<PAGE> 1
- --------------------------------------------------------------------------------
VAN KAMPEN GROWTH FUND
- --------------------------------------------------------------------------------
Van Kampen Growth Fund (the "Fund") is a diversified, open-end management
investment company, commonly known as a mutual fund. The Fund's investment
objective is to seek capital growth. The Fund seeks to achieve its investment
objective by investing primarily in a diversified portfolio of common stocks and
other equity securities of growth companies. Growth companies generally include
companies with established records of growth in sales or earnings and companies
with new products, services or processes that the Fund's investment adviser
believes offer investors above average potential for capital growth. Any income
received on such securities is incidental to the objective of capital growth.
There is no assurance that the Fund will achieve its investment objective. The
Fund is organized as a series of Van Kampen Equity Trust (the "Trust").
The Fund's investment adviser is Van Kampen Investment Advisory Corp. (the
"Adviser"). This Prospectus sets forth certain information about the Fund that a
prospective investor should know before investing in the Fund. Please read it
carefully and retain it for future reference. The address of the Fund is One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, and its telephone number is
(800) 341-2911.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, 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 September 30, 1998, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this prospectus. A copy of the Statement of Additional Information
may be obtained without charge by calling (800) 341-2911 or for
Telecommunications Device for the Deaf at (800) 421-2833. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related materials at the
SEC's internet web site (http://www.sec.gov).
[VAN KAMPEN FUNDS LOGO]
THIS PROSPECTUS IS DATED SEPTEMBER 30, 1998.
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 7
The Fund.................................................... 8
Investment Objective and Policies........................... 8
Portfolio Securities........................................ 8
Investment Practices........................................ 10
Investment Advisory Services................................ 13
Alternative Sales Arrangements.............................. 14
Purchase of Shares.......................................... 15
Shareholder Services........................................ 22
Redemption of Shares........................................ 24
Distribution and Service Plans.............................. 26
Distributions from the Fund................................. 27
Tax Status.................................................. 28
Fund Performance............................................ 30
Description of Shares of the Fund........................... 30
Additional Information...................................... 31
</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.
2
<PAGE> 3
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
THE FUND. Van Kampen Growth Fund (the "Fund") is a separate, diversified series
of Van Kampen Equity Trust (the "Trust"). The Trust is an open-end management
investment company organized as a Delaware business trust.
MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").
INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek capital
growth. There is no assurance that the Fund will achieve its investment
objective. See "Investment Objective and Policies."
INVESTMENT POLICY. The Fund seeks to achieve its investment objective by
investing primarily in a diversified portfolio of common stocks and other equity
securities of growth companies. Growth companies generally include companies
with established records of growth in sales or earnings and companies with new
products, services or processes that the Fund's investment adviser believes
offer investors above average potential for capital growth. The net asset value
per share of the Fund may increase or decrease depending on changes in the
securities markets, and other factors affecting the issuers of securities in
which the Fund may invest. See "Investment Objective and Policies."
INVESTMENT PRACTICES. The Fund may invest up to 25% of its assets in foreign
securities. Subject to certain limitations, the Fund may enter into strategic
transactions, lend its portfolio securities and enter into repurchase agreements
with selected commercial banks and broker-dealers. These investment practices
entail certain risks. See "Investment Practices."
INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights." The Fund's investment results are based on historical
performance and are not intended to indicate future performance. The Fund
commenced investment operations on December 27, 1995. From December 27, 1995 up
to February 3, 1997, the Fund operated with a limited amount of capital invested
by affiliates of the Fund's Adviser. Prior to February 3, 1997, the Fund had not
engaged in a broad continuous public offering of its shares, had sold shares to
only a limited number of investors and had not been subject to redemption
requests. The Fund commenced a broad public offering of its shares on February
3, 1997. The Fund was offered for a limited time and then was closed to new
investors on March 14, 1997 after raising new assets of approximately
$100,000,000. As discussed herein, the Fund may, from time to time, reopen and
close the offering of its shares to new investors as market conditions permit.
The Fund's Adviser believes that the Fund's portfolio prior to February 3, 1997
was managed in a manner substantially the same as if the Fund had been open for
a broader distribution to public investors. No assurances can be given, however,
that the Fund's investment performance would have been the same during such
period if the Fund had been broadly distributed.
PURCHASE OF SHARES. Investors may elect to purchase Class A Shares, Class B
Shares or Class C Shares, each with different sales charges and expenses. The
different classes of shares permit an investor to choose the method of
purchasing shares that is most 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. See "Purchase of Shares."
Investment opportunities for growth company securities may be more limited than
those in other sectors of the market. In order to facilitate the management of
the Fund's portfolio, the Fund may, from time to time, reopen and close the
offering of its shares to new investors. Any such limited offerings of the Fund
may commence and terminate without any prior notice.
REDEMPTION. Class A Shares generally may be redeemed at net asset value per
share, without charge, subject to conditions set forth herein. Shares sold
subject to a contingent deferred sales charge ("CDSC Shares") may be redeemed at
net asset value per share 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 expiration of the CDSC
period applicable to the respective class of CDSC Shares will not be subject to
a deferred sales charge. The Fund may require the redemption of shares if the
value of an account is $500 or less. See "Redemption of Shares."
INVESTMENT ADVISER. Van Kampen Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser.
DISTRIBUTOR. Van Kampen Funds Inc. (the "Distributor") distributes the Fund's
shares.
3
<PAGE> 4
DISTRIBUTIONS FROM THE FUND. Distributions from net investment income and
realized capital gains, if any, are 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 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."
The foregoing is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.
4
<PAGE> 5
- --------------------------------------------------------------------------------
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).................................... 5.75%(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 Year
1--5.00% 1--1.00%
Year After--None
2--4.00%
Year
3--3.00%
Year
4--2.50%
Year
5--1.50%
After--None
Redemption fees (as a percentage of amount redeemed)........ None None None
Exchange fees............................................... None None None
</TABLE>
- --------------------------------------------------------------------------------
(1) Reduced on investments of $50,000 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 redemptions made
within one year of the purchase. See "Purchase of Shares -- Deferred Sales
Charge Alternatives -- Class A Share Purchases of $1 Million or More."
(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 "Distribution and Service Plans."
5
<PAGE> 6
- --------------------------------------------------------------------------------
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; after fee waiver)................................. 0.75% 0.75% 0.75%
12b-1 Fees(1) (as a percentage of average daily net
assets)................................................... 0.25% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage of average daily net
assets)................................................... 0.59% 0.59% 0.59%
Total Expenses (as a percentage of average daily net assets;
after fee waiver)......................................... 1.59% 2.34% 2.34%
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund 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 for distribution-related expenses. The
asset based sales charge with respect to Class C Shares includes 0.75% (as a
percentage of average daily net assets) paid to investors' broker-dealers as
sales compensation. See "Distribution and Service Plans."
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.
