<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 2000
REGISTRATION NOS. 33-8122
811-4805
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 40 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 41 [X]
</TABLE>
VAN KAMPEN EQUITY TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555
(Address of Principal Executive Offices) (Zip Code)
(630) 684-6000
Registrant's Telephone Number, including Area Code
A. THOMAS SMITH III
Executive Vice President, General Counsel and Secretary
Van Kampen Investments Inc.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, Illinois 60181-5555
(Name and Address of Agent for Service)
------------------------
Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
------------------------
Approximate Date of Proposed Public Offering: As soon as practicable
following effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
This Post-Effective Amendment No. 40 to the Registration Statement contains
one prospectus describing the Class D Shares of the Van Kampen Aggressive Growth
Fund (the "Applicable Series") and one statement of additional information
describing the Class A, B, C and D Shares of the Applicable Series. This
Amendment is not intended to amend the prospectuses and statements of additional
information of other series of the Registrant. The Registration Statement is
organized as follows:
Facing Page
Prospectus relating to the Applicable Series
Statement of Additional Information relating to the Applicable Series
Part C Information
Exhibits
No changes are being made to the Class A Shares, Class B Shares and Class C
Shares prospectus of the Van Kampen Aggressive Growth Fund or the prospectuses
and statements of additional information of the Van Kampen Growth Fund, Van
Kampen Select Growth Fund, Van Kampen Small Cap Value Fund and Van Kampen
Utility Fund of the Registrant included in Post-Effective Amendment No. 39 to
the Registration Statement, filed with the Commission on July 27, 2000. No
changes are being made to the prospectuses and statements of additional
information of the Van Kampen Small Cap Growth Fund of the Registrant included
in Post-Effective Amendment No. 35 to the Registration Statement, filed with the
Commission on February 4, 2000 or the Van Kampen Small Company Growth Fund of
the Registrant included in Post-Effective Amendment No. 34 to the Registration
Statement, filed with the Commission on January 21, 2000.
<PAGE> 3
VAN KAMPEN
AGGRESSIVE GROWTH FUND
Van Kampen Aggressive Growth Fund's investment objective is to seek capital
growth. The Fund's investment adviser seeks to achieve the Fund's investment
objective by investing primarily in common stocks and other equity securities of
small- and medium-sized growth companies.
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulator, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This prospectus is dated SEPTEMBER 25, 2000
CLASS D SHARES
PROSPECTUS
[VAN KAMPEN FUNDS LOGO]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 5
Investment Objective, Policies and Risks........... 6
Investment Advisory Services....................... 10
Purchase of Shares................................. 12
Redemption of Shares............................... 13
Distributions from the Fund........................ 15
Shareholder Services............................... 15
Federal Income Taxation............................ 16
</TABLE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's 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.
<PAGE> 5
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek capital growth.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in common stocks or other equity securities of companies that the Fund's
investment adviser believes have an above-average potential for capital growth.
The Fund's investment adviser focuses on those companies that it believes have
rising earnings expectations and rising valuations. The Fund generally sells
securities when earnings expectations or valuations flatten or decline. The Fund
focuses primarily on equity securities of small- and medium-sized companies,
although the Fund may invest in securities of larger-sized companies that the
Fund's investment adviser believes have an above-average potential for capital
growth. The Fund may invest up to 20% of its total assets in securities of
foreign issuers. The Fund may purchase and sell certain derivative instruments,
such as options, futures and options on futures, for various portfolio
management purposes.
INVESTMENT RISKS
An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in common
stocks and other equity securities generally are affected by changes in the
stock markets, which fluctuate substantially over time, sometimes suddenly and
sharply. Different types of stocks tend to shift in and out of favor depending
on market and economic conditions. Thus, the value of the Fund's investments
will vary and at times may be lower or higher than that of other types of
investments.
The Fund emphasizes a growth style of investing and focuses primarily on small-
and medium-sized companies. The market values of such securities may be more
volatile than other types of investments. The returns on such securities may or
may not move in tandem with the returns on other styles of investing or the
overall stock markets. During an overall stock market decline, stock prices of
small- and medium-sized companies (in which the Fund may invest) often fluctuate
more and may fall more than stock prices of larger-sized, more established
companies. It is possible that the stocks of small- and medium-sized companies
will be more volatile and underperform the overall stock market. Historically,
stocks of small- and medium-sized companies have sometimes gone through extended
periods when they did not perform as well as stocks of larger-sized companies.
The Fund may from time to time emphasize certain sectors of the market. To the
extent the Fund invests a significant portion of its assets in securities of
companies in the same sector of the market, it is more susceptible to economic,
political, regulatory and other occurrences influencing those sectors.
RISKS OF AGGRESSIVE GROWTH STOCKS. Companies that the Fund's investment adviser
believes have significant growth potential are often companies with new, limited
or cyclical product lines, markets or financial resources and the management of
such companies may be dependent upon one or a few key people. The stocks of such
companies can therefore be subject to more abrupt or erratic market movements
than stocks of larger, more established companies or the stock market in
general.
FOREIGN RISKS. Because the Fund may own securities of foreign issuers, it may be
subject to risks not usually associated with owning securities of U.S. issuers.
These risks can include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading, and foreign
taxation issues.
RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options,
3
<PAGE> 6
futures and options on futures are examples of derivative instruments.
Derivative instruments involve risks different from the direct investment in
underlying securities. These risks include imperfect correlation between the
value of the instruments and the underlying assets; risks of default by the
other party to certain transactions; risks that the transactions may result in
losses that partially or completely offset gains in portfolio positions; and
risks that the transactions may not be liquid.
MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment techniques,
and the Fund's performance may lag behind that of similar funds.
INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:
- Seek capital growth over the long term
- Do not seek current income from their investment
- Are willing to take on the increased risks of investing in smaller- and
medium-sized companies in exchange for potentially higher capital growth
- Can withstand substantial volatility in the value of their shares of the Fund
- Wish to add to their investment portfolio a fund that invests primarily in
common stocks of smaller-and medium-sized growth companies
An investment in the Fund is not a deposit of any bank or other insured
depository institution. An investment in the Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-term
investment, and the Fund should not be used as a trading vehicle.
ANNUAL PERFORMANCE
One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund* over the three calendar years prior to the date of this
prospectus. Remember that the past performance of the Fund is not indicative of
its future performance.
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
1997 13.67
1998 35.40
1999** 130.59
</TABLE>
* The Fund commenced offering Class D Shares on September 25, 2000. The returns
shown in the Annual Performance chart above (and in the Comparative
Performance chart below) are for the Class A Shares of the Fund (which are
offered in a separate prospectus). The annual return variability of the
Fund's Class D Shares would be substantially similar to that shown for the
Class A Shares because all of the Fund's shares are invested in the same
portfolio of securities; however, the actual annual returns of the Class D
Shares would be higher than the annual returns shown for the Fund's Class A
Shares because of differences in the expenses borne by each class of shares.
** The Fund's performance during the one year period shown is largely
attributable to investments in the technology sector, which performed
favorably for the period. Additionally, the Fund's returns for this period
included investments in initial public offerings. This performance was
achieved during a rising market, and there is no guarantee that this
performance record or the circumstances leading to it can be replicated in
the future. As the Fund expects to have a substantial portion of its assets
invested in equity securities of small-and mid-sized companies, the Fund will
be subject to more volatility and more erratic market movements.
The Fund's return for Class A Shares for the six-month period ended June 30,
2000 was 4.40%.
During the three-year period shown in the bar chart, the highest quarterly
return for Class A Shares was 56.80% (for the quarter ended December 31, 1999)
and the lowest quarterly return for Class A Shares was -19.16% (for the quarter
ended March 31, 1997).
4
<PAGE> 7
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with two broad-based market indices
that the Fund's investment adviser believes are appropriate benchmarks for the
Fund: the Russell 2000 Stock Index* (a small capitalization company index that
measures performance of 2,000 small-cap stocks) and the Russell 2500 Growth
Index** (a small-capitalization index of companies in the Russell 2500 Index**
with higher price-to-book ratios and higher forecasted growth values). The
Fund's performance figures are for the Fund's Class A Shares and include the
maximum sales charges paid by investors on such Class A Shares***. The indices'
performance figures do not include any commissions or sales charges that would
be paid by investors purchasing the securities represented by those indices. An
investment cannot be made directly in the indices. Average annual total returns
are shown for the periods ended December 31, 1999 (the most recently completed
calendar year prior to the date of this prospectus). Remember that the past
performance of the Fund is not indicative of its future performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns
for the
Periods Ended Past Since
December 31, 1999 1 Year Inception
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Van Kampen Aggressive
Growth Fund--Class A Shares 117.35% 42.32%(1)
Russell 2000 Stock Index 21.26% 13.27%(2)
Russell 2500 Growth Index 55.48% 21.01%(2)
...........................................................
</TABLE>
Inception dates: (1) 5/29/96, (2) 5/26/96.
*Based on the Fund's asset composition, the Fund's investment adviser believes
the Russell 2500 Growth Stock Index provides a more accurate narrow-based
benchmark for the Fund. The Russell 2000 Stock Index will not be shown in
future reports.
**The Russell 2000 Stock Index, the Russell 2500 Growth Index and the Russell
2500 Index are subsets of the Russell 3000 Index, an index of the 3000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market.
***The Fund commenced offering Class D Shares on September 25, 2000. The returns
shown in the Comparative Performance chart above are for the Class A Shares
of the Fund (which are offered in a separate prospectus). The annual return
variability of the Fund's Class D Shares would be substantially similar to
that shown for the Class A Shares because all of the Fund's shares are
invested in the same portfolio of securities; however, the actual annual
returns of the Class D Shares would be higher than the annual returns shown
for the Class A Shares because of differences in the expenses borne by each
class of shares.
FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class D
(fees paid directly from your investment) Shares
------------------------------------------------------
<S> <C> <C>
Maximum sales charge (load) imposed on None
purchases
......................................................
Maximum deferred sales charge (load) None
......................................................
Maximum sales charge (load) imposed on
reinvested dividends
None
......................................................
Redemption fee None
......................................................
Exchange fee None
......................................................
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES Class D
(expenses that are deducted from Fund assets) Shares
----------------------------------------------------------
<S> <C> <C>
Management fees 0.70%
..........................................................
Other expenses 0.30%
..........................................................
Total annual fund operating expenses 1.00%
..........................................................
</TABLE>
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class D Shares $102 $318 $552 $1,225
.....................................................................
</TABLE>
5
<PAGE> 8
INVESTMENT OBJECTIVE,
POLICIES AND RISKS
The Fund's investment objective is to seek capital growth. Any income received
from the investment of portfolio securities is incidental to the Fund's
investment objective. The Fund's investment objective is a fundamental policy
and may not be changed without shareholder approval of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). There are risks inherent in all investments in
securities; accordingly there can be no assurance that the Fund will achieve its
investment objective.
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in common stocks or other equity securities that the Fund's investment
adviser believes have an above-average potential for capital growth. In
selecting securities for investment, the Fund focuses primarily on equity
securities of small- and medium-sized companies, although the Fund may invest
its assets in securities of larger-sized companies that the investment adviser
believes have an above-average potential for capital growth. Under current
market conditions, the Fund's investment adviser generally defines small-and
medium-sized companies by reference to those companies within or below the
capitalization range of companies represented in the Standard & Poor's MidCap
400 Index (which consists of companies in the capitalization range of
approximately $88 million to $13.7 billion as of June 30, 2000). Investments in
such companies may offer greater opportunities for capital growth than larger,
more established companies, but also may involve special risks. The Fund may
invest in securities that have above-average volatility of price movement.
Because prices of common stocks and other equity securities fluctuate, the value
of an investment in the Fund will vary based upon the Fund's investment
performance.
The Fund's primary approach is to seek what the Fund's investment adviser
believes to be attractive growth opportunities on an individual company basis.
The Fund's investment adviser uses a "bottom-up" disciplined style of investing
that emphasizes the analysis of individual stocks rather than economic and
market cycles. The Fund focuses on those companies that exhibit rising earnings
expectations and rising valuations. In selecting securities for investment, the
Fund generally seeks companies that appear to be positioned to produce an
attractive level of future earnings through the development of new products,
services or markets or as a result of changing markets or industry conditions.
The Fund's investment adviser expects that many of the companies in which the
Fund invests will, at the time of investment, be experiencing high rates of
earnings growth. The securities of such companies may trade at higher prices to
earnings ratios relative to more established companies and rates of earnings
growth may be higher than the market average. Stock prices of these companies
may tend to be more volatile.
The companies and industries in which the Fund invests will change over time
depending on the assessment of the Fund's investment adviser of growth
opportunities. Although the Fund will limit its investments to 25% of its total
assets in any single industry, a significant portion of the Fund's assets may be
invested in securities of companies in the same sector of the market. This may
occur, for example, when the Fund's investment adviser believes that several
companies in the same sector each offer unusually attractive growth
opportunities. To the extent that the Fund invests a significant portion of its
assets in a limited number of market sectors, the Fund will be more susceptible
to economic, political, regulatory and other factors influencing such sectors.
The Fund does not limit its investments to any single group or type of security.
The Fund may invest in unseasoned issuers and in securities involving special
circumstances, such as initial public offerings, companies with new management
or management reliant upon one or a few key people, special products and
techniques, limited or cyclical product lines, markets or resources, or unusual
developments, such as mergers, liquidations, bankruptcies or leveraged buyouts.
Investments in unseasoned companies and special circumstances often involve much
greater risks than are inherent in other types of investments because securities
of such companies may be more likely to experience unexpected fluctuations in
price. In addition, investments made in anticipation of future events may, if
delayed or never achieved, cause stock prices to fall.
6
<PAGE> 9
Although the Fund may invest in companies of any size, the Fund focuses
primarily on small- and medium-sized companies. The securities of small- or
medium-sized companies may be subject to more abrupt or erratic market movements
and may have lower trading volumes or more erratic trading than securities of
larger-sized companies or the market averages in general. In addition, such
companies typically are subject to a greater degree of change in earnings and
business prospects than are larger-sized, more established companies. Thus, the
Fund may be subject to greater investment risk than that assumed through
investment in the securities of larger-sized, more established companies. In
periods of increased market volatility, the Fund may invest a greater portion of
its assets in the equity securities of larger-sized companies.
The Fund may dispose of a security whenever, in the opinion of the Fund's
investment adviser, factors indicate it is desirable to do so. The Fund
generally sells securities when earnings expectations or valuations flatten or
decline. Other factors may include changes in the company's operations or
relative market performance, changes in the appreciation possibilities offered
by individual securities, a change in the market trend or other factors
affecting an individual security, a change in economic or market factors in
general or with respect to a particular industry, and other circumstances
bearing on the desirability of a given investment. In addition, if an individual
stock position appreciates to a point where it begins to account for a larger
percentage of the Fund's assets, the Fund's investment adviser may sell a
portion of the position held.
The Fund invests primarily in common stocks. 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.
While the Fund invests primarily in common stocks, the Fund may invest in other
equity securities including preferred stocks and securities convertible into
common stocks. 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.
A convertible security is a bond, debenture, note, preferred stock, warrant 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 or
into cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt securities or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The value of convertible securities tends to
decline as interest rates rise and, because of the conversion feature, tends to
vary with fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities.
Generally, warrants are securities that may be exchanged for a prescribed amount
of common stock or other equity security of the issuer within a particular
period of time at a specified price or in accordance with a specified formula.
Warrants do not carry with them the right to dividends and they do not represent
any rights in the assets of the issuer. As a result, any such investments may be
considered to be more speculative than most other types of equity investments.
The Fund also may invest in debt securities of various maturities considered
"investment grade" at the time of investment. A subsequent reduction in rating
does not require the Fund to dispose of a security. Investment grade securities
are securities rated BBB
7
<PAGE> 10
or higher by Standard & Poor's ("S&P") or rated Baa or higher by Moody's
Investors Service, Inc. ("Moody's") or comparably rated by any other nationally
recognized statistical rating organization or, if unrated, are considered by the
Fund's investment adviser to be of comparable quality. Securities rated BBB by
S&P or Baa by Moody's are in the lowest of the four investment grade categories
and are considered by the rating agencies to be medium-grade obligations which
possess speculative characteristics so that changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher-rated securities. The
market prices of debt securities generally fluctuate inversely with changes in
interest rates so that the value of investments in such securities can be
expected to decrease as interest rates rise and increase as interest rates fall.
RISKS OF INVESTING IN
SECURITIES OF FOREIGN ISSUERS
The Fund may invest up to 20% of its total assets in securities of foreign
issuers. Securities of foreign issuers may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), the
imposition of foreign exchange limitations (including currency blockage),
withholding taxes on income or capital transactions or other restrictions,
higher transaction costs (including higher brokerage, custodial and settlement
costs and currency conversion costs) and possible difficulty in enforcing
contractual obligations or taking judicial action. Foreign securities may not be
as liquid and may be more volatile than comparable domestic securities.
In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive auditing, accounting and financial reporting disclosure
requirements than domestic issuers. There is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in the
United States, and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the United States, the Fund may experience
settlement difficulties or delays not usually encountered in the United States.
Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact returns and result in temporary periods when assets of the Fund are
not fully invested or attractive investment opportunities are foregone.
The Fund may invest in securities of issuers in developing or emerging market
countries. Investments in securities of issuers in developing or emerging market
countries are subject to greater risks than investments in securities of
developed countries since emerging market countries tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed countries.
In addition to the increased risks of investing in foreign securities, there are
often increased transaction costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.
Many European countries have adopted or are in the process of adopting a single
European currency, commonly referred to as the "euro." The long-term
consequences of the euro conversion on foreign exchange rates, interest rates
and the value of European securities, all of which may adversely affect the
Fund, are still uncertain.
STRATEGIC TRANSACTIONS
The Fund may, but is not required to, use various investment strategic
transactions described below to facilitate portfolio management and mitigate
risks. Although the Fund's investment adviser seeks to use the practices to
further the Fund's investment objective, no assurance can be given that these
practices will achieve this result.
8
<PAGE> 11
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, purchase and
sell financial futures contracts and options thereon, 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 generally seeks to use Strategic Transactions as a portfolio management or
hedging technique to seek to protect against possible adverse changes in the
market value of securities held in or to be purchased for the Fund's portfolio,
protect the Fund's unrealized gains, facilitate the sale of certain securities
for investment purposes, protect against changes in currency exchange rates, or
establish positions in the derivatives markets as a temporary substitute for
purchasing or selling particular securities.
Strategic Transactions have risks including the imperfect correlation between
the value of such instruments and the underlying assets, the possible default of
the other party to the transaction or illiquidity of the derivative instrument.
Furthermore, the ability to successfully use Strategic Transactions depends on
the ability of the Fund's investment adviser to predict pertinent market
movements, which cannot be assured. Thus, the use of Strategic Transactions may
result in losses greater than if they had not been used, may require the Fund to
sell or purchase portfolio securities at inopportune times or for prices other
than current market values, may limit the amount of appreciation the Fund can
otherwise realize on an investment, or may cause the Fund to hold a security
that it might otherwise sell. The use of currency transactions can result in the
Fund incurring losses because of the imposition of exchange controls, suspension
of settlements or the inability of the Fund to deliver or receive a specified
currency. Additionally, amounts paid as premiums and cash or other assets held
in margin accounts with respect to Strategic Transactions are not otherwise
available to the Fund for investment purposes.
A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information. The Statement of
Additional Information can be obtained by investors free of charge as described
on the back cover of this prospectus.
OTHER INVESTMENTS AND RISK FACTORS
For cash management purposes, the Fund may engage in repurchase agreements with
broker-dealers, banks and other financial institutions to earn a return on
temporarily available cash. Such transactions are subject to the risk of default
by the other party.
The Fund may purchase and sell securities on a "when-issued" and "delayed
delivery" basis. The Fund accrues no income on such securities until the Fund
actually takes delivery of such securities. These transactions are subject to
market fluctuation; the value of the securities at delivery may be more or less
than their purchase price. The value or yield generally available on comparable
securities when delivery occurs may be higher than the value or yield on the
securities obtained pursuant to such transactions. Because the Fund relies on
the buyer or seller 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. The Fund will engage
in when-issued and delayed delivery transactions for the purpose of acquiring
securities consistent with the Fund's investment objective and policies and not
for the purpose of investment leverage.
The Fund may lend its portfolio securities in an amount up to 50% of its total
assets to broker-dealers, banks or other institutional borrowers of securities.
