION>
<S> <C>
AAA .......... 22.4%
AA ........... 61.8
A ............ 10.4
Non-Rated ... 5.4
-------
100.0%
=======
</TABLE>
See Notes to Financial Statements
B-30
<PAGE> 92
Statement of Assets and Liabilities
June 30,1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at Market Value (Cost $205,234,791) (Note 1) ............................ $ 205,493,605
Cash ................................................................................ 954
Receivables:
Investments Sold ................................................................... 6,128,330
Interest ........................................................................... 4,464,716
Fund Shares Sold ................................................................... 572
Options at Market Value (Net premiums paid of $1,537,634) (Note 5) .................. 714,705
Unamortized Organizational Expenses and Initial Registration Costs (Note 1) ......... 12,598
---------------
Total Assets ......................................................................... 216,815,480
---------------
Liabilities:
Payables:
Forward Currency Contracts and Swap Transactions (Note 5) .......................... 14,011,820
Fund Shares Repurchased ........................................................... 792,431
Income Distributions .............................................................. 565,099
Investment Advisory Fee (Note 2) ................................................... 93,434
Accrued Expenses ..................................................................... 728,872
---------------
Total Liabilities .................................................................... 16,191,656
---------------
Net Assets ........................................................................... $ 200,623,824
===============
Net Assets Consist of:
Paid in Surplus (Note 3) ............................................................. $ 286,965,034
Accumulated Distributions in Excess of Net Investment Income (Note 1) ............... (588,190)
Net Unrealized Depreciation on Investments and Foreign Currency ...................... (20,294,494)
Accumulated Net Realized Loss on Investments ......................................... (65,458,526)
---------------
Net Assets ........................................................................... $ 200,623,824
===============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $72,546,744 and
9,590,434 shares of beneficial interest issued and outstanding) (Note 3) ............. $ 7.56
Maximum sales charge (3.25%* of offering price) ...................................... .25
---------------
Maximum offering price to public ..................................................... $ 7.81
===============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $127,905,542 and
16,910,386 shares of beneficial interest issued and outstanding) (Note 3) ............ $ 7.56
===============
Class C Shares:
Net asset value and offering price per share (Based on net assets of $171,538 and
22,678 shares of beneficial interest issued and outstanding) (Note 3) ............... $ 7.56
===============
*On sales of $25,000 or more, the sales charge will be reduced.
</TABLE>
See Notes to Financial Statements
B-31
<PAGE> 93
Statement of Operations
For the Year Ended June 30,1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income:
Interest (Net of foreign withholding taxes of $320,941) ..................................... $ 24,695,762
----------------
Expenses:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B, C and D of $263,818,
$1,899,931, $1,918 and $2, respectively) (Note 6) .......................................... 2,165,669
Investment Advisory Fee (Note 2) ........................................................... 1,616,498
Shareholder Services (Note 2) ............................................................... 518,178
Custody ..................................................................................... 235,955
Legal (Note 2) ............................................................................. 56,215
Amortization of Organizational Expenses and Initial Registration Costs (Note 1) ............ 49,972
Trustees Fees and Expenses (Note 2) ......................................................... 26,594
Other ....................................................................................... 265,225
----------------
Total Expenses .............................................................................. 4,934,306
----------------
Net Investment Income ....................................................................... $ 19,761,456
================
Realized and Unrealized Gain/Loss on Investments and Foreign Currency:
Net Realized Loss on Investments and Foreign Currency (Including realized gain on
foreign currency transactions of $2,667,741 and realized loss on closed and expired
option transactions of $3,248,498) .......................................................... $ (12,602,409)
----------------
Net Unrealized Appreciation/Depreciation on Investments and Foreign Currency:
Beginning of the Period .................................................................... (12,555,624)
End of the Period (Including unrealized appreciation on foreign currency translation of other
assets and liabilities of $33,662 and unrealized depreciation on forward currency contracts,
option and swap transactions of $19,490,440, $822,929 and $273,601, respectively) .......... (20,294,494)
----------------
Net Unrealized Depreciation on Investments and Foreign Currency During the Period ........... (7,738,870)
----------------
Net Realized and Unrealized Loss on Investments and Foreign Currency ........................ $ (20,341,279)
================
Net Decrease in Net Assets from Operations ................................................. $ (579,823)
================
</TABLE>
See Notes to Financial Statements
B-32
<PAGE> 94
Statement of Changes in Net Assets
For the Years Ended June 30,1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30,1995 June 30,1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income .............................................. $ 19,761,456 $ 33,472,724
Net Realized Loss on Investments and Foreign Currency .............. (12,602,409) (45,182,611)
Net Unrealized Depreciation on Investments and
Foreign Currency During the Period ................................. (7,738,870) (5,827,126)
---------------- ----------------
Change in Net Assets from Operations .............................. (579,823) (17,537,013)
---------------- ----------------
Distributions from Net Investment Income* .......................... (14,866,346) (21,649,827)
Return of Capital Distribution* ................................... (7,736,408) (16,378,081)
---------------- ----------------
Total Distributions ............................................... (22,602,754) (38,027,908)
---------------- ----------------
Net Change in Net Assets from Investment Activities ................ (23,182,577) (55,564,921)
---------------- ----------------
From Capital Transactions (Note 3):
Proceeds from Shares Sold ......................................... 6,199,457 48,354,257
Net Asset Value of Shares Issued Through Dividend Reinvestment ..... 12,635,688 21,920,768
Cost of Shares Repurchased ......................................... (214,719,738) (193,990,293)
---------------- ----------------
Net Change in Net Assets from Capital Transactions ................ (195,884,593) (123,715,268)
---------------- ----------------
Total Decrease in Net Assets ....................................... (219,067,170) (179,280,189)
---------------- ----------------
Net Assets:
Beginning of the Period ........................................... 419,690,994 598,971,183
---------------- ----------------
End of the Period (Including undistributed net investment income of
$(588,190) and $(5,032,543), respectively) ........................ $ 200,623,824 $ 419,690,994
================ ================
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30,1995 June 30,1994
- ----------------------- ---------------- ----------------
<S> <C> <C>
Distributions from
Net Investment Income:
Class A Shares ................ $ (5,617,141) $ (8,004,201)
Class B Shares ................ (9,240,772) (13,642,774)
Class C Shares ................ (8,387) (2,850)
Class D Shares ................ (46) (2)
---------------- ----------------
$ (14,866,346) $ (21,649,827)
================ ================
Return of Capital Distribution:
Class A Shares ................ $ (2,908,177) $ (6,158,141)
Class B Shares ................ (4,822,441) (10,214,511)
Class C Shares ................ (5,768) (5,407)
Class D Shares ................ (22) (22)
---------------- ----------------
$ (7,736,408) $ (16,378,081)
================ ================
</TABLE>
See Notes to Financial Statements
B-33
<PAGE> 95
Notes to Financial Statements
June 30,1995
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen Merritt Short-Term Global Income Fund (the "Fund") is organized as a
sub-trust of Van Kampen Merritt Trust (the "Trust"), a Massachusetts business
trust, and is registered as a non-diversified open-end management investment
company under the Investment Company Act of 1940 as amended. The Fund commenced
investment operations on September 28, 1990. The distribution of the Fund's
Class B and Class C shares commenced on July 22, 1991, and August 13, 1993,
respectively. On May 2, 1995, all Class D shareholders redeemed their shares and
the class was eliminated. The Fund will no longer offer Class D shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation-Investments are stated at value using the last available
bid price or yield equivalents obtained from dealers in the OTC or interbank
market. Short-term securities with remaining maturities of less than 60 days are
valued at amortized cost.
B. Security Transactions-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may 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 aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At June 30, 1995, there were no when
issued or delayed delivery purchase commitments.
C. Investment Income-Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. Currency Translation-During the current period, the Fund adopted Statement of
Position 93-4, "Foreign Currency Accounting and Financial Statement Presentation
for Investment Companies." Accordingly, the 1994 statement of changes in net
assets and prior period financial highlights were restated to reflect
reclassification of net realized gain/loss on foreign currency and forward
currency contracts from net investment income to net realized gain/loss on
investments and foreign currency.
Assets and liabilities denominated in foreign currencies and commitments under
forward currency contracts are translated into U.S. dollars at the mean of the
quoted bid and ask prices of such currencies against the U.S. dollar. Purchases
and sales of portfolio securities are trans-
B-34
<PAGE> 96
Notes to Financial Statements (Continued)
June 30,1995
- --------------------------------------------------------------------------------
lated at the rate of exchange prevailing when such securities were acquired or
sold. Income and expenses are translated at rates prevailing when accrued.
