<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1998
REGISTRATION NOS. 33-37879
811-6220
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 15 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 16 [X]
</TABLE>
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THE DECLARATION OF TRUST)
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
VAN KAMPEN INVESTMENTS INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, IL 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, IL 60606
(312) 407-0700
---------------------
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 28, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PROSPECTUS CAPTION
FORM N-1A ITEM PART A ------------------
<S> <C> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... The Trust; Investment Objective and
Policies; Risk Factors; Investment
Practices; Description of Shares of the
Fund
5. Management of the Fund..................... Annual Fund Operating Expenses and Example;
The Trust; Investment Practices;
Investment Advisory Services; Inside Back
Cover
6. Capital Stock and Other Securities......... The Fund; Alternative Sales Arrangements;
Purchase of Shares; Shareholder Services;
Distribution and Service Plans;
Redemption of Shares; Distributions from
the Fund; Tax Status; Description of
Shares of the Fund; Additional
Information; Inside Back Cover
7. Purchase of Securities Being Offered....... Alternative Sales Arrangements; Purchase of
Shares; Shareholder Services;
Distribution and Service Plans
8. Redemption or Repurchase................... Shareholder Services; Redemption of Shares
9. Pending Legal Proceedings.................. Inapplicable
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION CAPTION
PART B -------------------------------------------
<S> <C> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Policies and Techniques;
Options, Futures Contracts and Related
Options; Repurchase Agreements; Loans of
Portfolio Securities; Investment
Restrictions
14. Management of the Fund..................... General Information; Trustees and Officers;
Investment Advisory Agreements
15. Control Persons and Principal Holders of
Securities............................... General Information; Trustees and Officers;
Investment Advisory Agreements
16. Investment Advisory and Other Services..... General Information; Trustees and Officers;
Investment Advisory Agreements;
Distributor; Distribution and Service
Plans; Transfer Agent; Portfolio
Transactions and Brokerage; Other
Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; Exchange
Privilege
20. Tax Status................................. Tax Status of the Fund
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Fund Performance
23. Financial Statements....................... Report of Independent Accountants;
Financial Statements; Notes to Financial
Statements
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE> 3
- --------------------------------------------------------------------------------
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Van Kampen Global Government Securities Fund (the "Fund") is a separate,
non-diversified series of Van Kampen World Portfolio Series Trust (the "Trust"),
an open-end management investment company. The Fund's primary investment
objective is to seek to provide a high level of current income. The Fund's
secondary investment objectives are capital appreciation and protection of
principal. The Fund seeks to achieve its investment objectives by investing
primarily in an international portfolio of high quality foreign and U.S.
government bonds and by actively managing the maturity structure and currency
exposure of its portfolio. There is no assurance that the Fund will achieve its
investment objectives.
The Fund's investment adviser is Van Kampen Asset Management Inc. (the
"Adviser"). Morgan Stanley Asset Management Inc. provides sub-advisory services
to the Adviser of the Fund (the "Subadviser"). This Prospectus sets forth
certain information that a prospective investor should know before investing in
the Fund. Please read it carefully and retain it for future reference. The
address of the Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, and
its telephone number is (800) 421-5666.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated September 28, 1998, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this Prospectus. A copy of the Statement of Additional Information
may be obtained without charge by calling (800) 421-5666 or for
Telecommunications Device For the Deaf at (800) 421-2833. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is available along with other related materials of
the Fund at the SEC's internet web site (http://www.sec.gov).
[VAN KAMPEN FUNDS LOGO]
THIS PROSPECTUS IS DATED SEPTEMBER 28, 1998.
<PAGE> 4
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 7
The Trust................................................... 9
Investment Objectives and Policies.......................... 9
Risk Factors................................................ 11
Investment Practices........................................ 12
Investment Advisory Services................................ 16
Alternative Sales Arrangements.............................. 17
Purchase of Shares.......................................... 19
Shareholder Services........................................ 25
Redemption of Shares........................................ 28
Distribution and Service Plans.............................. 30
Distributions from the Fund................................. 31
Tax Status.................................................. 31
Fund Performance............................................ 34
Description of Shares of the Fund........................... 36
Additional Information...................................... 36
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 5
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
THE FUND. Van Kampen Global Government Securities Fund (the "Fund") is a
separate, non-diversified series of Van Kampen World Portfolio Series Trust (the
"Trust"). The Trust is an open-end management investment company organized as a
Delaware business trust.
MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").
INVESTMENT OBJECTIVES. The primary investment objective of the Fund is to seek
to provide a high level of current income. The Fund's secondary investment
objectives are capital appreciation and protection of capital. There is no
assurance the Fund will achieve its investment objectives. See "Investment
Objectives and Policies."
INVESTMENT POLICY. The Fund seeks to achieve its investment objective by
investing primarily in an international portfolio of high quality foreign and
U.S. government bonds. The Fund may invest in securities of supranational
issuers. The Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U. S. Government securities or foreign
government securities, and may purchase and write put and call options to buy or
sell futures contracts.
RISK FACTORS. Investing in securities issued by foreign governments and
corporations involves considerations and possible risks not typically associated
with investing in obligations issued by the United States government. The values
of foreign investments are affected by changes in currency rates or exchange
control regulations, application of foreign tax laws, including withholding
taxes, changes in governmental administration or economic or monetary policy or
changed circumstances in dealings between nations. See "Investment Objectives
and Policies" and "Risk Factors." The use of options, futures contracts and
options on futures contracts may include additional risks. See "Investment
Practices."
INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights."
ALTERNATIVE SALES ARRANGEMENTS. The Fund offers three classes of shares to the
public, each with its own sales charge structure: Class A shares, Class B shares
and Class C shares. Each class has distinct advantages and disadvantages for
different investors, and investors may choose the class of shares that best
suits their circumstances and objectives. Each class of shares represents an
interest in the same portfolio of investments of the Fund. See "Alternative
Sales Arrangements." For information on redeeming shares see "Redemption of
Shares."
Class A Shares. Class A shares are offered at net asset value per share plus
a maximum initial sales charge of 4.75% of the offering price (4.99% of the net
amount invested), reduced on investments of $100,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a contingent deferred sales charge ("CDSC") of 1.00% may be imposed on certain
redemptions made within one year of purchase. The Fund pays an annual service
fee of up to 0.25% of its average daily net assets attributable to such class of
shares. See "Purchase of Shares -- Class A Shares" and "Distribution and Service
Plans."
Class B Shares. Class B shares are offered at net asset value per share and
are subject to a maximum CDSC of 4.00% on redemptions made within the first or
second year after purchase, declining thereafter to 0.00% after the fifth year.
See "Redemption of Shares." Class B shares are subject to a combined annual
distribution fee and service fee of up to 1.00% of the Fund's average daily net
assets attributable to such class of shares. See "Purchase of Shares -- Class B
Shares" and "Distribution and Service Plans." Class B shares convert
automatically to Class A shares eight years after the end of the calendar month
in which the shareholder's order to purchase was accepted. See "Alternative
Sales Arrangements -- Conversion Feature."
Class C Shares. Class C shares are offered at net asset value per share and
are subject to a CDSC of 1.00% on redemptions made within one year of purchase.
See "Redemption of Shares." Class C shares are subject to a combined annual
distribution fee and service fee of up to 1.00% of the Fund's average daily net
assets attributable to such class of shares. See "Purchase of Shares -- Class C
Shares" and "Distribution and Service Plans."
3
<PAGE> 6
INVESTMENT ADVISERS. Van Kampen Asset Management Inc. (the "Adviser") is the
Fund's investment adviser. Morgan Stanley Asset Management Inc. (the
"Subadviser") provides sub-advisory services to the Adviser.
DISTRIBUTOR. Van Kampen Funds Inc. (the "Distributor") distributes the Fund's
shares.
DISTRIBUTIONS FROM THE FUND. Income dividends are declared daily and paid
monthly; any net short-term or long-term capital gains are distributed at least
annually. All dividends and distributions are automatically reinvested in shares
of the Fund at net asset value per share (without a sales charge) unless payment
in cash is requested. See "Distributions from the Fund."
The foregoing is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.
4
<PAGE> 7
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage
of offering price)........................................ 4.75%(1) None None
Maximum sales charge imposed on reinvested dividends (as a
percentage of offering price)............................. None None None
Deferred sales charge (as a percentage of the lesser of
original purchase price or redemption proceeds)........... None(2) Year 1--4.00% Year 1--1.00%
Year 2--4.00% After--None
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a percentage of amount redeemed)........ None None None
Exchange fee................................................ None None None
</TABLE>
- --------------------------------------------------------------------------------
(1) Reduced for purchases of $100,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on redemptions made
within one year of the purchase. See "Purchase of Shares -- Class A Shares."