Such loans must be callable at any time and the borrower at all times during the
loan must maintain cash or liquid securities as collateral or provide the Fund
an irrevocable letter of credit equal to at least 100% of the value of the
securities loaned (including accrued interest). During the time portfolio
securities are on loan, the Fund receives any dividends or interest paid on such
securities and receives the interest earned on the collateral which is invested
in short-term instruments or receives an agreed-upon amount of interest income
from the borrower who has delivered the collateral or letter of credit. As with
any extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially.
The Fund may invest up to 15% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to
9
<PAGE> 12
sell such securities at a lower price, sell other securities instead to obtain
cash or forego other investment opportunities.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.
The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital growth has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) and higher
portfolio turnover may result in the realization of more short-term capital
gains than if a fund had lower portfolio turnover. Increases in a fund's
transaction costs would adversely impact that fund's performance. The turnover
rate will not be a limiting factor, however, if the Fund's investment adviser
considers portfolio changes appropriate.
TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, prime commercial paper,
certificates of deposit, bankers' acceptances and other obligations of domestic
banks and in investment grade corporate debt securities. Under normal market
conditions, the potential for capital growth on these securities will tend to be
lower than the potential for capital growth on other securities that may be
owned by the Fund. In taking such a defensive position, the Fund would not be
pursuing and may not achieve its investment objective.
INVESTMENT ADVISORY SERVICES
THE ADVISER. Van Kampen Investment Advisory Corp. is the Fund's investment
adviser (the "Adviser" or "Advisory Corp."). The Adviser is a wholly owned
subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company with more than three
million retail investor accounts, extensive capabilities for managing
institutional portfolios, and more than $100 billion under management or
supervision as of June 30, 2000. Van Kampen Investments' more than 50 open-end
and 39 closed-end funds and more than 2,700 unit investment trusts are
professionally distributed by leading authorized dealers nationwide. Van Kampen
Funds Inc., the distributor of the Fund (the "Distributor") and the sponsor of
the funds mentioned above, is also a wholly owned subsidiary of Van Kampen
Investments. Van Kampen Investments is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Adviser's principal office is located at 1
Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its
assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to the average daily net assets of
the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
-----------------------------------------------
<S> <C> <C> <C>
First $500 million 0.75%
...............................................
Next $500 million 0.70%
...............................................
Over $1 billion 0.65%
...............................................
</TABLE>
Applying this fee schedule, the effective advisory fee rate was 0.70% of the
Fund's average daily net assets for the Fund's fiscal year ended March 31, 2000.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.
10
<PAGE> 13
Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment, and provides administrative services to the Fund. The
Fund pays all charges and expenses of its day-to-day operations, including
service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of reports and proxies to shareholders, compensation
of trustees of the Trust (other than those who are affiliated persons of the
Adviser, Distributor or Van Kampen Investments) and all other ordinary business
expenses not specifically assumed by the Adviser.
From time to time, the Adviser or the Distributor may voluntarily undertake to
reduce the Fund's expenses by reducing the fees payable to them or by reducing
other expenses of the Fund in accordance with such limitations as the Adviser or
Distributor may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").
PERSONAL INVESTMENT POLICIES. The Fund, the Adviser and the Distributor have
adopted Codes of Ethics designed to recognize the fiduciary relationships among
the Fund, the Adviser, the Distributor and their respective employees. The Codes
of Ethics permit directors, trustees, officers and employees to buy and sell
securities for their personal accounts subject to certain restrictions. Persons
with access to certain sensitive information are subject to pre-clearance and
other procedures designed to prevent conflicts of interest.
PORTFOLIO MANAGEMENT. The Fund is managed by a team of portfolio managers.
Senior Portfolio Managers Gary M. Lewis and Dudley Brickhouse are the co-lead
managers of the Fund. Mr. Lewis has overall responsibility for the team of
portfolio managers which also manages the Van Kampen Emerging Growth, Van Kampen
Select Growth and Van Kampen Technology Funds in addition to the Fund. Mr. Lewis
has been a Senior Vice President of the Adviser and Asset Management since
September 1995. Mr. Lewis became a Vice President and Portfolio Manager of Asset
Management in June 1991. Mr. Lewis has been employed by Asset Management since
September 1986. He has been affiliated with the Fund since its inception.
Mr. Brickhouse has been a Senior Portfolio Manager since April 2000, and a
Portfolio Manager and Vice President of the Adviser and Asset Management since
December 1998. Mr. Brickhouse became an Associate Portfolio Manager of the
Adviser and Asset Management in September 1997. Prior to September 1997, Mr.
Brickhouse was a Vice President and Portfolio Manager with NationsBank, where he
had worked since 1985. He has been affiliated with the Fund since September
1997.
Senior Portfolio Managers Janet Luby and David Walker and Portfolio Manager
Matthew Hart are responsible as co-managers for the day-to-day management of the
Fund's investment portfolio.
Mr. Hart has been a Portfolio Manager since January 1998, and a Vice President
of the Adviser and Asset Management since December 1998. Mr. Hart became an
Associate Portfolio Manager of the Adviser and Asset Management in August 1997.
Prior to August 1997, Mr. Hart held various positions within the portfolio area
of AIM Capital Management, Inc., where he had worked since June 1992. Mr. Hart's
last position in the AIM portfolio area was as a convertible bonds analyst. He
has been affiliated with the Fund since February 2000.
Ms. Luby has been a Senior Portfolio Manager since April 2000, and a Portfolio
Manager and Vice President of the Adviser and Asset Management since December
1998. Ms. Luby became an Assistant Vice President of the Adviser and Asset
Management in December 1997 and an Associate Portfolio Manager of Asset
Management in July 1995. Prior to July 1995, Ms. Luby spent eight years at AIM
Capital Management, Inc. where she worked five years in the accounting
department and three years in the investment area. Her last position in the AIM
investment area was as a senior securities analyst. Ms. Luby also has been the
portfolio manager for various unit investment trusts managed by the Adviser or
its affiliates since August 1999. She has been affiliated with the Fund since
its inception.
Mr. Walker has been a Senior Portfolio Manager since April 2000, and a Portfolio
Manager and Vice President of the Adviser and Asset Management since December
1998. Mr. Walker became an Assistant
11
<PAGE> 14
Vice President of the Adviser and Asset Management in June 1995. Prior to April
1996, Mr. Walker was a Quantitative Analyst of Asset Management and has worked
for Asset Management since October 1990. Mr. Walker also has been the portfolio
manager for various unit investment trusts managed by the Adviser or its
affiliates since September 1997. He has been affiliated with the Fund since its
inception.
PURCHASE OF SHARES
GENERAL
This prospectus offers Class D Shares of the Fund. Class D Shares are offered
without any sales charges on purchases or sales and without any distribution fee
(12b-1). Class D shares are available for purchase exclusively by investors
meeting an initial minimum investment of $5 million and to investors of
tax-exempt retirement plans (Profit Sharing, 401(k), Money Purchase Pension and
Defined Benefit Plans) of Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean
Witter") or any of its subsidiaries for the benefit of certain employees of
Morgan Stanley Dean Witter and its subsidiaries.
Initial investments must be at least $5,000,000 for Class D Shares, and
subsequent investments must be at least $25 for Class D Shares. Minimum
investment amounts may be waived by the Distributor for plans involving periodic
investments and for certain retirement accounts.
Other classes of shares of the Fund may be offered through one or more separate
prospectuses of the Fund. Each class of shares of the Fund represents an
interest in the same portfolio of investments of the Fund and generally has the
same rights, except for the differing sales loads, distribution fees, services
fees and any related expenses associated with each class of shares, the
exclusive voting rights by each class with respect to any distribution plan or
service plan for such class or shares, and some classes may have different
conversion rights or shareholder servicing options.
The offering price of the Fund's Class D Shares is the Fund's net asset value
per share. The net asset value per share is determined once daily as of the
close of trading on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m., New York time) each day the Exchange is open for trading 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's Board
of Trustees reserves the right to calculate the net asset value per share and
adjust the offering price more frequently than once daily if deemed desirable.
Net asset value per share for each class is determined by dividing the value of
the Fund's portfolio securities, cash and other assets (including accrued
interest) attributable to such class, less all liabilities (including accrued
expenses) attributable to such class, by the total number of shares of the class
outstanding. Such computation is made by using prices as of the close of trading
on the Exchange and (i) valuing securities listed or traded on a national
securities exchange at the last reported sale price, and if there has been no
sale that day, at the mean between the last reported bid and asked prices, (ii)
valuing over-the-counter securities at the last reported sale price from the
National Association of Securities Dealer's Automated Quotations ("NASDAQ") and,
if there has been no sale that day, at the mean between the last reported bid
and asked prices and (iii) valuing securities for which market quotations are
not readily available and any other assets at fair value as determined in good
faith by the Adviser in accordance with procedures established by the Fund's
Board of Trustees. Short-term securities with remaining maturities of 60 days or
less are valued on an amortized cost basis, which approximates market value.
The shares are offered to investors on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555. Shares also are offered through members
of the NASD who are acting as securities dealers ("dealers") and NASD members or
eligible non-NASD members who are acting as brokers or agents for investors
("brokers").
12
<PAGE> 15
"Dealers" and "brokers" are sometimes referred to herein as "authorized
dealers."
Shares may be purchased on any business day by completing the account
application form and forwarding the account application, directly or through an
authorized dealer, to the Fund's shareholder service agent, Van Kampen Investor
Services Inc. ("Investor Services"), a wholly owned subsidiary of Van Kampen
Investments. When purchasing shares of the Fund through this prospectus,
investors must specify that the purchase is for Class D Shares.
The offering price for Class D Shares is the next calculation of net asset value
per share after an order is received by Investor Services. Orders received by
authorized dealers prior to the close of the Exchange are priced based on the
date of receipt, provided such order is transmitted to Investor Services prior
to Investor Services' close of business on such date. Orders received by
authorized dealers after the close of the Exchange or transmitted to Investor
Services after its close of business are priced based on the date of the next
determined net asset value per share provided they are received by Investor
Services prior to Investor Services' close of business on such date. It is the
responsibility of authorized dealers to transmit orders received by them to
Investor Services so they will be received in a timely manner.
The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund by telephone at (800)
341-2911 or by writing to the Fund, c/o Van Kampen Investor Services Inc., PO
Box 218256, Kansas City, MO 64121-8256.
REDEMPTION OF
SHARES
Generally, shareholders of Class D Shares of the Fund may redeem for cash some
or all of their shares without charge by the Fund at any time. The redemption
price will be the net asset value per share next determined after the receipt of
a request in proper form (see below). Redemptions completed through an
authorized dealer or a custodian/trustee of a retirement plan account may
involve additional fees charged by the dealer or custodian/trustee.
Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind will result
in recognition by the shareholder of a gain or loss for federal income tax
purposes when such securities are distributed, and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms the purchase check has cleared, which may
take up to 15 days from the date of purchase. A taxable gain or loss may be
recognized by the shareholder upon redemption of shares. Certificated shares
must be properly endorsed for transfer and must accompany a written redemption
request.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and class designation of such shares and the shareholder's account number.
The redemption request must be signed by all persons in whose names the shares
are registered. Signatures must conform exactly to the account registration. If
the proceeds of the redemption
13
<PAGE> 16
exceed $50,000, or if the proceeds are not to be paid to the record owner at the
record address, or if the record address has changed within the previous 30
days, signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some cases, however, additional documents may be necessary. Certificated
shares may be redeemed only by written request. The certificates for the shares
being redeemed must be properly endorsed for transfer and must accompany the
redemption request.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. The redemption price for such shares is
the net asset value per share next calculated after an order in proper form is
received by an authorized dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of business on such day. It is the
responsibility of authorized dealers to transmit redemption requests received by
them to the Distributor so they will be received prior to such time. Redemptions
completed through an authorized dealer may involve additional fees charged by
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. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Van Kampen Investments and its subsidiaries, including Investor
Services, 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, none of Van Kampen Investments, Investor
Services or the Fund will be liable for following telephone instructions which
it reasonably believes to be genuine. 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 procedure previously
described. Requests received by Investor Services prior to 4:00 p.m., New York
time, will be processed at the next determined net asset value per share. These
privileges are available for most 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 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 payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account that
has 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 provided to the
shareholder and such shareholder will be given
14
<PAGE> 17
an opportunity to purchase the required value of additional shares at the next
determined net asset value without sales charge. Any involuntary redemption may
only occur if the shareholder account is less than the minimum initial
investment due to shareholder redemptions.
DISTRIBUTIONS FROM THE FUND
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.
DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Trustees, is to
distribute all or substantially all of its net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.
CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. The Fund distributes any capital gains to
shareholders at least annually. As in the case of dividends, capital gain
dividends are automatically reinvested in additional shares of the Fund at the
next determined net asset value unless the shareholder instructs otherwise.
SHAREHOLDER SERVICES
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Fund's Statement of Additional Information or contact your
authorized dealer.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share on the applicable
payable date of the dividend or capital gain dividend. 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 by writing to Investor Services. The investor may, on the account
application form or prior to any declaration, instruct that dividends and/or
capital gain dividends be paid in cash, be reinvested in the Fund at the next
determined net asset value, or be invested in another participating Van Kampen
fund at the next determined net asset value.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit the shareholder's bank
account on a regular basis to invest predetermined amounts in the Fund.
Additional information is available from the Distributor or your authorized
dealer.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any participating Van Kampen fund based on the next determined 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 Van Kampen fund only if shares of that
participating Van Kampen fund are available for sale; however, during periods of
suspension of sales, shares of a participating Van Kampen fund may be available
for sale only to existing shareholders of a participating Van Kampen fund.
Shareholders seeking an exchange into a participating Van Kampen fund should
obtain and read the current prospectus for such fund prior to implementing an
exchange. A prospectus of any of the participating Van Kampen funds may be
obtained from an authorized dealer or the Distributor.
To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at least 30 days prior to an exchange. Shares of the Fund
registered in a shareholder's name for less than 30 days may only be exchanged
upon receipt of prior
15
<PAGE> 18
approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, not to approve such requests.
Exchanges of shares are sales of shares of one participating Van Kampen fund and
purchases of shares of another participating Van Kampen fund. The sale may
result in a gain or loss for federal income tax purposes.
If the exchanging shareholder does not have an account in the fund whose shares
are being acquired, a new account will be established with the same
registration, dividend and capital gain dividend options (except dividend
diversification) and authorized dealer of record as the account from which
shares are exchanged, unless otherwise specified by the shareholder. In order to
establish a systematic withdrawal plan for the new account or reinvest dividends
from the new account into another fund, however, an exchanging shareholder must
submit a specific request. The Fund reserves the right to reject any order to
acquire its shares through exchange. In addition, the Fund and other
participating Van Kampen funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disallowing the exchange privilege to such
shareholders. For further information on these restrictions, see the Fund's
Statement of Additional Information. 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.
Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares of the fund which the
shareholder is redeeming will be redeemed at the net asset value per share next
determined on the date of receipt. Shares of the fund that the shareholder is
purchasing will also normally be purchased at the net asset value per share next
determined on the date of receipt. Exchange requests received on a business day
after the time that shares of the funds involved in the request are priced will
be processed on the next business day in the manner described herein.
FEDERAL INCOME
TAXATION
Distributions of the Fund's investment company taxable income (consisting
generally of ordinary income and net short-term capital gain) are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain (which is the excess of net long-term capital
gain over net short-term capital loss) as capital gain dividends, if any, are
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of how long the shares of the
Fund have been held by such shareholders. The Fund expects that its
distributions will consist primarily of ordinary income and capital gain
dividends. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder (assuming
such shares are held as a capital asset). Although distributions generally are
treated as taxable in the year they are paid, distributions declared in October,
November or December, payable to shareholders of record on a specified date in
such month and paid during January of the following year will be treated as
having been distributed by the Fund and received by the shareholders on the
December 31st prior to the date of payment. The Fund will inform shareholders of
the source and tax status of all distributions promptly after the close of each
calendar year.
The sale or exchange of shares may be a taxable transaction for federal income
tax purposes. Shareholders who sell their shares will generally recognize a gain
or loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held by the
shareholder as a capital asset, the gain or loss will be a capital gain or loss.
Any recognized capital gains may be taxed at different rates depending on how
long the shareholder held such shares.
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
16
<PAGE> 19
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their tax
advisers concerning the tax consequences to them of an investment in shares.
The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.
The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding and disposing of shares
of the Fund, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
17
<PAGE> 20
BOARD OF TRUSTEES
AND OFFICERS
BOARD OF TRUSTEES
<TABLE>
<S> <C>
J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson
</TABLE>
OFFICERS
Richard F. Powers, III*
President
Stephen L. Boyd*
Executive Vice President and Chief Investment Officer
A. Thomas Smith III*
Vice President and Secretary
John H. Zimmermann, III*
Vice President
Michael H. Santo*
Vice President
Richard A. Ciccarone*
Vice President
John R. Reynoldson*
Vice President
John L. Sullivan*
Vice President, Chief Financial Officer and Treasurer
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
FOR MORE INFORMATION
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
WEB SITE
www.vankampen.com
VAN KAMPEN AGGRESSIVE GROWTH FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Aggressive Growth Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Aggressive Growth Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Auditors
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
<PAGE> 21
VAN KAMPEN
AGGRESSIVE GROWTH FUND
CLASS D SHARES
PROSPECTUS
SEPTEMBER 25, 2000
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.
You will find additional information about the
Fund in its annual and semiannual reports to
shareholders. The annual report explains the
market conditions and investment strategies
affecting the Fund's performance during its
last fiscal year.
You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.
Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC's Public
Reference Room in Washington, DC or on the
EDGAR database on the SEC's internet site
(http://www.sec.gov). Information on the
operation of the SEC's Public Reference Room
may be obtained by calling the SEC at
1-202-942-8090. You can also request copies of
these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail
address ([email protected]), or by writing
the Public Reference Section of the SEC,
Washington, DC 20549-0102.
[VAN KAMPEN FUNDS LOGO]
The Fund's Investment Company Act File No. is 811-4805. AGG PRO 9/00
<PAGE> 22
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN
AGGRESSIVE GROWTH FUND
Van Kampen Aggressive Growth Fund (the "Fund") is a mutual fund with the
investment objective to seek capital growth. The Fund's investment adviser seeks
to achieve the Fund's investment objective by investing primarily in common
stocks and other equity securities of small- and medium-sized growth companies.
The Fund is organized as a diversified series of the Van Kampen Equity
Trust, an open-end, management investment company (the "Trust").
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's Class A Share, Class B Share and Class C Share prospectus dated July 28,
2000 and the Fund's Class D Share prospectus dated September 25, 2000
(collectively, the "Prospectus"). This Statement of Additional Information does
not include all the information that a prospective investor should consider
before purchasing shares of the Fund. Investors should obtain and read the
Prospectus prior to purchasing shares of the Fund. A Prospectus may be obtained
without charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza,
PO Box 5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800)
421-2833 for the hearing impaired).
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective, Policies and Risks.................... B-4
Strategic Transactions...................................... B-8
Investment Restrictions..................................... B-16
Trustees and Officers....................................... B-18
Investment Advisory Agreement............................... B-28
Other Agreements............................................ B-29
Distribution and Service.................................... B-30
Transfer Agent.............................................. B-35
Portfolio Transactions and Brokerage Allocation............. B-35
Shareholder Services........................................ B-37
Redemption of Shares........................................ B-39
Contingent Deferred Sales Charge-Class A.................... B-40
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-40
Taxation.................................................... B-42
Fund Performance............................................ B-46
Other Information........................................... B-50
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-13
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 25, 2000.
AGG SAI 9/00
<PAGE> 23
GENERAL INFORMATION
The Trust is an unincorporated business trust established under the laws of
the State of Delaware by an Agreement and Declaration of Trust (the "Declaration
of Trust") dated May 10, 1995. The Declaration of Trust permits the Trustees to
create one or more separate investment portfolios and issue a series of shares
for each portfolio, such as the Fund. The Trustees may create one or more
classes of shares for each series.
The Trust was originally organized in 1987 under the name Van Kampen
Merritt Equity Trust as a Massachusetts business trust (the "Massachusetts
Trust"). The Massachusetts Trust was reorganized into the Trust under the name
Van Kampen American Capital Equity Trust on July 31, 1995. The Trust was created
for facilitating the Massachusetts Trust reorganization into a Delaware business
trust. On July 14, 1998, the Trust adopted its current name.
The Fund was originally organized as a series of the Trust under the name
Van Kampen American Capital Aggressive Growth Fund on April 26, 1996. On July
14, 1998, the Fund adopted its current name.