E. Organizational Expenses and Initial Registration Costs-The Fund has
reimbursed Van Kampen American Capital Distributors, Inc. or its affiliates
(collectively "VKAC") for costs incurred in connection with the Fund's
organization and initial registration in the amount of $250,000. These costs are
being amortized on a straight line basis over the 60 month period ending
September 28, 1995. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") has agreed that in the event any of the initial shares of the Fund
originally purchased by VKAC are redeemed during the amortization period, the
Fund will be reimbursed for any unamortized organizational expenses and initial
registration costs in the same proportion as the number of shares redeemed bears
to the number of initial shares held at the time of redemption.
F. 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 such losses against any future realized capital
gains. At June 30, 1995, the Fund had an accumulated capital loss carryforward
for tax purposes of $62,900,163. Of this amount, $10,010,730 and $52,889,433
will expire on June 30, 2001 and 2003, respectively. Net realized gains or
losses may differ for financial and tax reporting purposes primarily as a result
of post October 31 losses which are not recognized for tax purposes until the
first day of the following fiscal year.
G. Distribution of Income and Gains-The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on transactions in foreign
currencies and options on foreign currencies. These realized gains and losses
are included as net realized gains or losses for financial reporting purposes.
Permanent book and tax basis differences relating to these items totaling
$450,757 were reclassified from accumulated undistributed net investment income
to accumulated net realized gain/loss on investments.
Net realized gains on securities, if any, are distributed annually.
Distributions from net realized gains for book purposes may include short-term
capital gains which are included in ordinary income for tax purposes.
B-35
<PAGE> 97
Notes to Financial Statements (Continued)
June 30,1995
- --------------------------------------------------------------------------------
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 of .55% of the Fund's average net assets.
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 June 30, 1995, the Fund recognized expenses of
approximately $152,100 representing VKAC's cost of providing accounting, legal
and certain shareholder services to the Fund.
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. The Fund's liability under the
deferred compensation and retirement plans at June 30, 1995, was approximately
$23,100.
At June 30, 1995, VKAC owned 1,263, 1,347 and 100 shares of beneficial
interest of Classes A, B and C, respectively.
3. Capital Transactions
The Fund has outstanding three classes of common shares, Classes A, B and C.
There are an unlimited number of shares of each class without par value
authorized.
B-36
<PAGE> 98
Notes to Financial Statements (Continued)
June 30,1995
- --------------------------------------------------------------------------------
At June 30, 1995, paid in surplus aggregated $102,375,382, $184,393,612 and
$196,040, for Classes A, B and C, respectively. For the year ended June 30,
1995, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Sales:
Class A ....................... 147,880 $ 1,164,395
Class B ....................... 633,871 5,017,062
Class C ....................... 2,233 18,000
Class D ....................... -0- -0-
------------ --------------
Total Sales ................... 783,984 $ 6,199,457
------------ --------------
Dividend Reinvestment:
Class A ....................... 640,247 $ 5,003,613
Class B ....................... 973,210 7,618,093
Class C ....................... 1,792 13,973
Class D ....................... 1 9
------------ --------------
Total Dividend Reinvestment ... 1,615,250 $ 12,635,688
------------ --------------
Repurchases:
Class A ....................... (9,324,231) $(73,225,277)
Class B ....................... (18,052,147) (141,454,897)
Class C ....................... (4,985) (38,532)
Class D ....................... (124) (1,032)
------------ --------------
Total Repurchases ............ (27,381,487) $(214,719,738)
------------ --------------
</TABLE>
B-37
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
- --------------------------------------------------------------------------------
At June 30, 1994, paid in surplus aggregated $172,340,828, $318,035,795,
$208,367 and $1,045, for Classes A, B, C and D, respectively. For the year ended
June 30, 1994, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A ....................... 3,219,135 $ 29,120,587
Class B ....................... 2,103,750 18,929,822
Class C ....................... 33,998 302,784
Class D ....................... 123 1,064
------------ --------------
Total Sales ................... 5,357,006 $ 48,354,257
============ ==============
Dividend Reinvestment:
Class A ....................... 931,309 $ 8,246,649
Class B ....................... 1,543,949 13,668,730
Class C ....................... 629 5,386
Class D ....................... -0- 3
------------ --------------
Total Dividend Reinvestment ... 2,475,887 $ 21,920,768
============ ==============
Repurchases:
Class A ....................... (8,636,073) $(75,861,675)
Class B ....................... (13,472,314) (118,034,222)
Class C ....................... (10,989) (94,396)
Class D ....................... -0- -0-
------------ --------------
Total Repurchases ............ (22,119,376) $(193,990,293)
============ ==============
</TABLE>
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 three 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
arrangements, 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 ................... 3.00% 1.00%
Second ................. 2.00% None
Third ................... 1.00% None
Fourth and Thereafter ... None None
</TABLE>
B-38
<PAGE> 100
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
- --------------------------------------------------------------------------------
For the year ended June 30, 1995, VKAC, as Distributor for the Fund, received
net commissions on sales of the Fund's Class A shares of $197 and CDSC on the
redeemed shares of Classes B and C of approximately $900,200. Sales charges do
not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
Aggregate purchases and cost of sales of investment securities, excluding U.S.
Government securities and short-term notes, for the year ended June 30, 1995,
were $430,869,580 and $553,195,987, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on investments. Upon
disposition, a realized gain or loss is recognized accordingly, except for
exercised option contracts where the recognition of gain or loss is postponed
until the disposal of the security underlying the option contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. OPTION CONTRACTS-An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to manage the portfolio's foreign currency exposure and effective maturity and
duration.
B-39
<PAGE> 101
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
- --------------------------------------------------------------------------------
Transactions in options for the year ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
<S> <C> <C>
Outstanding at June 30, 1994 .... 30 $ (4,152,667)
Options Written and
Purchased (Net) ................ 66 (603,970)
Options Terminated in Closing
Transactions (Net) .............. (73) 913,996
Options Expired (Net) .......... (10) 2,344,492
Options Exercised (Net) ......... (2) (39,485)
----------------- ---------------
Outstanding at June 30, 1995 ... 11 $ (1,537,634)
================= ===============
</TABLE>
The descriptions and market values of the option contracts outstanding as of
June 30, 1995, are as follows:
<TABLE>
<CAPTION>
STRIKE
OPENING EXPIRATION PRICE/ MARKET
DESCRIPTION TRANSACTION DATE YIELD VALUE
<S> <C> <C> <C> <C>
Italian Lira Call ............ Buy 07/14/95 97.35 $ -0-
Japanese Yen Call ........... Buy 04/22/96 82.65 58,935
Japanese Yen Call ........... Buy 04/22/96 83.25 39,290
Japanese Yen Call ........... Buy 04/25/96 83.80 69,260
Japanese Yen Call ........... Buy 05/08/96 83.10 88,118
Japanese Yen Call ........... Buy 05/09/96 83.55 140,528
Japanese Yen Call ........... Buy 05/09/96 83.10 105,396
Japanese Yen Call ........... Buy 05/13/96 84.95 144,238
Receivers Option on Swaps:
6 month German Swap .......... Buy 06/07/96 5.71% 37,581
Payers Option on Swaps:
3 year Swedish/German Swap ... Buy 08/12/95 4.33% 14,498
3 year Spanish/German Swap ... Buy 08/12/95 5.17% 16,861
----------
$ 714,705
==========
</TABLE>
B. FORWARD CURRENCY CONTRACTS-These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on investments and foreign currency.