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 1.30% for Class A
Shares, 2.05% for Class B Shares and 2.05% for Class C
Shares, (ii) 5.00% annual return and (iii) redemption at the
end of each time period:
Class A Shares............................................ $73 $105 $139 $236
Class B Shares............................................ $74 $103 $140 $249*
Class C Shares............................................ $34 $ 73 $125 $268
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of each
period:
Class A Shares............................................ $73 $105 $139 $236
Class B Shares............................................ $24 $ 73 $125 $249*
Class C Shares............................................ $24 $ 73 $125 $268
</TABLE>
- --------------------------------------------------------------------------------
* Based on conversion to Class A Shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Adviser has discontinued the voluntary fee waivers and
expense reimbursements for the Fund thus increasing the expected total annual
Fund operating expenses for future periods compared to the historical expense
ratios shown in the Fund's "Financial Highlights." The "Example" reflects
expenses based on the "Annual Fund Operating Expenses" table as shown above
carried out to future years and is included to provide a means for the investor
to compare expense levels of funds with different fee structures over varying
investment periods. To facilitate such comparison, all funds are required by the
SEC to utilize a 5.00% annual return assumption. The ten year amount with
respect to Class B Shares of the Fund reflects the lower aggregate 12b-1 and
service fees applicable to such shares after conversion to Class A Shares. As
the Fund's assets increase, the fees waived or expenses reimbursed by the
Adviser are expected to decrease. Accordingly, it is unlikely that future
expenses as projected will remain consistent with those determined based on the
"Annual Fund Operating Expenses" table. Class B Shares acquired through the
exchange privilege are subject to the CDSC schedule relating to the Class B
Shares of the fund from which the purchase of Class B Shares was originally
made. Accordingly, future expenses as projected could be higher than those
determined in the above table if the investor's Class B Shares were exchanged
from a fund with a higher CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Redemption of
Shares," "Investment Advisory Services" and "Distribution and Service Plans."
6
<PAGE> 7
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for a share outstanding throughout the period)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for 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 accountants, for the periods indicated and their report
thereon appears in the Fund's 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 A SHARES CLASS B SHARES
-------------------------------------------- --------------------------------------------
DECEMBER 27, 1995 DECEMBER 27, 1995
YEAR ENDED JUNE 30, (COMMENCEMENT OF YEAR ENDED JUNE 30, (COMMENCEMENT OF
------------------- INVESTMENT OPERATIONS) ------------------- INVESTMENT OPERATIONS)
1998 1997(a) TO JUNE 30, 1996 1998 1997(a) TO JUNE 30, 1996
------- ------- ---------------------- ------- ------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period $17.878 $13.696 $10.000 $17.796 $13.695 $10.000
------- ------- ------- ------- ------- -------
Net Investment Income/Loss (0.136) 0.031 (0.044) (0.270) (0.093) (0.045)
Net Realized and Unrealized Gain 6.711 4.810 3.740 6.637 4.853 3.740
------- ------- ------- ------- ------- -------
Total from Investment Operations 6.575 4.841 3.696 6.367 4.760 3.695
------- ------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Realized Gain 0.990 0.353 -0- 0.990 0.353 -0-
Return of Capital Distribution -0- 0.306 -0- -0- 0.306 -0-
------- ------- ------- ------- ------- -------
Total Distributions 0.990 0.659 -0- 0.990 0.659 -0-
------- ------- ------- ------- ------- -------
Net Asset Value, End of the Period $23.463 $17.878 $13.696 $23.173 $17.796 $13.695
======= ======= ======= ======= ======= =======
Total Return*(b) 38.52% 36.00% 37.00%** 37.56% 35.32% 37.00%**
Net Assets at End of the Period
(In millions) $ 64.9 $ 53.1 $ 0.1 $ 79.7 $ 55.0 $ 0.1
Ratio of Expenses to Average Net
Assets* 1.30% 1.32% 1.46% 2.05% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets* (0.64%) 0.19% (0.79%) (1.40%) (0.56%) (0.74%)
Portfolio Turnover 125% 139% 94%** 125% 139% 94%**
- ----------------
* If certain fees had not been assumed by the Adviser, Total Return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average
Net Assets..................... 1.59% 2.31% 15.69% 2.34% 3.04% 15.70%
Ratio of Net Investment Income
to Average Net Assets.......... (0.92%) (0.80%) (15.02%) (1.68%) (1.53%) (14.97%)
<CAPTION>
CLASS C SHARES
--------------------------------------------
DECEMBER 27, 1995
YEAR ENDED JUNE 30, (COMMENCEMENT OF
------------------- INVESTMENT OPERATIONS)
1998 1997(a) TO JUNE 30, 1996
------- ------- ----------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period $17.793 $13.695 $10.000
------- ------- -------
Net Investment Income/Loss (0.311) (0.096) (0.045)
Net Realized and Unrealized Gain 6.681 4.853 3.740
------- ------- -------
Total from Investment Operations 6.370 4.757 3.695
------- ------- -------
Less:
Distributions from and in Excess
of Net Realized Gain 0.990 0.353 -0-
Return of Capital Distribution -0- 0.306 -0-
------- ------- -------
Total Distributions 0.990 0.659 -0-
------- ------- -------
Net Asset Value, End of the Period $23.173 $17.793 $13.695
======= ======= =======
Total Return*(b) 37.56% 35.32% 37.00%**
Net Assets at End of the Period
(In millions) $ 9.2 $ 8.3 $ 0.1
Ratio of Expenses to Average Net
Assets* 2.05% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets* (1.39%) (0.57%) (0.74%)
Portfolio Turnover 125% 139% 94%**
- ----------------
* If certain fees had not been a
follows:
Ratio of Expenses to Average
Net Assets..................... 2.34% 3.04% 15.70%
Ratio of Net Investment Income
to Average Net Assets.......... (1.68%) (1.55%) (14.97%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
See Financial Statements and Notes Thereto
7
<PAGE> 8
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
Van Kampen Growth Fund (the "Fund") is a separate, diversified series of Van
Kampen Equity Trust (the "Trust"). The Trust is an open-end management
investment company organized as a Delaware business trust.
Van Kampen Investment Advisory Corp. (the "Adviser") provides investment
advisory and administrative services to the Fund. The Adviser and its affiliates
also act as investment adviser to other mutual funds distributed by Van Kampen
Funds Inc. (the "Distributor"). To obtain prospectuses and other information on
any of these other funds, please call the telephone number on the cover page of
this Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to seek capital growth. This objective
is fundamental and cannot be changed without approval of the shareholders of the
Fund. Any income received on such securities is incidental to the objective of
capital growth. There can be no assurance that the Fund will achieve its
investment objective.
The Fund seeks to achieve its investment objective by investing primarily in
common stocks and other equity securities of growth companies. Growth companies
generally include companies with established records of growth in sales or
earnings and companies with new products, services or processes that the Adviser
believes offer investors above average potential for capital growth. The Fund
may also invest in companies in cyclical industries during periods when the
Adviser believes that such investments offer an above average potential for
capital growth. The Fund may also invest in investment grade income securities
for purposes of capital growth and cash management or as a temporary defensive
measure. See "Portfolio Securities --Income Securities." The Fund may also
invest in shares of other investment companies that pursue investment objectives
consistent with that of the Fund to the extent and subject to the limitations
discussed below. The Fund may invest up to 25% of its total assets in securities
of foreign issuers.
The Fund's primary approach is to seek what the Adviser believes to be above
average growth opportunities on an individual company basis. Such growth company
securities may have above average price volatility. The Fund may also invest in
special situations involving new management, special products and techniques,
unusual developments, mergers or liquidations. Investments in special situations
and less seasoned companies often involve much greater risks than are inherent
in more conservative investments. The Fund attempts to reduce overall exposure
to risk from declines in individual security prices by spreading its investments
over many different companies in a variety of industries.
An investment in the Fund may not be appropriate for all investors. Because
prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund 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.
DEFENSIVE STRATEGIES. When, in the judgment of the Adviser, economic and
market conditions warrant, the Fund may invest temporarily for defensive
purposes up to 100% of its total assets in U.S. Government securities of various
maturities, investment grade corporate debt securities, preferred stocks,
convertible bonds, banker's acceptances and certificates of deposit.
- --------------------------------------------------------------------------------
PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
COMMON STOCK. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other class of securities, including such
entity's debt securities, preferred stock and other senior equity securities.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so. In selecting common stocks for investment, the Fund
will focus primarily on the security's potential for capital growth.