Van Kampen Investment Advisory Corp. (the "Adviser" or "Advisory Corp."),
Van Kampen Funds Inc. (the "Distributor"), and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean Witter"). The principal
office of the Trust, the Fund, the Adviser, the Distributor and Van Kampen
Investments is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555. The principal office of Investor Services is located at 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153.
Morgan Stanley Dean Witter is a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities; asset management; and credit services.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
The Fund currently offers four classes of shares, designated Class A
Shares, Class B Shares, Class C Shares and Class D Shares. Other classes may be
established from time to time in accordance with provisions of the Declaration
of Trust. Each class of shares of the Fund generally is identical in all
respects except that each class bears certain distribution expenses and has
exclusive voting rights with respect to its distribution fee. 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 and separate
votes are taken by each class of a series on matters affecting an individual
class of such series. For example, a change in investment policy for a series
would be voted upon by shareholders
B-2
<PAGE> 24
of only the series involved and a change in the distribution fee for a class of
a series would be voted upon by shareholders of only the class of such series
involved. Except as otherwise described in the Prospectus or herein, shares do
not have cumulative voting rights, preemptive rights or any conversion,
subscription or exchange rights.
The Trust does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or rules or
regulations promulgated by the Securities and Exchange Commission ("SEC").
In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be less than to holders of
Class A Shares and Class D Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
outstanding and entitled to vote present at a meeting of shareholders (or such
higher vote as may be required by the 1940 Act or other applicable law) and
except that the Trustees cannot amend the Declaration of Trust to impose any
liability on shareholders, make any assessment on shares or impose liabilities
on the Trustees without approval from each affected shareholder or Trustee, as
the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
B-3
<PAGE> 25
As of September 5, 2000, no person was known by the Fund to own
beneficially or to hold of record 5% or more of the outstanding Class A Shares,
Class B Shares, Class C Shares or Class D Shares of the Fund, except as follows:
<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT
SEPTEMBER 5, CLASS PERCENTAGE
NAME AND ADDRESS OF RECORD HOLDER 2000 OF SHARES OWNERSHIP
--------------------------------- ------------ --------- ----------
<S> <C> <C> <C>
MLPF&S for the sole benefit................. 4,797,977 A 12.44%
of its customers
Attn: Fund Administration 97J79
4800 Deer Lake Drive E 2(nd) Floor
Jacksonville, FL 32246-6484
Northern Trust CO TR........................ 4,547,348 A 11.79%
FBO Morgan Stanley
Deferred Profit Sharing Plan
P.O. Box 92956
Chicago, Illinois 60675-2956
Edward D. Jones & CO........................ 2,667,004 A 6.92%
Attn: Mutual Fund
Shareholder Accounting
201 Progress Parkway
Maryland Heights, MO 63043-3009
MLPF&S for the sole benefit................. 1,934,850 B 6.37%
of its customers
Attn: Fund Administration 97J80
4800 Deer Lake Drive E 2(nd) Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit................. 824,601 C 11.78%
of its customers
Attn: Fund Administration 97J81
4800 Deer Lake Drive E 2(nd) Floor
Jacksonville, FL 32246-6484
</TABLE>
Van Kampen Trust Company acts as custodian for certain employee benefit
plans and individual retirement accounts.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The following disclosure supplements the disclosure set forth under the
same caption in the Prospectus and does not, standing alone, present a complete
or accurate explanation of the matters disclosed. Readers must refer also to
this caption in the Prospectus for a complete presentation of the matters
disclosed below.
B-4
<PAGE> 26
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements with broker-dealers, banks and
other financial institutions in order to earn a return on temporarily available
cash. The Fund may invest an amount up to 25% of its total assets at the time of
purchase in securities subject to repurchase agreements. A repurchase agreement
is a short-term investment in which the purchaser (i.e., the Fund) acquires
ownership of a security and the seller agrees to repurchase the obligation at a
future time and set price, thereby determining the yield during the holding
period. Repurchase agreements involve certain risks in the event of default by
the other party. The Fund may enter into repurchase agreements with broker-
dealers, banks and other financial institutions deemed to be creditworthy by the
Adviser under guidelines approved by the Fund's Board of Trustees. The Fund will
not invest in repurchase agreements maturing in more than seven days if any such
investment, together with any other illiquid securities held by the Fund, would
exceed the Fund's limitation on illiquid securities described herein. The Fund
does not bear the risk of a decline in the value of the underlying security
unless the seller defaults under its repurchase obligation. In the event of the
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and losses
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible lack
of access to income on the underlying security during this period; and (c)
expenses of enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC permitting this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
Repurchase agreements are fully collateralized by the underlying securities
and are considered to be loans under the 1940 Act. The Fund pays for such
securities only upon physical delivery or evidence of book entry transfer to the
account of a custodian or bank acting as agent. The seller under a repurchase
agreement will be required to maintain the value of the underlying securities
marked-to-market daily at not less than the repurchase price. The underlying
securities (normally securities of the U.S. government, its agencies or
instrumentalities) may have maturity dates exceeding one year.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
The Fund may borrow money for investment purposes. The Fund may borrow
money from banks and engage in reverse repurchase agreements in an amount up to
33 1/3% of the Fund's total assets (including the amount borrowed). The Fund may
also borrow money in an amount up to 5% of the Fund's total assets for temporary
purposes. The Fund has no current intention to borrow money other than for
temporary purposes.
B-5
<PAGE> 27
Borrowing by the Fund creates an opportunity for increased net income but,
at the same time, creates special risk considerations such as higher volatility
in the net asset value of the shares and in the yield on the Fund's portfolio.
To the extent that the Fund is otherwise fully invested and the Adviser believes
that additional investment opportunities exist with the potential for capital
growth, the Fund may employ leverage for the purpose of acquiring portfolio
securities. Such utilization of leverage is considered speculative, and involves
risks. The assets of the Fund, including any additional assets which may be
purchased with the proceeds of any borrowings, will consist primarily of common
stocks and other equity securities of growth companies, the prices of which are
volatile. In the event that the values of the Fund's portfolio securities do not
appreciate or, in fact, depreciate, the Fund would be forced to liquidate a
portion of its portfolio, which could be significant depending upon the
magnitude of the decline in value of the Fund's assets, to pay interest on, and
repay the principal of, any such borrowings. Even in the event that any assets
purchased with the proceeds of such borrowings appreciate as anticipated by the
Adviser, a portion of the Fund's assets may be required to be liquidated to meet
scheduled principal and interest payments with respect to such borrowings. Any
such liquidations may be at inopportune times and prices. Utilization of
investment leverage would result in a higher volatility of the net asset value
of the Fund. The effect of leverage in a declining market would result in a
greater decrease in net asset value to holders of the Fund's shares than if the
Fund were not leveraged.
Reverse repurchase agreements involve sales by the Fund of portfolio assets
concurrently with an agreement by the Fund to repurchase the same assets at a
later date at a fixed price. During the reverse repurchase agreement period, the
Fund continues to receive principal and interest payments on these securities.
The Fund will establish a segregated account with its custodian in which it will
maintain cash or liquid securities equal in value to its obligations in respect
of reverse repurchase agreements and, accordingly, the Fund will not treat such
obligations as senior securities for purposes of the 1940 Act. Reverse
repurchase agreements involve the risk that the market value of the securities
retained by the Fund may decline below the price of the securities the Fund has
sold but is obligated to repurchase under the agreement. In the event the buyer
of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable legal and regulatory requirements, the Fund may
lend its portfolio securities to broker-dealers, banks and other institutional
borrowers of securities provided that such loans are at all times secured by
collateral that is at least equal to the market value, determined daily, of the
loaned securities and such loans are callable at any time by the Fund. The
advantage of such loans is that the Fund continues to receive the interest or
dividends on the loaned securities, while at the same time earning interest on
the collateral which is invested in short-term obligations or the Fund receives
an agreed-upon amount of interest from the borrower of the security. The Fund
may pay reasonable finders', administrative and custodial fees in connection
with loans of its securities. There is no assurance as to the extent to which
securities loans can be effected.
B-6
<PAGE> 28
If the borrower fails to return the borrowed securities or maintain the
requisite amount of collateral, the loan automatically terminates, and the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Fund's Adviser to be creditworthy and when the consideration
which can be earned from such loans is believed to justify the attendant risks.
On termination of the loan, the borrower is required to return the securities to
the Fund; any gain or loss in the market price during the loan would inure to
the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan.
"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 the Fund on securities in
connection with such purchase transactions prior to the date the Fund actually
takes delivery of such securities. These transactions are subject to market
fluctuation; the value of the securities at delivery may be more or less than
their purchase price, and yields generally available on comparable securities
when delivery occurs may be higher or lower than yields on the securities
obtained pursuant to such transactions. Because the Fund relies on the buyer or
seller, as the case may be, to consummate the transaction, failure by the other
party to complete the transaction may result in the Fund missing the opportunity
of obtaining a price or yield considered to be advantageous. When the Fund is
the buyer in such a transaction, however, it will maintain, in a segregated
account with its custodian, cash or portfolio securities having an aggregate
value equal to the amount of such purchase commitments until payment is made.
The Fund will make commitments to purchase securities on such basis only with
the intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such 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 objectives and
policies and not for the purpose of investment leverage.
SHORT SALES AGAINST THE BOX
The Fund may engage in "short-sales against the box." A short sale is a
transaction in which the Fund would sell securities it does not own (but has
borrowed) in anticipation of a decline in the market price of securities. A
short-sale against the box is a transaction where at all times when the short
position is open the Fund owns an equal amount of such securities or securities
convertible or exchangeable into such securities without payment of additional
consideration. The Fund will not engage in short sales other than against the
box.
B-7
<PAGE> 29
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year. The
turnover rate may vary greatly from year to year as well as within a year.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities,
which includes securities that are not readily marketable, repurchase agreements
which have a maturity of longer than seven days and generally includes
securities that are restricted from sale to the public without registration
under the Securities Act of 1933, as amended (the "1933 Act"). 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 liquid
securities trading on national securities exchanges or in the over-the-counter
markets. Restricted securities are often purchased at a discount from the market
price of unrestricted securities of the same issuer reflecting the fact that
such securities may not be readily marketable without some time delay.
Investments in securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Adviser in
accordance with procedures approved by the Fund's Board of Trustees. Ordinarily,
the Fund would invest in restricted securities only when it receives the
issuer's commitment to register the securities without expense to the Fund.
However, registration and underwriting expenses (which typically range from 7%
to 15% of the gross proceeds of the securities sold) may be paid by the Fund.
Restricted securities, which can be offered and sold to qualified institutional
buyers under Rule 144A under the 1933 Act ("144A Securities") and are determined
to be liquid under guidelines adopted by and subject to the supervision of the
Fund's Board of Trustees, are not subject to the limitation on illiquid
securities. Such 144A Securities are subject to monitoring and may become
illiquid to the extent qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Factors used to determine whether
144A Securities are liquid include, among other things, a security's trading
history, the availability of reliable pricing information, the number of dealers
making quotes or making a market in such security and the number of potential
purchasers in the market for such security. For purposes hereof, investments by
the Fund in securities of other investment companies will not be considered
investments in restricted securities to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief (such as "no action" letters issued by the staff of the SEC
interpreting or providing guidance on the 1940 Act or regulations thereunder)
from the provisions of the 1940 Act, as amended from time to time.
STRATEGIC TRANSACTIONS
The Fund may, but is not required to, use various investment strategies as
described below to facilitate portfolio management and mitigate risks.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. Although the Fund's
Adviser seeks to use such transactions to further the
B-8
<PAGE> 30
Fund's investment objective, no assurance can be given that the use of these
transactions will achieve this result.
In the course of pursuing these investment strategies, the Fund may
purchase and sell derivative securities such as exchange-listed and
over-the-counter put and call options on securities, financial futures, equity,
fixed-income and interest rate indices and other financial instruments, purchase
and sell financial futures contracts and options thereon, and enter into various
currency transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currency or currency futures
(collectively, all the above are called "Strategic Transactions"). Among other
things, Strategic Transactions may be used to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
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,
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 or purchase 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 use of
these futures contracts and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such
B-9
<PAGE> 31
losses can be greater than if the Strategic Transactions had not been utilized.
Income earned or deemed to be earned, if any, by the Fund from its Strategic
Transactions will generally be taxable.
OPTIONS
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Strategic Transactions involving options
require segregation of Fund assets in special accounts, as described below under
"Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as a paradigm, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
B-10
<PAGE> 32
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with U.S.
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers", or broker dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of "A-1" from Standard &
Poor's ("S&P") or "P-1" from Moody's Investors Service, Inc. ("Moody's") or an
equivalent rating from any other nationally recognized statistical rating
organization ("NRSRO"). The staff of the SEC currently takes the position that,
in general, over-the-counter options on securities purchased by the Fund, and
portfolio securities "covering" the amount of the Fund's obligation pursuant to
an over-the-counter option sold by it (the cost of the sell-back plus the
in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on illiquid securities described herein.
If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call or put options on securities, including
U.S. Treasury and agency securities, foreign sovereign debt, mortgage-backed
securities, corporate debt securities, Eurodollar instruments and foreign debt
securities that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets and related futures on such securities, indices,
currencies and futures. All calls sold by the Fund must
B-11
<PAGE> 33
be "covered" (i.e., the Fund must own the securities or futures contract subject
to the call) or must meet the asset segregation requirements described below as
long as the call is outstanding. Even though the Fund will receive the option
premium to help protect it against loss, a call sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may require the Fund to hold a security or instrument which it might otherwise
have sold. In selling put options, there is a risk that the Fund may be required
to buy the underlying security at a disadvantageous price above the market
price.
FUTURES
The Fund may enter into financial futures contracts or purchase or sell put
and call options on such futures as a hedge against anticipated interest rate,
currency, equity or fixed-income market changes and for risk management
purposes. Futures generally are bought and sold on the commodities exchanges
where they are listed with payment of initial and variation margin as described
below. The purchase of a futures contract creates a firm obligation by the Fund,
as purchaser, to take delivery from the seller the specific type of financial
instrument called for in the contract at a specific future time for a specified
price. The sale of a futures contract creates a firm obligation by the Fund, as
seller, to deliver to the buyer the specific type of financial instrument called
for in the contract at a specific future time for a specified price (or, with
respect to index futures and Eurodollar instruments, the net cash amount).
Options on futures contracts are similar to options on securities except that an
option on a futures contract gives the purchaser the right in return for the
premium paid to assume a position in a futures contract and obligates the seller
to deliver such option.
The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission ("CFTC") and
will be entered into only for bona fide hedging, risk management or other
portfolio management purposes. Typically, maintaining a futures contract or
selling an option thereon requires the Fund to deposit with a financial
intermediary as security for its obligations an amount of cash or other
specified assets (initial margin) which initially is typically 1% to 10% of the
face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of options on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price nor that delivery will occur.
The Fund will not enter into a futures contract or related option (except
for closing transactions) for other than bona fide hedging purposes if,
immediately thereafter, the sum of the amount of its initial margin and premiums
on open futures contracts and options thereon would exceed 5% of the Fund's
total assets (taken at current value); however, in the case of an option that is
in-the-money at the time of the purchase, the in-the-money
B-12
<PAGE> 34
amount may be excluded in calculating the 5% limitation. The segregation
requirements with respect to futures contracts and options thereon are described
below.
OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES
The Fund also may purchase and sell call and put options on securities
indices and other financial indices and in so doing can achieve many of the same
objectives it would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices and
other financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, they settle by cash settlement, i.e., an option on an index gives
the holder the right to receive, upon exercise of the option, an amount of cash
if the closing level of the index upon which the option is based exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option (except if, in the case of an OTC option, physical delivery is
specified). This amount of cash is equal to the excess of the closing price of
the index over the exercise price of the option, which also may be multiplied by
a formula value. The seller of the option is obligated, in return for the
premium received, to make delivery of this amount. The gain or loss on an option
on an index depends on price movements in the instruments making up the market,
market segment, industry or other composite on which the underlying index is
based, rather than price movements in individual securities, as is the case with
respect to options on securities.
CURRENCY TRANSACTIONS
The Fund may engage in currency transactions with Counterparties in order
to manage the value of currencies against fluctuations in relative value.
Currency transactions include forward currency contracts, exchange listed
currency futures, exchange listed and OTC options on currencies, and currency
swaps. A forward currency contract involves a privately negotiated obligation to
purchase or sell (with delivery generally required) a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. A
currency swap is an agreement to exchange cash flows based on the notional
difference among two or more currencies and operates similarly to an interest
rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties rated A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
options) are determined to be of equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended to wholly or partially
offset other
B-13
<PAGE> 35
transactions, than the aggregate market value (at the time of entering into the
transaction) of the securities held in its portfolio that are denominated or
generally quoted in or currently convertible into such currency other than with
respect to cross-hedging or proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which Fund expects to
have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Adviser considers the Austrian schilling is
linked to the German deutschemark (the "D-mark"), the Fund holds securities
denominated in Austrian schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may enter into a
contract to sell D-marks and buy dollars. Currency hedging involves some of the
same risks and considerations as other transactions with similar instruments.
Currency transactions can result in losses to the Fund if the currency being
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from other transactions. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be
negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
COMBINED TRANSACTIONS
Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions and multiple currency transactions
(including forward currency contracts) and any combination of futures, options
and currency transactions
B-14
<PAGE> 36
("component" transactions), instead of a single Strategic Transaction, as part
of a single or combined strategy when, in the opinion of the Adviser, it is in
the best interests of the Fund to do so. A combined transaction will usually
contain elements of risk that are present in each of its component transactions.
Although combined transactions are normally entered into based on the Adviser's
judgment that the combined strategies will reduce risk or otherwise more
effectively achieve the desired portfolio management goal, it is possible that
the combination will instead increase such risks or hinder achievement of the
portfolio management objective.
RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES
When conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lower
trading volume and liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many Strategic Transactions, in addition to other requirements, require
that the Fund segregate cash or liquid securities with its custodian to the
extent Fund obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency. In general, either the
full amount of any obligation by the Fund to pay or deliver securities or assets
must be covered at all times by the securities, instruments or currency required
to be delivered, or, subject to any regulatory restrictions, an amount of cash
or liquid securities at least equal to the current amount of the obligation must
be segregated with the custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option written by the
Fund will require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate cash or liquid securities sufficient to purchase
and deliver the securities if the call is exercised. A call option sold by the
Fund on an index will require the Fund to own portfolio securities which
correlate with the index or to segregate cash or liquid securities equal to the
excess of the index value over the exercise price on a current basis. A put
option written by the Fund requires the Fund to segregate cash or liquid
securities equal to the exercise price. A currency contract which obligates the
Fund to buy or sell currency will generally require the Fund to hold an amount
of that currency or liquid securities denominated in that currency equal to the
Fund's obligations or to segregate cash or liquid securities equal to the amount
of the Fund's obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no
B-15
<PAGE> 37
requirement for payment or delivery of amounts in excess of the net amount.
These amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OCC guaranteed listed option sold by the Fund,
or the in-the-money amount plus any sell-back formula amount in the case of a
cash-settled put or call. In addition, when the Fund sells a call option on an
index at a time when the in-the-money amount exceeds the exercise price, the
Fund will segregate, until the option expires or is closed out, cash or liquid
securities equal in value to such excess. OCC issued and exchange listed options
sold by the Fund other than those above generally settle with physical delivery,
and the Fund will segregate an amount of assets equal to the full value of the
option. OTC options settling with physical delivery, or with an election of
either physical delivery or cash settlement, will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash or liquid
securities.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund also may enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions also may be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
The Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which may not be changed without shareholder approval by the vote of a majority
of its outstanding voting securities which is defined by the 1940 Act as the
lesser of (i) 67% or more of the Fund's voting securities present at a meeting,
if the holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy; or (ii) more than 50% of the Fund's
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities.
B-16
<PAGE> 38
With respect to the limitations on illiquid securities and borrowings, the
percentage limitations apply at the time of purchase and on an ongoing basis.
The Fund shall not:
1. Purchase any securities (other than obligations issued or guaranteed by
the U.S. government or by its instrumentalities), if, as a result, more
than 5% of the Fund's total assets (taken at current value) would then be
invested in securities of a single issuer or, if, as a result, such Fund
would hold more than 10% of the outstanding voting securities of an
issuer; except that up to 25% of the Fund's total assets may be invested
without regard to such limitation and except that the Fund may purchase
securities of other investment companies without regard to such limitation
to the extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time or (iii) an exemption or other relief from
the provisions of the 1940 Act, as amended from time to time.