B-40
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
- --------------------------------------------------------------------------------
At June 30, 1995, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
BUYS TO OPEN
German Mark,
expiring 07/07/95 -
08/15/95 .............. $ 131,042,708 $ 129,839,029 $ (1,203,679)
Italian Lira,
expiring 07/07/95 ..... 23,211,778 23,205,800 (5,978)
Japanese Yen,
expiring 07/07/95 ..... 16,014,783 15,353,525 (661,258)
Mexican Peso,
expiring 08/24/95 -
03/04/96 .............. 2,769,927 2,952,033 182,106
Spanish Peseta,
expiring 07/07/95 ..... 17,821,564 17,977,614 156,050
SELLS TO OPEN
Australian Dollar,
expiring 07/05/95 -
07/31/95 .............. 10,071,541 9,958,077 113,464
British Pound Sterling,
expiring 07/17/95 ..... 10,593,040 10,812,856 (219,816)
Canadian Dollar,
expiring 07/07/95 -
07/17/95 .............. 13,999,993 14,537,250 (537,257)
German Mark,
expiring 07/06/95 -
08/18/95 .............. 158,699,985 171,093,073 (12,393,088)
Irish Pound,
expiring 07/11/95 ..... 6,222,052 6,250,261 (28,209)
Italian Lira,
expiring 07/07/95 ..... 18,685,556 20,148,673 (1,463,117)
Japanese Yen,
expiring 07/11/95 -
07/17/95 .............. 18,174,961 20,345,093 (2,170,132)
Spanish Peseta,
expiring 07/07/95 -
07/24/95 .............. 29,968,720 31,253,398 (1,284,678)
Swedish Krona,
expiring 08/03/95 ..... 5,025,273 5,000,121 25,152
----------------
$ (19,490,440)
================
</TABLE>
B-41
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
- --------------------------------------------------------------------------------
At June 30, 1995, the Fund had realized gains on closed but unsettled forward
currency contracts of $5,752,221 scheduled to settle between July 3, 1995 and
July 8, 1996.
C. SWAP TRANSACTIONS-A swap represents an agreement between two parties to
exchange a series of cash flows based upon various indices at specified
intervals. A forward swap represents a commitment to enter into a swap agreement
at a future date.
The interest rate swap and forward swap transactions outstanding as of June
30, 1995, and the descriptions and unrealized depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
DESCRIPTION DEPRECIATION
<S> <C>
INTEREST RATE SWAPS:
Goldman Sachs, 5,000,000 US$ notional amount, maturing 11/20/95,
payment based upon the following formula: Notional amount times
[5.33%-(3 month Spanish LIBOR-3 month German LIBOR)] ...................... $ 21,500
Goldman Sachs, 5,000,000 US$ notional amount, maturing 11/20/95,
payment based upon the following formula: Notional amount times
[4.06%-(3 month Spanish LIBOR-3 month German LIBOR)] ...................... 27,000
J.P.Morgan, 5,000,000 US$ notional amount, maturing 08/17/95,
payment based upon the following formula: Notional amount times
[5.41%-(1 year Spanish rate-1 year German rate)] .......................... 29,387
J.P.Morgan, 5,000,000 US$ notional amount, maturing 08/18/95,
payment based upon the following formula: Notional amount times
[5.44%-(1 year Italian rate-1 year German rate)] .......................... 80,270
J.P.Morgan, 5,000,000 US$ notional amount, maturing 08/18/95,
payment based upon the following formula: Notional amount times
[4.42%-(1 year Swedish rate-1 year German rate)] .......................... 55,210
FORWARD SWAPS:
J.P.Morgan, 8,000,000,000 Italian Lira notional amount, effective 12/07/95,
Fund receives 11.068% fixed, Fund pays 6 month Italian LIBOR ............... 60,234
------------
$ 273,601
------------
</TABLE>
D. INDEXED SECURITIES-These instruments are identified in the portfolio of
investments.
Currency Indexed securities contain one or more embedded links to currency
indices or forward currency contracts which cause a security's valuation to
fluctuate based upon the value of the linked foreign currency or currencies.
B-42
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
- --------------------------------------------------------------------------------
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a service plan (the "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 .30% for Class A and 1.00% each for Class
B and Class C shares are accrued daily. Included in these fees for the year
ended June 30, 1995, are payments to VKAC of approximately $1,443,200.
B-43
<PAGE> 105
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
List all financial statements and exhibits as part of the Registration
Statement.
(A) FINANCIAL STATEMENTS:
For Van Kampen American Capital High Yield Fund and Van Kampen
American Capital Strategic Income Fund: Included in Post-Effective
Amendment No. 30 to the Registration Statement of the Registrant.
For Van Kampen American Capital Adjustable Rate U.S. Government Fund:
included in Post-Effective Amendment No. 32 to the Registration Statement
of the Registrant.
For Van Kampen American Capital Short-Term Global Income Fund:
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Independent Auditors' Report
Financial Statements
Notes to Financial Statements.
For Van Kampen American Capital Emerging Markets Income Fund: not
included herein because such fund is a new registrant.
(B) EXHIBITS:
(1)(a) Form of Agreement and Declaration of Trust(32)
(b) Form of Certificate of Designation for:
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global Income
Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(32)
(iv) Van Kampen American Capital Strategic Income Fund++
(v) Van Kampen American Capital Emerging Markets Income
Fund++
(2) Form of By-Laws(32)
(4) Form of Specimen of Share Certificates
(i) Van Kampen American Capital High Yield Fund
(a) Class A Shares++
(b) Class B Shares++
(c) Class C Shares++
(ii) Van Kampen American Capital Short-Term Global Income
Fund
(a) Class A Shares+
(b) Class B Shares+
(c) Class C Shares+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund
(a) Class A Shares(32)
(b) Class B Shares(32)
(c) Class C Shares(32)
(iv) Van Kampen American Capital Strategic Income Fund
(a) Class A Shares++
(b) Class B Shares++
(c) Class C Shares++
C-1
<PAGE> 106
(v) Van Kampen American Capital Emerging Markets Income
Fund
(a) Class A Shares(27)
(b) Class B Shares(27)
(c) Class C Shares(27)
(5) (a) Form of Investment Advisory Agreement
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global Income
Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(32)
(iv) Van Kampen American Capital Strategic Income Fund++
(v) Van Kampen American Capital Emerging Markets Income
Fund, as amended and restated(27)
(b) Form of Investment Sub-Advisory Agreement
(i) Van Kampen American Capital Emerging Markets Income
Fund(27)
(6) (a) Form of Distribution and Service Agreement(32)
(b) Form of Dealer Agreement(32)
(c) Form of Broker Agreement(32)
(d) Form of Bank Agreement(32)
(e) Form of Underwriting Agreement(1)
(f) Form of Selected Dealer Agreement(1)
(g) Form of Agreement Between Underwriters(1)
(8) (a) Form of Custodian Agreement
(i) Van Kampen American Capital High Yield Fund*
(ii) Van Kampen American Capital Short-Term Global Income
Fund(6)
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(12)
(iv) Van Kampen American Capital Strategic Income
Fund(20)
(v) Van Kampen American Capital Emerging Markets Income
Fund, as amended and restated(24)
(b) Form of Transfer Agency Agreement(32)
(9) (a) Form of Accounting Service Agreement(32)
(b) Form of Legal Services Agreement(32)
(10) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(a) Van Kampen American Capital High Yield Fund++
(b) Van Kampen American Capital Short-Term Global Income Fund+
(c) Van Kampen American Capital Adjustable Rate U.S. Government
Fund(32)
(d) Van Kampen American Capital Strategic Income Fund++
(e) Van Kampen American Capital Emerging Markets Income Fund++
(11) Consent of KPMG Peat Marwick LLP
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global
Income Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(32)
(iv) Van Kampen American Capital Strategic Income Fund++
(v) Van Kampen American Capital Emerging Markets Income
Fund(21)
(13) Letter of Understanding relating to initial capital(1)
(15) (a) Form of Distribution Plan Pursuant to Rule 12b-1(32)
(b) Form of Shareholder Assistance Agreement(32)
(c) Form of Administrative Services Agreement(32)
(d) Form of Service Plan(32)
(16) (a) Computation of Performance Quotations
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global
Income Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(28)
(iv) Van Kampen American Capital Strategic Income Fund++
(17) (a) List of certain investment companies in response to Item
29(a)+
C-2
<PAGE> 107
(b) List of officers and directors of Van Kampen American
Capital Distributors, Inc. in response to Item 29(b)+
(24) Power of attorney+
(27) Financial Data Schedules+
- ---------------
* Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A, File Number 33-4410.
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(6) Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(9) Incorporated herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(12) Incorporated herein by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(16) Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(17) Incorporated herein by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(20) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(21) Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(23) Incorporated herein by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(24) Incorporated herein by reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(25) Incorporated herein by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(27) Incorporated herein by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(28) Incorporated herein by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(30) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(31) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(32) Incorporated herein by reference to Post-Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
- ---------------
+ Filed herewith.
++ To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
To the best knowledge of Registrant, no person is controlled by or under
common control with the Registrant.