5
<PAGE> 8
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees (as a percentage of average daily net
assets)................................................... 0.75% 0.75% 0.75%
12b-1 Fees (as a percentage of average daily net
assets)(1)................................................ 0.25% 1.00%(2) 1.00%(2)
Other Expenses (as a percentage of average daily net
assets)................................................... 0.95% 0.97% 0.97%
Total Fund Operating Expenses (as a percentage of average
daily net assets)......................................... 1.95% 2.72% 2.72%
</TABLE>
- --------------------------------------------------------------------------------
(1) Class A shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
shares and Class C shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Distribution and Service Plans."
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.
EXAMPLE:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
------- ------- ------- -------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (i) an operating expense ratio of 1.95% for Class
A shares, 2.72% for Class B shares and 2.72% for Class C
shares, (ii) a 5.00% annual return and (iii) redemption at
the end of each time period:
Class A................................................... $66 $106 $148 $264
Class B................................................... $68 $114 $159 $287*
Class C................................................... $38 $ 84 $144 $305
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of each time
period:
Class A................................................... $66 $106 $148 $264
Class B................................................... $28 $ 84 $144 $287*
Class C................................................... $28 $ 84 $144 $305
</TABLE>
- --------------------------------------------------------------------------------
* Based on conversion to Class A shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. The ten year amount with respect to Class B shares of the
Fund reflects the lower aggregate 12b-1 and service fees applicable to such
shares after conversion to Class A shares. Class B shares acquired through the
exchange privilege are subject to the CDSC schedule relating to the Class B
shares of the fund from which the purchase of Class B shares was originally
made. Accordingly, future expenses as projected could be higher than those
determined in the above table if the investor's Class B shares were exchanged
from a fund with a higher CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Investment
Advisory Services," "Redemption of Shares" and the "Distribution and Service
Plans."
6
<PAGE> 9
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for a share of beneficial interest
outstanding throughout each of the periods indicated)
- --------------------------------------------------------------------------------
The following financial highlights have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon was unqualified. The most
recent annual report (which contains financial highlights for the last five
fiscal years) is included in the Statement of Additional Information and may be
obtained by shareholders without charge by calling the telephone number on the
cover of this Prospectus. This information should be read in conjunction with
the financial statements and notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------
YEAR ENDED MAY 31,
---------------------------------------------------------------
1998(A) 1997(A) 1996 1995 1994 1993(A)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $7.604 $7.92 $8.24 $8.26 $9.01 $9.07
-------- -------- -------- -------- -------- --------
Net Investment Income......... .352 .526 .56 .60 .78 .845
Net Realized and Unrealized
Gain/Loss on Securities..... .088 (.310) (.328) (.016) (.5715) (.123)
-------- -------- -------- -------- -------- --------
Total from Investment
Operations.................... .440 .216 .232 .584 .2085 .722
-------- -------- -------- -------- -------- --------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .491 .532 .552 .604 .726 .782
Distributions from and in
Excess of Net Realized Gain
on Securities............... -0- -0- -0- -0- .2325 -0-
-------- -------- -------- -------- -------- --------
Total Distributions............ .491 .532 .552 .604 .9585 .782
-------- -------- -------- -------- -------- --------
Net Asset Value, End of the
Period........................ $7.553 $7.604 $7.92 $8.24 $8.26 $9.01
======== ======== ======== ======== ======== ========
Total Return(b)................ 5.98% 2.65% 2.81% 7.52% 1.89% 8.47%
Net Assets at End of the Period
(In millions)................. $21.9 $25.7 $36.4 $47.9 $62.8 $36.1
Ratio of Expenses to Average
Net Assets(c)................. 1.95% 1.57% 1.51% 1.42% 1.45% 1.52%
Ratio of Net Investment Income
to Average Net Assets(c)...... 4.69% 6.58% 6.66% 7.18% 8.12% 9.33%
Portfolio Turnover............. 276% 161% 239% 209% 236% 301%
</TABLE>
<TABLE>
<CAPTION>
------------------------------
NOVEMBER 15, 1991
(COMMENCEMENT OF DISTRIBUTION)
TO MAY 31, 1992(A)
------------------------------
<S> <C>
Net Asset Value, Beginning of
the Period.................... $9.43
--------
Net Investment Income......... .59
Net Realized and Unrealized
Gain/Loss on Securities..... ) (.5245)
--------
Total from Investment
Operations.................... .0655
--------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .4255
Distributions from and in
Excess of Net Realized Gain
on Securities............... -0-
--------
Total Distributions............ .4255
--------
Net Asset Value, End of the
Period........................ $9.07
========
Total Return(b)................ .71%
Net Assets at End of the Period
(In millions)................. $25.0
Ratio of Expenses to Average
Net Assets(c)................. .50%
Ratio of Net Investment Income
to Average Net Assets(c)...... 10.41%
Portfolio Turnover............. 289%
</TABLE>
(Table and footnotes continued on following page)
7
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
-------------------------------------------------------------------------- -----------------
NOVEMBER 15, 1991
YEAR ENDED MAY 31, (COMMENCEMENT OF YEAR ENDED MAY 31,
----------------------------------------------------- DISTRIBUTION) -----------------
1998(A) 1997(A) 1996 1995 1994 1993(A) TO MAY 31, 1992(A) 1998(A) 1997(A)
------- ------- ----- ------ ------ ------- ------------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period..................... $7.645 $ 7.96 $8.28 $ 8.30 $ 9.04 $9.09 $ 9.43 $7.585 $ 7.91
------ ------ ----- ------ ------ ----- ------ ------ ------
Net Investment Income.......... .299 .477 .49 .53 .69 .78 .55 .293 .471
Net Realized and Unrealized
Gain/Loss on Securities...... .083 (.320) (.318) (.006) (.5435) (.12) (.5005) .087 (.324)
------ ------ ----- ------ ------ ----- ------ ------ ------
Total from Investment
Operations..................... .382 .157 .172 .524 .1465 .66 .0495 .380 .147
------ ------ ----- ------ ------ ----- ------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income....................... .431 .472 .492 .544 .654 .71 .3895 .431 .472
Distributions from and in
Excess of Net Realized Gain
on Securities................ -0- -0- -0- -0- .2325 -0- -0- -0- -0-
------ ------ ----- ------ ------ ----- ------ ------ ------
Total Distributions............. .431 .472 .492 .544 .8865 .71 .3895 .431 .472
------ ------ ----- ------ ------ ----- ------ ------ ------
Net Asset Value, End of the
Period......................... $7.596 $7.645 $7.96 $ 8.28 $ 8.30 $9.04 $ 9.09 $7.534 $7.585
====== ====== ===== ====== ====== ===== ====== ====== ======
Total Return(b)................. 4.98% 2.00% 2.06% 6.69% 1.07% 7.95% .53% 5.02% 1.88%
Net Assets at End of the Period
(In millions).................. $ 39.5 $ 56.9 $97.7 $123.4 $147.5 $56.7 $ 22.5 $ 3.5 $ 5.6
Ratio of Expenses to Average Net
Assets(c)...................... 2.72% 2.33% 2.27% 2.18% 2.22% 2.19% 1.02% 2.72% 2.33%
Ratio of Net Investment Income
to Average Net Assets(c)....... 3.91% 5.86% 5.91% 6.41% 7.30% 8.66% 9.86% 3.90% 5.84%
Portfolio turnover rate......... 276% 161% 239% 209% 236% 301% 289% 276% 161%
<CAPTION>
CLASS C SHARES
---------------------------------------------
APRIL 12, 1993
YEAR ENDED MAY 31,
------------------------ DISTRIBUTION)
1996 1995 1994 TO MAY 31, 1993(A)
------ ------ ------ ------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period..................... $ 8.22 $ 8.25 $ 8.99 $ 9.00
------ ------ ------ ------
Net Investment Income.......... .46 .51 .63 .095
Net Realized and Unrealized
Gain/Loss on Securities...... (.278) .004 (.4835) .011
------ ------ ------ ------
Total from Investment
Operations..................... .182 .514 .1465 .106
------ ------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income....................... .492 .544 .654 .116
Distributions from and in
Excess of Net Realized Gain
on Securities................ -0- -0- .2325 -0-
------ ------ ------ ------
Total Distributions............. .492 .544 .8865 .116
------ ------ ------ ------
Net Asset Value, End of the
Period......................... $ 7.91 $ 8.22 $ 8.25 $ 8.99
====== ====== ====== ======
Total Return(b)................. 2.20% 6.60% 1.19% 8.78%*
Net Assets at End of the Period
(In millions).................. $ 9.5 $ 18.5 $ 23.5 $ 1.4
Ratio of Expenses to Average Net
Assets(c)...................... 2.27% 2.18% 2.22% 2.63%
Ratio of Net Investment Income
to Average Net Assets(c)....... 5.91% 6.42% 7.13% 10.06%
Portfolio turnover rate......... 239% 209% 236% 301%
</TABLE>
- ---------------
* Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended through May 31, 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to the
Adviser's reimbursement of certain expenses was less than 0.01%.
8
<PAGE> 11
- --------------------------------------------------------------------------------
THE TRUST
- --------------------------------------------------------------------------------
The Trust is an open-end management investment company, commonly known as a
mutual fund. A mutual fund provides, for those who have similar investment
goals, a practical and convenient way to invest in a portfolio of securities by
combining their resources in an effort to achieve such goals.