2. Invest more than 25% of its assets in a single industry, provided,
however, that this limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of
the securities and other assets owned by any such company. (Neither the
U.S. government nor any of its agencies or instrumentalities will be
considered an industry for purposes of this restriction.)
3. Issue senior securities, borrow money from banks or enter into reverse
repurchase agreements with banks in the aggregate in excess of 33 1/3% of
the Fund's total assets (after giving effect to any such borrowing); which
amount excludes no more than 5% of its total assets in borrowings and
reverse repurchase agreements with any entity for temporary purposes. The
Fund will not mortgage, pledge or hypothecate any assets other than in
connection with issuances of senior securities, borrowings, delayed
delivery and when issued transactions and strategic transactions.
4. Make loans of money or property to any person, except (i) to the extent
the securities in which the Fund may invest are considered to be loans,
(ii) through the loan of portfolio securities, and (iii) to the extent
that the Fund may lend money or property in connection with maintenance of
the value of, or the Fund's interest with respect to, the securities owned
by the Fund.
5. Sell any securities "short," unless at all times when a short position is
open the Fund owns an equal amount of the securities or of securities
convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short.
6. Act as an underwriter of securities, except to the extent the Fund may be
deemed to be an underwriter in connection with the sale of securities held
in its portfolio.
7. Make investments for the purpose of exercising control or participation in
management, except to the extent that exercise by the Fund of its rights
under agreements related to portfolio securities would be deemed to
constitute such control or participation and except that the Fund may
purchase securities of other investment companies to the extent permitted
by (i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions of
the 1940 Act, as amended from time to time.
8. Invest in securities issued by other investment companies except as part
of a merger, reorganization or other acquisition and except to the extent
permitted by (i) the
B-17
<PAGE> 39
1940 Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief from the provisions of the 1940 Act,
as amended from time to time.
9. Invest in interests in oil, gas, or other mineral exploration or
development programs, except pursuant to the exercise by the Fund of its
rights under agreements relating to portfolio securities.
10. Purchase or sell real estate, commodities or commodity contracts, except
to the extent that the securities that the Fund may invest in are
considered to be interests in real estate, commodities or commodity
contracts or to the extent the Fund exercises its rights under agreements
relating to portfolio securities (in which case the Fund may liquidate
real estate acquired as a result of a default on a mortgage), and except
to the extent that Strategic Transactions the Fund may engage in are
considered to be commodities or commodities contracts.
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are
referred to herein collectively as the "Advisers". For purposes hereof, the term
"Fund Complex" includes each of the open-end investment companies advised by the
Advisers (excluding Van Kampen Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder, and
Raleigh, NC 27614 prior to August 1996, Chairman, Chief Executive
Date of Birth: 07/14/32 Officer and President, MDT Corporation (now
Age: 68 known as Getinge/Castle, Inc., a subsidiary of
Getinge Industrier AB), a company which
develops, manufactures, markets and services
medical and scientific equipment.
</TABLE>
B-18
<PAGE> 40
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
53 Monarch Bay Drive company. Trustee/Director of each of the funds
Dana Point, CA 92629 in the Fund Complex. Prior to January 1999,
Date of Birth: 09/16/38 Chairman and Chief Executive Officer of The
Age: 62 Allstate Corporation ("Allstate") and Allstate
Insurance Company. Prior to January 1995,
President and Chief Executive Officer of
Allstate. Prior to August 1994, various
management positions at Allstate.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of each
233 South Wacker Drive of the funds in the Fund Complex. Prior to
Suite 7000 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management consulting
Date of Birth: 06/03/48 firm. Formerly, Executive Vice President of ABN
Age: 52 AMRO, N.A., a Dutch bank holding company. Prior
to 1992, Executive Vice President of La Salle
National Bank. Trustee on the University of
Chicago Hospitals Board, Vice Chair of the
Board of The YMCA of Metropolitan Chicago and a
member of the Women's Board of the University
of Chicago. Prior to 1996, Trustee of The
International House Board, a fellowship and
housing organization for international graduate
students.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of
11 DuPont Circle, N.W. the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
Age: 48 of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor to
the Dennis Trading Group Inc., a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
</TABLE>
B-19
<PAGE> 41
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Mitchell M. Merin*........................ President and Chief Operating Officer of Asset
Two World Trade Center Management of Morgan Stanley Dean Witter since
66th Floor December 1998. President and Director since
New York, NY 10048 April 1997 and Chief Executive Officer since
Date of Birth: 08/13/53 June 1998 of Morgan Stanley Dean Witter
Age: 47 Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc. Chairman, Chief Executive
Officer and Director of Morgan Stanley Dean
Witter Distributors Inc. since June 1998.
Chairman and Chief Executive Officer since June
1998, and Director since January 1998, of
Morgan Stanley Dean Witter Trust FSB. Director
of various Morgan Stanley Dean Witter
subsidiaries. President of the Morgan Stanley
Dean Witter Funds since May 1999.
Trustee/Director of each of the funds in the
Fund Complex. Previously Chief Strategic
Officer of Morgan Stanley Dean Witter Advisors
Inc. and Morgan Stanley Dean Witter Services
Company Inc. and Executive Vice President of
Morgan Stanley Dean Witter Distributors Inc.
April 1997-June 1998, Vice President of the
Morgan Stanley Dean Witter Funds May 1997-April
1999, and Executive Vice President of Dean
Witter, Discover & Co.
Jack E. Nelson............................ President and owner, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser in the State
Date of Birth: 02/13/36 of Florida. President and owner, Nelson Ivest
Age: 64 Brokerage Services Inc., a member of the
National Association of Securities Dealers,
Inc. and Securities Investors Protection Corp.
Trustee/Director of each of the funds in the
Fund Complex.
Richard F. Powers, III*................... Chairman, President and Chief Executive Officer
1 Parkview Plaza of Van Kampen Investments. Chairman, Director
P.O. Box 5555 and Chief Executive Officer of the Advisers,
Oakbrook Terrace, IL 60181-5555 the Distributor, Van Kampen Advisors Inc. and
Date of Birth: 02/02/46 Van Kampen Management Inc. Director and officer
Age: 54 of certain other subsidiaries of Van Kampen
Investments. Trustee/Director and President of
each of the funds in the Fund Complex. Trustee,
President and Chairman of the Board of other
investment companies advised by the Advisers
and their affiliates, and Chief Executive
Officer of Van Kampen Exchange Fund. Prior to
May 1998, Executive Vice President and Director
of Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and Dean
Witter Realty. Prior to 1996, Director of Dean
Witter Reynolds Inc.
</TABLE>
B-20
<PAGE> 42
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Phillip B. Rooney......................... Vice Chairman (since April 1997) and Director
One ServiceMaster Way (since 1994) of The ServiceMaster Company, a
Downers Grove, IL 60515 business and consumer services company.
Date of Birth: 07/08/44 Director of Illinois Tool Works, Inc., a
Age: 56 manufacturing company and the Urban Shopping
Centers Inc., a retail mall management company.
Trustee, University of Notre Dame.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1998, Director of Stone
Smurfit Container Corp., a paper manufacturing
company. From May 1996 through February 1997 he
was President, Chief Executive Officer and
Chief Operating Officer of Waste Management,
Inc., an environmental services company, and
from November 1984 through May 1996 he was
President and Chief Operating Officer of Waste
Management, Inc.
Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a
155 Hickory Lane George M. Bond Chaired Professor with Stevens
Closter, NJ 07624 Institute of Technology, and prior to 1995,
Date of Birth: 08/02/24 Dean of the Graduate School, Stevens Institute
Age: 76 of Technology. Director, Dynalysis of
Princeton, a firm engaged in engineering
research. Trustee/Director of each of the funds
in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal counsel
Chicago, IL 60606 to the funds in the Fund Complex, and other
Date of Birth: 08/22/39 investment companies advised by the Advisers.
Age: 61 Trustee/Director of each of the funds in the
Fund Complex, and Trustee/ Managing General
Partner of other investment companies advised
by the Advisers.
Suzanne H. Woolsey........................ Chief Operating Officer of the National Academy
2101 Constitution Ave., N.W. of Sciences/National Research Council, an
Room 206 independent, federally chartered policy
Washington, D.C. 20418 institution, since 1993. Director of Neurogen
Date of Birth: 12/27/41 Corporation, a pharmaceutical company, since
Age: 58 January 1998. Director of the German Marshall
Fund of the United States, Trustee of Colorado
College, and Vice Chair of the Board of the
Council for Excellence in Government. Trustee/
Director of each of the funds in the Fund
Complex. Prior to 1993, Executive Director of
the Commission on Behavioral and Social
Sciences and Education at the National Academy
of Sciences/National Research Council. From
1980 through 1989, Partner of Coopers &
Lybrand.
</TABLE>
------------------------------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. Merin and
Powers are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter or its affiliates.
B-21
<PAGE> 43
OFFICERS
Messrs. Smith, Santo, Ciccarone, Reynoldson, Sullivan and Zimmermann are
located at 1 Parkview Plaza, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is
located at 2800 Post Oak Blvd., Houston, TX 77056.
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Age: 43 the Advisers, Van Kampen Advisors Inc., Van Kampen
Vice President and Secretary Management Inc., the Distributor, American Capital
Contractual Services, Inc., Van Kampen Exchange
Corp., Van Kampen Recordkeeping Services Inc.,
Investor Services, Van Kampen Insurance Agency of
Illinois Inc. and Van Kampen System Inc. Vice
President and Secretary of each of the funds in the
Fund Complex and Vice President and Secretary/Vice
President, Principal Legal Officer and Secretary of
other investment companies advised by the Advisers
or their affiliates. Prior to January 1999, Vice
President and Associate General Counsel to New York
Life Insurance Company ("New York Life"), and prior
to March 1997, Associate General Counsel of New
York Life. Prior to December 1993, Assistant
General Counsel of The Dreyfus Corporation. Prior
to August 1991, Senior Associate, Willkie Farr &
Gallagher. Prior to January 1989, Staff Attorney at
the Securities and Exchange Commission, Division of
Investment Management, Office of Chief Counsel.
Michael H. Santo..................... Executive Vice President, Chief Administrative
Date of Birth: 10/22/55 Officer and Director of Van Kampen Investments, the
Age: 44 Advisers, the Distributor, Van Kampen Advisors
Vice President Inc., Van Kampen Management Inc. and Van Kampen
Investor Services Inc., and serves as a Director or
Officer of certain other subsidiaries of Van Kampen
Investments. Vice President of each of the funds in
the Fund Complex and certain other investment
companies advised by the Advisers and their
affiliates. Prior to 1998, Senior Vice President
and Senior Planning Officer for Individual Asset
Management of Morgan Stanley Dean Witter and its
predecessor since 1994. From 1990-1994, First Vice
President and Assistant Controller in Dean Witter's
Controller's Department.
</TABLE>
B-22
<PAGE> 44
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Stephen L. Boyd...................... Executive Vice President and Chief Investment
Date of Birth: 11/16/40 Officer of Van Kampen Investments, and President
Age: 59 and Chief Operating Officer of the Advisers.
Executive Vice President and Chief Executive Vice President and Chief Investment
Investment Officer Officer of each of the funds in the Fund Complex
and certain other investment companies advised by
the Advisers or their affiliates. Prior to April
2000, Executive Vice President and Chief Investment
Officer for Equity Investments of the Advisers.
Prior to October 1998, Vice President and Senior
Portfolio Manager with AIM Capital Management, Inc.
Prior to February 1998, Senior Vice President and
Portfolio Manager of Van Kampen American Capital
Asset Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American
Capital Management, Inc.
Richard A. Ciccarone................. Senior Vice President and Co-head of the Fixed
Date of Birth: 06/15/52 Income Department of the Advisers, Van Kampen
Age: 48 Management Inc. and Van Kampen Advisors Inc. Prior
Vice President to May 2000, he served as Co-head of Municipal
Investments and Director of Research of the
Advisers, Van Kampen Management Inc. and Van Kampen
Advisors Inc. Mr. Ciccarone first joined the
Adviser in June 1983, and worked for the Adviser
until May 1989, with his last position being a Vice
President. From June 1989 to April 1996, he worked
at EVEREN Securities (formerly known as Kemper
Securities), with his last position at EVEREN being
an Executive Vice President. Since April 1996, Mr.
Ciccarone has been a Senior Vice President of the
Advisers, Van Kampen Management Inc. and Van Kampen
Advisors Inc.
John R. Reynoldson................... Senior Vice President and Co-head of the Fixed
Date of Birth: 05/15/53 Income Department of the Advisers, Van Kampen
Age: 47 Management Inc. and Van Kampen Advisors Inc. Prior
Vice President to May 2000, he managed the investment grade
taxable group for the Adviser since July 1999. From
July 1988 to June 1999, he managed the government
securities bond group for Asset Management. Mr.
Reynoldson has been with Asset Management since
April 1987, and has been a Senior Vice President of
Asset Management since July 1988. He has been a
Senior Vice President of the Adviser and Van Kampen
Management Inc. since June 1995 and Senior Vice
President of Van Kampen Advisors Inc. since June
2000.
John L. Sullivan..................... Senior Vice President of Van Kampen Investments and
Date of Birth: 08/20/55 the Advisers. Vice President, Chief Financial
Age: 45 Officer and Treasurer of each of the funds in the
Vice President, Chief Financial Fund Complex and certain other investment companies
Officer and Treasurer advised by the Advisers or their affiliates.
</TABLE>
B-23
<PAGE> 45
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
John H. Zimmermann, III.............. Senior Vice President and Director of Van Kampen
Date of Birth: 11/25/57 Investments, President and Director of the
Vice President Distributor, and President of Van Kampen Insurance
Age: 42 Agency of Illinois Inc. Vice President of each of
the funds in the Fund Complex. From November 1992
to December 1997, Mr. Zimmermann was Senior Vice
President of the Distributor.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 61 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(each a "Non-Affiliated Trustee") is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex provides a deferred compensation plan to its Non-Affiliated
Trustees that allows trustees/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the
date of the meeting, plus reasonable expenses incurred by the Non-Affiliated
Trustee in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500
B-24
<PAGE> 46
per year for each of the ten years following such retirement from such Fund.
Non-Affiliated Trustees retiring prior to the age of 60 or with fewer than 10
years but more than 5 years of service may receive reduced retirement benefits
from such Fund. Each trustee/director has served as a member of the Board of
Trustees of the Fund since he or she was first appointed or elected in the year
set forth below. The retirement plan contains a Fund Complex retirement benefit
cap of $60,000 per year.
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Fund Complex
---------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Retirement Annual Compensation
Aggregate Benefits Benefits from before
Compensation Accrued as the Fund Deferral from
from the Part of Upon Fund
Name(1) Registrant(2) Expenses(3) Retirement(4) Complex(5)
------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
J. Miles Branagan $9,540 $40,303 $60,000 $126,000
Jerry D. Choate(1) 8,340 0 60,000 88,700
Linda Hutton Heagy 9,540 5,045 60,000 126,000
R. Craig Kennedy 9,540 3,571 60,000 125,600
Jack E. Nelson 9,540 21,664 60,000 126,000
Phillip B. Rooney 9,540 7,787 60,000 113,400
Fernando Sisto 9,540 72,060 60,000 126,000
Wayne W. Whalen 9,540 15,189 60,000 126,000
Suzanne H. Woolsey(1) 6,940 0 60,000 88,700
</TABLE>
------------------------------------
(1) Trustees not eligible for compensation are not included in the Compensation
Table. Mr. Choate and Ms. Woolsey became members of the Board of Trustees
for the Fund and other funds in the Fund Complex on May 26, 1999 and
therefore do not have a full year of information to report. Paul G. Yovovich
resigned as a member of the Board of Trustees for the Fund and other funds
in the Fund Complex on April 14, 2000.
(2) The amounts shown in this column represent the aggregate compensation before
deferral from all operating series of the Trust during the fiscal year ended
March 31, 2000. The details of aggregate compensation before deferral for
each operating series of the Registrant during the fiscal year ended March
31, 2000 are shown in Table A below. The details of compensation deferred
for each operating series of the Registrant during the fiscal year ended
March 31, 2000 are shown in Table B below. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to either the
return on the common shares of the Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match
B-25
<PAGE> 47
the deferred compensation obligation. The details of cumulative deferred
compensation (including interest) for each operating series of the
Registrant as of March 31, 2000 are shown in Table C below. The deferred
compensation plan is described above the Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the funds' respective fiscal years ended in
1999. The retirement plan is described above the Compensation Table.
(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
retirement plan is described above the Compensation Table. Each
Non-Affiliated Trustee has served as a member of the Board of Trustees since
the year set forth in Table D below.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1999 before
deferral by the trustees under the deferred compensation plan. Because the
funds in the Fund Complex have different fiscal year ends, the amounts shown
in this column are presented on a calendar year basis. Certain trustees
deferred all or a portion of their aggregate compensation from the Fund
Complex during the calendar year ended December 31, 1999. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such Non-
Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of
those investment companies selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Mr. Whalen, the Non-Affiliated Trustees were
not trustees of such investment companies. Combining the Fund Complex with
other investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $279,250 during the calendar year
ended December 31, 1999.
The Fund, the Adviser and the Distributor have adopted Codes of Ethics
(collectively, the "Code of Ethics") that set forth general and specific
standards relating to the securities trading activities of their employees. The
Code of Ethics does not prohibit employees from acquiring securities that may be
purchased or held by the Fund, but is intended to ensure that all employees
conduct their personal transactions in a manner that does not interfere with the
portfolio transactions of the Fund or other Van Kampen funds, or that such
employees take unfair advantage of their relationship with the Fund. Among other
things, the Code of Ethics prohibits certain types of transactions absent prior
approval, imposes various trading restrictions (such as time periods during
which personal transactions may or may not be made) and requires quarterly
reporting of securities transactions and other matters. All reportable
securities transactions and other required reports are to be reviewed by
appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
Fund or other Van Kampen funds or who otherwise are involved in the investment
B-26
<PAGE> 48
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.
As of September 5, 2000, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
TABLE A
2000 AGGREGATE COMPENSATION FROM THE TRUST AND EACH SERIES
<TABLE>
<CAPTION>
TRUSTEE
FISCAL ----------------------------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- -------- -------- ------ ----- ------- ------ ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.......... 3/31 $2,340 $2,140 $2,340 $2,340 $2,340 $2,340 $2,340 $2,340 $1,940
Great American Companies
Fund(1)....................... 3/31 1,202 1,002 1,202 1,202 1,202 1,202 1,202 1,202 802
Growth Fund..................... 3/31 1,388 1,188 1,388 1,388 1,388 1,388 1,388 1,388 988
Mid Cap Value Fund(1)........... 3/31 1,201 1,001 1,201 1,201 1,201 1,201 1,201 1,201 801
Prospector Fund(1).............. 3/31 1,203 1,003 1,203 1,203 1,203 1,203 1,203 1,203 803
Select Growth Fund*............. 3/31 0 0 0 0 0 0 0 0 0
Small Cap Value Fund............ 3/31 801 801 801 801 801 801 801 801 601
Utility Fund.................... 3/31 1,405 1,205 1,405 1,405 1,405 1,405 1,405 1,405 1,005
------ ------ ------ ------ ------ ------ ------ ------ ------
Equity Trust Total............ $9,540 $8,340 $9,540 $9,540 $9,540 $9,540 $9,540 $9,540 $6,940
</TABLE>
------------------------------------
* The Select Growth Fund had not commenced investment operations as of March
31, 2000. Such trustees received an organizational meeting fee of
$200/trustee paid by the Adviser in connection with the Fund's organization.
(1) The Fund was liquidated during the Registrant's fiscal year ended March 31,
2000.
TABLE B
2000 AGGREGATE COMPENSATION DEFERRED FROM
THE TRUST AND EACH SERIES
<TABLE>
<CAPTION>
TRUSTEE
FISCAL ----------------------------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- -------- -------- ------ ----- ------- ------ ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.......... 3/31 $2,340 $1,778 $2,340 $1,170 $2,340 $2,340 $1,170 $2,340 $ 0
Great American Companies
Fund(1)....................... 3/31 1,202 802 1,202 601 1,202 1,202 601 1,202 0
Growth Fund..................... 3/31 1,388 940 1,388 694 1,388 1,388 694 1,388 0
Mid Cap Value Fund(1)........... 3/31 1,201 801 1,201 601 1,201 1,201 601 1,201 0
Prospector Fund(1).............. 3/31 1,203 803 1,203 602 1,203 1,203 602 1,203 0
Select Growth Fund*............. 3/31 0 0 0 0 0 0 0 0 0
Small Cap Value Fund............ 3/31 801 801 801 400 801 801 400 801 0
Utility Fund.................... 3/31 1,405 952 1,405 703 1,405 1,405 703 1,405 0
------ ------ ------ ------ ------ ------ ------ ------ ------
Equity Trust Total............ $9,540 $6,877 $9,540 $4,771 $9,540 $9,540 $4,771 $9,540 $ 0
</TABLE>
------------------------------------
* The Select Growth Fund had not commenced investment operations as of March
31, 2000.