C-3
<PAGE> 108
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of August 18, 1995:
<TABLE>
<CAPTION>
(2)
NUMBER
(1) OF
RECORD
TITLE OF CLASS HOLDERS
---------------------------------------------------------- ------
<S> <C>
Shares of Beneficial Interest, $0.01 par value
(i) Van Kampen American Capital High Yield Fund*:
Class A Shares.................................... 14,987
Class B Shares.................................... 2,928
Class C Shares.................................... 147
(ii) Van Kampen American Capital Short-Term Global
Income Fund*:
Class A Shares.................................... 4,070
Class B Shares.................................... 8,650
Class C Shares.................................... 14
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund:
Class A Shares.................................... 277
Class B Shares.................................... 716
Class C Shares.................................... 41
(iv) Van Kampen American Capital Strategic Income Fund:
Class A Shares.................................... 1,918
Class B Shares.................................... 3,175
Class C Shares.................................... 63
(v) Van Kampen American Capital Emerging Markets Income
Fund*:
Class A Shares.................................... 5
Class B Shares.................................... 3
Class C Shares.................................... 2
</TABLE>
- ---------------
* Prior to May 1, 1995, the Fund offered Class D Shares.
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 willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved 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 willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved 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
C-4
<PAGE> 109
Registrant's disinterested, non-party trustees, or an independent legal counsel
in a written opinion, shall determine, based upon a review of readily available
facts, that a recipient of the advance ultimately will be found entitled to
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefor 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 "Investment
Advisory and Other Services" and "Officers and Trustees" 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. 801-18161) 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(a) 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(b). Except as disclosed under the
heading, "Officers and Trustees" 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 to be maintained by the
Registrant by Section 31 (a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of the Registrant located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, Access Investors Services,
Inc., 7501 Tiffany Springs Parkway, Kansas City, Missouri, 64153, or at the
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts. All such accounts, books and other documents required to be
maintained by the principal underwriter will be maintained at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
C-5
<PAGE> 110
ITEM 32. UNDERTAKINGS.
(a) Not Applicable.
(b) Not Applicable.
Registrant undertakes, if requested to do so by the holders of at least 10%
of the shareholders of the Van Kampen American Capital Emerging Markets Income
Fund, a series of the Registrant, to call a meeting of such shareholders for the
purpose of voting upon the question of removal of a trustee or trustees, and to
assist in communications with other shareholders to the extent required by
Section 16(c) of the Investment Company Act of 1940, as amended.
C-6
<PAGE> 111
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT, VAN KAMPEN AMERICAN CAPITAL
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 THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED IN THE CITY OF
OAKBROOK TERRACE, AND THE STATE OF ILLINOIS, ON THE 20TH DAY OF AUGUST, 1995.
VAN KAMPEN AMERICAN CAPITAL 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 THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON AUGUST 20, 1995 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ DONALD C. MILLER * Chairman of the Board and Trustee
- ---------------------------------------------
Donald C. Miller
Chief Executive Officer:
/s/ DENNIS J. McDONNELL* President and Trustee
- ---------------------------------------------
Dennis J. McDonnell
Chief Financial and Accounting Officer:
/s/ EDWARD C. WOOD, III * Vice President and Treasurer
- ---------------------------------------------
Edward C. Wood, III
Trustees:
/s/ J. MILES BRANAGAN * Trustee
- ---------------------------------------------
J. Miles Branagan
/s/ RICHARD E. CARUSO* Trustee
- ---------------------------------------------
Richard E. Caruso
/s/ PHILIP P. GAUGHAN * Trustee
- ---------------------------------------------
Philip P. Gaughan
/s/ ROGER HILSMAN * Trustee
- ---------------------------------------------
Roger Hilsman
/s/ R. CRAIG KENNEDY * Trustee
- ---------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON * Trustee
- ---------------------------------------------
Jack E. Nelson
/s/ DON G. POWELL * Trustee
- ---------------------------------------------
Don G. Powell
</TABLE>
C-7
<PAGE> 112
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ DAVID REES* Trustee
- ---------------------------------------------
David Rees
/s/ JEROME L. ROBINSON * Trustee
- ---------------------------------------------
Jerome L. Robinson
/s/ LAWRENCE J. SHEEHAN * Trustee
- ---------------------------------------------
Lawrence J. Sheehan
/s/ FERNANDO SISTO * Trustee
- ---------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN * Trustee
- ---------------------------------------------
Wayne W. Whalen
/s/ WILLIAM S. WOODSIDE* Trustee
- ---------------------------------------------
William S. Woodside
- ---------------
*Signed by Ronald A. Nyberg pursuant to a power of attorney.
/s/ RONALD A. NYBERG
- ---------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
August 20, 1995
C-8
<PAGE> 113
SCHEDULE OF EXHIBITS TO
POST-EFFECTIVE AMENDMENT 35 TO FORM N-1A
SUBMITTED TO THE SECURITIES AND EXCHANGE
COMMISSION ON AUGUST 30, 1995
(B) EXHIBITS:
(1)(a) Form of Agreement and Declaration of Trust(32)
(b) Form of Certificate of Designation for:
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global Income
Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(32)
(iv) Van Kampen American Capital Strategic Income Fund++
(v) Van Kampen American Capital Emerging Markets Income
Fund++
(2) Form of By-Laws(32)
(4) Form of Specimen of Share Certificates
(i) Van Kampen American Capital High Yield Fund
(a) Class A Shares++
(b) Class B Shares++
(c) Class C Shares++
(ii) Van Kampen American Capital Short-Term Global Income
Fund
(a) Class A Shares+
(b) Class B Shares+
(c) Class C Shares+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund
(a) Class A Shares(32)
(b) Class B Shares(32)
(c) Class C Shares(32)
(iv) Van Kampen American Capital Strategic Income Fund
(a) Class A Shares++
(b) Class B Shares++
(c) Class C Shares++
(v) Van Kampen American Capital Emerging Markets Income
Fund
(a) Class A Shares(27)
(b) Class B Shares(27)
(c) Class C Shares(27)
(5)(a) Form of Investment Advisory Agreement
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global Income
Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(32)
(iv) Van Kampen American Capital Strategic Income Fund++
(v) Van Kampen American Capital Emerging Markets Income
Fund, as amended and restated(27)
(b) Form of Investment Sub-Advisory Agreement
(i) Van Kampen American Capital Emerging Markets Income
Fund(27)
(6)(a) Form of Distribution and Service Agreement(32)
(b) Form of Dealer Agreement(32)
(c) Form of Broker Agreement(32)
(d) Form of Bank Agreement(32)
(e) Form of Underwriting Agreement(1)
(f) Form of Selected Dealer Agreement(1)
(g) Form of Agreement Between Underwriters(1)
(8)(a) Form of Custodian Agreement
(i) Van Kampen American Capital High Yield Fund*
(ii) Van Kampen American Capital Short-Term Global Income
Fund(6)
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(12)
<PAGE> 114
(iv) Van Kampen American Capital Strategic Income
Fund(20)
(v) Van Kampen American Capital Emerging Markets Income
Fund, as amended and restated(24)
(b) Form of Transfer Agency Agreement(32)
(9) (a) Form of Accounting Service Agreement(32)
(b) Form of Legal Services Agreement(32)
(10) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(a) Van Kampen American Capital High Yield Fund++
(b) Van Kampen American Capital Short-Term Global Income Fund+
(c) Van Kampen American Capital Adjustable Rate U.S. Government
Fund(32)
(d) Van Kampen American Capital Strategic Income Fund++
(e) Van Kampen American Capital Emerging Markets Income Fund++
(11) Consent of KPMG Peat Marwick LLP
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global
Income Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(32)
(iv) Van Kampen American Capital Strategic Income Fund++
(v) Van Kampen American Capital Emerging Markets Income
Fund(21)
(13) Letter of Understanding relating to initial capital(1)
(15) (a) Form of Distribution Plan Pursuant to Rule 12b-1(32)
(b) Form of Shareholder Assistance Agreement(32)
(c) Form of Administrative Services Agreement(32)
(d) Form of Service Plan(32)
(16)(a) Computation of Performance Quotations
(i) Van Kampen American Capital High Yield Fund++
(ii) Van Kampen American Capital Short-Term Global
Income Fund+
(iii) Van Kampen American Capital Adjustable Rate U.S.
Government Fund(28)
(iv) Van Kampen American Capital Strategic Income Fund++
(17) (a) List of certain investment companies in response to Item
29(a)+
(b) List of officers and directors of Van Kampen American
Capital Distributors, Inc. in response to Item 29(b)+
(24) Power of attorney+
(27) Financial Data Schedules+
- ---------------
* Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A, File Number 33-4410.