OTHER EQUITY SECURITIES. The Fund may invest in other equity securities,
including convertible securities or preferred stock. A convertible security is a
bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid
8
<PAGE> 9
or accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities have characteristics similar to nonconvertible income
securities in that they ordinarily provide a stream of income with generally
higher yields than those of common stocks of the same or similar issuers.
Convertible securities rank senior to common stock in a corporation's capital
structure but are usually subordinated to comparable nonconvertible securities.
The Fund may invest in adjustable or fixed rate preferred stock. Preferred stock
generally has a preference as to dividends and liquidation over an issuer's
common stock but ranks junior to debt securities in an issuer's capital
structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
WARRANTS. The Fund may invest in warrants, which are securities permitting,
but not obligating, their holders to subscribe for other securities. Warrants do
not carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not represent
any rights in the assets of the issuer. As a result, an investment in warrants
may be considered to be more speculative than most other types of equity
investment. In addition, the value of a warrant does not necessarily change with
the value of the underlying securities and a warrant ceases to have value if it
is not exercised prior to its expiration date. The Fund may retain in its
portfolio any securities received upon the exercise of a warrant.
INVESTMENTS IN SPECIAL SITUATIONS AND LESS SEASONED COMPANIES. Investments in
special situations and securities of less seasoned companies may present greater
opportunities for growth but also involve greater risks than customarily are
associated with investments in securities of more established companies. Special
situations and securities of less seasoned companies may be subject to more
abrupt or erratic market movements than more established companies.
Additionally, these companies may have limited product lines, markets or
financial resources, may be dependent upon a limited management group, may be
subject to a greater degree of change in earnings and business prospects and may
be subject to greater uncertainties generally than more established companies.
In addition, securities of small capitalization companies are traded in lower
volume than those issued by larger companies.
FOREIGN SECURITIES. The Fund may invest up to 25% of the value of its total
assets in securities of foreign issuers. 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 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.
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 security than
about a United States security, 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 income, withholding or
other taxes, which would reduce the Fund's total return on such investments and
the amounts available for distributions by the Fund to its shareholders. 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
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
9
<PAGE> 10
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.
INCOME SECURITIES. The Fund may invest in income securities, which include
primarily debt securities of various maturities. The Fund will only invest in
income securities that are investment grade at the time of investment.
Investment grade securities are securities that are rated at least BBB by
Standard & Poor's Ratings Group ("S&P"), Baa by Moody's Investors Services, Inc.
("Moody's") or comparably rated by any nationally recognized statistical rating
organization, or, if unrated, are considered by the Adviser to be of comparable
quality to securities so rated. Income securities rated A or higher by S&P or A
or higher by Moody's generally are regarded as high grade and as having a strong
to outstanding capacity to pay interest or dividends and repay principal or
capital. Medium grade securities (i.e., securities rated BBB by S&P or Baa by
Moody's) are regarded as having an adequate capacity to pay interest or
dividends, and repay principal, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make such
payments. Securities rated Baa are regarded by Moody's as having some
speculative characteristics. For a description of such ratings see the Statement
of Additional Information.
The net asset value of the Fund will change with changes in the value of its
portfolio securities. The values of income securities may change as interest
rate levels fluctuate. When interest rates decline, the value of a portfolio
invested in income securities generally can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio invested in income securities
generally can be expected to decline. Volatility may be greater during periods
of general economic uncertainty.
The foregoing policies with respect to credit quality of portfolio investments
will apply only at the time of purchase of a security, and the Fund will not be
required to dispose of a security in the event that S&P or Moody's (or any other
rating organization) or, in the case of unrated income securities, the Adviser,
downgrades its assessment of the credit characteristics of a particular issuer.
In determining whether the Fund will retain or sell such a security, the Adviser
may consider such factors as the Adviser's assessment of the credit quality of
the issuer of such security, the price at which such security could be sold and
the rating, if any, assigned to such security by other nationally recognized
statistical rating organizations.
YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser
is taking steps that it believes are reasonably designed to address the Year
2000 Problem with respect to computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by the Fund's other
major service providers. At this time, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund. In addition,
the Year 2000 Problem may adversely affect the issuers of securities in which
the Fund may invest which, in turn, may adversely affect the net asset value of
the Fund.
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
In connection with the investment policies described above, the Fund may also
engage in the investment practices described below. These practices entail
risks. The investment practices described below are not fundamental and can be
changed without a vote of the shareholders of the Fund.
LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to selected commercial
banks or broker-dealers up to a maximum of 50% of the assets of the Fund. Such
loans must be callable at any time and be continuously secured by collateral
deposited by the borrower in a segregated account with the Fund's custodian
consisting of cash or liquid securities, which collateral is equal at all times
to at least 100% of the value of the securities loaned, including accrued
interest. The Fund will receive amounts equal to earned income for having made
the loan. Any cash collateral pursuant to these loans will be invested in
short-term instruments. The Fund is the beneficial owner of the loaned
securities in that any gain or loss in the market price during the loan inures
to the Fund and its shareholders. Thus, when the loan is terminated, the value
of the securities may be more or less than their value at the beginning of the
loan. In determining whether to lend its portfolio securities to a bank or
broker-dealer, the Fund will take into account the credit-worthiness of such
borrower and will monitor such credit-worthiness on an ongoing basis in as much
as default by the other party may cause delays or other collection difficulties.
The Fund may pay finders' fees in connection with loans of its portfolio
securities.
10
<PAGE> 11
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities which generally includes 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 such 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 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 illiquid securities by the Fund for purposes of the
investment limitations set forth above.
REPURCHASE AGREEMENTS. The Fund may use up to 20% of its assets to enter into
repurchase agreements with selected banks and broker-dealers under which the
Fund acquires securities and agrees to resell the securities at an agreed upon
time and at an agreed upon price. The Fund accrues as interest the difference
between the amount it pays for the securities and the amount it receives upon
resale. At the time 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. The Adviser will monitor the value of the
underlying security in this regard. Repurchase agreements involve certain risks
in the event of default by the other party. The Fund will enter into repurchase
agreements only with commercial banks whose deposits are insured by the Federal
Deposit Insurance Corporation and whose assets exceed $500 million or
broker-dealers who are registered with the SEC. In determining whether to enter
into a repurchase agreement with a bank or broker-dealer, the Fund will take
into account the credit-worthiness of such party and will monitor its
credit-worthiness on an ongoing basis. In the event of default by such party,
the delays and expenses potentially involved in establishing the Fund's rights
to, and in liquidating, the security may result in loss to the Fund. Repurchase
agreements that mature in more than seven days are treated by the Fund as
illiquid securities and are subject to the Fund's limitation on "illiquid"
securities.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an SEC exemption order authorizing this practice, which
conditions are designed to ensure the fair administration of the joint account
and to protect the amounts in that account.
"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Fund may purchase and
sell portfolio securities on a "when issued" and "delayed delivery" basis. No
income accrues to or is earned by the Fund on portfolio 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
fluctuations, the value of such securities at delivery may be more or less than
their purchase price, and yields generally available on such securities when
delivery occurs may be higher or lower than yields on such 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 liquid securities having an aggregate value equal to
the account of such purchase commitments until payment is made. The Fund will
make commitments to purchase securities on such basis early with the intention
of actually acquiring these securities, but the Fund may sell such securities
prior to the settlement date if such sale is considered to be advisable. 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
purpose of investment leverage. 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.