(1) The Fund was liquidated during the Registrant's fiscal year ended March 31,
2000.
B-27
<PAGE> 49
TABLE C
2000 CUMULATIVE COMPENSATION DEFERRED
(PLUS INTEREST) FROM THE TRUST AND EACH SERIES
<TABLE>
<CAPTION>
CURRENT TRUSTEES
FISCAL ---------------------------------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- -------- -------- ------ ----- ------- ------ ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund....... 3/31 $15,694 $2,622 $12,224 $7,764 $28,302 $13,161 $ 6,960 $18,446 $0
Growth Fund.................. 3/31 11,377 1,453 7,665 7,594 19,459 11,021 5,405 13,700 0
Select Growth Fund*.......... 3/31 0 0 0 0 0 0 0 0 0
Small Cap Value Fund......... 3/31 999 1,247 899 557 1,155 1,377 566 1,063 0
Utility Fund................. 3/31 12,628 1,475 12,464 27,182 37,021 10,454 8,316 29,366 0
------- ------ ------- ------- ------- ------- ------- ------- --
Equity Trust Total.......... $40,698 $6,797 $33,252 $43,097 $85,937 $36,013 $21,247 $62,575 $0
<CAPTION>
FORMER TRUSTEES
------------------------------------------------
FUND NAME GAUGHAN MILLER REES ROBINSON YOVOVICH
--------- ------- ------ ---- -------- --------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund....... $ 0 $ 3,074 $ 0 $11,674 $3,183
Growth Fund.................. 0 1,962 375 8,680 2,006
Select Growth Fund*.......... 0 0 0 0 0
Small Cap Value Fund......... 0 0 0 0 921
Utility Fund................. 1,142 13,406 3,285 26,162 2,040
------ ------- ------ ------- ------
Equity Trust Total.......... $1,142 $18,442 $3,660 $46,516 $8,150
</TABLE>
------------------------------------
* The Select Growth Fund had not commenced investment operations as of March 31,
2000.
TABLE D
YEAR OF ELECTION OR APPOINTMENT TO EACH SERIES OF THE TRUST
<TABLE>
<CAPTION>
TRUSTEE
--------------------------------------------------------------------------------
FUND NAME BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- -------- ------ ----- ------- ------ ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.......... 1996 1999 1996 1996 1996 1997 1996 1996 1999
Growth Fund..................... 1995 1999 1995 1995 1995 1997 1995 1995 1999
Select Growth Fund*............. 2000 2000 2000 2000 2000 2000 2000 2000 2000
Small Cap Value Fund............ 1999 1999 1999 1999 1999 1999 1999 1999 1999
Utility Fund.................... 1995 1999 1995 1993 1993 1997 1995 1993 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
------------------------------------
* The Select Growth Fund commenced investment operations in June 2000.
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate
strategy and implement the Fund's investment objective. The Adviser also
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, renders periodic reports to the Fund's Board of Trustees,
and permits its officers and employees to serve without compensation as trustees
of the Trust or officers of the Fund if elected to such positions. The Fund
however, bears the cost of its day-to-day operations, including service fees,
distribution fees, custodian fees, legal and independent accountant fees, the
cost of reports and proxies to shareholders, compensation of trustees of the
Trust (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments), and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to the Fund for any error of judgment or of law,
or for any loss suffered by the Fund in connection with the matters to which the
Advisory Agreement relates, except a loss resulting from willful misfeasance,
bad faith, or gross negligence on the part of the Adviser in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under the Advisory Agreement.
B-28
<PAGE> 50
The Advisory Agreement also provides that, in the event the expenses of the
Fund for any fiscal year exceed the most restrictive expense limitations
applicable in any jurisdiction in which the Fund's shares are qualified for
offer and sale (excluding any expenses permitted to be excluded from the
computation under applicable law or regulation), the compensation due the
Adviser will be reduced by the amount of such excess and that, if a reduction in
and refund of the advisory fee is insufficient, the Adviser will pay the Fund
monthly an amount sufficient to make up the deficiency, subject to readjustment
during the fiscal year.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Board of Trustees or (ii) by a
vote of a majority of the Fund's outstanding voting securities and (b) by a vote
of a majority of the Trustees who are not parties to the agreement or interested
persons of any such party by votes cast in person at a meeting called for such
purpose. The Advisory Agreement provides that it shall terminate automatically
if assigned and that it may be terminated without penalty by either party on 60
days' written notice.
During the fiscal year ended March 31, 2000, the fiscal period ended March
31, 1999 and the fiscal year ended June 30, 1998, the Adviser received
approximately $8,558,600, $1,777,900 and $1,414,500, respectively, in advisory
fees from the Fund.
OTHER AGREEMENTS
Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
to the Fund supplementary to those provided by the custodian. Such services are
expected to enable the Fund to more closely monitor and maintain its accounts
and records. The Fund pays all costs and expenses related to such services,
including all salary and related benefits of accounting personnel, as well as
the overhead and expenses of office space and the equipment necessary to render
such services. The Fund shares together with the other Van Kampen funds in the
cost of providing such services with 25% of such costs shared proportionately
based on the respective number of classes of securities issued per fund and the
remaining 75% of such costs based proportionately on the respective net assets
per fund.
During the fiscal year ended March 31, 2000, the fiscal period ended March
31, 1999 and the fiscal year ended June 30, 1998, Advisory Corp. received
approximately $151,200, $86,600 and $76,100, respectively, in accounting
services fees from the Fund.
Legal Services Agreement. The Fund and certain of the other Van Kampen
funds advised by the Advisers or their affiliates and distributed by the
Distributor have entered into legal services agreements pursuant to which Van
Kampen Investments provides legal services, including without limitation:
accurate maintenance of the funds' minute books and records, preparation and
oversight of the funds' regulatory reports, and other information provided to
shareholders, as well as responding to day-to-day legal issues on behalf of the
funds. Payment by the funds for such services is made on a cost basis for the
salary and salary-related benefits, including but not limited to bonuses, group
insurance and other regular wages for the employment of personnel, as well as
overhead and the expenses related to the office space and the equipment
necessary to render the legal services. Other
B-29
<PAGE> 51
funds distributed by the Distributor also receive legal services from Van Kampen
Investments. Of the total costs for legal services provided to funds distributed
by the Distributor, one half of such costs are allocated equally to each fund
and the remaining one half of such costs are allocated to specific funds based
on monthly time records.
During the fiscal year ended March 31, 2000, the fiscal period ended March
31, 1999 and the fiscal year ended June 30, 1998, Van Kampen Investments
received approximately $14,900, $5,500 and $10,000, respectively, in legal
services fees from the Fund.
DISTRIBUTION AND SERVICE
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's
Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by a vote of a majority of Trustees who are not parties to
the Distribution and Service Agreement or interested persons of any party, by
votes cast in person at a meeting called for such purpose. The Distribution and
Service Agreement provides that it will terminate if assigned, and that it may
be terminated without penalty by either party on 90 days' written notice. Total
underwriting commissions on the sale of shares of the Fund for the last three
fiscal years/period are shown in the chart below.
<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal year ended March 31, 2000....................... $6,829,570 $869,569
Fiscal period ended March 31, 1999..................... $1,005,397 $137,952
Fiscal year ended June 30, 1998........................ $ 876,086 $140,600
</TABLE>
B-30
<PAGE> 52
With respect to sales of Class A Shares of the Fund, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:
CLASS A SHARES SALES CHARGE TABLE
<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 or more.......................... * * *
------------------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although the Fund may impose a contingent deferred sales
charge of 1.00% on certain redemptions made within one year of the purchase. A
commission or transaction fee will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for purchases
of $1 million or more computed on a percentage of the dollar value of such
shares sold 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. For single purchases of
$20 million or more by an individual retail investor the Distributor will pay,
at the time of purchase and directly out of the Distributor's assets (and not
out of the Fund's assets), a commission or transaction fee of 1.00% to
authorized dealers who initiate and are responsible for such purchases. The
commission or transaction fee of 1.00% will be computed on a percentage of the
dollar value of such shares sold.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.
Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing commission and transaction
fees of up to 0.75% of the average daily net assets of the Fund's Class C Shares
annually commencing in the second year after purchase.
With respect to Class D Shares, there are no sales charges paid by
investors and no commissions or transaction fees to authorized dealers.
In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be
B-31
<PAGE> 53
eligible to win nominal awards for certain sales efforts or under which the
Distributor will reallow to any authorized dealer that sponsors sales contests
or recognition programs conforming to criteria established by the Distributor,
or participates in sales programs sponsored by the Distributor, an amount not
exceeding the total applicable sales charges on the sales generated by the
authorized dealer at the public offering price during such programs. Also, the
Distributor in its discretion may from time to time, pursuant to objective
criteria established by the Distributor, pay fees to, and sponsor business
seminars for, qualifying authorized dealers for certain services or activities
which are primarily intended to result in sales of shares of the Fund or other
Van Kampen funds. Fees may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives 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 quarterly sales of shares of the Fund and other Van
Kampen funds and increases in net assets of the Fund and other Van Kampen funds
over specified thresholds. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total daily net assets of the Fund on an annual basis. These
programs will not change the price an investor will pay for shares or the amount
that a Fund will receive from such sale.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to Class A Shares, Class B Shares and Class C Shares pursuant to Rule
12b-1 under the 1940 Act. The Fund also has adopted a service plan (the "Service
Plan") with respect to Class A Shares, Class B Shares and Class C Shares. There
is no distribution plan or service plan in effect for Class D Shares. The
Distribution Plan and the Service Plan sometimes are referred to herein as the
"Plans." The Plans provide that the Fund may spend a portion of the Fund's
average daily net assets attributable to each such class of shares in connection
with distribution of the respective class of shares and in connection with the
provision of ongoing services to shareholders of such class, respectively. The
Distribution Plan and the Service Plan are being implemented through the
Distribution and Service Agreement with the Distributor of each such class of
the Fund's shares, sub-agreements between the Distributor and members of the
NASD who are acting as securities dealers and NASD members or eligible
non-members who are acting as brokers or agents and similar agreements between
the Fund and financial intermediaries who are acting as brokers (collectively,
"Selling Agreements") that may provide for their customers or clients certain
services or assistance, which may include, but not be limited to, processing
purchase and redemption transactions, establishing and maintaining shareholder
accounts regarding the Fund, and such other services as may be agreed to from
time to time and as may be permitted by applicable statute, rule or regulation.
Brokers, dealers and financial intermediaries that have entered into
sub-agreements with the Distributor and sell shares of the Fund are referred to
herein as "financial intermediaries."
Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary were
prohibited from acting in any capacity or providing any of the described
services, the Distributor would
B-32
<PAGE> 54
consider what action, if any, would be appropriate. The Distributor does not
believe that termination of a relationship with a financial intermediary would
result in any material adverse consequences to the Fund.
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
For Class A Shares in any given year in which the Plans are in effect, the
Plans generally provide for the Fund to pay the Distributor the lesser of (i)
the amount of the Distributor's actual expenses incurred during such year less
any deferred sales charges (if any) it received during such year (the "actual
net expenses") or (ii) the distribution and service fees at the rates specified
in the Prospectus (the "plan fees"). Therefore, to the extent the Distributor's
actual net expenses in a given year are less than the plan fees for such year,
the Fund only pays the actual net expenses. Alternatively, to the extent the
Distributor's actual net expenses in a given year exceed the plan fees for such
year, the Fund only pays the plan fees for such year. For Class A Shares, there
is no carryover of any unreimbursed actual net expenses to succeeding years.
The Plans for Class B Shares and Class C Shares are similar to the Plans
for Class A Shares, except that any actual net expenses which exceed plan fees
for a given year are carried forward and are eligible for payment in future
years by the Fund so long as the Plans remain in effect. Thus, for each of the
Class B Shares and Class C Shares, in any given year in which the Plans are in
effect, the Plans generally provide for the Fund to pay the Distributor the
lesser of (i) the applicable amount of the Distributor's actual net expenses
incurred during such year for such class of shares plus any actual net expenses
from prior years that are still unpaid by the Fund for such class of shares or
(ii) the applicable plan fees for such class of shares. Except as may be
mandated by applicable law, the Fund does not impose any limit with respect to
the number of years into the future that such unreimbursed actual net expenses
may be carried forward (on a Fund level basis). These unreimbursed actual net
expenses may or may not be recovered through plan fees or contingent deferred
sales charges in future years.
Because of fluctuation in net asset value, the plan fees with respect to a
particular Class B Share or Class C Share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
March 31, 2000, there were $10,678,923 and $677,543 of unreimbursed
distribution-related expenses with respect to
B-33
<PAGE> 55
Class B Shares and Class C Shares, respectively, representing 1.13% and 0.33% of
the Fund's net assets attributable to Class B Shares and Class C Shares,
respectively. If the Plans are terminated or not continued, the Fund would not
be contractually obligated to pay the Distributor for any expenses not
previously reimbursed by the Fund or recovered through contingent deferred sales
charges.
Because the Fund is a series of the Trust, amounts paid to the Distributor
as reimbursement for expenses of one series of the Trust may indirectly benefit
the other funds which are series of the Trust. The Distributor will endeavor to
allocate such expenses among such funds in an equitable manner. The Distributor
will not use the proceeds from the contingent deferred sales charge applicable
to a particular class of shares to defray distribution-related expenses
attributable to any other class of shares.
For the fiscal year ended March 31, 2000, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $908,097 or 0.25% of the Class A
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for payments made to financial intermediaries for servicing Class A
shareholders and for administering the Class A Share Plans. For the fiscal year
ended March 31, 2000, the Fund's aggregate expenses paid under the Plans for
Class B Shares were $4,236,725 or 1.00% of the Class B Shares' average daily net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $3,272,169 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B Shares of the Fund and $964,556
for fees paid to financial intermediaries for servicing Class B shareholders and
administering the Class B Share Plans. For the fiscal year ended March 31, 2000,
the Fund's aggregate expenses paid under the Plans for Class C Shares were
$743,176 or 1.00% of the Class C Shares' average daily net assets. Such expenses
were paid to reimburse the Distributor for the following payments: $496,857 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class C Shares of the Fund and $246,319 for fees paid to financial
intermediaries for servicing Class C shareholders and administering the Class C
Share Plans.
The Distributor has entered into agreements with the following firms: (i)
Fidelity Investments Institutional Operations Company, Inc., (ii) Fidelity
Brokerage Services, Inc. & National Financial Services Corporation, (iii) First
Union National Bank, (iv) GreatWest Life & Annuity Insurance
Company/BenefitsCorp Equities, Inc., (v) Hewitt Associates, LLC, (vi) Huntington
Bank, (vii) Invesco Retirement and Benefit Services, Inc., (viii) Lincoln
National Life Insurance Company, (ix) Merrill Lynch Pierce, Fenner & Smith,
Incorporated, (x) Dean Witter Reynolds, Inc., (xi) National Deferred
Compensation, Inc., (xii) Nationwide Investment Services Corporation, (xiii)
Wells Fargo Bank, N.A. on behalf of itself and its affiliated banks, (xiv) The
Prudential Insurance Company of America, (xv) Delaware Charter Guarantee & Trust
under the trade name of Trustar(SM) Retirement Services, (xvi) Union Bank of CA,
N.A. and (xvii) The Vanguard Group Inc. Shares of the Fund will be offered
pursuant to such firm's retirement plan alliance program(s). Trustees and other
fiduciaries of retirement plans seeking to invest in multiple fund families
through a broker-dealer retirement plan alliance program should contact the
firms mentioned above for further information concerning the program(s)
including, but not limited to, minimum size and operational requirements.
B-34
<PAGE> 56
TRANSFER AGENT
The Fund's transfer agent, shareholder service agent and dividend
disbursing agent is Van Kampen Investor Services Inc. The transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.
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 on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Board of Trustees of the Fund.
The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker-dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, 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 may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Fund. The Adviser also may place portfolio transactions, to the extent
permitted by law, with brokerage firms affiliated with the Fund, the Adviser or
the Distributor and with brokerage firms participating in the distribution of
the Fund's shares if it reasonably believes that the quality of execution and
the commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
B-35
<PAGE> 57
discounts to a firm supplying research or other services or to a firm
participating in the distribution of the Fund's shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.
Effective October 31, 1996, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") became an affiliate of the Adviser. Effective May 31, 1997, Dean
Witter Reynolds, Inc. ("Dean Witter") became an affiliate of the Adviser. The
Fund's Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the SEC under the 1940 Act which require that
the commissions paid to affiliates of the Fund must be reasonable and fair
compared to the commissions, fees or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. The rule and procedures
also contain review requirements and require the Adviser to furnish reports to
the Board of Trustees and to maintain records in connection with such reviews.
After consideration of all factors deemed relevant, the Board of Trustees will
consider from time to time whether the advisory fee for the Fund will be reduced
by all or a portion of the brokerage commission given to affiliated brokers.
The Fund paid the following commissions to all brokers and affiliated
brokers during the years/period shown:
Commissions Paid:
<TABLE>
<CAPTION>
Affiliated
Brokers
-----------------
All Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Fiscal year ended March 31, 2000................... $1,149,589 $16,850 $-0-
Fiscal period ended March 31, 1999................. $ 349,381 $ -0- $-0-
Fiscal year ended June 30, 1998.................... $ 519,606 $ -0- $-0-
Fiscal 2000 Percentages:
Commissions with affiliate to total
commissions................................... 1.470% 0%
Value of brokerage transactions with affiliate to
total transactions............................ 0.052% 0%
</TABLE>
During the fiscal year ended March 31, 2000, the Fund paid $749,729 in
brokerage commissions on transactions totaling $555,259,147 to brokers selected
primarily on the basis of research services provided to the Adviser.
B-36
<PAGE> 58
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
INVESTMENT ACCOUNT
Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, 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 Van
Kampen funds will receive statements quarterly from Investor Services showing
any reinvestments of dividends and capital gain dividends 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 gain dividends and systematic purchases or
redemptions. Additional shares may be purchased at any time through authorized
dealers or by mailing a check directly to Investor Services.
SHARE CERTIFICATES
Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 1.50% of the
net asset value of the issued shares, and bill the party to whom the replacement
certificate was mailed.
RETIREMENT PLANS
Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and Money Purchase and Profit Sharing
Keogh plans. Details regarding fees, as well as plan administration for profit
sharing, pension and 401(k) plans, are available from the Distributor.
B-37
<PAGE> 59
AUTOMATED CLEARING HOUSE("ACH") DEPOSITS
Shareholders can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemption proceeds 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 redemption proceeds 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 or by calling (800) 341-2911 ((800) 421-2833
for the hearing impaired).
DIVIDEND DIVERSIFICATION
A shareholder may, upon written request by completing the appropriate
section of the account application form or by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired), elect to have all dividends and capital gain
dividends paid on a class of shares of the Fund invested into shares of the same
class of any Van Kampen fund that participates in the exchange privilege program
so long as the investor has a pre-existing account for such class of shares of
the other fund. Both accounts must be of the same type, either non-retirement or
retirement. If the accounts are retirement accounts, they must both be for the
same class and of the same type of retirement plan (e.g. IRA, 403(b)(7), 401(k),
Money Purchase and Profit Sharing Keogh plans) and for the benefit of the same
individual. If a qualified, pre-existing account does not exist, the shareholder
must establish a new account subject to minimum investment and other
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value per
share as of the payable date of the distribution from the Fund.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual 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 payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for periodic checks in any
amount, not less than $25. Such a systematic withdrawal plan may also be
maintained by an investor purchasing shares for a retirement plan established on
a form made available by the Fund. See "Shareholder Services -- Retirement
Plans."