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(6) Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(9) Incorporated herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(12) Incorporated herein by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(16) Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(17) Incorporated herein by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(20) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(21) Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(23) Incorporated herein by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
<PAGE> 115
(24) Incorporated herein by reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(25) Incorporated herein by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(27) Incorporated herein by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(28) Incorporated herein by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(30) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(31) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
(32) Incorporated herein by reference to Post-Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.
- ---------------
+ Filed herewith.
++ To be filed by amendment.
<PAGE> 1
EXHIBIT 1(b)(ii)
VAN KAMPEN AMERICAN CAPITAL TRUST
Certificate of Designation
of
Van Kampen American Capital Short-Term Global Income Fund
The undersigned, being the Secretary of Van Kampen American Capital
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
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 Short-Term Global Income Fund (the
"Fund") with following the 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 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
and officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the 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.
May 10, 1995
- ----------------------
Ronald A. Nyberg,
Secretary
2
<PAGE> 1
EXHIBIT 4(ii)(a)
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST
CLASS A
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP
_________________
fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share of Van Kampen American Capital Short-Term Global Income
Fund, transferable on the books of the Fund by the holder thereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM GLOBAL INCOME FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND
NUMBER CLASS A SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 4(ii)(b)
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST
CLASS B
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP
_________________
fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share of Van Kampen American Capital Short-Term Global Income
Fund, transferable on the books of the Fund by the holder thereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM GLOBAL INCOME FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND
NUMBER CLASS B SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 4(ii)(c)
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST
CLASS C
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP
_________________
fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share of Van Kampen American Capital Short-Term Global Income
Fund, transferable on the books of the Fund by the holder thereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM GLOBAL INCOME FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND
NUMBER CLASS C SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 5(a)(ii)
FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of _________, 199_, by and
between VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND (the "Fund"),
a series of VAN KAMPEN AMERICAN CAPITAL TRUST, a Delaware business trust
(the "Trust"), and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. (the
"Adviser"), a Delaware corporation.
1. (a) Retention of Adviser by Fund. The Fund hereby employs
the Adviser to act as the investment adviser for and to manage
the investment and reinvestment of the assets of the Fund in
accordance with the Fund's investment objective and policies and
limitations, and to administer its affairs to the extent
requested by, and subject to the review and supervision of, the
Board of Trustees of the Fund for the period and upon the terms
herein set forth. The investment of funds shall be subject to
all applicable restrictions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions
of the Board of Trustees of the Fund as may from time to time be
in force and delivered or made available to the Adviser.
(b) Adviser's Acceptance of Employment. The Adviser accepts
such employment and agrees during such period to render such
services, to supply investment research and portfolio management
(including without limitation the selection of securities for
the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in
accordance with the policies adopted by the Fund and its Board
of Trustees), to administer the business affairs of the Fund, to
furnish offices and necessary facilities and equipment to the
Fund, to provide administrative services for the Fund, to render
periodic reports to the Board of Trustees of the Fund, and to
permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to
such positions.
(c) Independent Contractor. The Adviser shall be deemed
to be an independent contractor under this Agreement and, unless
otherwise expressly provided or authorized, shall have no
authority to act for or represent the Fund in any way or
otherwise be deemed as agent of the Fund.
(d) Non-Exclusive Agreement. The services of the Adviser to
the Fund under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services or
other services to others so long as its services hereunder are
not impaired thereby.
1
<PAGE> 2
2. (a) Fee. For the services and facilities described in
Section 1, the Fund will accrue daily and pay to the Adviser at
the end of each calendar month an investment management fee
equal to a percentage of the average daily net assets of the
Fund as follows:
FEE PERCENT OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
____________________ ____________________
____________________ ____________________
(b) Expense Limitation. The Adviser's compensation for any
fiscal year of the Fund shall be reduced by the amount, if any,
by which the Fund's expense for such fiscal year exceeds the
most restrictive applicable expense jurisdiction in which the
Fund's shares are qualified for offer and sale, as such
limitations set forth in the most recent notice thereof
furnished by the Adviser to the Fund. For purposes of this
paragraph there shall be excluded from computation of the Fund's
expenses any amount borne directly or indirectly by the Fund
which is permitted to be excluded from the computation of such
limitation by such statute or regulatory authority. If for any
month expenses of the Fund properly included in such calculation
exceed 1/12 of the amount permitted annually by the most
restrictive applicable expense limitation, the payment to the
Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the
total net expense for the month will not exceed 1/12 of such
amount. As of the end of the Fund's fiscal year, however, the
computations and payments shall be readjusted so that the
aggregate compensation payable to the Adviser for the year is
equal to the fee set forth in subsection (a) of this Section 2,
diminished to the extent necessary so that the expenses for the
year do not exceed those permitted by the applicable expense
limitation.
(c) Determination of Net Asset Value. The net asset value of
the Fund shall be calculated as of the close of the New York
Stock Exchange on each day the Exchange is open for trading or
such other time or times as the trustees may determine in
accordance with the provisions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions
of the Board of Trustees of the Fund as from time to time in
force. For the purpose of the foregoing computations, on each
such day when net asset value is not calculated, the net asset
value of a share of beneficial interest of the Fund shall be
deemed to be the net asset value of such share as of the close
of business of the last day on which such calculation was made.
2
<PAGE> 3
(d) Proration. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate
proration of the Adviser's fee on the basis of the number of
days that the Agreement is in effect during such month and year,
respectively.
3. Expenses. In addition to the fee of the Adviser, the Fund
shall assume and pay any expenses for services rendered by a
custodian for the safekeeping of the Fund's securities or other
property, for keeping its books of account, for any other
charges of the custodian and for calculating the net asset value
of the Fund as provided above. The Adviser shall not be
required to pay, and the Fund shall assume and pay, the charges
and expenses of its operations, including compensation of the
trustees (other than those who are interested persons of the
Adviser and other than those who are interested persons of the
distributor of the Fund but not of the Adviser, if the
distributor has agreed to pay such compensation), charges and
expenses of independent accountants, of legal counsel and of any
transfer or dividend disbursing agent, costs of acquiring and
disposing of portfolio securities, cost of listing shares of the
New York Stock Exchange or other exchange interest (if any) on
obligations incurred by the Fund, costs of share certificates,
membership dues in the Investment Company Institute or any
similar organization, costs of reports and notices to
shareholders, costs of registering shares of the Fund under the
federal securities laws, miscellaneous expenses and all taxes
and fees to federal, state or other governmental agencies on
account of the registration of securities issued by the Fund,
filing of corporate documents or otherwise. The Fund shall not
pay or incur any obligation for any management or administrative
expenses for which the Fund intends to seek reimbursement from
the Adviser without first obtaining the written approval of the
Adviser. The Adviser shall arrange, if desired by the Fund, for
officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of
the Fund if duly elected or appointed to such positions and
subject to their individual consent and to any limitations
imposed by law.
4. Interested Persons. Subject to applicable statutes and
regulations, it is understood that trustees, officers,
shareholders and agents of the Fund are or may be interested in
the Adviser as directors, officers, shareholders, agents or
otherwise and that the directors, officers, shareholders and
agents of the Adviser may be interest in the Fund as trustees,
officers, shareholders, agents or otherwise.
5. Liability. The Adviser shall not be liable for any error of
judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance
of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6. (a) Term. This Agreement shall become effective on the
date hereof and shall remain in full force until the second
anniversary of the date hereof unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
3
<PAGE> 4
from year to year thereafter, but only as long as such
continuance is specifically approved as least annually in the
manner required by the Investment Company Act of 1940, as
amended.
(b) Termination. This Agreement shall automatically
terminate in the event of its assignment. This Agreement may be
terminated at any time without the payment of any penalty by the
Fund or by the Adviser on sixty (60) days written notice to the
other party. The Fund may effect termination by action of the
Board of Trustees or by vote of a majority of the outstanding
shares of stock of the Fund, accompanied by appropriate notice.
This Agreement may be terminated at any time without the payment
of any penalty and without advance notice by the Board of
Trustees or by vote of a majority of the outstanding shares of
the Fund in the event that it shall have been established by a
court of competent jurisdiction that the Adviser or any officer
or director of the Adviser has taken any action which results in
a breach of the covenants of the Adviser set forth herein.
(c) Payment upon Termination. Termination of this Agreement
shall not affect the right of the Adviser to receive payment on
any unpaid balance of the compensation described in Section 2
earned prior to such termination.
7. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder shall not thereby affected.
8. Notices. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage prepaid, to
the other party at such address as such other party may
designate for the receipt of such notice.