BORROWINGS. The Fund is authorized to borrow money from banks (including
entering into reverse repurchase agreements) in an amount up to 33 1/3% of the
Fund's total assets (after giving effect to any such borrowing) which amount
excludes up to 5% in borrowings and reverse repurchase agreements from any
entity for temporary purposes, such as
11
<PAGE> 12
clearances of portfolio transactions, share repurchase and payment of dividends
and distributions. If the Fund is otherwise fully invested and the Adviser
believes market conditions exist with additional investment opportunities for
capital growth, the Fund may use borrowings to acquire additional portfolio
securities. Utilization of such investment leverage may result in higher returns
but may also increase the volatility of the Fund's net asset value and the
effects of leverage in a declining market would result in a greater decrease in
net asset value than if the Fund were not leveraged. The Fund has no current
intention to borrow money other than for temporary purposes. See the Fund's
Statement of Additional Information for a more complete discussion of borrowings
and certain of the associated risks.
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, equity and fixed-income indices and other financial
instruments and purchase and sell financial futures contracts and enter into
various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures.
Collectively, all of the above are referred to as "Strategic Transactions." The
Fund may also invest in income securities the terms of which include elements of
or are similar in effect to Strategic Transactions in which it may engage.
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, 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 protect against changes in
currency exchange rates, or to establish a position in the derivatives markets
as a temporary substitute for purchasing or selling particular securities.
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 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. To the extent that a futures contract or
an option thereon is used to protect against possible changes in the market
value of securities that the Fund anticipates acquiring and the Fund
subsequently does not acquire such securities, the Fund will have incurred the
transactional expenses associated with entering into such transaction and will
be subject to the risks inherent in an unhedged purchase of such futures
contract or option. 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. Income earned or deemed to be earned, if
any, by the Fund from its Strategic Transactions will generally be taxable
income of the Fund. See "Tax Status."
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
12
<PAGE> 13
securities as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). See "Investment Policies and Restrictions" in the Statement of
Additional Information.
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 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. 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. If it is believed in the best interests of the Fund, the
Adviser may place portfolio transactions with brokers who provide research or
other services, even if the Fund will have to pay a higher commission than would
be the case if no weight were given to the broker's furnishing of such 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 and this
will be done only when, in the opinion of the Fund's Adviser, the amount of
additional commission or increased cost is reasonable in relation to the value
of such services to the Fund.
The Adviser may place portfolio transactions, to the extent permitted by law,
with brokerage firms which are affiliated with the Fund, the Adviser or the
Distributor and with firms participating in the distribution of the Fund if it
reasonably believes that the quality of execution and the commission are
comparable to that available from other qualified firms. See "Portfolio
Transactions and Brokerage Allocation" in the Statement of Additional
Information for more information.
The Fund purchases securities which are believed by the Adviser to have
potential for capital growth. Common stocks are disposed of in situations where
it is believed that potential for such capital growth has lessened or that other
common stocks have a greater potential. Therefore, the Fund may purchase and
sell securities without regard to the length of time the security is to be, or
has been held. The Fund's annual portfolio turnover rate is shown in the table
of "Financial Highlights." The rate may exceed 100% in any given year, which is
higher than that of many other investment companies. A 100% turnover rate
occurs, for example, if all the Fund's portfolio securities are replaced during
one year. High portfolio activity increases the Fund's transaction costs,
including brokerage commissions, and may result in the realization of more
short-term capital gains than if the Fund had low portfolio activity. The
turnover rate will not be a limiting factor, however, if the Adviser deems
portfolio changes appropriate.
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
THE ADVISER. Van Kampen Investment Advisory Corp. (the "Adviser") is the
investment adviser for the Fund. The Adviser is a wholly-owned subsidiary of Van
Kampen Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset
management company with more than two million retail investor accounts,
extensive capabilities for managing institutional portfolios and more than $65
billion under management or supervision. Van Kampen's more than 50 open-end and
39 closed-end funds and more than 2,500 unit investment trusts are
professionally distributed by leading financial advisers nationwide. Van Kampen
Funds Inc., the distributor of the Fund and sponsor of the funds mentioned
above, is a wholly-owned subsidiary of Van Kampen. Van Kampen is an indirect
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's
principal office is located at One Parkview Plaza, Oakbrook Terrace, Illinois
60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financing and investing; and global custody, securities clearance services and
securities lending.
13
<PAGE> 14
ADVISORY AGREEMENT. The business and affairs of the Fund are managed under the
direction of the Board of Trustees of the Trust, of which the Fund is a separate
series. Subject to the Trustees' authority, the Adviser and the officers of the
Fund supervise and implement the Fund's investment activities and are
responsible for overall management of the Fund's business affairs. The Fund pays
the Adviser a fee computed based on an annual rate applied to the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS PERCENTAGE PER ANNUM
- ------------------------ --------------------
<S> <C>
First $500 million.......................................... 0.75 of 1.00%
Next $500 million........................................... 0.70 of 1.00%
Over $1 billion............................................. 0.65 of 1.00%
</TABLE>
Under its investment advisory agreement, the Fund has agreed to assume and pay
the charges and expenses of the Fund's operations, including the compensation of
the Trustees of the Trust (other than those who are affiliated persons, as
defined in the 1940 Act, of the Adviser, the Distributor or Van Kampen), the
charges and expenses of independent accountants, legal counsel, transfer agent
(Van Kampen Investor Services Inc. ("Investor Services"), a wholly-owned
subsidiary of Van Kampen), 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,
costs of reports and notices to shareholders, costs of registering shares of the
Fund under federal and state securities laws, miscellaneous expenses and all
taxes and fees to federal, state or other governmental agencies. The Adviser
reserves the right in its sole discretion from time-to-time to waive all or a
portion of its management fee or to reimburse the Fund for all or a portion of
its other expenses.
The Adviser may utilize at its own expense credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc.
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
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.
PORTFOLIO MANAGEMENT. The Fund is managed by a management team headed by Jeff
New. Mr. New has been primarily responsible for managing the Fund's investment
portfolio since its inception. Mr. New has been Vice President and Portfolio
Manager of the Adviser since June 1995 and of Van Kampen Asset Management Inc.
("Asset Management") since 1994. Prior to that time, Mr. New was an Associate
Portfolio Manager with Asset Management. Evan Harrel and Michael Davis have been
responsible as co-managers for the day-to-day management of the Fund's
investment portfolio since March, 1988. Mr. Harrel has been Vice President of
the Adviser and Asset Management since October 1996. Prior to that time, Mr.
Harrel was Associate Portfolio Manager of Asset Management. Prior to May 1994,
Mr. Harrel was a Vice President with Fayez Sarafim and Co. Mr. Davis has been
Vice President and Portfolio Manager of Asset Management and the Adviser since
March 1998. Prior to that time, Mr. Davis was the owner of Davis Equity, a stock
research company.
- --------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- --------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most 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 currently 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
Share accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share accounts over $1 million, Class B Shares and Class C Shares). Shares
purchased subject to
14
<PAGE> 15
a contingent deferred sales charge (a "CDSC") 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 in an amount of $500,000 or more and not to accept any order for Class
C Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
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 Share
purchases 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 which have a shorter CDSC period
(discussed below). Investors should weigh the benefits of deferring the sales
charge and having all of their funds invested against the higher aggregate
distribution and service fee applicable to Class B Shares and 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 that (i) each class of
shares bears those sales charges, distribution fees, service fees and
administrative expenses applicable to the respective class of shares as a result
of its sales arrangements, (ii) generally, each class of shares has exclusive
voting rights with respect to those provisions of the Fund's Rule 12b-1
distribution plan which relate only to such class, (iii) each class of shares
has different exchange privileges, (iv) certain classes of shares have a
conversion feature and (v) certain classes of shares have different shareholder
service options available. Generally, a class of shares subject to a higher
ongoing distribution fee and services fee or subject to 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 and 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 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) securities 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 expenses 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. 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
Internal Revenue Code of 1986, as amended (the "Code").
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Fund offers three classes of shares to the public through Van Kampen Funds
Inc. (the "Distributor"), as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
acting as securities dealers ("dealers") and through NASD members acting as
brokers for investors ("brokers") or eligible non-NASD members acting as agents
for investors ("financial intermediaries").