Van Kampen Asset Management Inc. (the "Adviser") provides investment advisory
and administrative services to the Fund. The Adviser or its affiliates also act
as investment adviser to other mutual funds distributed by Van Kampen Funds Inc.
(the "Distributor"). To obtain Prospectuses and other information on any of
these other funds, please call the telephone number on the cover page of the
Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The primary investment objective of the Fund is to seek to provide a high
level of current income. The Fund's secondary objectives are capital
appreciation and protection of principal. The Fund seeks to achieve its
investment objectives by investing primarily in an international portfolio of
high quality foreign and U.S. government debt securities and by actively
managing the maturity structure and currency exposure of its portfolio. Under
normal circumstances, the Fund invests at least 65% of its total assets in
government securities. Government securities include debt securities issued or
guaranteed by the United States or foreign governments or their agencies,
authorities or instrumentalities. The Fund may invest all or a portion of its
remaining assets in high quality debt securities of U.S. and foreign
corporations.
Under normal market conditions, the Fund invests in obligations of at least
three countries. These countries may include the United States, the countries of
Western Europe, Japan, Australia, New Zealand and Canada. Obligations of any
other country may also be considered for investment. Securities of any one
issuer (other than the United States government) will represent no more than 25%
of the Fund's total assets. The Fund may purchase securities that are issued by
the government of one nation but denominated in the currency of another nation
(or in a multinational currency unit).
The Fund may also invest in debt obligations of supranational lending entities
organized or supported by several national governments. The supranational
entities in which the Fund may invest include the following: International Bank
for Reconstruction and Development (World Bank), established to promote
reconstruction and economic development in its member nations; European Coal and
Steel Community, a partnership of 12 European countries created to establish a
common market for coal and steel and to further the economic development of its
member countries; European Investment Bank, established to finance investment
projects that contribute to the balanced development of the European Economic
Community; European Bank for Reconstruction & Development, whose objectives are
to foster the transition toward open market economies and to promote private and
entrepreneurial initiative in countries of central and eastern Europe;
Inter-American Development Bank, established to further the development of its
Latin American member countries; African Development Bank, established to
contribute to the economic development and social progress of its African member
countries; and Asian Development Bank, established to promote economic growth
and cooperation in Asia and the Far East. The Fund may from time to time invest
up to 25% of its total assets in these and other supranational entities.
The Adviser, subject to the direction of the Trustees, provides the Fund with
an overall investment program consistent with the Fund's objectives and
policies. The Adviser is solely responsible for advising the Fund with respect
to investments in the United States. The Subadviser, subject to overall review
by the Adviser and the Trustees, is responsible for recommending an optimal
asset allocation and currency exposure of the Fund's assets among various
markets and for recommending particular securities in such markets. The Adviser
and the Subadviser are sometimes referred to as the Adviser.
The Fund limits its purchases of debt securities to high quality obligations.
For debt obligations other than commercial paper, this includes securities that
are rated Aa3 or better by Moody's Investors Service ("Moody's") or AA- or
better by Standard & Poor's Ratings Group ("S&P"), or that are not rated but
considered by the Adviser to be of equivalent quality. A description of the
Moody's and S&P ratings is included in the Statement of Additional Information.
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The Fund's portfolio is managed in accordance with a global investment
strategy, which means that the Fund's investments are allocated among securities
denominated in the United States dollar and the currencies of a number of
foreign countries and, within each such country, among different types of debt
securities. The Fund's exposure with respect to each currency is adjusted based
on Fund management's perception of the most favorable markets and issuers. In
this regard, the percentage of assets invested in securities of a particular
country or denominated in a particular currency will vary in accordance with
Fund management's assessment of the relative yield and appreciation potential of
such securities and the relationship of a country's currency to the United
States dollar. Fundamental economic strength, credit quality and interest rate
trends are the principal factors considered by Fund management in determining
whether to increase or decrease the emphasis placed upon a particular type of
security within the Fund's investment portfolio.
The returns available from foreign currency denominated debt obligations can
be adversely affected by changes in exchange rates. The Adviser believes that
the use of foreign currency hedging techniques, including "cross-hedges" (see
"Investment Practices -- Forward Foreign Currency Exchange Contracts"), can help
protect against changes in the United States dollar value of income available
for distribution to shareholders and declines in the net asset value of the
Fund's shares resulting from adverse changes in currency exchange rates. For
example, the return available from securities denominated in a particular
foreign currency would diminish in the event the value of the United States
dollar increased against such currency. Such a decline could be partially or
completely offset by an increase in value of a hedge involving a foreign
currency contract, or by a cross-hedge involving a forward currency contract,
where such contract is available on terms more advantageous to the Fund than a
contract to sell the currency in which the position being hedged is denominated.
It is the Adviser's belief that hedges and cross-hedges can therefore provide
significant protection of net asset value in the event of a general rise in the
United States dollar against foreign currencies. However, a hedge or cross-
hedge cannot protect completely against exchange rate risks, and if Fund
management is incorrect in its judgment of future exchange rate relationships,
the Fund could be in a less advantageous position than if such a hedge had not
been established.
The investment objectives and policies, the percentage limitations and the
kinds of securities in which the Fund may invest may be changed by the Trustees
without shareholder action unless expressly governed by those limitations as
described under "Investment Practices and Restrictions" which can be changed
only by action of the shareholders. A change in the Fund's investment objectives
may result in the Fund having investment objectives different from that which a
shareholder deemed appropriate at the time of investment. See also the Statement
of Additional Information.
An investment in the Fund may not be appropriate for all investors. The Fund
is not intended to be a complete investment program, and investors should
consider their long-term investment goals and financial needs when making an
investment decision with respect to the Fund. An investment in the Fund is
intended to be a long-term investment, and should not be used as a trading
vehicle.
TEMPORARY SHORT-TERM INVESTMENTS. The Fund's policy generally is to invest in
a global portfolio of longer term debt securities. In the interest of preserving
shareholders' capital and consistent with the Fund's investment objectives, the
Adviser may employ a temporary defensive investment strategy if it determines
such a strategy to be warranted. Under a defensive strategy, the Fund may hold
cash (United States dollars or foreign currencies) or invest a portion or all of
its assets in high quality money market instruments. It is impossible to predict
when or for how long the Fund will employ defensive strategies. Money market
instruments in which the Fund may invest include, but are not limited to, the
following instruments of United States or foreign issuers: government
securities; commercial paper; bank certificates of deposit and bankers'
acceptances; and repurchase agreements related to any of the foregoing. The Fund
will only purchase commercial paper if it is rated Prime-1 or Prime-2 by Moody's
or A-1 or A-2 by S&P or, if not rated, is considered by the Adviser to be of
equivalent quality. In addition, for temporary defensive reasons, such as during
times of international political or economic uncertainty, most or all of the
Fund's investments may be made in the United States and denominated in United
States dollars.
Under such a temporary defensive strategy, the Fund would invest at least 25%
of its assets in securities issued by banks. See "Investment
Practices -- Investment Restrictions." Such investments may include certificates
of deposit, time deposits, bankers' acceptances, and obligations issued by bank
holding companies, as well as repurchase agreements entered into with banks. In
such event, the Fund would have greater exposure to the risk factors which are
characteristic of such investments. In particular, the value of and investment
return on the Fund's shares would be affected by economic or regulatory
developments in or related to the banking industry. Sustained increases in
interest rates can adversely affect
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the availability and cost of funds for a bank's lending activities, and a
deterioration in general economic conditions could increase the exposure to
credit losses. The banking industry is also subject to the effects of the
concentration of loan portfolios in particular businesses such as real estate,
energy, agriculture or high technology-related companies; concentration of loan
portfolios in lesser developed country loans and highly leveraged transaction
loans; national and local regulation; and competition within those industries as
well as with other types of financial institutions. In addition, the Fund's
investments in commercial banks located in several foreign countries are subject
to additional risks due to the combination in such banks of commercial banking
and diversified securities activities.
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RISK FACTORS
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FOREIGN SECURITIES AND CURRENCIES. Investing in securities issued by foreign
governments and corporations involves considerations and possible risks not
typically associated with investing in obligations issued by the United States
government. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in this country or abroad) or changed circumstances in
dealings between nations. Foreign currency exchange rates are determined by
forces of supply and demand on the foreign exchange markets. These forces are
themselves affected by the international balance of payments and other economic
and financial conditions, government intervention, speculation and other
factors. Moreover, foreign currency exchange rates may be affected by the
regulatory control of the exchanges on which the currencies trade. Costs are
incurred in connection with conversions between various currencies. In addition,
foreign brokerage commissions and dealer mark-ups are generally higher than in
the United States, and foreign securities markets may be less liquid, more
volatile and less subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other factors not present
in the United States, including expropriation, confiscatory taxation, lack of
uniform accounting and auditing standards and potential difficulties in
enforcing contractual obligations, and could be subject to extended settlement
periods.