9. Disclaimer. The Adviser acknowledges and agrees that, as
provided by Article 8, Section 8.1 of the Agreement and Declaration of Trust of
the Trust, the shareholders, trustees, officers, employees and other agents of
the Trust and the Fund shall not personally be bound by or liable hereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.
10. Governing Law. All questions concerning the validity,
meaning and effect of this Agreement shall be determined in
accordance with the laws (without giving effect to the
conflict-of-law principles thereof) of the State of Delaware
applicable to contracts made and to be performed in that state.
4
<PAGE> 5
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed on the day and year first above written.
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By:_____________________________________________
Dennis J. McDonnell, President
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME
FUND, a series of VAN KAMPEN AMERICAN CAPITAL
TRUST
By:_____________________________________________
Dennis J. McDonnell, President
5
<PAGE> 1
EXHIBIT 10(b)
August 30, 1995
Van Kampen American Capital
Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Van Kampen American Capital
Trust --
Registration Statement on Form N-1A
(File Nos. 33-4410 and 811-4629)
Ladies and Gentlemen:
We have acted as counsel to Van Kampen American Capital Short-Term
Global Income Fund (the "Fund"), a series of Van Kampen American
Capital Trust (the "Trust"), a voluntary association with transferable
shares formed and existing under and by virtue of the laws of the State of
Delaware, in connection with the preparation of Post-Effective Amendment No. 35
to the Trust's Registration Statement on Form N-1A (as so 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 August 30, 1995. 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, $.01 par value per share, Class B Shares of beneficial
interest, $.01 par value per share, and Class C Shares of beneficial interest,
$.01 par value per share, of the Fund (collectively, the "Shares"). The Trust
has stated in Post-Effective Amendment No. 32 to the Registration Statement
that it is thereby adopting the Registration Statement of Van Kampen Merritt
Trust, a Massachusetts business trust (the "Old Trust"), reorganized into
the Trust as of July 31, 1995.
<PAGE> 2
Van Kampen American Capital
Trust
August 30, 1995
Page 2
The Shares will be sold pursuant to a distribution and service
agreement to be entered into among the Trust, on behalf of the Fund, and Van
Kampen American Capital Distributors, Inc. (the "Distribution Agreement").
The Old Trust is a party to an "Order Pursuant to Section 6(c) of the
Investment Company Act for an Exemption from the Provisions of Sections
2(a)(32), 2(a)(35), 18(f), 18(g), 18(i), 22(c) and 22(d) of such Act and Rule
22c-1 thereunder" (the "Exemptive Order"), issued by the Commission on July 28,
1993, allowing registered investment companies party thereto to issue an
unlimited number of classes of securities (including the Class A Shares,
Class B Shares and Class C Shares) with varying combinations of sales charges,
distribution fees and service fees, the application for which Exemptive Order
requested that such order apply to entities organized for the purpose of
changing the state of domicile of the original parties to such order.
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 originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement, (ii) 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 designations of series with respect to the Fund,
(iv) copies of 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, (v) the form of Distribution Agreement, which is included as
an exhibit to the Registration Statement, (vi) the Exemptive Order and (vii)
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
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submited to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed or
<PAGE> 3
Van Kampen American Capital
Trust
August 30, 1995
Page 3
photostatic copies and the authenticity of the originals of such copies. We
have also assumed that the Distribution Agreement, when executed and delivered
by the parties thereto, will be in the form reviewed by us in connection with
this opinion and that the Fund will be entitled to rely on the Exemptive Order
as if it were a party thereto. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Trust and others.
Members of our firm are admitted to the practice of law in the State of
Delaware, and we express no opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement (and such other Post-Effective Amendments,
if any, to the Registration Statement relating to the public offering of the
Shares) shall have become effective under the 1933 Act and shall be deemed to
be the Registration Statement of the Trust pursuant to the rules and
regulations of the Commission under the 1933 Act, (ii) the Distribution
Agreement is duly executed and delivered by the Trust and the other respective
parties thereto and (iii) certificates representing the Shares are duly
executed, countersigned, registered and duly delivered and paid for in
accordance with the Distribution Agreement, the Shares will be validly issued,
fully paid and nonassessable.
<PAGE> 4
Van Kampen American Capital
Trust
August 30, 1995
Page 4
We hereby consent to the filing of this opinion with the Commission as
Exhibit 10(b) 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 admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom
<PAGE> 1
EXHIBIT 11(ii)
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Van Kampen American Capital Short-Term Global Income Fund:
We consent to the use of our report included in the Statement of Additional
Information which is incorporated by reference into the Prospectus and to the
reference to our Firm under the headings "Financial Highlights" in the
Prospectus and "Custodian and Independent Auditors" in the Statement of
Additional Information.
KPMG Peat Marwick LLP
Chicago, Illinois
August 28, 1995
<PAGE> 1
EXHIBIT 16(a)(ii)
SHORT-TERM GLOBAL INCOME FUND
30 DAY SEC YIELD WORKSHEET
FOR PERIOD ENDING JUNE 30, 1995
Class A Shares
Formula
<TABLE>
<S><C>
___ __
| |
| Total Income - Total Expenses 6 |
Class A Shares |(((( ----------------------- - ---------------------- ) + 1) ) -1) * 2| = SEC Yield
| Average Dividend Shares x Public Offering Price |
|___ __|
___ __
| |
| $649,829.93 - $92,080.15 6 |
Class A Shares |(((( ---------------------- - ---------------------- ) + 1) ) -1) * 2| = 8.91%
| 9,799,177.794 x $7.81 |
|___ __|
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
<S> <C>
Formula
Class A Share Yield + Sales Charge Effect - Expense Differential
Class A Share Yield 8.91%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
3.25% x 8.91% .29%
- Expense Differential between Class A Shares and Class B Shares .75%
-----
Class B Share SEC Yield 8.45%
=====
<CAPTION>
Class C Shares
<S> <C>
Formula
Class A Share Yield + Sales Charge Effect - Expense Differential
Class A Share Yield 8.91%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
3.25% x 8.91% .29%
- Expense Differential between Class A Shares and Class C Shares .75%
-----
Class C Share SEC Yield 8.45%
=====
</TABLE>
<PAGE> 2
SHORT-TERM GLOBAL INCOME FUND
CALCULATION OF DISTRIBUTION RATE
PERIOD ENDED JUNE 30, 1995
Current Annual Income Per Share
-------------------------------
Current Offering Price
<TABLE>
<S> <C> <C>
Class A Shares
$ .600
-------
$ 7.81 = 7.68%
Class B Shares
$ .545
-------
$ 7.56 = 7.21%
Class C Shares
$ .545
-------
$ 7.56 = 7.21%
</TABLE>
<PAGE> 3
SHORT-TERM GLOBAL INCOME FUND
CLASS A SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1995
<TABLE>
<S> <C>
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $ 7.56
Initial Investment $1,158.36 = P
Ending Redeemable Value $1,128.41 = ERV
One Year Period Ended 06/30/95 = (12 Mos.) 1 = n
TOTAL RETURN FOR THE PERIOD (2.59%) = T
Excluding Payment of the Sales Charge
Net Asset Value $ 7.56
Initial Investment $1,120.71 = P
Ending Redeemable Value $1,128.41 = ERV
One Year Period Ended 06/30/95 = (12 Mos.) 1 = n
TOTAL RETURN FOR THE PERIOD .69% = T
</TABLE>
<PAGE> 4
SHORT-TERM GLOBAL INCOME FUND
CLASS A SHARES
TOTAL RETURN CALCULATION FROM INCEPTION THROUGH JUNE 30, 1995
<TABLE>
<S> <C>
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,128.41 = ERV
Period From Inception to 06/30/95 = (57 Mos.) 4.75 = n
TOTAL RETURN FOR THE PERIOD 2.58% = T
Excluding Payment of the Sales Charge
Net Asset Value $ 7.56
Initial Investment $ 967.10 = P
Ending Redeemable Value $1,128.41 = ERV
Period From Inception to 06/30/95 = (57 Mos.) 4.75 = n
TOTAL RETURN FOR THE PERIOD 3.30% = T
</TABLE>
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1995
<TABLE>
<S> <C>
Formula ERV - P
---------
P = T
Including Payment of the Sales Charge
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,128.41 = ERV
TOTAL RETURN FOR THE PERIOD 12.84% = T
Excluding Payment of the Sales Charge
Net Asset Value $ 7.56
Initial Investment $ 967.10 = P
Ending Redeemable Value $1,128.41 = ERV
TOTAL RETURN FOR THE PERIOD 16.68% = T
</TABLE>
<PAGE> 5
SHORT-TERM GLOBAL INCOME FUND
CLASS B SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1995
<TABLE>
<S> <C>
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $1,079.43 = P
Ending Redeemable Value $1,047.92 = ERV
One Year Period Ended 06/30/95 = (12 Mos.) 1 = n
TOTAL RETURN FOR THE PERIOD (2.92%) = T
Excluding Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $1,079.43 = P
Ending Redeemable Value $1,077.96 = ERV