15
<PAGE> 16
Investment opportunities for growth company securities may be more limited
than those in other sectors of the market. In order to facilitate the management
of the Fund's portfolio, the Fund may, from time to time, reopen and close the
offering of its shares to new investors. Any such limited offerings of the Fund
may commence and terminate without any prior notice.
The Fund's shares are offered at net asset value per share next computed after
an investor places an order to purchase with the investor's broker, dealer, or
financial intermediary or directly with the Distributor, plus any applicable
sales charge. It is the responsibility of the investor's broker, dealer or
financial intermediary to transmit the order to the Distributor. Because the
Fund generally determines 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 Distributor 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 Distributor 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 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 intermediary 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 it, 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. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. Such 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 and not out of assets of the Fund. Such fees paid for such
services and activities with respect to the Fund will not exceed in the
aggregate 1.25% of the average total daily net assets of the Fund on an annual
basis. These programs will not change the price an investor pays for shares or
the amount that the 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 or 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 and financial intermediaries who
16
<PAGE> 17
receive 90% or more of the sales charge may be deemed to be "underwriters" as
that term is defined in the Securities Act of 1933, as amended.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
TOTAL SALES CHARGE COMMISSION
-------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000........................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............................. 4.75 4.99 4.00
$100,000 but less than $250,000............................. 3.75 3.90 3.00
$250,000 but less than $500,000............................. 2.75 2.83 2.25
$500,000 but less than $1,000,000........................... 2.00 2.04 1.75
$1,000,000 or more*......................................... * * *
</TABLE>
- --------------------------------------------------------------------------------
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC of
1.00% on redemptions made within one year of the purchase. A commission will
be paid by the Distributor to brokers, dealers and financial intermediaries
who initiate and are responsible for purchases of $1 million or more. See
"Purchase of Shares -- Deferred Sales Charge Alternatives."
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 at the time of the purchase order whenever a quantity discount is
applicable to purchases. Upon such notification, an investor will receive the
lowest applicable sales charge. Quantity discounts may be modified or terminated
at any time. For more information about quantity discounts, investors should
contact their broker, dealer or financial intermediary or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or
her spouse and children under 21 years of age and any corporation, partnership,
or sole proprietorship which is 100% owned, either alone or in combination, by
any of the foregoing; a trustee or other fiduciary purchasing for a single trust
estate or a single fiduciary account; or a "company" as defined in section
2(a)(8) of the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser or Van Kampen Asset Management Inc. and
distributed by the Distributor as determined from time to time by the Fund's
Board of Trustees.
VOLUME DISCOUNTS. The size of investment shown in the preceding sales charge
table applies to the total dollar amount being invested by any person at any one
time in Class A Shares of the Fund, or in any combination of shares of the Fund
and shares of other Participating Funds, although other Participating Funds may
have different sales charges.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
in 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 sales
charge 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
17
<PAGE> 18
the goal is not achieved within the 13-month period, the investor must pay the
difference between the sales charges applicable to the purchases made and the
sales 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 investment trust reinvestment programs and purchases by
registered representatives of selling firms or purchases by persons affiliated
with the Fund or the Distributor. The Fund reserves the right to modify or
terminate these arrangements at any time.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
Shares of the Fund at net asset value with no minimum initial or subsequent
investment requirement if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the 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, 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 Investor Services with appropriate
backup data for each participating investor in a computerized format fully
compatible with Investor Services processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NAV PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by the Fund,
by:
(1) Current or retired trustees or directors of funds advised by the Adviser
or Asset Management and such persons' families and their beneficial
accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley
Dean Witter & Co. or any of its subsidiaries, employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser, and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21
years of age when purchasing for any accounts they beneficially own, or,
in the case of any such financial institution, when purchasing for
retirement plans for such institution's employees; provided that such
purchases are otherwise permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay brokers, dealers or
financial intermediaries through which purchases are made an amount up to
0.50% of the amount invested over a 12-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans
which invest in multiple fund complexes through broker-dealer retirement
plan alliance programs that have entered into agreements with the
Distributor and which are subject to certain minimum size and operational
requirements. Trustees and other fiduciaries should refer to the Statement
of Additional Information for further detail with respect to such alliance
programs.
18
<PAGE> 19
(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares of
the Fund with proceeds from distributions from such a plan or retirement
account other than distributions taken to correct an excess contribution.
(7) Accounts as to which a 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.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Code, or custodial accounts
held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(c)(3) of
the Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided, for plans
initially establishing accounts with the Distributor in the Participating
Funds after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating Fund or have
received proposals from the Distributor prior to February 1, 1997 based on
net asset value purchase privileges previously in effect will be qualified
to purchase shares of the Participating Funds at net asset value for
accounts established on or before May 1, 1997. Section 403(b) and similar
accounts for which Van Kampen Trust Company serves as custodian will not
be eligible for net asset value purchases based on the aggregate
investment made by the plan or the number of eligible employees, except
under certain uniform criteria established by the Distributor from time to
time. Prior to February 1, 1997, a commission will be paid to authorized
dealers who initiate and are responsible for such purchases within a
rolling twelve-month period as follows: 1.00% on sales to $5 million, plus
0.50% on the next $5 million, and 0.25% on the excess over $10 million.
For purchases on February 1, 1997 and thereafter, a commission will be
paid as follows: 1.00% on sales to $2 million, plus 0.80% on the next $1
million, plus 0.50% on the next $47 million, and 0.25% on the excess over
$50 million.
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified
group does not include one whose sole organization nexus, for example, is
that its participants are credit card holders of the same institution,
policy holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or other similar groups.
Shares purchased in each group's participants account in connection with
this privilege will be subject to a CDSC of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to each
individual as follows: 1.00% on sales to $2 million, plus 0.80% on the
next $1 million and 0.50% on the excess over $3 million.
The term "families" includes a person's spouse, children under 21 years of age
and grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly with Investor Services, the investment adviser, trust company or bank
trust department, provided that Investor Services receives federal funds for the
purchase by the close of business on the next business day following acceptance
of the order. An authorized broker, dealer or financial intermediary may charge
a transaction fee for placing an order to purchase shares pursuant to this
provision or for placing a redemption order with respect to such shares. The
broker, dealer or financial intermediary will be paid a service fee as described
herein under "Distribution and Service Plans" on purchases made as described in
(3) through (9) above. The Fund may terminate, or amend the terms of, offering
shares of the Fund at net asset value to such groups at any time.
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 or 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.
19
<PAGE> 20
CDSC Shares redeemed within a specified period of time generally will be
subject to a CDSC at the rates set forth below charged as a percentage of the
dollar amount subject thereto. 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. The CDSC schedule and holding period applicable to any CDSC Share
acquired through the exchange privilege is determined by reference to the
Participating Fund from which such share was originally purchased.
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
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 in the shareholder's Fund
account that have converted from Class B Shares or Class C 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 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 4.00% (the
applicable rate in the second year after purchase).
Proceeds from the CDSC and the distribution fee 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. A commission or transaction fee will generally be paid by the
Distributor at the time of purchase out of the Distributor's own assets (and not
out of the Fund's assets) to brokers, dealers and financial intermediaries
participating in the continuous public offering of the CDSC Shares 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 is
equal to (i) with respect to Class A Shares, 1.00% on sales to $2 million, plus
0.80% on the next $1 million and 0.50% on the excess over $3 million; (ii) 4.00%
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. Brokers, dealers and
financial intermediaries also will be paid ongoing commissions and transaction
fees of up to 0.75% of the average daily net assets of the Fund's Class C shares
generally annually commencing 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 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. Class A Shares redeemed thereafter will not be subject to a
CDSC.