NON-DIVERSIFICATION. The Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), which
requires, among other things, that the Fund limit its investments so that, at
the close of each quarter of the taxable year, (i) not more than 25% of the
market value of the Fund's total assets are invested in securities of a single
issuer (other than the U.S. Government, its agencies and instrumentalities) and
(ii) at least 50% of the market value of its total assets is invested in cash,
securities of the U.S. Government, its agencies and instrumentalities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the market value of the Fund's total assets and not more than 10% of the
outstanding voting securities of such issuer. For purposes of the Fund's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Fund does not
have recourse directly against the borrower, both the borrower and each agent
bank and co-lender interposed between the Fund and the borrower will be deemed
issuers of the loan participation for tax diversification purposes. Since the
Fund, as a non-diversified investment company, may invest in a smaller number of
individual issuers than a diversified investment company, an investment in the
Fund may, under certain circumstances, present greater risks to an investor than
an investment in a diversified company.
YEAR 2000 PROBLEM. Like other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Fund's Adviser and other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem". The Adviser is taking steps that it believes are reasonably designed
to address the Year 2000 Problem with respect to computer systems that it uses
and to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the issuers of securities
in which the Fund may invest which, in turn, may adversely affect the net asset
value of the Fund.
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INVESTMENT PRACTICES
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REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks or broker-dealers in order to earn a return on temporarily available cash.
A repurchase agreement is a short-term investment in which the purchaser (i.e.,
the Fund) acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the holding period. Repurchase agreements involve certain risks
in the event of a default by the other party. The Fund will not invest in
repurchase agreements maturing in more than seven days if any such investment,
together with any other illiquid securities held by the Fund, exceeds 10% of the
value of the Fund's net assets. In the event of the bankruptcy or other default
of the seller of a repurchase agreement, the Fund could incur losses in
connection with delays in liquidating the underlying securities including: (a)
possible decline in the value of the underlying security during the period while
the 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 aggregates
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 greater
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 the SEC exemptive order authorizing this practice, which
conditions are designed to ensure the fair administration of the joint account
and to protect the amounts in that account.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES. The Adviser is responsible
for the placement of orders for the purchase and sale of portfolio securities
for the Fund and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution services rendered
on a continuing basis. The Fund's portfolio securities generally are traded in
the over-the-counter market through dealers. A dealer is a securities firm or
bank which makes a market for securities by opening a position at one price and
closing the position at a slightly more favorable price. The difference between
the prices is known as a spread. Foreign currency and forward currency exchange
contracts are traded in a similar fashion in a dealer market maintained
primarily by large commercial banks. The Fund will pay brokerage commissions in
connection with transactions in exchange-traded options, futures contracts and
related options. Spreads or commissions for transactions executed in foreign
markets often are higher than in the United States.
The Adviser may place portfolio transactions, to the extent permitted by law,
with brokerage firms which are affiliated with the Fund, the Adviser or the
Distributor and with firms participating in the distribution of shares of the
Fund if it reasonably believes that the quality of the execution and the
commission are comparable to that available from other qualified firms. The
Adviser is authorized to pay higher commissions to brokerage firms that provide
investment and research information than to firms which do not provide such
services if the Adviser determines that such commissions are reasonable in
relation to the overall services provided. The information received may be used
by the Adviser in managing the assets of other advisory accounts as well as in
the management of the assets of the Fund.
PORTFOLIO TURNOVER. A change in securities held by the Fund is known as
"portfolio turnover" and may involve the payment by the Fund of brokerage
commissions or dealer spreads and other transaction costs on the sale of
securities as well as on the investment of the proceeds in other securities. The
portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the average value of portfolio
securities, excluding debt securities whose maturities at acquisition were one
year or less. The Fund expects its portfolio turnover rate to be as much as 400%
in any given year. An annual turnover rate of 400% occurs, for example, when the
dollar equivalent of all securities in the Fund's portfolio are replaced four
times over the period of one year. A high rate of portfolio turnover involves
correspondingly greater expenses than a lower rate, which expenses must be borne
by the Fund and its shareholders. A high portfolio turnover rate may also result
in the realization of substantial net short-term capital gains. See "Tax
Status." The Fund's annual portfolio turnover rate is shown in the table of
"Financial Highlights."
LOANS OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
unaffiliated brokers, dealers and financial institutions provided that (a)
immediately after any such loan, the value of the securities loaned does not
exceed 15% of
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<PAGE> 15
the total value of the Fund's assets, and (b) any securities loan is
collateralized in accordance with applicable regulatory requirements. Lending
portfolio securities involves risks of delay in recovery of the loaned
securities or, in some cases, loss of rights in the collateral should the
borrower fail financially.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. As used herein, securities are considered illiquid if, in
the ordinary course of business, the Fund would not be able to dispose of the
security and receive the proceeds of the sale within seven days. Since market
quotations are not readily available for illiquid securities, such securities
will be valued by a method that the Fund's Trustees believe accurately reflects
fair value.
SHORT SALES AGAINST THE BOX. The Fund may from time to time make short sales
of securities it owns or has the right to acquire. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain at no added cost securities identical to those sold short. In a short
sale, the Fund does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Fund is said to have a short position in
the securities sold until it delivers the securities sold, at which time it
receives the proceeds of the sale. The Fund may not make short sales or maintain
a short position if doing so would cause more than 25% of its total assets,
taken at market value, to be involved in such sales.
The Fund may close out a short position by purchasing and delivering an equal
amount of the securities sold short, rather than by delivering securities
already held by the Fund, because the Fund may want to continue to receive
interest and dividend payments on securities in its portfolio.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices
including any index of United States government securities or foreign government
securities ("futures contracts") and may purchase and write put and call options
to buy or sell futures contracts ("options on futures contracts"). A "sale" of a
futures contract means the acquisition of a contractual obligation to deliver
the securities or foreign currencies called for by the contract at a specified
price on a specified date. A "purchase" of a futures contract means the
incurring of a contractual obligation to acquire the securities or foreign
currencies called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified multiple of the
value of the index on the expiration date of the contract ("current contract
value") and the price at which the contract was originally struck. No physical
delivery of the fixed-income securities underlying the index is made. Options on
futures contracts to be written or purchased by the Fund will be traded on
United States or foreign exchanges. These investment techniques are used to
hedge against anticipated future changes in interest or exchange rates which
otherwise might either adversely affect the value of the Fund's portfolio
securities or adversely affect the price of securities which the Fund intends to
purchase at a later date.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write put and call
options on foreign currencies to increase the Fund's gross income and for the
purpose of protecting against declines in the United States dollar value of
foreign currency denominated portfolio securities and against increases in the
United States dollar cost of such securities to be acquired. As in the case of
other kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received, and
the Fund could be required to cover its position by purchasing or selling
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to the Fund's position, the Fund may forfeit the entire amount
of the premium plus related transaction costs. Options on foreign currencies
written or purchased by the Fund are traded on United States and foreign
exchanges or over-the-counter. There is no specific percentage limitation on the
Fund's investments in options on foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell
forward foreign currency exchange contracts ("forward contracts") to attempt to
minimize the risk to the Fund from adverse changes in the relationship between
the United States dollar and foreign currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers. The Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the United States dollar
price of the security ("transaction hedge"). Additionally, when the Fund
believes that a foreign currency may suffer a substantial decline against the
United States dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency
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<PAGE> 16
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes that the United
States dollar may suffer a substantial decline against foreign currency, it may
enter into a forward purchase contract to buy that foreign currency for a fixed
dollar amount ("position hedge"). In this situation, the Fund may, in the
alternative, enter into a forward contract to sell a different foreign currency
for a fixed United States dollar amount where the Fund believes that the United
States dollar value of the currency to be sold pursuant to the forward contract
will fall whenever there is a decline in the United States dollar value of the
currency in which portfolio securities of the Fund are denominated
("cross-hedge").
The Fund's custodian will place cash or liquid securities in a segregated
account having a value equal to the aggregate amount of the Fund's commitments
under forward contracts entered into with respect to position hedges and
cross-hedges. If the value of the securities placed in the segregated account
declines, additional cash or liquid securities are placed in the account on a
daily basis so that the value of the account equals the amount of the Fund's
commitments with respect to such contracts. As an alternative to maintaining all
or part of the segregated account, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency being hedged by a
forward sale contract at a price no higher than the forward contract price or
the Fund may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high or
higher than the forward contract price. Unanticipated changes in currency prices
may result in poorer overall performance for the Fund than if it had not entered
into such contracts.
OPTIONS ON PORTFOLIO SECURITIES. The Fund may purchase or sell options on
certain of its portfolio securities at such time and from time to time as Fund
management shall determine to be appropriate and consistent with the investment
objective of the Fund. Generally, the Fund expects that options purchased or
sold by it will be conducted on recognized securities exchanges.