One Year Period Ended 06/30/95 = (12 Mos.) 1 = n
TOTAL RETURN FOR THE PERIOD (.14%) = T
</TABLE>
TOTAL RETURN CALCULATION FROM INCEPTION THROUGH JUNE 30, 1995
<TABLE>
<S> <C>
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,077.96 = ERV
Period From Inception to 06/30/95 = (48 Mos.) 4.000 = n
TOTAL RETURN FOR THE PERIOD 1.89% = T
Excluding Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,077.96 = ERV
Period From Inception to 06/30/95 = (48 Mos.) 4.000 = n
TOTAL RETURN FOR THE PERIOD 1.89% = T
</TABLE>
<PAGE> 6
SHORT-TERM GLOBAL INCOME FUND
CLASS B SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1995
<TABLE>
<S> <C>
Formula ERV - P
---------
P = T
Including Payment of CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,077.96 = ERV
TOTAL RETURN FOR THE PERIOD 7.80% = T
Excluding Payment of CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,077.96 = ERV
TOTAL RETURN FOR THE PERIOD 7.80% = T
</TABLE>
<PAGE> 7
SHORT-TERM GLOBAL INCOME FUND
CLASS C SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1995
<TABLE>
<S> <C> n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $936.78 = P
Ending Redeemable Value $925.56 = ERV
One Year Period Ended 06/30/95 = (12 Mos.) 1 = n
TOTAL RETURN FOR THE PERIOD (1.20%) = T
Excluding Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $936.78 = P
Ending Redeemable Value $934.24 = ERV
One Year Period Ended 06/30/95 = (12 Mos.) 1 = n
TOTAL RETURN FOR THE PERIOD (.27%) = T
</TABLE>
TOTAL RETURN CALCULATION FROM INCEPTION THROUGH JUNE 30, 1995
<TABLE>
<S> <C> n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $ 934.24 = ERV
Period From Inception to 06/30/95 = (23 Mos.) 1.917 = n
TOTAL RETURN FOR THE PERIOD (3.49%) = T
Excluding Payment of the CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $ 934.24 = ERV
Period From Inception to 06/30/95 = (23 Mos.) 1.917 = n
TOTAL RETURN FOR THE PERIOD (3.49%) = T
</TABLE>
<PAGE> 8
SHORT-TERM GLOBAL INCOME FUND
CLASS C SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1995
<TABLE>
<S> <C>
Formula ERV - P
---------
P = T
Including Payment of CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $ 934.24 = ERV
TOTAL RETURN FOR THE PERIOD (6.58%) = T
Excluding Payment of CDSC
Net Asset Value $ 7.56
Initial Investment $1,000.00 = P
Ending Redeemable Value $ 934.24 = ERV
TOTAL RETURN FOR THE PERIOD (6.58%) = T
</TABLE>
<PAGE> 1
EXHIBIT 17 (a)
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN/AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
AUGUST 17, 1995
Van Kampen Merritt U.S. Government Trust
Van Kampen Merritt Tax Free Fund
Van Kampen Merritt Insured Tax Free Income Fund
Van Kampen Merritt Tax Free High Income Fund
Van Kampen Merritt California Insured Tax Free Fund
Van Kampen Merritt Municipal Income Fund
Van Kampen Merritt Limited Term Municipal Income Fund
Van Kampen Merritt Florida Insured Tax Free Income Fund
Van Kampen Merritt New Jersey Tax Free Income Fund
Van Kampen Merritt New York Tax Free Income Fund
Van Kampen Merritt Trust
Van Kampen Merritt High Yield Fund
Van Kampen Merritt Short-Term Global Income Fund
Van Kampen Merritt Adjustable Rate U.S. Government Fund
Van Kampen Merritt Strategic Income Fund
Van Kampen Merritt Emerging Markets Income Fund
Van Kampen Merritt Growth Fund
Van Kampen Merritt Equity Trust
Van Kampen Merritt Growth and Income Fund
Van Kampen Merritt Utility Fund
Van Kampen Merritt Balanced Fund
Van Kampen Merritt Total Return Fund
Van Kampen Merritt Pennsylvania Tax Free Income Fund
Van Kampen Merritt Money Market Trust
Van Kampen Merritt Money Market Fund
Van Kampen Merritt Tax Free Money Fund
Van Kampen Merritt Prime Rate Income Trust
Van Kampen Merritt Series Trust
American Capital Comstock Fund, Inc.
American Capital Corporate Bond Fund, Inc.
American Capital Emerging Growth Fund, Inc.
American Capital Enterprise Fund, Inc.
American Capital Equity Income Fund, Inc.
American Capital Federal Mortgage Trust
American Capital Global Managed Assets Fund, Inc.
American Capital Government Securities, Inc.
American Capital Government Target Series
American Capital Growth and Income Fund, Inc.
American Capital Harbor Fund, Inc.
American Capital High Yield Investments, Inc.
American Capital Life Investment Trust
American Capital Municipal Bond Fund, Inc.
American Capital Pace Fund, Inc.
American Capital Real Estate Securities Fund, Inc.
American Capital Reserve Fund, Inc.
American Capital Tax-Exempt Trust
American Capital Texas Municipal Securities, Inc.
American Capital U.S. Government Trust for Income
American Capital Utilities Income Fund, Inc.
American Capital World Portfolio Series, Inc.
<PAGE> 2
<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 353
Insured Municipals Income Trust (Discount) . . . . . . . . . . . . . . . . . . . . . . . . . Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) . . . . . . . . . . . . . . . . . . Series 1 through 1009
Insured Municipals Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . . . . . Series 5 through 84
Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . . . . . . . . . . . . Series 9 through 80
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
Investors' Quality Tax-Exempt Trust-Intermediate . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Corporate Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 12
Investors' Governmental Securities Income Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 7
Van Kampen Merritt International Bond Income Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Alabama Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Arizona Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 12
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 144
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 20
Colorado Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 75
Colorado Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 18
Connecticut Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 27
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 95
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 76
Georgia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Quality Municipals Trust (AMT) . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 55
Louisiana Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 13
Maine Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Maryland Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 73
Massachusetts Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 31
Massachusetts Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . Series 1
Michigan Financial Institutions Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 130
Michigan Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series) . . . . . . . . . . . . . Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 30
Minnesota Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 55
Minnesota Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
Missouri Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 92
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
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
New Mexico Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 18
New Jersey Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 105
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 127
New York Insured Tax-Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 15
New York Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1
North Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 83
Ohio Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 98
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 204
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 79
Tennessee Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1-3 and 5-32
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 67
Van Kampen Merritt Utility Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Van Kampen Merritt Insured Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 45
Van Kampen Merritt Insured Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . Series 1 through 44
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 5
</TABLE>
<PAGE> 1
EXHIBIT 17(b)
OFFICERS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX
William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer
Ronald A. Nyberg Executive Vice President & General Oakbrook Terrace, IL
Counsel
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Debra A. Nichols Sr. Vice President Houston, TX
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Frederick Shepherd Sr. Vice President Houston, TX
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
Edward F. Lynch 1st Vice President Oakbrook Terrace, IL
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
David M. Swanson 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
Linda Mae Brown Vice President Oakbrook Terrace, IL
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 Oakbrook Terrace, IL
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Suzanne Cummings Vice President Houston, TX
David B. Dibo Vice President Oakbrook Terrace, IL
Howard A. Doss Vice President Tampa, FL
Jonathan Eckhard Vice President Boulder, CO
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Jack Glaw Vice President Fairhope, AL
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
J. Christopher Jackson Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
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
Michele L. Manley 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
Gary Polson Vice President Overland Park, KS