Class B Shareholders and Class C Shareholders who establish a systematic
withdrawal plan may redeem up to 12% annually of the shareholder's initial
account balance without
B-38
<PAGE> 60
incurring a contingent deferred sales charge. 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 gain dividends
on shares held in accounts with systematic withdrawal plans are reinvested in
additional shares at the next determined net asset value per share. If periodic
withdrawals continuously exceed reinvested dividends and capital gain dividends,
the shareholder's original investment will be correspondingly reduced and
ultimately exhausted. Redemptions made concurrently with the purchase of
additional shares ordinarily will be disadvantageous to the shareholder because
of the duplication of sales charges. Any gain or loss realized by the
shareholder upon redemption of shares is a taxable event. The Fund reserves the
right to amend or terminate the systematic withdrawal program upon 30 days'
notice to its shareholders.
EXCHANGE PRIVILEGE
All shareholders are limited to eight exchanges per fund during a rolling
365-day period.
Exchange privileges will be suspended on a particular fund if more than
eight exchanges out of that fund are made by a shareholder during a rolling
365-day period. If exchange privileges are suspended, subsequent exchange
requests during the stated period will not be processed. Exchange privileges
will be restored when the account history shows fewer than eight exchanges in
the rolling 365-day period.
This policy does not apply to money market funds, systematic exchange
plans, or employer-sponsored retirement plans.
REINSTATEMENT PRIVILEGE
A Class A Shareholder or Class B Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of the Fund. A Class C Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C Shares of the Fund with credit given for any contingent deferred sales
charge paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge) next determined after the order is
received, which must be made 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.
There is no reinstatement privilege for Class D Shares.
REDEMPTION OF SHARES
Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably
B-39
<PAGE> 61
practicable or it is not reasonably practicable for the Fund to fairly determine
the value of its net assets; or (d) the SEC, by order, so permits.
In addition, if the Fund's Board of Trustees determines that payment wholly
or partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. A
distribution-in-kind will result in recognition by the shareholder of a gain or
loss for federal income tax purposes when such securities are distributed, and
the shareholder may have brokerage charges and a gain or loss for federal income
tax purposes upon the shareholder's subsequent disposition of such securities.
CONTINGENT DEFERRED SALES CHARGE-CLASS A
As described in the Class A, B and C Shares Prospectus under "Purchase of
Shares -- Class A Shares," there is no sales charge payable on Class A Shares at
the time of purchase on investments of $1 million or more, but a contingent
deferred sales charge ("CDSC -- Class A") may be imposed on certain redemptions
made within one year of purchase. For purposes of the CDSC-Class A, when shares
of one fund are exchanged for shares of another fund, the purchase date for the
shares of the fund exchanged into will be assumed to be the date on which shares
were purchased in the fund from which the exchange was made. If the exchanged
shares themselves are acquired through an exchange, the purchase date is assumed
to carry over from the date of the original election to purchase shares subject
to a CDSC-Class A rather than a front-end load sales charge. In determining
whether a CDSC-Class A is payable, it is assumed that shares being redeemed
first are any shares in the shareholder's account not subject to a contingent
deferred sales charge followed by shares held the longest in the shareholder's
account. The contingent deferred sales charge is assessed on an amount equal to
the lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends.
WAIVER OF CLASS B AND CLASS C CONTINGENT
DEFERRED SALES CHARGES
As described in the Class A, B and C Shares Prospectus under "Redemption of
Shares," redemptions of Class B Shares and Class C Shares will be subject to a
contingent deferred sales charge ("CDSC -- Class B and C"). The CDSC-Class B and
C is waived on redemptions of Class B Shares and Class C Shares in the
circumstances described below:
REDEMPTION UPON DEATH OR DISABILITY
The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), which in pertinent part defines a person as disabled if
such person "is unable to engage in
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any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of death or disability before it determines to
waive the CDSC-Class B and C.
In cases of death or disability, the CDSC-Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC-Class B and C applies to a total or partial redemption,
but only to redemptions of shares held at the time of the death or initial
determination of disability.
REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS
The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The CDSC-Class B and C will be waived upon the tax-free rollover or
transfer of assets to another retirement plan invested in one or more Van Kampen
funds that participate in the exchange privilege program; in such event, as
described below, the Fund will "tack" the period for which the original shares
were held on to the holding period of the shares acquired in the transfer or
rollover for purposes of determining what, if any, CDSC-Class B and C is
applicable in the event that such acquired shares are redeemed following the
transfer or rollover. The charge also will be waived on any redemption which
results from the return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code, the return of excess deferral amounts pursuant to Code
Section 401(k)(8) or 402(g)(2), the financial hardship of the employee pursuant
to U.S. Treasury Regulations Section 1.401(k)-(1)(d)(2) or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.
REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in the Fund. Under the systematic
withdrawal plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic basis, and
the proceeds sent to the designated payee of record. The amount to be redeemed
and frequency of the systematic withdrawals will be specified by the shareholder
upon his or her election to participate in the systematic withdrawal plan. The
CDSC-Class B and C will be waived on redemptions made under the systematic
withdrawal plan.
The amount of the shareholder's investment in the Fund at the time the
election to participate in the systematic withdrawal plan is made with respect
to the Fund is hereinafter referred to as the "initial account balance." The
amount to be systematically
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redeemed from the Fund without the imposition of a CDSC-Class B and C may not
exceed a maximum of 12% annually of the shareholder's initial account balance.
The Fund reserves the right to change the terms and conditions of the systematic
withdrawal plan and the ability to offer the systematic withdrawal plan.
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" in the Class A, B and C Shares Prospectus.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the value of the
account up to the required minimum balance. The Fund will waive the CDSC-Class B
and C upon such involuntary redemption.
REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder who has redeemed Class C Shares of the Fund may reinvest at
net asset value, with credit for any CDSC-Class C paid on the redeemed shares,
any portion or all of his or her redemption proceeds (plus that amount necessary
to acquire a fractional share to round off his or her purchase to the nearest
full share) in Class C Shares of the Fund, provided that the reinvestment is
effected within 180 days after such redemption and the shareholder has not
previously exercised this reinvestment privilege with respect to Class C Shares
of the Fund. Shares acquired in this manner will be deemed to have the original
cost and purchase date of the redeemed shares for purposes of applying the
CDSC-Class C to subsequent redemptions.
REDEMPTION BY ADVISER
The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
TAXATION
FEDERAL INCOME TAXATION OF THE FUND
The Trust and each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund has elected and
qualified, and intends to continue to qualify each year, to be treated as a
regulated investment company under Subchapter M of the Code. To qualify as a
regulated investment company, the Fund must comply with certain requirements of
the Code relating to, among other things, the source of its income and
diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its investment company taxable income (generally including ordinary
income and net short-
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term capital gain, but not net capital gain, which is the excess of net
long-term capital gain over net short-term capital loss), and meets certain
other requirements, it will not be required to pay federal income taxes on any
income it distributes to shareholders. The Fund intends to distribute at least
the minimum amount of investment company taxable income necessary to satisfy the
90% distribution requirement. The Fund will not be subject to federal income tax
on any net capital gain distributed to shareholders.
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
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. In addition, the Fund
could be required to recognize unrealized gains, pay taxes and interest charges
and make distributions before requalifying for taxation as a regulated
investment company.
Some of the Fund's investment practices are subject to special provisions
of the Code that may, among other things, (i) disallow, suspend or otherwise
limit the allowance of certain losses or deductions, (ii) convert lower taxed
long-term capital gain into higher taxed short-term capital gain or ordinary
income, (iii) convert an ordinary loss or a deduction into a capital loss (the
deductibility of which is more limited) and/or (iv) cause the Fund to recognize
income or gain without a corresponding receipt of cash with which to make
distributions in amounts necessary to satisfy the 90% distribution requirement
and the distribution requirements for avoiding income and excise taxes. The Fund
will monitor its transactions and may make certain tax elections to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company.
PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in non-U.S.
corporations that could be classified as "passive foreign investment companies"
as defined for federal income tax purposes. For federal income tax purposes,
such an investment may, among other things, cause the Fund to recognize income
or gain without a corresponding receipt of cash, to incur an interest charge on
taxable income that is deemed to have been deferred and/or to recognize ordinary
income that would otherwise have been treated as capital gain.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions of the Fund's investment company taxable income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains regardless of the length of time shares
of the Fund have been held by such shareholders.
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Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gain to such holder (assuming such
shares are held as a capital asset). For a summary of the maximum tax rates
applicable to capital gains (including capital gain dividends), see "Capital
Gains Rates" below. Tax-exempt shareholders not subject to federal income tax on
their income generally will not be taxed on distributions from the Fund.
Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the distribution date. The basis of such shares will
equal the fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain requirements of the Code are satisfied.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
SALE OF SHARES
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) may be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
sold and the amount received. If the shares sold are held as a capital asset,
the gain or loss will be a capital gain or loss. For a summary of the maximum
tax rates applicable to capital gains (including capital gain dividends), see
"Capital Gains Rates" below. Any loss recognized upon a taxable disposition of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital 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.
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CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers investing in the Fund is (i) the
same as the maximum ordinary income tax rate for capital assets held for one
year or less or (ii) 20% for capital assets held for more than one year. The
maximum long-term capital gains rate for corporations is 35%.
NON-U.S. SHAREHOLDERS
A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder.
Non-effectively connected capital gain dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) an
individual Non-U.S. Shareholder who is not present in the United States for more
than 182 days during the taxable year (assuming that certain other conditions
are met). However, certain Non-U.S. Shareholders may nonetheless be subject to
backup withholding on capital gain dividends and gross proceeds paid to them
upon the sale of their shares. See "Backup Withholding" below.
If income from the Fund or gains realized from the sale of shares are
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.
United States Treasury Regulations, generally effective for payments made
after December 31, 2000, modify the withholding, backup withholding and
information reporting rules, including the procedures to be followed by foreign
investors in establishing foreign status. Prospective foreign investors should
consult their tax advisers concerning the applicability and effect of such
Treasury Regulations on an investment in shares of the Fund.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their tax advisers with respect to the
tax implications of purchasing, holding and disposing of shares of the Fund.
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BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to properly furnish the Fund with its correct taxpayer
identification number, (ii) the IRS notifies the Fund that the shareholder has
failed to properly report certain interest and dividend income to the IRS and to
respond to notices to that effect or (iii) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's U.S. federal income tax liability, if any,
provided that the required information is furnished to the IRS.
INFORMATION REPORTING
The Fund must report annually to the IRS and to each shareholder (other
than a Non-U.S. Shareholder) the amount of dividends paid to such shareholder
and the amount, if any, of tax withheld pursuant to backup withholding rules
with respect to such dividends. In the case of a Non-U.S. Shareholder, the Fund
must report to the IRS and such shareholder the aggregate amount of dividends
paid that are subject to backup withholding (if any) and the amount of tax
withheld with respect to such dividends pursuant to the backup withholding
rules. This information may also be made available to the tax authorities in the
Non-U.S. Shareholder's country of residence. Generally, dividends paid to
Non-U.S. Shareholders that are subject to the 30% federal income tax withholding
described above under "Non-U.S. Shareholders" are not subject to backup
withholding.
GENERAL
The federal income tax discussion set forth above is for general
information only. Prospective investors and shareholders should consult their
tax advisers regarding the specific federal tax consequences of purchasing,
holding and disposing of shares, as well as the effects of state, local and
foreign tax law and any proposed tax law changes.
FUND PERFORMANCE
From time to time the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one-year, five-year and ten-year periods. Other total
return quotations, aggregate or average, over other time periods may also be
included.
The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the current maximum public
offering price (which includes the maximum sales charge for Class A Shares);
that all
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income dividends or capital gain dividends during the period are reinvested in
Fund shares at net asset value; and that any applicable contingent deferred
sales charge has been paid. The Fund's total return will vary depending on
market conditions, the securities comprising the Fund's portfolio, the Fund's
operating expenses and unrealized net capital gains or losses during the period.
Total return is based on historical earnings and asset value fluctuations and is
not intended to indicate future performance. No adjustments are made to reflect
any income taxes payable by shareholders on dividends and capital gain dividends
paid by the Fund or to reflect the fact that 12b-1 fees may have changed over
time.
Average annual total return quotations are computed by finding the average
annual compounded rate of return over the period that would equate the initial
amount invested to the ending redeemable value.
The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative non-standardized total return is calculated by measuring the value of
an initial investment in a given class of shares of the Fund at a given time,
deducting the maximum initial sales charge, if any, determining the value of all
subsequent reinvested distributions, and dividing the net change in the value of
the investment as of the end of the period by the amount of the initial
investment and expressing the result as a percentage. Non-standardized total
return will be calculated separately for each class of shares.
Non-standardized total return calculations do not reflect the imposition of
a contingent deferred sales charge, and if any contingent deferred sales charge
imposed at the time of redemption were reflected, it would reduce the
performance quoted.
Total return is calculated separately for Class A Shares, Class B Shares,
Class C Shares and Class D Shares of the Fund. Total return figures for Class A
Shares include the maximum sales charge. Total return figures for Class B Shares
and Class C Shares include any applicable contingent deferred sales charge.
Because of the differences in sales charges and distribution fees, the total
returns for each class of shares will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.
From time to time marketing materials may provide a portfolio manager
update, an Adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top sector holdings and largest holdings. Materials may also
mention how the Distributor believes the
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Fund compares relative to other Van Kampen funds. Materials may also discuss the
Dalbar Financial Services study from 1984 to 1994 which studied investor cash
flow into and out of all types of mutual funds. The ten-year study found that
investors who bought mutual fund shares and held such shares outperformed
investors who bought and sold. The Dalbar study conclusions were consistent
regardless of whether shareholders purchased their fund shares in direct or
sales force distribution channels. The study showed that investors working with
a professional representative have tended over time to earn higher returns than
those who invested directly. The performance of the funds purchased by the
investors in the Dalbar study and the conclusions based thereon are not
necessarily indicative of future performance of such funds or conclusions that
may result from similar studies in the future. The Fund may also be marketed on
the internet.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking or rating services and by
nationally recognized financial publications. Such comparative performance
information will be stated in the same terms in which the comparative data or
indices are stated. Such advertisements and sales material may also include a
yield quotation as of a current period. In each case, such total return and
yield information, if any, will be calculated pursuant to rules established by
the SEC and will be computed separately for each class of the Fund's shares. For
these purposes, the performance of the Fund, as well as the performance of other
mutual funds or indices, do not reflect sales charges, the inclusion of which
would reduce the Fund's performance. The Fund will include performance data for
each class of shares of the Fund in any advertisement or information including
performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return.
The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without charge by calling or writing the Fund at the telephone number
and address printed on the cover of this Statement of Additional Information.
CLASS A SHARES
The Fund's average annual total return, assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one-year period ended
March 31, 2000
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was 120.18% and (ii) the approximately three-year, ten-month period since May
29, 1996, the commencement of investment operations for Class A Shares of the
Fund, through March 31, 2000 was 45.97%.
The Fund's cumulative non-standardized total return, including payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to March 31, 2000 was 327.02%.
The Fund's cumulative non-standardized total return, excluding payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to March 31, 2000 was 353.29%.
CLASS B SHARES
The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class B Shares of the Fund for (i) the one-year
period ended March 31, 2000 was 126.91% and (ii) the approximately three-year,
ten-month period since May 29, 1996, the commencement of investment operations
for Class B Shares of the Fund, through March 31, 2000 was 46.91%.
The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class B Shares from
May 29, 1996 (the commencement of distribution of Class B Shares) to March 31,
2000 was 337.71%.
The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class B Shares from
May 29, 1996 (the commencement of distribution of Class B Shares) to March 31,
2000 was 340.21%.
CLASS C SHARES
The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class C Shares of the Fund for (i) the one-year
period ended March 31, 2000 was 131.31%, and (ii) the approximately three-year,
ten-month period since May 29, 1996, the commencement of investment operations
for Class C Shares of the Fund, through March 31, 2000 was 47.21%.
The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class C Shares from
May 29, 1996 (the commencement of distribution of Class C Shares) to March 31,
2000 was 341.22%.
The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class C Shares from
May 29, 1996 (the commencement of distribution of Class C Shares) to March 31,
2000 was 341.22%.
These results are based on historical earnings and asset value fluctuations
and are not intended to indicate future performance. Such information should be
considered in light of the Fund's investment objective and policies as well as
the risks incurred in the Fund's investment practices.
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CLASS D SHARES
Class D Shares have not been offered prior to the date of this Statement of
Additional Information and have no historical performance information to report.
OTHER INFORMATION
CUSTODY OF ASSETS
All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as custodian. The custodian also provides accounting
services to the Fund.
SHAREHOLDER REPORTS
Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent auditors.
INDEPENDENT AUDITORS
Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Fund's Board of Trustees has engaged Ernst & Young
LLP, located at 233 South Wacker Drive, Chicago, Illinois 60606, to be the
Fund's independent auditors. The change in independent auditors was approved by
the Fund's audit committee and the Fund's Board of Trustees, including Trustees
who are not "interested persons" of the Fund (as defined in the 1940 Act).
PricewaterhouseCoopers LLP, located at 200 East Randolph Drive, Chicago,
Illinois 60601 ("PWC"), ceased being the Fund's independent auditors effective
May 25, 2000. The cessation of the client-auditor relationship between the Fund
and PWC was based solely on a possible future business relationship by PWC with
an affiliate of the Fund's investment adviser. The change in independent
auditors was approved by the Fund's audit committee and the Fund's Board of
Trustees, including Trustees who are not "interested persons" of the Fund (as
defined in the 1940 Act).
KPMG LLP, located at 303 West Wacker Drive, Chicago, Illinois 60601
("KPMG"), ceased being the Fund's independent auditors effective April 14, 2000.
The cessation of the client-auditor relationship between the Fund and KPMG was
based solely on a possible future business relationship by KPMG with an
affiliate of the Fund's investment adviser. The change in independent auditors
was approved by the Fund's audit committee and the Fund's Board of Trustees,
including Trustees who are not "interested persons" of the Fund (as defined in
the 1940 Act).