The Fund is authorized to purchase and sell over-the-counter options ("OTC
Options"). OTC options are purchased from or sold to securities dealers,
financial institutions or other parties ("Counterparty") through direct
bilateral agreement with the Counterparty. The Fund will sell only OTC Options
(other than over-the-counter currency options) that are subject to a buy-back
provision permitting the Fund to require to the Counterparty to sell the option
back to the Fund at a formula price within seven days. The staff of the SEC
currently takes the position that, in general, OTC options on securities other
than U.S. Government securities purchased by the Fund, and portfolio securities
covering OTC options sold by the Fund, are illiquid securities subject to the
Fund's limitation on investing no more than 10% of its assets in illiquid
securities.
Purchasing and selling option contracts is a highly specialized activity which
involves investment techniques and risks different from those ordinarily
associated with investment companies, although the Fund believes that
transactions in options in which the Fund owns the underlying securities tend to
reduce such risks.
POTENTIAL RISKS OF OPTIONS, FUTURES AND FORWARD CONTRACTS. The successful use
of the foregoing investment techniques depends on the ability of the Fund's
Adviser to forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an unexpected manner, the
Fund may not achieve the anticipated benefits of futures contracts, options or
forward contracts or may realize losses and thus be in a worse position than if
such strategies had not been used. Unlike many exchange-traded futures contracts
and options on futures contracts, there are no daily price fluctuation limits
with respect to options on currencies and forward contracts, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of such instruments
and movements in the price of the securities and currencies hedged or used for
cover will not be perfect and could produce unanticipated losses. The Fund's
ability to dispose of its positions in futures contracts, options and forward
contracts will depend on the availability of liquid markets in such instruments.
Markets in options and futures with respect to a number of fixed-income
securities and currencies are relatively new and still developing. It is
impossible to predict the amount of trading interest that may exist in various
types of futures contracts, options and forward contracts. If a secondary market
does not exist with respect to an option purchased or written by the Fund
over-the-counter, it might not be possible to effect a closing transaction in
the option (i.e., dispose of the option) with the result that (i) an option
purchased by the Fund would have to be exercised in order for the Fund to
realize any profit and (ii) the Fund may not be able to sell currencies or
portfolio securities covering an option written by the Fund until the option
expires or it delivers the underlying futures contract or currency upon
exercise. Therefore, no assurance can be given that the Fund will be able to
utilize these instruments effectively for the purposes set forth above.
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<PAGE> 17
In order to prevent leverage in connection with the purchase of futures
contracts or call options thereon by the Fund, an amount of cash or liquid
securities equal to the market value of the obligation under the futures
contracts (less any related margin deposits) will be maintained in a segregated
account with the Custodian. Furthermore, the Fund's ability to engage in options
and futures transactions may be limited by tax considerations.
SECURITY FORWARD COMMITMENTS. The Fund may purchase or sell securities on a
"when issued" or "delayed delivery" basis ("Forward Commitments"). These
transactions occur when securities are purchased or sold by the Fund with
payment and delivery taking place in the future, frequently a month or more
after such transaction. The price is fixed on the date of the commitment, and
the seller continues to accrue interest on the securities covered by the Forward
Commitment until delivery and payment takes place. At the time of settlement,
the market value of the securities may be more or less than the purchase or sale
price.
The Fund may settle a Forward Commitment either by taking delivery of the
securities or by reselling or repurchasing a Forward Commitment on or before the
settlement date. The Fund's use of Forward Commitments may increase its overall
investment exposure and thus its potential for gain or loss. When engaging in
Forward Commitments, the Fund relies on the other party to complete the
transaction; should the other party fail to do so, the Fund might lose a
purchase or sale opportunity that could be more advantageous than alternative
opportunities at the time of the failure.
The Fund maintains a segregated account (which is marked to market daily) of
cash, liquid securities or the security covered by the Forward Commitment (in
the case of a Forward Commitment sale) with the Fund's Custodian in an aggregate
amount equal to the amount of its commitment as long as the obligation to
purchase or sell continues.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of fundamental
investment restrictions that may not be changed without approval by a vote of a
majority of the outstanding voting shares of the Fund (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")). The percentage
limitations need only be met at the time the investment is made or other
relevant action taken. These restrictions provide, among other things, that the
Fund may not:
1. Purchase any security (other than obligations of the United States
Government, its agencies, or instrumentalities) if more than 25% of its
total assets (taken at current value) would be invested in a single
industry except that, if the value of securities owned by the Fund with
remaining maturities of less than 13 months exceeds 35% of the value of
the Fund's total assets, the Fund will invest at least 25% of its assets
in securities issued by banks. Although this policy is not applicable to
securities issued by government or political subdivisions because such
issues are not members of any industry, the Fund does not intend to invest
more than 25% of its total assets in the securities issued or guaranteed
by any government (except U.S. Government, its agencies or
instrumentalities). For purposes of this restriction, issuers are not
considered to be of a single industry if their primary economic
characteristics are materially different.
2. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of its
net assets, or pledge more than 10% of its net assets in connection with
permissible borrowings or purchase additional securities when money
borrowed exceeds 5% of its net assets. Margin deposits or payments in
connection with the writing of options, or in connection with the purchase
or sale of forward contracts, futures, foreign currency futures and
related options, are not deemed to be a pledge or other encumbrance.
3. Lend money except through the purchase of (i) United States and foreign
government securities, commercial paper, bankers' acceptances,
certificates of deposit and similar evidences of indebtedness, both
foreign and domestic, and (ii) repurchase agreements; or lend securities
in an amount exceeding 15% of the total assets of the Fund. The purchase
of a portion of an issue of securities described under (i) above
distributed publicly, whether or not the purchase is made on the original
issuance, is not considered the making of a loan.
4. Write, purchase or sell puts, calls or combinations thereof, except that
the Fund may (i) write covered or fully collateralized call options, write
secured put options, and enter into closing or offsetting purchase
transactions with respect to such options, (ii) purchase and sell options
to the extent that the premiums paid for all such options owned at any
time do not exceed 10% of its total assets and (iii) engage in
transactions in interest rate futures contracts and related options
provided that such transactions are entered into for bona fide hedging
purposes (or that the underlying commodity value of the Fund's long
positions does not exceed the sum of certain identified liquid
15
<PAGE> 18
investments as specified in CFTC regulations), provided further that the
aggregate initial margin and premiums do not exceed 5% of the fair market
value of the Fund's total assets, and provided further that the Fund may
not enter into net aggregate long and short futures contracts or related
options if more than 50% of the Fund's total assets would be so invested.
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INVESTMENT ADVISORY SERVICES
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THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen
Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset management
company with more than two million retail investor accounts, extensive
capabilities for managing institutional portfolios, and more than $65 billion
under management or supervision. Van Kampen's more than 50 open-end and 39
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen Funds Inc., the
distributor of the Fund and the sponsor of the Funds mentioned above, is also a
wholly-owned subsidiary of Van Kampen. Van Kampen is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser ("MSAM" or the "Subadviser"), Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and Morgan
Stanley International are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; credit
services; asset management; trading of futures, options, foreign exchange,
commodities and swaps (involving foreign exchange, commodities, indices and
interest rates); real estate advice, financing and investing; and securities
lending.
THE SUBADVISER. The Subadviser is an indirect wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co. and is an affiliate of the Adviser. The
Subadviser provides portfolio management and named fiduciary services to various
closed-end and open-end investment companies, taxable and nontaxable
institutions, international organizations and individuals investing in United
States and international equities and fixed income securities. At June 30, 1998,
the Subadviser had, together with its affiliated institutional investment
management companies, assets under management (including assets under fiduciary
advisory control) totaling approximately $169 billion. The Subadviser emphasizes
a global investment strategy and benefits from research coverage of a broad
spectrum of investment opportunities worldwide and draws upon the capabilities
of its asset management specialists located in various offices throughout the
world, including New York, London, Tokyo, Singapore, Bombay, Hong Kong, Milan
and Sydney. The Subadviser also draws upon the research capabilities of Morgan
Stanley Dean Witter & Co. and its other affiliates as well as the research and
investment ideas of other companies whose brokerage services the Subadviser
utilizes. The address of the Subadviser is 1221 Avenue of the Americas, New
York, New York 10020.
ADVISORY AGREEMENTS. The Trust retains the Adviser to manage the investment of
the Fund's assets and to place orders for the purchase and sale of the Fund's
portfolio securities. Under an investment advisory agreement between the Adviser
and the Trust (the "Advisory Agreement"), the Trust pays the Adviser a monthly
fee computed at the annual rate of 0.75% of the Fund's average daily net assets.
Under the Advisory Agreement, the Trust also reimburses the Adviser for the cost
of the Fund's accounting services, which include maintaining its financial books
and records and calculating its daily net asset value. Operating expenses paid
by the Fund include service fees, distribution fees, custodian fees, legal and
accounting fees, the costs of reports and proxies to shareholders, trustees'
fees (other than those who are affiliated persons as defined in the 1940 Act of
the Adviser, Distributor, Van Kampen Investor Services Inc. ("Investor
Services"), Van Kampen or Morgan Stanley Dean Witter & Co.) and all other
business expenses not specifically assumed by the Adviser. Advisory (management)
fee and total operating expense ratios are shown under the caption "Annual Fund
Operating Expenses and Example" herein.