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
Colette Saucedo Vice President Houston, TX
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
William C. Strafford Vice President Granger, IN
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Steven T. West Vice President Wayne, PA
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
James R. Yount Vice President Seattle, WA
Richard P. Zgonina Vice President Oakbrook Terrace, IL
James J. Boyne Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Gerald A. Davis Asst. Vice President Oakbrook Terrace, IL
Jerome M. Dybzinski 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
Rocco Fiordelisi III Asst. Vice President St. Louis, MO
Robert D. Gorski Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Susan J. Hill Asst. Vice President Oakbrook Terrace, IL
Hunter Knapp Asst. Vice President Laguna, CA
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Brian T. Levinson Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
David R. Niemi Asst. Vice President Oakbrook Terrace, IL
Daniel J. O'Keefe Asst. Vice President Oakbrook Terrace, IL
Allison Okun Asst. Vice President Oakbrook Terrace, IL
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Scott M. Pulkrabek 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
Thomas J. Sauerborn Asst. Vice President New York, NY
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Asst. Vice President Philadelphia, PA
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
Kathleen M. Wennerstrum Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
Melinda K. Yeager Asst. Vice President Houston, TX
David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL
</TABLE>
<PAGE> 4
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 24
POWER OF ATTORNEY
The undersigned, being officers and trustees of Van Kampen American
Capital Trust, a Delaware business trust (the "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 on Form N-1A
filed by the 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: July 25, 1995
Signature Title
/s/ J. Miles Branagan
- -------------------------- Trustee
J. Miles Branagan
<PAGE> 2
/s/ Richard E. Caruso
- ----------------------------- Trustee
Richard E. Caruso
/s/ Philip P. Gaughan
- ----------------------------- Trustee
Philip P. Gaughan
/s/ Roger Hilsman
- ------------------------ Trustee
Roger Hilsman
/s/ R. Craig Kennedy
- ------------------------ Trustee
R. Craig Kennedy
/s/ Dennis J. McDonnell
- ----------------------- President, Chief Executive Officer and Trustee
Dennis J. McDonnell
/s/ Donald C. Miller
- --------------------- Chairman and Trustee
Donald C. Miller
<PAGE> 3
/s/ Jack E. Nelson
- --------------------------- Trustee
Jack E. Nelson
/s/ Don G. Powell
- --------------------------- Trustee
Don G. Powell
/s/ David Rees
- --------------------- Trustee
David Rees
/s/ Jerome L. Robinson
- ----------------------- Trustee
Jerome L. Robinson
/s/ Lawrence J. Sheehan
- ------------------------- Trustee
Lawrence J. Sheehan
/s/ Fernando Sisto
- ------------------------- Trustee
Fernando Sisto
<PAGE> 4
/s/ Wayne W. Whalen
- -------------------- Trustee
Wayne W. Whalen
/s/ Edward C. Wood III
- ----------------------- Chief Financial and Accounting Officer
Edward C. Wood III
/s/ William S. Woodside
- ------------------------- Trustee
William S. Woodside
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> SHORT-TERM GLOBAL A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 205234791<F1>
<INVESTMENTS-AT-VALUE> 205493605<F1>
<RECEIVABLES> 10593618<F1>
<ASSETS-OTHER> 12598<F1>
<OTHER-ITEMS-ASSETS> 715659<F1>
<TOTAL-ASSETS> 216815480<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 16191656<F1>
<TOTAL-LIABILITIES> 16191656<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 102375382
<SHARES-COMMON-STOCK> 9590434
<SHARES-COMMON-PRIOR> 18126538
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (588190)<F1>
<ACCUMULATED-NET-GAINS> (65458526)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (20294494)<F1>
<NET-ASSETS> 72546744
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 24695762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4934306)<F1>
<NET-INVESTMENT-INCOME> 19761456<F1>
<REALIZED-GAINS-CURRENT> (12602409)<F1>
<APPREC-INCREASE-CURRENT> (7738870)<F1>
<NET-CHANGE-FROM-OPS> (579823)<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5617141)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (2908177)
<NUMBER-OF-SHARES-SOLD> 147880
<NUMBER-OF-SHARES-REDEEMED> (9324231)
<SHARES-REINVESTED> 640247
<NET-CHANGE-IN-ASSETS> (75165704)
<ACCUMULATED-NII-PRIOR> (5032543)<F1>
<ACCUMULATED-GAINS-PRIOR> (53306874)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1616498<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4934306<F1>
<AVERAGE-NET-ASSETS> 104453176
<PER-SHARE-NAV-BEGIN> 8.15
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> (.45)
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.27)
<PER-SHARE-NAV-END> 7.56
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> SHORT-TERM GLOBAL B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 205234791<F1>
<INVESTMENTS-AT-VALUE> 205493605<F1>
<RECEIVABLES> 10593618<F1>
<ASSETS-OTHER> 12598<F1>
<OTHER-ITEMS-ASSETS> 715659<F1>
<TOTAL-ASSETS> 216815480<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 16191656<F1>
<TOTAL-LIABILITIES> 16191656<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 184393612
<SHARES-COMMON-STOCK> 16910386
<SHARES-COMMON-PRIOR> 33355452
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (588190)<F1>
<ACCUMULATED-NET-GAINS> (65458526)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (20294494)<F1>
<NET-ASSETS> 127905542
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 24695762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4934306)<F1>
<NET-INVESTMENT-INCOME> 19761456<F1>
<REALIZED-GAINS-CURRENT> (12602409)<F1>
<APPREC-INCREASE-CURRENT> (7738870)<F1>
<NET-CHANGE-FROM-OPS> (579823)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (9240772)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (4822441)
<NUMBER-OF-SHARES-SOLD> 633871
<NUMBER-OF-SHARES-REDEEMED> (18052147)
<SHARES-REINVESTED> 973210
<NET-CHANGE-IN-ASSETS> (143879075)
<ACCUMULATED-NII-PRIOR> (5032543)<F1>
<ACCUMULATED-GAINS-PRIOR> (53306874)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1616498<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4934306<F1>
<AVERAGE-NET-ASSETS> 190607924
<PER-SHARE-NAV-BEGIN> 8.15
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> (.42)
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.24)
<PER-SHARE-NAV-END> 7.56
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> SHORT-TERM GLOBAL C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 205234791<F1>
<INVESTMENTS-AT-VALUE> 205493605<F1>
<RECEIVABLES> 10593618<F1>
<ASSETS-OTHER> 12598<F1>
<OTHER-ITEMS-ASSETS> 715659<F1>
<TOTAL-ASSETS> 216815480<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 16191656<F1>
<TOTAL-LIABILITIES> 16191656<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 196040
<SHARES-COMMON-STOCK> 22678
<SHARES-COMMON-PRIOR> 23638
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (588190)<F1>
<ACCUMULATED-NET-GAINS> (65458526)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (20294494)<F1>
<NET-ASSETS> 171538
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 24695762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4934306)<F1>
<NET-INVESTMENT-INCOME> 19761456<F1>
<REALIZED-GAINS-CURRENT> (12602409)<F1>
<APPREC-INCREASE-CURRENT> (7738870)<F1>
<NET-CHANGE-FROM-OPS> (579823)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (8387)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (5768)
<NUMBER-OF-SHARES-SOLD> 2233
<NUMBER-OF-SHARES-REDEEMED> (4985)
<SHARES-REINVESTED> 1792
<NET-CHANGE-IN-ASSETS> (21387)
<ACCUMULATED-NII-PRIOR> (5032543)<F1>
<ACCUMULATED-GAINS-PRIOR> (53306874)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1616498<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4934306<F1>
<AVERAGE-NET-ASSETS> 192056
<PER-SHARE-NAV-BEGIN> 8.16
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> (.52)
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.24)
<PER-SHARE-NAV-END> 7.56
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> SHORT-TERM GLOBAL D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 205234791<F1>
<INVESTMENTS-AT-VALUE> 205493605<F1>
<RECEIVABLES> 10593618<F1>
<ASSETS-OTHER> 12598<F1>
<OTHER-ITEMS-ASSETS> 715659<F1>
<TOTAL-ASSETS> 216815480<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 16191656<F1>
<TOTAL-LIABILITIES> 16191656<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 123
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (588190)<F1>
<ACCUMULATED-NET-GAINS> (65458526)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (20294494)<F1>
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 24695762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4934306)<F1>
<NET-INVESTMENT-INCOME> 19761456<F1>
<REALIZED-GAINS-CURRENT> (12602409)<F1>
<APPREC-INCREASE-CURRENT> (7738870)<F1>
<NET-CHANGE-FROM-OPS> (579823)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (46)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (22)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (124)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (1004)
<ACCUMULATED-NII-PRIOR> (5032543)<F1>
<ACCUMULATED-GAINS-PRIOR> (53306874)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1616498<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4934306<F1>
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