20
<PAGE> 21
CLASS B SHARES. Class B Shares redeemed within five 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
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ------------------- --------------------------------
<S> <C>
First....................................................... 5.00%
Second...................................................... 4.00%
Third....................................................... 3.00%
Fourth...................................................... 2.50%
Fifth....................................................... 1.50%
Sixth and after............................................. 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."
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.
CONVERSION FEATURE. Class B shares automatically convert to Class A shares
eight years after the end of the calendar month in which the shares were
purchased. Such conversion will be on the basis of the relative net asset values
per share, without the imposition of any sales load, fee or other charge. The
conversion schedule applicable to any share acquired through the exchange
privilege is determined by reference to the Participating Fund from which such
share originally was purchased.
The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fees and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Code and (ii) the conversion of such shares
does not constitute a taxable event under federal income tax law. The conversion
may be suspended if such an opinion is no longer available and such shares might
continue to be subject to the higher aggregate fees applicable to such shares
for an indefinite period.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC is waived on redemptions
of Class B Shares and Class C Shares (i) following the death or disability (as
defined in the Code) of a shareholder; (ii) in connection with required minimum
distributions from an IRA or other retirement plan; (iii) pursuant to the Fund's
systematic withdrawal plan but limited to 12% annually of the initial value of
the account; (iv) in circumstances under which no commission or transaction fee
is paid to authorized dealers at the time of purchase of such shares; or (v)
effected pursuant to the right of the Fund to liquidate a shareholder's account
as described herein under "Redemption of Shares." The CDSC also is waived on
redemptions of Class C Shares as it relates to the reinvestment of redemption
proceeds in shares of the same class of the Fund within 180 days after
redemption. 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 of the Fund outstanding. The net asset value for the Fund
is computed once daily as of the close of the daily trading session of the New
York Stock Exchange, 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.
The securities of the Fund that are listed on a securities exchange are valued
at their closing sales price on the day of the valuation. Price valuations for
listed securities are based on market quotations where the security is primarily
traded or, if actual trade information is not available on any valuation date,
are valued at the mean of the bid and asked prices. Unlisted securities in the
portfolio are valued by using market quotations, prices provided by market
makers or estimates of market
21
<PAGE> 22
values obtained from yield data relating to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Board of Trustees of the Trust of which the Fund is a series. Securities
with remaining maturities of 60 days or less 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. Any securities or other assets for
which current market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of 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. The
following 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.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares of the Fund are held by Van Kampen Investor Services Inc., the
Fund's transfer agent and a wholly-owned subsidiary of Van Kampen. Investor
Services performs bookkeeping, data processing and administration services
related to the maintenance of shareholder accounts. Except as described in this
Prospectus, after each share transaction in an account, the shareholder receives
a statement showing the activity in the account. Each shareholder who has an
account in any of the Participating Funds will receive statements at least
quarterly from Investor Services showing any reinvestments of dividends and
capital gains distributions and any other activity in the account since the
preceding statement. Such shareholders also will receive separate confirmations
for each purchase or sale transaction other than reinvestment of dividends and
capital gains distributions and systematic purchases or redemptions. Additions
to an investment account may be made at any time by purchasing shares through
authorized brokers, dealers or financial intermediaries or by mailing a check
directly to Investor Services.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued, representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen Funds, c/o Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and to
obtain a Surety Bond in a form acceptable to Investor Services. On the date the
letter is received Investor Services will calculate a fee for replacing the lost
certificate equal to no more than 2.00% of the net asset value of the issued
shares and bill the party to whom the replacement certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge) on the record date of such dividend or distribution. Unless the
shareholder instructs otherwise, the reinvestment plan is automatic. This
instruction may be made by telephone by calling (800) 341-2911 ((800) 421-2833
for the hearing impaired) or in writing to Investor Services. The investor may,
on the initial application or prior to any declaration, instruct that dividends
be paid in cash and capital gains distributions be reinvested at net asset
value, or that both dividends and capital gains distributions be paid in cash.
For further information, see "Distributions from the Fund."
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize Investor Services to charge a bank account on
a regular basis to invest pre-determined amounts in the Fund. Additional
information is available from the Distributor or authorized brokers, dealers or
financial intermediaries.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; 401(k) plans; Section 403(b)(7) plans in the case of
employees of public school systems and certain non-profit organizations; or
other pension and profit sharing plans. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
Trust Company serves as custodian under the IRA, 403(b)(7) and Keogh plans.
Details regarding fees, as well as full plan administration for profit sharing,
pension and 401(k) plans, are available from the Distributor.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus or by calling (800) 341-2911 ((800) 421-2833 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same
22
<PAGE> 23
class of a Participating Fund so long as the investor has a pre-existing account
for such class of shares of the other fund. Both accounts must be of the same
type, either non-retirement or retirement. If the accounts are retirement
accounts, they must both be for the same type of retirement plan (e.g. IRA,
403(b)(7), 401(k) or Keogh) and for the benefit of the same individual. 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 per share as of the payable date of the
distribution.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of the Participating Fund are available
for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of
the Participating Fund. Shareholders seeking an exchange with a Participating
Fund should obtain and read the current prospectus for such fund.
When Class B Shares and Class C Shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such shares from a Participating Fund. If such
Class B or Class C Shares are redeemed and not exchanged for shares of another
Participating Fund, such Class B or Class C Shares are subject to the CDSC
schedule imposed by the Participating Fund from which such shares were
originally purchased.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written
request to Investor Services or by contacting the telephone transaction line at
(800) 421-5684 ((800) 421-2833 for the hearing impaired). A shareholder
automatically has telephone exchange privileges unless otherwise designated in
the application form accompanying this Prospectus. Van Kampen and its
subsidiaries, including Investor Services (collectively, "VK"), and the Fund
employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither VK nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VK and the
Fund may be liable for any losses due to unauthorized or fraudulent instructions
if reasonable procedures are not followed. If the exchanging shareholder does
not have an account in the fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital 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 reinvest dividends from the
new account into another fund, an exchanging shareholder must file a specific
written request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund may modify, restrict or terminate
the exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.
A prospectus of any of these Participating Funds may be obtained from any
broker, dealer or financial intermediary or the Distributor. An investor
considering an exchange to one of such funds should refer to the prospectus for
additional information regarding such fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares in a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a quarterly, semi-annual or annual withdrawal plan. This plan provides
for the orderly use of the entire account, not only the income but also the
capital, if necessary. Each withdrawal constitutes a redemption of shares on
which 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."
23
<PAGE> 24
Class B shareholders and Class C shareholders who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value per share. If periodic withdrawals
continuously exceed reinvested dividends and capital gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Withdrawals made concurrently with 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. Any
gain or loss realized by the shareholder upon redemption of shares is a taxable
event.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A Shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of ACH. In addition, the shareholder must fill out the appropriate
section of the account application. The shareholder must also include a voided
check or deposit slip from the bank account into which redemptions are to be
deposited together with the completed application. Once Investor Services has
received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing Investor
Services.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.van-kampen.com for further instruction. VK and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
through the internet are genuine. Such procedures include requiring use of a
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed neither VK nor the Fund will be
liable for following instructions through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.
- --------------------------------------------------------------------------------
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 CDSC) at any
time by sending a written request in proper form directly to Van Kampen Investor
Services Inc., P. O. Box 418256, Kansas City, Missouri 64141-9256, by placing
the redemption request through an authorized dealer or by calling the Fund.
WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent directly
to Investor Services, 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 120 days must accompany the redemption
request. The redemption price is the net asset value per share next determined
after the request is received by Investor Services 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 Investor Services
of the request and any other necessary documents in proper order.