The Adviser has entered into a sub-advisory agreement (the "Sub-advisory
Agreement") with the Subadviser to assist it in performing its investment
advisory functions. The Subadviser, subject to overall review by the Adviser and
the Trustees, is responsible for recommending an optimal asset allocation and
currency exposure of the Fund's assets among various
16
<PAGE> 19
markets and for recommending particular securities in such markets. Pursuant to
the Sub-advisory Agreement, the Subadviser receives on an annual basis 50% of
the compensation received by the Adviser.
From time to time the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them to the extent of, or bearing expenses in excess of, such limitations as
they may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.")
PERSONAL INVESTMENT POLICIES. The Fund, the Adviser and the Subadviser have
adopted Codes of Ethics designed to recognize the fiduciary relationship between
the Fund and the Adviser and the Subadviser and their employees. The Codes
permit directors, trustees, officers and employees to buy and sell securities
for their personal accounts subject to certain restrictions. Persons with access
to certain sensitive information are subject to pre-clearance and other
procedures designed to prevent conflicts of interest.
PORTFOLIO MANAGEMENT. Effective April 1, 1997, J. David Germany, Michael B.
Kushma and Paul E. O'Brien assumed the primary responsibility for the day-to-day
management of the Fund's Portfolio. Effective April 1, 1998, Ram Willner also
shares primary responsibility for the day-to-day management of the Fund's
Portfolio.
J. David Germany joined the Subadviser in 1996 and has been a portfolio
manager with the Adviser's affiliate, Miller Anderson & Sherrerd, LLP ("MAS")
since 1991. He was Vice President & Senior Economist for Morgan Stanley & Co.
Incorporated from 1989 to 1991. He assumed responsibility for the Global Fixed
Income and International Fixed Income Portfolios of the MAS-advised MAS Funds in
1993 and the MAS Funds' Multi-Asset-Class Portfolio in 1994. Mr. Germany was
Senior Staff Economist (International Finance and Macroeconomics) to the Council
of Economic Advisors -- Executive Office of the President from 1986 through 1987
and an Economist with the Board of Governors of the Federal Reserve
System --Division of International Finance from 1983 through 1987. He holds a
A.B. degree from Princeton University and a Ph.D. in Economics from the
Massachusetts Institute of Technology.
Michael B. Kushma, a Principal at Morgan Stanley & Co. Incorporated, joined
the firm in 1987. He was a member of Morgan Stanley & Co. Incorporated's global
fixed income strategy group in the fixed income division from 1987-1995 where he
became the division's senior government bond strategist. He joined the
Subadviser in 1995 where he took responsibility for the global fixed income
portfolio. Mr. Kushma received an A.B. in economics from Princeton University in
1979, an M. Sc. in economics from the London School of Economics in 1981 and an
M.Phil. in economics from Columbia University in 1983.
Paul F. O'Brien joined the Subadviser and MAS in 1996. He was head of European
Economics from 1993 through 1995 for JP Morgan and as Principal Administrator
from 1991 through 1992 for the Organization for Economic Cooperation and
Development. He assumed responsibility for the MAS-advised MAS Funds' Global
Fixed Income and International Fixed Income Portfolios in 1996. Mr. O'Brien
holds a B.S. degree from the Massachusetts Institute of Technology and a Ph.D.
in Economics from the University of Minnesota.
Ram Willner, a Principal of Morgan Stanley & Co., has been a portfolio manager
with MAS since April 1, 1998. From 1994 to 1998, he was a Market Strategist/Risk
Control Manager and Director of International Bond Research with Pacific
Investment Management Company and from 1992 to 1994 he was a Senior Quantitative
Analyst for Sanford C. Bernstein & Co. Prior to that he was a Vice President of
Citibank, NA. Mr. Willner holds a B.A. from Brandeis University, an M.S.I.A.
from Carnegie-Mellon University and a D.B.A. from Harvard University.
- --------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- --------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial given the amount of the
purchase and the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
maximum sales charge of up to 4.75% of the offering price (4.99% of the net
amount invested), reduced on investments of $100,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a CDSC of 1.00% may be imposed on redemptions made within one year of the
purchase. Class A shares are subject to an ongoing service fee at an annual rate
of up to 0.25%
17
<PAGE> 20
of the Fund's aggregate average daily net assets attributable to the Class A
shares. Certain purchases of Class A shares qualify for reduced initial sales
charges. See "Purchase of Shares -- Class A Shares."
CLASS B SHARES. Class B shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within five years of purchase. Class B
shares are subject to an ongoing service fee at an annual rate of up to 0.25% of
the Fund's aggregate average daily net assets attributable to the Class B shares
and an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class B shares. Class B
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
B shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. Class B shares convert
automatically to Class A shares eight years after the end of the calendar month
in which the shareholder's order to purchase was accepted. See "Purchase of
Shares -- Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.25% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class C shares. Class C
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
C shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. See "Purchase of Shares -- Class
C Shares."
CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and
any dividend reinvestment plan shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares six years after the end of the calendar month in which the shares
were purchased. Class C shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares ten years after the end of the calendar month in which such
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a share acquired through the
exchange privilege is determined by reference to the Participating Fund (defined
below) from which such share was originally purchased.
The conversion of such shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Code, and (ii) the conversion of shares does
not constitute a taxable event under federal income tax law. The conversion may
be suspended if such an opinion is no longer available and such shares might
continue to be subject to the higher aggregate fees applicable to such shares
for an indefinite period.
FACTORS FOR CONSIDERATION. In deciding which class of shares to purchase,
investors should take into consideration their investment goals, present and
anticipated purchase amounts, time horizons and temperaments. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the aggregate fees and CDSC on Class B shares and Class C shares would be less
than the initial sales charge on Class A shares purchased at the same time, and
to what extent such differential would be offset by the higher dividends per
share on Class A shares. To assist investors in making this determination, the
table under the caption "Annual Fund Operating Expenses and Example" sets forth
examples of the charges applicable to each class of shares. In this regard,
Class A shares may be more beneficial to the investor who qualifies for reduced
initial sales charges or purchases at net asset value. It is presently the
policy of the Distributor not to accept any order of $500,000 or more for Class
B shares or any order of $1 million or more for Class C shares as it ordinarily
would be more beneficial for such an investor to purchase Class A shares.
Class A shares are not subject to an ongoing distribution fee and,
accordingly, receive correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase for accounts
under $1 million, investors in Class A shares do not have all their funds
invested initially and, therefore, initially own fewer shares. Other investors
might determine that it is more advantageous to purchase either Class B shares
or Class C shares and have all their funds invested initially, although
remaining subject to a CDSC. Ongoing distribution fees on Class B shares and
Class C shares may be offset to the extent of the additional funds originally
invested and any return realized on those funds. However, there can be no
assurance as to the return, if any, which will be realized on such additional
funds. For
18
<PAGE> 21
investments held for ten years or more, the relative value upon liquidation of
the three classes tends to favor Class A shares or Class B shares, rather than
Class C shares.
Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges or have a longer-term investment horizon.
In addition, the check writing privilege is only available for Class A shares
(see "Shareholder Services -- Check Writing Privilege"). Class B shares may be
appropriate for investors who wish to avoid a front-end sales charge, put 100%
of their investment dollars to work immediately or have a longer-term investment
horizon. Class C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately, have a shorter-term investment horizon or desire a short CDSC
schedule.
The distribution expenses incurred by the Distributor in connection with the
sale of the shares will be reimbursed, in the case of Class A shares, from the
proceeds of the initial sales charge and, in the case of Class B shares and
Class C shares, from the proceeds of the ongoing distribution fee and any CDSC
incurred upon redemption within five years or one year, respectively, of
purchase. Sales personnel of broker-dealers distributing the Fund's shares and
other persons entitled to receive compensation for selling such shares may
receive differing compensation for selling such shares. INVESTORS SHOULD
UNDERSTAND THAT THE PURPOSE AND FUNCTION OF THE CDSC AND ONGOING DISTRIBUTION
FEE WITH RESPECT TO THE CLASS B SHARES AND CLASS C SHARES ARE THE SAME AS THOSE
OF THE INITIAL SALES CHARGE WITH RESPECT TO CLASS A SHARES. See "Distribution
and Service Plans."
GENERAL. Dividends paid by the Fund with respect to Class A shares, Class B
shares and Class C shares will be calculated in the same manner at the same time
on the same day, except that the higher distribution fees and transfer agency
costs relating to Class B shares or Class C shares will be borne by the
respective class. See "Distributions from the Fund." Shares of the Fund may be
exchanged, subject to certain limitations, for shares of the same class of
certain other mutual funds advised by the Adviser and its affiliates and
distributed by the Distributor. See "Shareholder Services -- Exchange
Privilege."