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Van Kampen Aggressive Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Aggressive Growth Fund
(the "Fund") at March 31, 2000, and the results of its operations, the changes
in its net assets and the financial highlights for the year then ended in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at March 31, 2000 by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed above. The
statement of changes in net assets and the financial highlights for each of the
periods ended on or prior to March 31, 1999 were audited by other independent
accountants whose report dated May 6, 1999 expressed an unqualified opinion
thereon.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
May 5, 2000
F-1
<PAGE> 73
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
March 31, 2000
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR FUND AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS* 96.7%
CONSUMER DISTRIBUTION 2.1%
Anixter International, Inc. (a)............................ 200,000 $ 5,575,000
Emulex Corp. (a)........................................... 350,000 38,193,750
Whitehall Jewellers, Inc. (a).............................. 225,000 5,287,500
--------------
49,056,250
--------------
CONSUMER NON-DURABLES 0.5%
Kenneth Cole Productions, Inc., Class A (a)................ 300,000 11,775,000
--------------
CONSUMER SERVICES 7.7%
Adelphia Business Solutions, Class A (a)................... 325,000 20,028,125
Aether Systems, Inc. (a)................................... 23,100 4,192,650
Albany Molecular Research, Inc. (a)........................ 100,000 5,837,500
Cox Radio, Inc., Class A (a)............................... 40,000 3,360,000
Diamond Technology Partners, Inc., Class A (a)............. 172,500 11,341,875
Hispanic Broadcasting Corp. (a)............................ 200,000 22,650,000
Macrovision Corp. (a)...................................... 400,000 34,450,000
Photon Dynamics, Inc. (a).................................. 85,000 5,865,000
Proxicom, Inc. (a)......................................... 350,000 15,509,375
Quanta Services, Inc. (a).................................. 125,000 7,585,937
Radio One, Inc., Class A (a)............................... 175,000 11,659,375
TMP Worldwide, Inc. (a).................................... 240,000 18,660,000
ValueVision International, Inc., Class A (a)............... 300,000 12,412,500
Vignette Corp. (a)......................................... 50,000 8,012,500
--------------
181,564,837
--------------
ENERGY 5.0%
ENSCO International, Inc. ................................. 800,000 28,900,000
Newfield Exploration Co. (a)............................... 175,000 6,168,750
Patterson Energy, Inc. (a)................................. 500,000 15,875,000
Rowan Cos., Inc. (a)....................................... 500,000 14,718,750
Santa Fe International Corp. .............................. 150,000 5,550,000
Smith International, Inc. (a).............................. 275,000 21,312,500
Stone Energy Corp. (a)..................................... 150,000 7,387,500
Triton Energy Ltd. ........................................ 500,000 17,531,250
--------------
117,443,750
--------------
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 74
YOUR FUND'S INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
FINANCE 1.7%
London Pacific Group Ltd.--ADR (United Kingdom)............ 700,000 $ 16,275,000
Silicon Valley Bancshares (a).............................. 350,000 25,156,250
--------------
41,431,250
--------------
FINANCIAL SERVICES 0.3%
TD Waterhouse Group, Inc. (a).............................. 300,000 7,500,000
--------------
HEALTHCARE 3.1%
Hooper Holmes, Inc. ....................................... 100,000 3,431,250
Jones Pharma, Inc. ........................................ 750,000 22,781,250
Medicis Pharmaceutical Corp., Class A (a).................. 125,000 5,000,000
MedImmune, Inc. (a)........................................ 60,000 10,447,500
PolyMedica Corp. (a)....................................... 175,000 10,281,250
Priority Healthcare Corp., Class B (a)..................... 150,000 7,537,500
QLT PhotoTherapeutics, Inc. (a)............................ 150,000 8,287,500
Zoll Medical Corp. (a)..................................... 85,000 4,356,250
--------------
72,122,500
--------------
PHARMACEUTICALS 0.9%
Biovail Corp. (a).......................................... 200,000 8,862,500
Celgene Corp. (a).......................................... 40,000 3,982,500
Cor Therapeutics, Inc. (a)................................. 135,000 8,899,453
--------------
21,744,453
--------------
PRODUCER MANUFACTURING 7.1%
Advanced Energy Industries, Inc. (a)....................... 100,000 5,100,000
Advanced Fibre Communications, Inc. (a).................... 200,000 12,537,500
Amphenol Corp., Class A (a)................................ 55,000 5,623,750
Asyst Technologies, Inc. (a)............................... 650,000 38,025,000
Cooper Cameron Corp. (a)................................... 125,000 8,359,375
Cree Research, Inc. (a).................................... 250,000 28,218,750
Elantec Semiconductor, Inc. (a)............................ 175,000 12,873,437
Electro Scientific Industries, Inc. (a).................... 200,000 11,600,000
Helix Technology Corp. .................................... 250,000 15,015,625
Insituform Technologies, Inc., Class A (a)................. 175,000 5,359,375
Kopin Corp. (a)............................................ 150,000 10,312,500
LTX Corp. (a).............................................. 150,000 6,778,125
Newport Corp............................................... 50,000 6,750,000
--------------
166,553,437
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.2%
Maverick Tube Corp. (a).................................... 175,000 5,676,563
--------------
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 75
YOUR FUND'S INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
TELECOMMUNICATIONS 4.0%
Exar Corp. (a)............................................. 232,500 $ 16,638,282
LCC International, Inc. (a)................................ 250,000 9,906,250
Natural MicroSystems Corp. (a)............................. 100,000 8,575,000
Network Plus Corp. (a)..................................... 175,000 7,087,500
Next Level Communications, Inc., Class A (a)............... 16,700 1,816,125
OTG Software, Inc. (a)..................................... 12,800 516,000
Primus Telecommunications Group, Inc. (a).................. 150,000 7,753,125
Tekelec, Inc. (a).......................................... 150,000 5,568,750
Telaxis Communications Corp. (a)........................... 11,200 673,225
Terayon Communication Systems, Inc. (a).................... 125,000 25,625,000
UTStarcom, Inc. (a)........................................ 21,300 1,662,731
Westell Technologies, Inc., Class A (a).................... 250,000 7,968,750
--------------
93,790,738
--------------
TECHNOLOGY 60.8%
724 Solutions, Inc. (a) ................................... 29,000 3,610,500
Actuate Corp. (a).......................................... 120,000 6,457,500
Advanced Digital Information Corp. (a)..................... 1,050,000 35,962,500
Allaire Corp. (a).......................................... 250,000 18,906,250
Alpha Industries, Inc. .................................... 200,000 19,000,000
ANADIGICS, Inc. (a)........................................ 350,000 23,100,000
Applied Micro Circuits Corp. (a)........................... 300,000 45,018,750
AppNet, Inc. (a)........................................... 75,000 3,525,000
Arrowpoint Communications, Inc. (a)........................ 4,900 580,573
Aspect Development, Inc. (a)............................... 300,000 19,312,500
Aspen Technology, Inc. (a)................................. 150,000 6,056,250
Audiovox Corp., Class A (a)................................ 301,000 13,131,125
AVX Corp. ................................................. 200,000 15,162,500
BroadVision, Inc. (a)...................................... 235,000 10,545,625
Brocade Communications Systems, Inc. (a)................... 112,000 20,083,000
Business Objects SA--ADR (France) (a)...................... 550,000 54,725,000
C-COR.net Corp. (a)........................................ 325,000 15,925,000
Check Point Software Technologies, Ltd.--ADR (Israel) 200,000 34,212,500
(a)......................................................
Copper Mountain Networks, Inc. (a)......................... 200,000 16,387,500
Credence Systems Corp. (a)................................. 350,000 43,793,750
Cymer, Inc. (a)............................................ 325,000 16,250,000
Davox Corp. (a)............................................ 150,000 4,012,500
Digital Lightwave, Inc. (a)................................ 100,000 6,231,250
Efficient Networks, Inc. (a)............................... 175,000 27,256,250
Exodus Communications, Inc. (a)............................ 130,000 18,265,000
Extreme Networks, Inc. (a)................................. 125,000 9,875,000
Foundry Networks, Inc. (a)................................. 74,200 10,666,250
Gemstar International Group Ltd. (a)....................... 259,200 22,291,200
Harmonic, Inc. (a)......................................... 400,000 33,300,000
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 76
YOUR FUND'S INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Informatica Corp. (a)...................................... 150,000 $ 11,521,875
Informix Corp. (a)......................................... 650,000 11,009,375
Integrated Device Technology, Inc. (a)..................... 300,000 11,887,500
Intersil Holding Corp., Class A (a)........................ 45,200 2,336,275
Iona Technologies--ADR (Ireland) (a)....................... 100,000 7,400,000
ISS Group, Inc. (a)........................................ 250,000 29,125,000
JDS Uniphase Corp. (a)..................................... 500,000 60,281,250
KEMET Corp. (a)............................................ 362,000 22,896,500
Keynote Systems, Inc. (a).................................. 125,000 12,781,250
Lam Research Corp. (a)..................................... 225,000 10,139,062
LSI Logic Corp. (a)........................................ 200,000 14,525,000
Mercury Interactive Corp. (a).............................. 250,000 19,812,500
Micrel, Inc. (a)........................................... 230,000 22,080,000
Micromuse, Inc. (a)........................................ 450,000 62,465,625
MRV Communications, Inc. (a)............................... 50,000 4,581,250
NetIQ Corp. (a)............................................ 20,700 1,383,019
Novellus Systems, Inc. (a)................................. 225,000 12,628,125
OpenTV Corp., Class A (a).................................. 31,100 3,681,462
Orbotech, Ltd. (a)......................................... 97,500 8,287,500
PC-Tel, Inc. (a)........................................... 28,900 2,174,725
Peregrine Systems, Inc. (a)................................ 500,000 33,531,250
PerkinElmer, Inc. ......................................... 125,000 8,312,500
Pharmacopeia, Inc. (a)..................................... 300,000 14,700,000
Pinnacle Systems, Inc. (a)................................. 300,000 9,975,000
Polycom, Inc. (a).......................................... 150,000 11,878,125
Powerwave Technologies, Inc. (a)........................... 250,000 31,250,000
Proxim, Inc. (a)........................................... 100,000 11,968,750
QIAGEN NV--ADR (Netherlands) (a)........................... 40,000 5,440,000
QLogic Corp. (a)........................................... 340,000 46,070,000
Radisys Corp. (a).......................................... 105,000 6,313,125
RADVision Ltd. (a)......................................... 13,000 680,875
Redback Networks, Inc. (a)................................. 50,000 14,996,875
SanDisk Corp. (a).......................................... 175,000 21,437,500
Scient Corp. (a)........................................... 50,000 4,534,375
SDL, Inc. (a).............................................. 450,000 95,793,750
Selectica, Inc. (a)........................................ 20,600 1,817,950
Semtech Corp. (a).......................................... 300,000 19,218,750
Silicon Image, Inc. (a).................................... 22,900 1,640,213
Silicon Storage Technology, Inc. (a)....................... 125,000 9,234,375
St Assembly Test Services Ltd.--ADR (Singapore) (a)........ 28,400 1,377,400
Symyx Technologies, Inc. (a)............................... 27,400 1,181,625
Techne Corp. (a)........................................... 250,000 17,250,000
Three-Five Systems, Inc. (a)............................... 200,000 12,000,000
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 77
YOUR FUND'S INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Titan Corp. (a)............................................ 500,000 $ 25,500,000
TranSwitch Corp. (a)....................................... 187,500 18,023,438
TriQuint Semiconductor, Inc. (a)........................... 300,000 22,050,000
Turnstone Systems, Inc. (a)................................ 8,400 966,000
Varian Semiconductor Equipment Associates, Inc. (a)........ 350,000 22,268,750
VERITAS Software Corp. (a)................................. 112,500 14,737,500
Versata, Inc. (a).......................................... 10,600 637,988
Virata Corp. (a)........................................... 25,700 2,566,788
Vishay Intertechnology, Inc. (a)........................... 350,000 19,468,750
Vitria Technology, Inc. (a)................................ 16,000 1,613,000
WebTrends Corp. (a)........................................ 150,000 10,800,000
Zomax, Inc. (a)............................................ 325,000 19,581,250
Zoran Corp. (a)............................................ 175,000 9,854,687
--------------
1,433,311,155
--------------
UTILITIES 3.3%
AirGate PCS, Inc. (a)...................................... 45,300 4,779,150
Calpine Corp. (a).......................................... 350,000 32,900,000
Clarent Corp. (a).......................................... 60,000 5,411,250
Illuminet Holdings, Inc. (a)............................... 13,100 644,970
RF Micro Devices, Inc. (a)................................. 250,000 33,593,750
--------------
77,329,120
--------------
TOTAL LONG-TERM INVESTMENTS 96.7%
(Cost $1,289,693,421)............................................... 2,279,299,053
REPURCHASE AGREEMENT 3.2%
Warburg Dillon Read ($74,975,000 par, collateralized by U.S.
Government obligations in a pooled cash account, dated 03/31/00, to
be sold on 04/03/00 at $75,012,987) (Cost $74,975,000).............. 74,975,000
--------------
TOTAL INVESTMENTS 99.9%
(Cost $1,364,668,421)............................................. 2,354,274,053
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%........................... 2,723,318
--------------
NET ASSETS 100.0%.................................................... $2,356,997,371
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt.
* The common stocks are classified by sectors which represent broad groupings
of related industries.
See Notes to Financial Statements
F-6
<PAGE> 78
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2000
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,364,668,421)..................... $2,354,274,053
Cash........................................................ 3,138
Receivables:
Investments Sold.......................................... 45,708,764
Fund Shares Sold.......................................... 16,791,054
Dividends................................................. 100,260
Interest.................................................. 12,691
Unamortized Organizational Costs............................ 24,456
Other....................................................... 19,397
--------------
Total Assets............................................ 2,416,933,813
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 30,219,549
Investments Purchased..................................... 25,419,440
Distributor and Affiliates................................ 2,283,905
Investment Advisory Fee................................... 1,571,579
Accrued Expenses............................................ 322,723
Trustees' Deferred Compensation and Retirement Plans........ 119,246
--------------
Total Liabilities....................................... 59,936,442
--------------
NET ASSETS.................................................. $2,356,997,371
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,174,619,430
Net Unrealized Appreciation................................. 989,605,632
Accumulated Net Realized Gain............................... 192,891,352
Accumulated Net Investment Loss............................. (119,043)
--------------
NET ASSETS.................................................. $2,356,997,371
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,205,790,902 and 32,203,301 shares of
beneficial interest issued and outstanding)............. $ 37.44
Maximum sales charge (5.75%* of offering price)......... 2.28
--------------
Maximum offering price to public........................ $ 39.72
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $948,484,491 and 26,170,809 shares of
beneficial interest issued and outstanding)............. $ 36.24
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $202,721,978 and 5,580,265 shares of
beneficial interest issued and outstanding)............. $ 36.33
==============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
F-7
<PAGE> 79
Statement of Operations
For the Year Ended March 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 4,411,270
Dividends (Net of foreign withholding taxes of $8,640)...... 348,204
--------------
Total Income............................................ 4,759,474
--------------
EXPENSES:
Investment Advisory Fee..................................... 8,558,616
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,528,368, $5,124,708 and $920,433,
respectively)............................................. 7,573,509
Shareholder Services........................................ 2,506,653
Custody..................................................... 133,654
Legal....................................................... 63,152
Trustees' Fees and Related Expenses......................... 60,060
Amortization of Organizational Costs........................ 21,056
Other....................................................... 861,878
--------------
Total Expenses.......................................... 19,778,578
Less Credits Earned on Overnight Cash Balances.......... 2,232
--------------
Net Expenses............................................ 19,776,346
--------------
NET INVESTMENT LOSS......................................... $ (15,016,872)
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 285,606,283
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 168,181,463
End of the Period......................................... 989,605,632
--------------
Net Unrealized Appreciation During the Period............... 821,424,169
--------------
NET REALIZED AND UNREALIZED GAIN............................ $1,107,030,452
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $1,092,013,580
==============
</TABLE>
See Notes to Financial Statements
F-8
<PAGE> 80
Statement of Changes in Net Assets
For the Year Ended March 31, 2000, Nine Months Ended March 31, 1999 and the Year
Ended June 30, 1998
<TABLE>
<CAPTION>
YEAR ENDED
MARCH NINE MONTHS ENDED YEAR ENDED
31, 2000 MARCH 31, 1999 JUNE 30, 1998
----------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss................ $ (15,016,872) $ (3,914,828) $ (3,698,217)
Net Realized Gain.................. 285,606,283 17,607,525 46,196,606
Net Unrealized Appreciation During
the Period....................... 821,424,169 98,128,461 30,931,626
-------------- ------------ ------------
Change in Net Assets from
Operations....................... 1,092,013,580 111,821,158 73,430,015
-------------- ------------ ------------
Distributions from Net Realized
Gain:
Class A Shares................... (44,926,473) (8,188,984) -0-
Class B Shares................... (42,825,702) (10,090,918) -0-
Class C Shares................... (7,505,533) (1,152,760) -0-
-------------- ------------ ------------
Total Distributions................ (95,257,708) (19,432,662) -0-
-------------- ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............ 996,755,872 92,388,496 73,430,015
-------------- ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......... 1,278,094,894 293,035,698 165,163,266
Net Asset Value of Shares Issued
Through Dividend Reinvestment.... 84,362,153 18,218,328 -0-
Cost of Shares Repurchased......... (503,929,502) (184,145,939) (145,403,812)
-------------- ------------ ------------
NET CHANGE IN NET ASSETS FROM
CAPITAL TRANSACTIONS............. 858,527,545 127,108,087 19,759,454
-------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS....... 1,855,283,417 219,496,583 93,189,469
NET ASSETS:
Beginning of the Period............ 501,713,954 282,217,371 189,027,902
-------------- ------------ ------------
End of the Period (Including
accumulated net investment loss
of $119,043, $66,257 and $51,572,
respectively).................... $2,356,997,371 $501,713,954 $282,217,371
============== ============ ============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE> 81
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
MAY 29, 1996
(COMMENCEMENT
NINE MONTHS YEAR ENDED OF INVESTMENT
YEAR ENDED ENDED JUNE 30, OPERATIONS) TO
CLASS A SHARES MARCH 31, MARCH 31, ---------------- JUNE 30,
2000 (B) 1999 (B) 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD................. $ 17.137 $13.676 $ 9.948 $9.118 $9.430
-------- ------- ------- ------ ------
Net Investment Loss........ (.234) (.125) (.135) (.065) (.002)
Net Realized and Unrealized
Gain/Loss................ 22.414 4.445 3.863 .895 (.310)
-------- ------- ------- ------ ------
Total from Investment
Operations................. 22.180 4.320 3.728 .830 (.312)
Less Distributions from Net
Realized Gain.............. 1.874 .859 -0- -0- -0-
-------- ------- ------- ------ ------
NET ASSET VALUE, END OF THE
PERIOD..................... $ 37.443 $17.137 $13.676 $9.948 $9.118
======== ======= ======= ====== ======
Total Return (a)............. 133.67% 33.72%** 37.49% 9.10% (3.29%)**
Net Assets at End of the
Period (In millions)....... $1,205.8 $ 242.6 $ 117.5 $ 84.0 $ 30.3
Ratio of Expenses to Average
Net Assets*................ 1.25% 1.56% 1.44% 1.30% 1.29%
Ratio of Net Investment Loss
to Average Net Assets*..... (.86%) (1.22%) (1.09%) (.81%) (.50%)
Portfolio Turnover........... 139% 126%** 185% 186% 4%**
* If certain expenses had not been waived by Van Kampen, Total Return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................. N/A N/A 1.61% 1.61% 2.05%
Ratio of Net Investment Loss
to Average Net Assets...... N/A N/A (1.26%) (1.12%) (1.25%)
</TABLE>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge ("CDSC"). On purchases of $1 million or more, a CDSC of 1% may
be imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.
(b) Based on average shares outstanding.
N/A = Not Applicable
See Notes to Financial Statements
F-10
<PAGE> 82
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
MAY 29, 1996
(COMMENCEMENT
NINE MONTHS YEAR ENDED OF INVESTMENT
YEAR ENDED ENDED JUNE 30, OPERATIONS) TO
CLASS B SHARES MARCH 31, MARCH 31, ---------------- JUNE 30,
2000 (B) 1999 (B) 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD................. $16.747 $13.461 $ 9.867 $9.112 $9.430
------- ------- ------- ------ ------
Net Investment Loss........ (.422) (.197) (.204) (.105) (.006)
Net Realized and Unrealized
Gain/Loss................ 21.791 4.342 3.798 .860 (.312)
------- ------- ------- ------ ------
Total from Investment
Operations................. 21.369 4.145 3.594 .755 (.318)
Less Distributions from Net
Realized Gain.............. 1.874 .859 -0- -0- -0-
------- ------- ------- ------ ------
NET ASSET VALUE, END OF THE
PERIOD..................... $36.242 $16.747 $13.461 $9.867 $9.112
======= ======= ======= ====== ======
Total Return (a)............. 131.91% 32.99%** 36.37% 8.34% (3.39%)**
Net Assets at End of the
Period (In millions)....... $ 948.5 $ 231.8 $ 148.4 $ 94.2 $ 25.5
Ratio of Expenses to Average
Net Assets*................ 2.00% 2.33% 2.20% 2.05% 2.06%
Ratio of Net Investment Loss
to Average Net Assets*..... (1.61%) (1.99%) (1.85%) (1.55%) (1.28%)
Portfolio Turnover........... 139% 126%** 185% 186% 4%**
* If certain expenses had not been waived by Van Kampen, Total Return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................. N/A N/A 2.37% 2.35% 2.81%
Ratio of Net Investment Loss
to Average Net Assets...... N/A N/A (2.02%) (1.86%) (2.04%)
</TABLE>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining thereafter to 0% after the
fifth year. If the sales charge was included, total returns would be lower.
(b) Based on average shares outstanding.
N/A = Not Applicable
See Notes to Financial Statements
F-11
<PAGE> 83
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
MAY 29, 1996
(COMMENCEMENT
NINE MONTHS YEAR ENDED OF INVESTMENT
YEAR ENDED ENDED JUNE 30, OPERATIONS) TO
CLASS C SHARES MARCH 31, MARCH 31, ---------------- JUNE 30,
2000 (B) 1999 (B) 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD................. $16.762 $13.470 $ 9.869 $9.113 $9.430
------- ------- ------- ------ ------
Net Investment Loss........ (.447) (.197) (.203) (.103) (.006)
Net Realized and Unrealized
Gain/Loss................ 21.887 4.348 3.804 .859 (.311)
------- ------- ------- ------ ------
Total from Investment
Operations................. 21.440 4.151 3.601 .756 (.317)
Less Distributions from Net
Realized Gain.............. 1.874 .859 -0- -0- -0-
------- ------- ------- ------ ------
NET ASSET VALUE, END OF THE
PERIOD..................... $36.328 $16.762 $13.470 $9.869 $9.113
======= ======= ======= ====== ======
Total Return (a)............. 132.31% 32.96%** 36.47% 8.34% (3.39%)**
Net Assets at End of the
Period (In millions)....... $ 202.7 $ 27.4 $ 16.4 $ 10.8 $ 3.9
Ratio of Expenses to Average
Net Assets*................ 2.01% 2.33% 2.20% 2.05% 2.05%
Ratio of Net Investment Loss
to Average Net Assets*..... (1.62%) (1.98%) (1.85%) (1.54%) (1.28%)
Portfolio Turnover........... 139% 126%** 185% 186% 4%**
* If certain expenses had not been waived by Van Kampen, Total Return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................. N/A N/A 2.36% 2.35% 2.81%
Ratio of Net Investment Loss
to Average Net Assets...... N/A N/A (2.02%) (1.85%) (2.04%)
</TABLE>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower.