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
24
<PAGE> 25
network. The redemption price for such shares is the net asset value per share
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 privilege, a shareholder must complete the appropriate section of the
application accompanying this Prospectus or call the Fund at (800) 341-2911
((800) 421-2833 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. VK and
the Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither VK nor the Fund will be liable for following
instructions which it reasonably believes to be genuine. VK and the Fund may be
liable for any losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed. Telephone redemptions may not be
available if the shareholder cannot reach Investor Services by telephone,
whether because all telephone lines are busy or for any other reason; in such
case, a shareholder would have to use the Fund's other redemption procedures
previously described. Requests received by Investor Services prior to 4:00 p.m.,
New York time, on a regular business day will be processed at the net asset
value per share determined that day. These privileges are available for all
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 and up to $1 million may be redeemed daily if the proceeds are to be paid
by wire. The proceeds must be payable to the shareholder(s) of record and sent
to the address of record for the account or wired directly to their
predesignated bank account. This privilege is not available if the address of
record has been changed within 30 days prior to a telephone redemption request.
Proceeds from redemptions 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. The Fund reserves the right at any
time to terminate, limit or otherwise modify this telephone redemption
privilege.
REDEMPTION UPON DEATH OR DISABILITY. The Fund will waive the CDSC on
redemptions following the death or 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 long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of disability before it determines to waive the
CDSC on Class B Shares and Class C Shares.
In cases of death or disability, the CDSC on Class B Shares and Class C Shares
will be waived where the decedent or disabled person is either an individual
shareholder or owns the shares as a joint tenant with right of survivorship or
is the beneficial owner of a custodial or fiduciary account, and where the
redemption is made within one year of death or the initial determination of
disability. This waiver of the CDSC on Class B Shares and Class C Shares applies
to a total or partial redemption, but only to redemptions of shares held at the
time of death or the initial determination of disability.
GENERAL REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with a value on the date of the notice of redemption less than the minimum
initial investment as specified in this Prospectus. At least 60 days advance
written notice of any such involuntary redemption will be given and the
shareholder will be given an opportunity to purchase the required value of
additional shares at the next determined net asset value per share without sales
charge. Any
25
<PAGE> 26
involuntary redemption may only occur if the shareholder account is less than
the minimum initial 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 CDSC paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption. Reinstatement at
net asset value per share is also offered to participants in those eligible
retirement plans held or administered by Van Kampen Trust Company for repayment
of principal (and interest) on their borrowings on such plans.
- --------------------------------------------------------------------------------
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 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 as a service fee 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 connection with the distribution of Class B 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 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.
The Distributor's actual distribution-related expenses with respect to a class
of CDSC Shares (for purposes of this section, excluding any Class A Shares that
may be subject to a CDSC) 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
26
<PAGE> 27
payments received pursuant to the CDSC. In such event, with respect to any such
class of CDSC Shares, any unreimbursed distribution-related 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, 1998 there were $1,994,702 and
$5,872 of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares, respectively, representing 2.50% and 0.06% of the
Fund's net assets attributable to Class B Shares and Class C Shares,
respectively. If the Distribution Plan was terminated or not continued, the Fund
would not be contractually obligated to pay the Distributor for any expenses not
previously reimbursed by the Fund or recovered through the CDSC.
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 CDSC applicable to a particular class of
shares to defray distribution-related expenses attributable to any other class
of shares. Various federal and state laws prohibit national banks and some
state-chartered commercial banks from underwriting or dealing in the Fund's
shares. In addition, state securities laws on this issue may differ from the
interpretations of federal law, and banks and financial institutions may be
required to register as dealers pursuant to state law. In the unlikely event
that a court were to find that these laws prevent such banks from providing such
services described above, the Fund would seek alternate providers and expects
that shareholders would not experience any disadvantage.
- --------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- --------------------------------------------------------------------------------
The Fund's present policy, which may be changed at any time by the Board of
Trustees, is to declare annually dividends to holders of each class of shares
from net investment income and net short-term capital gains attributable to each
respective class. The Fund also presently intends to make distributions of net
long-term capital gains, if any, annually. Dividends are composed of all or a
portion of investment income earned by each class of shares of the Fund plus all
or a portion of net short-term capital gains by the Fund on transactions in
securities and futures and options hedging transactions, less the expenses
attributable to the respective class. Long-term capital gains distributions
consist of the Fund's gain on transactions in securities and futures and options
hedging transactions, net of any realized capital losses, less any carryover
capital losses from previous years.
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 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 Investor Services receives payments for such shares. However,
shares become entitled to dividends on the day Investor Services receives
payment for the shares either through a fed wire or NSCC settlement. Shares
remain entitled to dividends through the day such shares are processed for
payment or 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 account application accompanying
this Prospectus or available from Van Kampen Funds, c/o Van Kampen Investor
Services Inc., P.O. Box 418256, Kansas City, MO 64141-9256. After Investor
Services 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 distributions to a shareholder's account in additional shares of the Fund
valued at net asset value per share, without a sales charge. Unless the
Shareholder
27
<PAGE> 28
instructs otherwise, the reinvestment plan is automatic. This instruction may be
made by telephone by calling (800) 421-5666 ( (800) 421-2833 for the hearing
impaired) or in writing to Investor Services. See "Shareholder Services --
Reinvestment Plan."
- --------------------------------------------------------------------------------
TAX STATUS
- --------------------------------------------------------------------------------
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the source of
its income and the diversification of its assets. If the Fund so qualifies and
if it distributes to its shareholders at least 90% of its net investment income
(including taxable income and 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), 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 required to satisfy the 90% distribution
requirement. The Fund will not be subject to federal income tax on any net
capital gains distributed to its shareholders.
Distributions of the Fund's net investment income are taxable to shareholders
as ordinary income to the extent of the Fund's earnings and profits, whether
received in shares or cash. Shareholders who receive distributions in the form
of additional shares will have a basis for federal income tax purposes in each
share equal to the value thereof on the distribution date. Distributions of the
Fund's net capital gains ("capital gain dividends"), if any, are taxable to
shareholders as long-term capital gains regardless of the length of time the
Fund shares have been held by such shareholders. 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 shareholder (assuming such shares
are held as a capital asset). See the discussion below for a summary of the tax
rates applicable to capital gains (including capital gain dividends). The Fund
will inform shareholders of the source and tax status of such distributions
promptly after the close of each calendar year. Some portion of the
distributions made by the Fund generally will be eligible for the dividends
received deduction for corporations if the Fund receives qualifying dividends
during the year and if certain other requirements of the Code are satisfied.
If the Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) will be a taxable transaction for federal income tax
purposes. Selling shareholders will recognize gain or loss in an amount equal to
the difference between their basis in such sold shares of the Fund and the
amount received. If such shares are held as a capital asset, the gain or loss
will be a capital gain or loss. See the discussion below for a summary of the
tax rates applicable to capital gains. Any loss recognized upon a taxable
disposition of shares held for six months or less will be treated as long-term
capital loss to the extent of any capital gain dividends received with respect
to such shares. For purposes of determining whether shares have been held for
six months or less, the holding period is suspended for any periods during which
the shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property or through certain
options or short sales.
The maximum tax rate applicable to net capital gains recognized by individuals
and other non-corporate taxpayers is (i) the same as ordinary income tax rate
for capital assets held for one year or less or (ii) 20% for capital assets held
for
28
<PAGE> 29
more than one year. A special 28% tax rate may apply to a portion of the capital
gain dividends paid by the Fund with respect to its taxable year ended June 30,
1998.
Some of the Fund's investment practices, including those described under
"Investment Practices -- Strategic Transactions," are subject to special
provisions of the Code that may, among other things, defer the use of losses of
the Fund and affect the holding period of securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or gain without receiving the cash with
which to make distributions in the amounts necessary to satisfy the distribution
requirements for avoiding federal income and, as described below, excise taxes.