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Fund offers three classes of shares to the public on a continuous basis
through the Distributor as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are acting as securities dealers ("dealers") and NASD members or eligible
non-NASD members who are acting as brokers or agents for investors ("brokers").
"Dealers" and "brokers" are sometimes referred to collectively herein as
"authorized dealers."
Initial investments must be at least $500 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments. Shares of the Fund may be sold in foreign countries where
permissible. The Fund and the Distributor reserve the right to refuse any order
for the purchase of shares. The Fund also reserves the right to suspend the sale
of the Fund's shares in response to conditions in the securities markets or for
other reasons.
Shares of the Fund may be purchased on any business day through authorized
dealers. Shares also may be purchased by completing the application accompanying
this prospectus and forwarding the application through the authorized dealer, to
the shareholder service agent, Investor Services, a wholly-owned subsidiary of
Van Kampen. When purchasing shares of the Fund, investors must specify whether
the purchase is for Class A shares, Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or contingent deferred sales charge depending on the class of shares
chosen by the investor, as shown in the tables herein. Net asset value per share
for each class is computed once daily as of the close of trading on the New York
Stock Exchange (the "Exchange") (currently 4:00 p.m. New York time) each day the
Exchange is open. Net asset value per share for each class is determined by
dividing the value of the Fund's securities, cash and other assets (including
accrued interest) attributable to such class less all liabilities (including
accrued expenses) attributable to such class, by the total number of shares of
the class outstanding.
19
<PAGE> 22
Securities listed or traded on a national securities exchange are valued at
the mean of representative quoted bid or asked prices. Unlisted securities and
listed securities for which such prices are not available are valued at prices
of comparable securities. Options and futures contracts are valued at the last
sale price or if no sales are reported, at the mean between the bid and asked
prices. Short-term investments are valued at cost plus interest earned
(amortized cost), which approximates market value. The net asset value of the
Fund is computed by (i) valuing long-term debt obligations at the mean of
representative quoted bid or asked prices for such securities or, if such prices
are not available, at prices for securities of comparable maturity, quality and
type, however, when the Adviser deems it appropriate, prices obtained for the
day of valuation from a bond pricing service will be used, (ii) valuing
short-term debt obligations with remaining maturities in excess of 60 days at
the mean of representative quoted bid and asked prices for such securities or,
if such prices are not available, using the prices for securities of comparable
maturity, quality and type, (iii) valuing short-term debt securities with 60
days or less remaining to maturity by amortizing such securities to maturity
based on their cost to the Fund. Options and futures contracts and options
thereon which are traded on exchanges are valued at their last sale or
settlement price as of the close of such exchanges, or, if no sales are
reported, at the mean between the last reported bid and asked prices.
Over-the-counter options are valued at the average of the last bid prices
obtained from dealers. Any other assets will be valued at fair value as
determined in good faith by the Trustees of the Fund.
Generally, the net asset values per share of the Class A shares, Class B
shares, and Class C shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class A
shares, Class B shares and Class C shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fee and
transfer agency costs applicable with respect to the Class B shares and Class C
shares and the differential in the dividends paid on the classes of shares. The
price paid for shares purchased is based on the next calculation of net asset
value (plus sales charges, where applicable) after an order is received by an
authorized dealer, provided such order is transmitted to the Distributor prior
to the Distributor's close of business on such day. Orders received by
authorized dealers after the close of the Exchange are priced based on the next
close, provided they are received by the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit orders received by them to the Distributor so they will be received
prior to such time. Orders of less than $500 are mailed by the authorized dealer
and processed at the offering price next calculated after receipt by Investor
Services.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) Class B shares
and Class C shares bear the expenses of the deferred sales arrangement and any
expenses (including the higher distribution fee and transfer agency costs)
resulting from such sales arrangement, (ii) generally, each class has exclusive
voting rights with respect to approvals of the Rule 12b-1 distribution plan
pursuant to which its distribution fee or service fee is paid, (iii) each class
of shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature, and (v) certain classes of shares have
different shareholder service options available. The net income attributable to
Class B shares and Class C shares and the dividends payable on Class B shares
and Class C shares will be reduced by the amount of the distribution fee and
other expenses associated with such shares. Sales personnel of authorized
dealers distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling Class A shares, Class B shares or Class C shares.
The Distributor may from time to time implement programs under which an
authorized dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
authorized dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor, an amount not exceeding the total
applicable sales charges on the sales generated by the authorized dealer at the
public offering price during such programs. Other programs provide, among other
things and subject to certain conditions, for certain favorable distribution
arrangements for shares of the Fund. Also, the Distributor in its discretion may
from time to time, pursuant to objective criteria established by the
Distributor, pay fees to, and sponsor business seminars for, qualifying
authorized dealers for certain services or activities which are primarily
intended to result in sales of shares of the Fund. Fees may include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. In some instances additional compensation or promotional incentives may
be offered to brokers, dealers or financial intermediaries that have sold or may
sell significant amounts of shares during specific periods of time. The
Distributor may provide additional compensation to Edward D. Jones & Co. or an
affiliate thereof based on a combination of its sales of shares and increases in
assets under management. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees
20
<PAGE> 23
paid for such services and activities with respect to the Fund will not exceed
in the aggregate 1.25% of the average 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 the Fund will receive from such sale.
CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value plus a sales charge, as set forth below.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED TO
AS % OF AS % OF DEALERS (AS
SIZE OF OFFERING NET AMOUNT % OF OFFERING
INVESTMENT PRICE INVESTED PRICE)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000.......................................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000............................. 3.75% 3.90% 3.25%
$250,000 but less than $500,000............................. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........................... 2.00% 2.04% 1.75%
$1,000,000 or more*......................................... * * *
- ---------------------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC of
1.00% on redemptions made within one year of the purchase. A commission
will be paid to authorized dealers who initiate and are responsible for
purchases of $1 million or more as follows: 1.00% on sales to $2 million,
plus 0.80% on the next $1 million and 0.50% on the excess over $3 million.
In addition to the reallowances from the applicable public offering price
described above, the Distributor may, from time to time, pay or allow additional
reallowances or promotional incentives, in the form of cash or other
compensation, to authorized dealers that sell shares of the Fund. Authorized
dealers which are reallowed all or substantially all of the sales charges may be
deemed to be underwriters for purposes of the Securities Act of 1933.
The Distributor may also pay financial institutions (which may include banks)
and other industry professionals that provide services to facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the reallowance allowable to authorized dealers described herein. Such
financial institutions, other industry professionals and authorized dealers are
hereinafter referred to as "Service Organizations." Banks are currently
prohibited from providing certain underwriting or distribution services. If
banking firms were prohibited from acting in any capacity or providing any of
the described services, the Distributor would consider what action, if any,
would be appropriate. The Distributor does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund. State securities laws regarding registration of banks and other
financial institutions may differ from the interpretations of federal law
expressed herein, and banks and other financial institutions may be required to
register as dealers pursuant to certain state laws.
QUANTITY DISCOUNTS
Investors purchasing Class A shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described below.
Investors, or their authorized dealers, must notify the Fund at the time of
the purchase order whenever a quantity discount is applicable to purchases. Upon
such notification, an investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated at any time. For more
information about quantity discounts, investors should contact their authorized
dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or
her spouse and children under 21 years of age and any corporation, partnership
or sole proprietorship which is 100% owned, either alone or in combination, by
any of the foregoing; a trustee or other fiduciary purchasing for a single trust
or for a single fiduciary account, or a "company" as defined in Section 2(a)(8)
of the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
21
<PAGE> 24
Volume Discounts. The size of investment shown in the preceding preceding
sales charge table applies to the total dollar amount being invested by any
person in shares of the Fund, or in any combination of shares of the Fund and
shares of other Participating Funds, although other Participating Funds may have
different sales charges.
Cumulative Purchase Discount. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds which have been previously purchased and are
still owned.
Letter of Intent. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the preceding sales charge
table. The size of investment shown in the preceding sales charge table also
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
If the goal is not achieved within the period, the investor must pay the
difference between the sales charges applicable to the purchases made and the
sales charges previously paid. The initial purchase must be for an amount equal
to at least 5% of the minimum total purchased amount of the level selected. If
trades not initially made under a Letter of Intent subsequently qualify for a
lower sales charge through the 90-day back-dating provisions, an adjustment will
be made at the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustments in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. Additional
information is contained in the application form accompanying this Prospectus.
OTHER PURCHASE PROGRAMS
Purchasers of Class A shares may be entitled to reduced initial sales charges
in connection with unit investment trust reinvestment programs and purchases by
registered representatives of selling firms or purchases by persons affiliated
with the Fund or the Distributor. The Fund reserves the right to modify or
terminate these arrangements at any time.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
shares of the Fund, at net asset value and with no minimum initial or subsequent
investment requirement, if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the authorized dealer,
if any, through which such participation in the qualifying program was initiated
0.50% of the offering price as a dealer concession or agency commission. Persons
desiring more information with respect to this program, including the applicable
terms and conditions thereof, should contact their authorized dealer or the
Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each participating investor in a computerized format fully
compatible with Investor Services' processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NAV Purchase Options. Class A shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by the Fund,
by:
(1) Current or retired trustees or directors of funds advised by the Adviser
or Advisory Corp. and such persons' families and their beneficial
accounts.