(b) Based on average shares outstanding.
N/A = Not Applicable
See Notes to Financial Statements
F-12
<PAGE> 84
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Aggressive Growth Fund (the "Fund") is organized as a separate
diversified series of Van Kampen Equity Trust (the "Trust"), a Delaware business
trust, which is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended. The Fund's investment objective
is to seek capital growth by investing primarily in a diversified portfolio of
common stocks and other equity securities. The Fund commenced investment
operations on May 29, 1996 with three classes of common shares, Class A, Class B
and Class C.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are collateralized by the underlying debt security. The
Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain
F-13
<PAGE> 85
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
the value of the underlying security at not less than the repurchase proceeds
due the Fund.
C. INCOME AND EXPENSES Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. ORGANIZATIONAL COSTS The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $105,000. These costs are being amortized
on a straight line basis over the 60 month period ending May 28, 2001. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed by the Fund during the
amortization period, the Fund will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Accumulated net realized gain/loss differs for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.
At March 31, 2000, for federal income tax purposes, cost of long- and short-
term investments is $1,365,546,684; the aggregate gross unrealized appreciation
is $1,019,181,282 and the aggregate gross unrealized depreciation is
$30,453,913, resulting in net unrealized appreciation on long- and short-term
investments of $988,727,369.
F. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income and net realized gains, if any. Due to
inherent differences in the recognition of income, expenses and realized
gains/losses under generally accepted accounting principles and federal income
tax purposes, permanent differences between book and tax basis reporting for the
year ended March 31, 2000, the nine months ended March 31, 1999 and for the year
ended June 30, 1998 have been identified and appropriately reclassified. For the
year ended March 31, 2000, a permanent difference related to net operating loss
which may be used as an offset against short-term gains for tax purposes
totaling $14,964,086 has been reclassified from accumulated net realized gains
to
F-14
<PAGE> 86
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
accumulated net investment loss. For the nine months ended March 31, 1999, a
permanent difference related to a net operating loss totaling $3,900,143 has
been reclassified from accumulated net investment loss to capital. For the year
ended June 30, 1998, a permanent difference related to net operating loss which
may be used as an offset against short-term gains for tax purposes totaling
$124,267 has been reclassified from accumulated net realized gains to
accumulated net investment loss. The $3,557,256 of remaining tax basis net
operating loss was reclassified from accumulated net investment loss to capital.
G. EXPENSE REDUCTIONS During the year ended March 31, 2000, the Fund's custody
fee was reduced by $2,232 as a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
<S> <C>
First $500 million.......................................... .75 of 1%
Next $500 million........................................... .70 of 1%
Over $1 billion............................................. .65 of 1%
</TABLE>
For the year ended March 31, 2000, the Fund recognized expenses of
approximately $48,200, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended March 31, 2000, the Fund recognized expenses of
approximately $166,100, representing Van Kampen's cost of providing accounting
and legal services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended March 31, 2000,
the Fund recognized expenses of approximately $1,931,100. Transfer agency fees
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
F-15
<PAGE> 87
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At March 31, 2000, Van Kampen owned 100 shares each of Classes A, B and C.
3. CAPITAL TRANSACTIONS
At March 31, 2000, capital aggregated $624,037,002, $434,920,028 and
$115,662,400 for Classes A, B, and C, respectively. For the year ended March 31,
2000, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A.............................................. 28,901,927 $ 792,938,804
Class B.............................................. 15,130,699 372,428,551
Class C.............................................. 4,427,215 112,727,539
----------- --------------
Total Sales............................................ 48,459,841 $1,278,094,894
=========== ==============
Dividend Reinvestment:
Class A.............................................. 1,492,984 $ 39,967,184
Class B.............................................. 1,455,968 37,811,488
Class C.............................................. 252,919 6,583,481
----------- --------------
Total Dividend Reinvestment............................ 3,201,871 $ 84,362,153
=========== ==============
Repurchases:
Class A.............................................. (12,345,867) $ (366,411,624)
Class B.............................................. (4,256,570) (116,693,001)
Class C.............................................. (732,790) (20,824,877)
----------- --------------
Total Repurchases...................................... (17,335,227) $ (503,929,502)
=========== ==============
</TABLE>
F-16
<PAGE> 88
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
At March 31, 1999, capital aggregated $157,542,638, $141,372,990 and
$17,176,257 for Classes A, B, and C, respectively. For the nine months ended
March 31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 16,304,723 $ 225,416,282
Class B............................................... 4,260,040 58,630,954
Class C............................................... 654,046 8,988,462
----------- -------------
Total Sales............................................. 21,218,809 $ 293,035,698
=========== =============
Dividend Reinvestment:
Class A............................................... 617,711 $ 7,881,994
Class B............................................... 748,531 9,356,636
Class C............................................... 78,313 979,698
----------- -------------
Total Dividend Reinvestment............................. 1,444,555 $ 18,218,328
=========== =============
Repurchases:
Class A............................................... (11,356,554) $(151,245,333)
Class B............................................... (2,191,661) (28,721,224)
Class C............................................... (315,445) (4,179,382)
----------- -------------
Total Repurchases....................................... (13,863,660) $(184,145,939)
=========== =============
</TABLE>
At June 30, 1998, capital aggregated $77,375,241, $103,908,446 and
$11,600,254 for Classes A, B, and C, respectively. For the year ended June 30,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 9,586,041 $ 113,481,993
Class B............................................... 3,875,397 46,006,833
Class C............................................... 476,868 5,674,440
----------- -------------
Total Sales............................................. 13,938,306 $ 165,163,266
=========== =============
Repurchases:
Class A............................................... (9,437,958) $(112,683,409)
Class B............................................... (2,400,562) (28,531,040)
Class C............................................... (359,118) (4,189,363)
----------- -------------
Total Repurchases....................................... (12,197,638) $(145,403,812)
=========== =============
</TABLE>
F-17
<PAGE> 89
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996, and any dividend reinvestment plan Class B shares
received thereon, automatically convert to Class A shares eight years after the
end of the calendar month in which the shares were purchased. Class B shares
purchased before June 1, 1996, and any dividend reinvestment plan Class B shares
received thereon, automatically convert to Class A shares six years after the
end of the calendar month in which the shares were purchased. For the year ended
March 31, 2000, no Class B shares converted to Class A shares. Class C shares
purchased before January 1, 1997, and any dividend reinvestment plan Class C
shares received thereon, automatically convert to Class A shares ten years after
the end of the calendar month in which such shares were purchased. Class C
shares purchased on or after January 1, 1997 do not possess a conversion
feature. For the year ended March 31, 2000, no Class C shares converted to Class
A shares. The CDSC will be imposed on most redemptions made within five years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First...................................................... 5.00% 1.00%
Second..................................................... 4.00% None
Third...................................................... 3.00% None
Fourth..................................................... 2.50% None
Fifth...................................................... 1.50% None
Sixth and Thereafter....................................... None None
</TABLE>
For the year ended March 31, 2000, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$860,000, and CDSC on redeemed shares of approximately $655,600. Sales charges
do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $2,298,722,633 and $1,577,164,936,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
F-18
<PAGE> 90
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
The Fund may invest in futures contracts, a type of derivative. A futures
contract is an agreement involving the delivery of a particular asset on a
specified future date at an agreed upon price. The Fund generally invests in
stock index futures. These contracts are generally used to provide the return of
an index without purchasing all of the securities underlying the index or to
manage the Fund's overall exposure to the equity markets.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). There were no transactions in
futures contracts during the year ended March 31, 2000.
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended March 31, 2000, are payments retained by Van Kampen of
approximately $3,811,700.
7. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for
F-19
<PAGE> 91
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000
the credit facility meets or exceeds $650 million on a complex-wide basis, each
fund will be limited to its pro-rata percentage based on the net assets of each
participating fund. Interest on borrowings is charged under the agreement at a
rate of 0.50% above the federal funds rate per annum. An annual commitment fee
of 0.09% per annum is charged on the unused portion of the credit facility,
which each fund incurs based on its pro-rata percentage of quarterly net assets.
The Fund has not borrowed against the credit facility during the period.
F-20
<PAGE> 92
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a)(1) Agreement and Declaration of Trust(4)
(2) Certificate of Amendment(6)
(3) Certificate of Designation for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(6)
(ii) Van Kampen Growth Fund(6)
(iii) Van Kampen Aggressive Growth Fund+
(iv) Van Kampen Small Cap Value Fund(7)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(b) By-Laws(7)
(c) Specimen Share Certificates for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(4)
(ii) Van Kampen Growth Fund(4)
(iii) Van Kampen Aggressive Growth Fund+
(iv) Van Kampen Small Cap Value Fund(7)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(d)(1) Investment Advisory Agreement for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(5)
(ii) Van Kampen Growth Fund(5)
(iii) Van Kampen Aggressive Growth Fund(5)
(iv) Van Kampen Small Cap Value Fund(7)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(2) Investment Subadvisory Agreement for Van Kampen Small Company
Growth Fund++
(e)(1) Distribution and Service Agreement for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(5)
(ii) Van Kampen Growth Fund(5)
(iii) Van Kampen Aggressive Growth Fund(5)
(iv) Van Kampen Small Cap Value Fund(7)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(2) Form of Dealer Agreement(9)
(3) Form of Broker Fully Disclosed Clearing Agreement(9)
(4) Form of Bank Fully Disclosed Clearing Agreement(9)
(f)(1) Form of Trustee Deferred Compensation Agreement(8)
(2) Form of Trustee Retirement Plan(8)
(g)(1) Custodian Contract(9)
(2) Transfer Agency and Service Agreement(5)
(h)(1) Fund Accounting Agreement(9)
(2) Amended and Restated Legal Services Agreement(9)
(i)(1) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois) for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(1)
(ii) Van Kampen Growth Fund(2)
(iii) Van Kampen Aggressive Growth Fund+
(iv) Van Kampen Small Cap Value Fund(9)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(j)(1) Opinion of KPMG LLP for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(11)
(ii) Van Kampen Growth Fund(11)
(iii) Van Kampen Aggressive Growth Fund+
</TABLE>
(2) Consent of KPMG LLP for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(11)
(ii) Van Kampen Growth Fund(11)
(iii) Van Kampen Aggressive Growth Fund+
(iv) Van Kampen Small Cap Value Fund(11)
</TABLE>
C-1
<PAGE> 93
(3) Consent of PricewaterhouseCoopers LLP for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(11)
(ii) Van Kampen Growth Fund(11)
(iii) Van Kampen Aggressive Growth Fund+
(iv) Van Kampen Small Cap Value Fund(11)
(v) Van Kampen Select Growth Fund(11)
</TABLE>
(4) Consent of Ernst and Young LLP for:
<TABLE>
<C> <S>
Van Kampen Utility Fund, Van Kampen Growth Fund, Van Kampen
Small Cap Value Fund, and Van Kampen Select Growth Fund(11)
(i)
Van Kampen Aggressive Growth Fund+
(ii)
</TABLE>
(k) Not Applicable
(l) Letter of Understanding relating to initial capital(4)
(m)(1) Distribution Plan pursuant to Rule 12b-1 for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(4)
(ii) Van Kampen Growth Fund(4)
(iii) Van Kampen Aggressive Growth Fund(4)
(iv) Van Kampen Small Cap Value Fund(7)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(2) Form of Shareholder Assistance Agreement(9)
(3) Form of Administrative Services Agreement(9)
(4) Service Plan for:
<TABLE>
<C> <S>
(i) Van Kampen Utility Fund(4)
(ii) Van Kampen Growth Fund(4)
(iii) Van Kampen Aggressive Growth Fund(4)
(iv) Van Kampen Small Cap Value Fund(7)
(v) Van Kampen Small Company Growth Fund++
(vi) Van Kampen Small Cap Growth Fund++
(vii) Van Kampen Select Growth Fund(10)
</TABLE>
(n)(1) Amended Multi-Class Plan(5)
(2) Van Kampen Small Cap Value Fund Multi-Class Plan(9)
(3) Amended Multi-Class Plan for Van Kampen Aggressive Growth Fund+
(p)(1) Code of Ethics of the Funds, Investment Adviser and
Distributor+
(2) Code of Ethics of the subadviser to Van Kampen Small Company
Growth Fund++
(q) Power of Attorney(10)
(z)(1) List of certain investment companies in response to Item 27(a)+
(2) List of Officers and Directors of Van Kampen Funds Inc. in
response to Item 27(b)+
---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on August 1, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on October 13, 1995.
(3) Incorporated herein by reference to Post-Effective Amendment No. 26 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on March 15, 1996.
(4) Incorporated herein by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on October 28, 1996.
(5) Incorporated herein by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on October 28, 1997.
(6) Incorporated herein by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on September 30, 1998.
(7) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on March 1, 1999.
(8) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van
Kampen Harbor Fund's Registration Statement on Form N-1A, File Numbers
2-12685 and 811-734, filed April 29, 1999.
(9) Incorporated herein by reference to Post-Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on June 16, 1999.
(10) Incorporated herein by reference to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on April 24, 2000.
(11) Incorporated herein by reference to Post-Effective Amendment No. 38 to
Registrant's Registration Statement on Form N-1A, File No. 33-8122, filed
on July 27, 2000.
+ Filed herewith.
++ To be filed by further amendment.
C-2
<PAGE> 94
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Pursuant to Del. Code Ann. Title 12, Section 3817, a Delaware business
trust may provide in its governing instrument for the indemnification of its
officers and trustees from and against any and all claims and demands
whatsoever.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust, as amended, Article 8, Section 8.4 of the Agreement
and Declaration of Trust provides that each officer and trustee of the
Registrant shall be indemnified by the Registrant against all liabilities
incurred in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which the officer or trustee may
be or may have been involved by reason of being or having been an officer or
trustee, except that such indemnity shall not protect any such person against a
liability to the Registrant or any shareholder thereof to which such person
would otherwise be subject by reason of (i) not acting in good faith in the
reasonable belief that such person's actions were not in the best interests of
the Trust, (ii) willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office or (iii)
for a criminal proceeding, not having a reasonable cause to believe that such
conduct was unlawful (collectively, "Disabling Conduct"). Absent a court
determination that an officer or trustee seeking indemnification was not liable
on the merits or guilty of Disabling Conduct in the conduct of such person's
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent legal counsel in a written
opinion or a majority of a quorum of non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct, in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or trustees would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance and only if the following conditions
are met: (1) the trustee or officer provides a security for the undertaking; (2)
the Registrant is insured against losses arising from lawful advances; or (3) a
majority of a quorum of the Registrant's disinterested, non-party trustees, or
an independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that a recipient of the advance ultimately
will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
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<PAGE> 95
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements, in light of the circumstances, not
misleading under the 1933 Act, or any other statute or the common law. The
Registrant does not agree to indemnify the Distributor or hold it harmless to
the extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Registrant by or on behalf of the
Distributor. In no case is the indemnity of the Registrant in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor or
any person against any liability to the Fund or its security holders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
agreement.
Pursuant to the agreement by which Van Kampen Investor Services Inc.
("Investor Services") is appointed transfer agent of the Fund, the Registrant
agrees to indemnify and hold Investor Services harmless against any losses,
damages, costs, charges, payments, liabilities and expenses (including
reasonable counsel fees) arising out of or attributable to:
(1) the performance of Investor Services under the agreement provided that
Investor Services acted in good faith with due diligence and without negligence
or willful misconduct.
(2) reliance by Investor Services on, or reasonable use by, Investor Services
of information, records and documents which have been prepared on behalf of, or
have been furnished by, the Fund, or the carrying out by Investor Services of
any instructions or requests of the Fund.
(3) the offer or sale of the Fund's shares in violation of any federal or
state law or regulation or ruling by any federal agency unless such violation
results from any failure by Investor Services to comply with written
instructions from the Fund that such offers or sales were not permitted under
such law, rule or regulation.
(4) the refusal of the Fund to comply with terms of the agreement, or the
Fund's lack of good faith, negligence or willful misconduct or breach of any
representation or warranty made by the Fund under the agreement provided that if
the reason for such failure is attributable to any action of the Fund's
investment adviser or distributor or any person providing accounting or legal
services to the Fund, Investor Services only will be entitled to indemnification
if such entity is otherwise entitled to the indemnification from the Fund.
See also "Investment Advisory Agreement" in each Statement of Additional
Information.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
See "Investment Advisory Services" in each Prospectus and "Investment
Advisory Agreement," "Other Agreements," and "Trustees and Officers" in each
Statement of Additional Information for information regarding the business of
Van Kampen Investment Advisory Corp. (the "Adviser"). For information as to the
business, profession, vocation or employment of a substantial nature of each
officer and director of the Adviser, reference is made to the Adviser's current
Form ADV (File No. 801-18161) filed under the Investment Advisers Act of 1940,
as amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The sole principal underwriter is Van Kampen Funds Inc. (the
"Distributor") which acts as principal underwriter for certain investment
companies and unit investment trusts. See Exhibit (z)(1) incorporated by
reference herein.
(b) Van Kampen Funds Inc., is an affiliated person of the Registrant and is
the only principal underwriter for the Registrant. The name, principal business
address and position and office with Van Kampen Funds Inc. of each of its
directors and officers are disclosed in Exhibit (z)(2). Except as disclosed
under the heading, "Trustees and Officers" in Part B of this Registration
Statement, none of such persons has any position or office with the Registrant.
(c) Not applicable.
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<PAGE> 96
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder to be maintained (i) by the Registrant will be maintained at its
offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, or
at Van Kampen Investor Services Inc., 7501 Tiffany Springs Parkway, Kansas City,
Missouri 64153, or at the State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, Massachusetts 02171; (ii) by the Adviser, will be
maintained at its offices, located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555; and (iii) by Van Kampen Funds Inc., the principal
underwriter, will be maintained at its offices located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
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<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN EQUITY TRUST, certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the 1933 Act and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of Oakbrook Terrace and the State of Illinois, on the
25th day of September, 2000.
VAN KAMPEN EQUITY TRUST
By: /s/ A. THOMAS SMITH III
-------------------------------------
A. Thomas Smith III, Secretary
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on September 25, 2000, by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
Principal Executive Officer:
/s/ RICHARD F. POWERS, III* Trustee and President
------------------------------------------------
Richard F. Powers, III
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and
------------------------------------------------ Treasurer
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
------------------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Trustee
------------------------------------------------
Jerry D. Choate
/s/ LINDA HUTTON HEAGY* Trustee
------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
------------------------------------------------
R. Craig Kennedy
/s/ MITCHELL M. MERIN* Trustee
------------------------------------------------
Mitchell M. Merin
/s/ JACK E. NELSON* Trustee
------------------------------------------------
Jack E. Nelson
/s/ PHILLIP B. ROONEY* Trustee
------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
------------------------------------------------
Wayne W. Whalen
/s/ SUZANNE H. WOOLSEY* Trustee
------------------------------------------------
Suzanne H. Woolsey
---------------
* Signed by A. Thomas Smith III pursuant to a power of attorney previously filed.
/s/ A. THOMAS SMITH III September 25, 2000
------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>
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<PAGE> 98
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE
AMENDMENT NO. 40 TO FORM N-1A
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
----------- -------
<S> <C>
(a)(3)(iii) Certificate of Designation for Aggressive Growth Fund
(c)(iii) Specimen Share Certificate for Aggressive Growth Fund
(i)(1)(iii) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois) for Aggressive Growth Fund
(j)(1)(iii) Opinion of KPMG LLP for Aggressive Growth Fund
(2)(iii) Consent of KPMG LLP for Aggressive Growth Fund
(3)(iii) Consent of PricewaterhouseCoopers LLP for Aggressive Growth
Fund
(4)(ii) Consent of Ernst & Young LLP for Aggressive Growth Fund
(n)(3) Amended and Restated Multi-class plan for Aggressive Growth
Fund
(p)(1) Code of Ethics
(z)(1) List of certain investment companies in response to Item
27(a)
(z)(2) List of Officers and Directors of Van Kampen Funds Inc. in
response to Item 27(b)
</TABLE>