The Fund will monitor its transactions and may make certain tax elections in
order to mitigate the effect of these rules and prevent disqualification of the
Fund as a regulated investment company.
Income from investments in foreign securities may be subject to foreign
income, withholding or other taxes. Shareholders of the Fund will not be able to
claim any deduction or foreign tax credit with respect to such foreign taxes.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (i) at least 75% of its gross income is passive income or (ii)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a regulated investment company
that holds stock of a PFIC will be subject to federal income tax on (i) a
portion of any "excess distribution" received on such stock or (ii) any gain
from a sale or disposition of such stock (collectively, "PFIC income"), plus
interest on such amounts, even if the regulated investment company distributes
the PFIC income as a taxable dividend to its shareholders. The balance of the
PFIC income will be included in the regulated investment company's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. If the Fund invests in a PFIC
and elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, which most likely would have to be
distributed to satisfy the 90% distribution requirement and the distribution
requirement for avoiding income and excise taxes. In most instances it will be
very difficult to make this election due to certain requirements imposed with
respect to the election.
As an alternative to making the above-described election to treat the PFIC as
a qualified electing fund, the Fund may make an election to annually
mark-to-market certain publicly traded PFIC stock that it owns (a "PFIC
Mark-to-Market Election"). "Marking-to-market," in this context, means
recognizing as ordinary income or loss each year an amount equal to the
difference between the Fund's adjusted tax basis in such PFIC stock and its fair
market value. Losses will be allowed only to the extent of net mark-to-market
gain previously included by the Fund pursuant to the election for prior taxable
years. The Fund may be required to include in its taxable income for the first
taxable year in which it makes a PFIC Mark-to-Market Election an amount equal to
the interest charge that would otherwise accrue with respect to distributions
on, or dispositions of, the PFIC stock. This amount would not be deductible from
the Fund's taxable income. The PFIC Mark-to-Market Election applies to the
taxable year for which made and to all subsequent taxable years, unless the
Internal Revenue Service consents to revocation of the election. By making the
PFIC Mark-to-Market Election, the Fund could ameliorate the adverse tax
consequences arising from its ownership of PFIC stock, but in any particular
year may be required to recognize income in excess of the distributions it
receives from the PFIC and proceeds from the dispositions of PFIC stock.
In order to avoid a 4% excise tax, the Fund will be required to distribute by
December 31st of each year at least an amount equal to the sum of (i) 98% of its
ordinary income for such year and (ii) 98% of its capital gain net income
(computed on the basis of the one-year period ending on October 31st of such
year), together with any amounts that were not distributed in previous taxable
years. For purposes of the excise tax, any ordinary income or capital gain net
income retained by and subject to federal income tax in the hands of the Fund
will be treated as having been distributed.
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 in January of the following
year, will be treated as having been distributed by the Fund (and received by
the shareholders) on December 31st of the year in which the dividend was
declared. 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
29
<PAGE> 30
taxable year. In such case, shareholders will be treated as having received such
dividends in the taxable year in which the distribution is actually made.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) or who are otherwise subject
to backup withholding. Foreign shareholders, including shareholders who are
non-resident aliens, may be subject to United States withholding tax on certain
distributions (whether received in cash or in shares) at a rate of 30% or such
lower rate as prescribed by an applicable income tax treaty.
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 purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax laws and any
proposed tax law changes.
- --------------------------------------------------------------------------------
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 total return will be
calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. Such calculations are based on
historical information and are not intended to indicate future performance. In
lieu of or in addition to total return calculations, such information may
include performance rankings and similar information from independent
organizations such as Lipper Analytical Services, Inc. or nationally recognized
financial publications. In addition, from time to time the Fund may compare its
performance to certain securities and unmanaged indices which may have different
risk or reward characteristics than the Fund. Such characteristics may include,
but are not limited to, tax features, guarantees, insurance and the fluctuation
of principal or return. In addition, from time to time sales materials and
advertisements for the Fund may include hypothetical information.
The Fund commenced investment operations on December 27, 1995. From December
27, 1995 up to February 3, 1997, the Fund operated with a limited amount of
capital being invested by affiliates of the Fund's Adviser. Prior to February 3,
1997, the Fund had not engaged in a broad continuous public offering of its
shares, had sold shares to only a limited number of public investors and had not
been subject to redemption requests. The Fund commenced a broad public offering
of its shares on February 3, 1997. The Fund was offered for a limited time and
then was closed to new investors on March 14, 1997 after raising new assets of
approximately $100,000,000. As discussed herein, the Fund may, from time to
time, reopen and close the offering of its shares to new investors as market
conditions permit. The Fund's Adviser believes that the Fund's portfolio prior
to February 3, 1997 was managed in a manner substantially the same as if the
Fund had been open for a broader distribution to public investors. No assurances
can be given, however, that the Fund's investment performance would have been
the same during such period if the Fund had been broadly distributed. The Fund's
investment results are based on historical performance and are not intended to
indicate future performance.
Further information about the Fund's performance is contained in its Annual
Report, Semi-Annual Report and Statement of Additional Information, each of
which can be obtained without charge by calling (800) 421-5666 ((800) 421-2833
for the hearing impaired).
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The Fund is a series of the Van Kampen Equity Trust, a Delaware business trust
organized as of May 10, 1995 (the "Trust"). 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, par value $0.01 per share, divided into classes.
The Fund currently offers three classes of shares designated Class A Shares,
Class B Shares and Class C Shares. The Fund is permitted to issue an unlimited
number of classes of shares. Other classes may be established from time to time
in accordance with provisions of the Fund's Declaration of Trust.
30
<PAGE> 31
Each class of shares represents an interest in the same assets of the Fund and
are identical in all respects except that each class bears certain distribution
expenses and has exclusive voting rights with respect to its distribution fee.
Except as described herein, there are no conversion, preemptive or other
subscription rights. In the event of liquidation, each share of the Fund is
entitled to its pro rata 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 holders of Class A
Shares.
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.
The Trust's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to his or her private property for the satisfaction of any
obligation or liability of the Fund but the assets of the Fund only shall be
liable.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
The fiscal year end of the Fund is June 30. The Fund sends to its shareholders
at least semi-annually reports showing the Fund's portfolio and other
information. An Annual Report, containing financial statements audited by the
Fund's independent accountants, is sent to shareholders each year. After the end
of each year, shareholders will receive federal income tax information regarding
dividends and capital gains distributions.
31
<PAGE> 32
VAN KAMPEN GROWTH FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
EXISTING SHAREHOLDERS-- VAN KAMPEN FUNDS INC.
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE One Parkview Plaza
CALL THE FUND'S TOLL-FREE Oakbrook Terrace, IL 60181
NUMBER (800) 341-2911.
Transfer Agent
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 341-2911. VAN KAMPEN INVESTOR
DEALERS--FOR DEALER SERVICES INC.
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS, P.O. Box 418256
OR REDEMPTIONS CALL THE Kansas City, MO 64141-9256
DISTRIBUTOR'S TOLL-FREE
NUMBER (800) 421-5666. Attn: Van Kampen Growth Fund
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH Custodian
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD) STATE STREET BANK AND
DIAL (800) 421-2833 TRUST COMPANY
225 West Franklin Street, P.O. Box 1713
FOR AUTOMATED TELEPHONE Boston, MA 02105-1713
SERVICES DIAL (800) 847-2424
Attn: Van Kampen Growth Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 33
- --------------------------------------------------------------------------------
GROWTH FUND
- --------------------------------------------------------------------------------
P R O S P E C T U S
SEPTEMBER 30, 1998
[VAN KAMPEN FUNDS LOGO]
GF PRO 9/98