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<PAGE> 25
(2) Current or retired directors, officers and employees of Morgan Stanley
Group Inc. and any of its subsidiaries, employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21
years of age when purchasing for any accounts they beneficially own, or,
in the case of any such financial institution, when purchasing for
retirement plans for such institution's employees; provided that such
purchases are otherwise permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers
through which purchases are made an amount up to 0.50% of the amount
invested over a twelve-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans
which invest in multiple fund families through broker-dealer retirement
plan alliance programs that have entered into agreements with the
Distributor and which are subject to certain minimum size and operational
requirements. Trustees and other fiduciaries should refer to the Statement
of Additional Information for further detail with respect to such alliance
programs.
(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares of
the Fund with proceeds from distributions from such a plan or retirement
account other than distributions taken to correct an excess contribution.
(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Code, or custodial accounts
held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(c)(3) of
the Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided, for plans
initially establishing accounts with the Distributor in the Participating
Funds after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating Fund or have
received proposals from the Distributor prior to February 1, 1997 based on
net asset value purchase privileges previously in effect will be qualified
to purchase shares of the Participating Funds at net asset value for
accounts established on or before May 1, 1997. Section 403(b) and similar
accounts for which Van Kampen Trust Company served as custodian will not
be eligible for net asset value purchases based on the aggregate
investment made by the plan or the number of eligible employees, except
under certain uniform criteria established by the Distributor from time to
time. A commission will be paid to authorized dealers who initiate and are
responsible for such purchases within a rolling twelve-month period as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million,
plus 0.50% on the next $47 million, plus 0.25% on the excess over $50
million.
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified
group does not include one whose sole organizational nexus, for example,
is that its participants are credit card holders of the same institution,
policy holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or other similar groups.
Shares purchased in each group's participants account in connection with
this privilege will be subject to a CDSC of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to each
individual as follows: 1.00% on sales to $2 million, plus 0.80% on the
next $1 million and 0.50% on the excess over $3 million.
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<PAGE> 26
The term "families" includes a person's spouse, children under 21 years of
age, grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as described
herein under "Distribution and Service Plans" on purchases made as described in
(3) through (9) above. The Fund may terminate, or amend the terms of, offering
shares of the Fund at net asset value to such groups at any time.
CLASS B SHARES
Class B shares are offered at net asset value. Class B shares which are
redeemed within five years of purchase are subject to a CDSC at the rates set
forth in the following table charged as a percentage of the dollar amount
subject thereto. The charge is assessed on an amount equal to the lesser of the
then current market value or the cost of the shares being redeemed. Accordingly,
no sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on shares derived from
reinvestment of dividends or capital gains distributions. It is presently the
policy of the Distributor not to accept any order for Class B shares in an
amount of $500,000 or more because it ordinarily will be more advantageous for
an investor making such an investment to purchase Class A shares.
The amount of the CDSC, if any, varies depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month are aggregated and deemed to have been made on the last day of
the month.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ----------------------------------------------------------------------------------------------
<S> <C>
First....................................................... 4.00%
Second...................................................... 4.00%
Third....................................................... 3.00%
Fourth...................................................... 2.50%
Fifth....................................................... 1.50%
Sixth and After............................................. None
</TABLE>
- --------------------------------------------------------------------------------
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC, second of shares held for over five years and
third of shares held longest during the five-year period.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds is subject to a deferred sales charge at a
rate of 4.00% (the applicable rate in the second year after purchase).
A commission or transaction fee of up to 4.00% of the purchase amount will
generally be paid to authorized dealers and at the time of purchase.
Additionally, the Distributor may, from time to time, pay additional promotional
incentives in the form of cash or other compensation, to authorized dealers that
sell Class B shares of the Fund.
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<PAGE> 27
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the lesser of the then current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. It is presently the policy of the Distributor
not to accept any order in an amount of $1 million or more for Class C shares
because it ordinarily will be more advantageous for an investor making such an
investment to purchase Class A shares.
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC and second of shares held for more than one year.
A commission or transaction fee of up to 1.00% of the purchase amount will
generally be paid to authorized dealers at the time of purchase. Authorized
dealers also will generally be paid ongoing commissions and transaction fees of
up to 0.75% of the average daily net assets of the Fund's Class C shares
annually commencing in the second year after purchase. Additionally, the
Distributor may, from time to time, pay additional promotional incentives in the
form of cash or other compensation, to authorized dealers that sell Class C
shares of the Fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The CDSC is waived on redemptions of Class B shares and Class C shares (i)
following the death or disability (as defined in the Code) of a shareholder;
(ii) in connection with required minimum distributions from an IRA or other
retirement plan; (iii) pursuant to the Fund's systematic withdrawal plan but
limited to 12% annually of the initial value of the account; (iv) in
circumstances under which no commission or transaction fee is paid to authorized
dealers at the time of purchase of such shares; or (v) effected pursuant to the
right of the Fund to liquidate a shareholder's account as described herein under
"Redemption of Shares." The CDSC is also waived on redemptions of Class C shares
as it relates to the reinvestment of redemption proceeds in shares of the same
class of the Fund within 180 days after redemption. See the Statement of
Additional Information for further discussion of waiver provisions.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. The
following is a description of such services.
INVESTMENT ACCOUNT. Investor Services, transfer agent for the Fund and a
wholly-owned subsidiary of Van Kampen, performs bookkeeping, data processing and
administration services related to the maintenance of shareholder accounts. Each
shareholder has an investment account under which the investor's shares of the
Fund are held by Investor Services. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a statement
showing the activity in the account. Each shareholder who has an account in any
of the Participating Funds will receive statements quarterly from Investor
Services showing any reinvestments of dividends and capital gains distributions
and any other activity in the account since the preceding statement. Such
shareholders also will receive separate confirmations for each purchase or sale
transaction other than reinvestment of dividends and capital gains distributions
and systematic purchases or redemptions. Additions to an investment account may
be made at any time by purchasing shares through authorized dealers or by
mailing a check directly to Investor Services.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen Funds, c/o Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain
a Surety Bond in a form acceptable to Investor Services. On the date the letter
is received Investor Services will calculate a fee for replacing the lost
certificates equal to no more than 2.00% of the net asset value of the issued
shares, and bill the party to whom the replacement certificate was mailed.
25
<PAGE> 28
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date. Unless the shareholder instructs otherwise, the reinvestment
plan is automatic. This instruction may be made by telephone by calling (800)
341-2911 ((800) 421-2833 for the hearing impaired) or in writing to Investor
Services. The investor may, on the initial application or prior to any
declaration, instruct that dividends be paid in cash and capital gains
distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize Investor Services to debit a bank account on a
regular basis to invest pre-determined amounts in the Fund. Additional
information is available from the Distributor or authorized dealers.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; 401(k) plans; Section 403(b)(7) plans in the case of
employees of public school systems and certain non-profit organizations; or
other pension or profit sharing plans. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
Trust Company serves as custodian under the IRA, 403(b)(7) and Keogh plans.
Details regarding fees, as well as full plan administration for profit sharing,
pension and 401(k) plans are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of ACH. In addition, the shareholder must fill out the appropriate
section of the account application. The shareholder must also include a voided
check or deposit slip from the bank account into which redemptions are to be
deposited together with the completed application. Once Investor Services has
received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing Investor
Services.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus or by calling (800) 341-2911 ((800) 421-2833 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any
Participating Fund so long as the investor has a pre-existing account for such
class of shares of the other fund. Both accounts must be of the same type,
either non-retirement or retirement. If the accounts are retirement accounts,
they must both be for the same class and of the same type of retirement plan
(e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the same individual.
If a qualified, pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the fund into which distributions would be invested. Distributions are invested
into the selected fund at its net asset value as of the payable date of the
distribution.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the
same class of any Participating Fund based on the next computed net asset values
of each Fund after requesting the exchange without any sales charge, subject to
certain limitations. Shares of the Fund may be exchanged for shares of any
Participating Fund only if shares of that Participating Fund are available for
sale; however, during periods of suspension of sales, shares of a Participating
Fund may be available for sale only to existing shareholders of the
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund.
To be eligible for exchange, shares of the Fund must have been registered in
the shareholder's name for at least 30 days. Shares of the Fund registered in a
shareholder's name for less than 30 days may be exchanged only upon receipt of
prior approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, not to approve such request.
When Class B shares and Class C shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such shares from a Participating Fund. If such
Class B or Class C shares are redeemed and not exchanged for shares of another
Participating Fund, such Class B or Class C shares are subject to the CDSC
schedule imposed by the Participating Fund from which such shares were
originally purchased.
26
<PAGE> 29
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares being exchanged have been held for less than
91 days, the sales charge paid on such shares is carried over and included in
the tax basis of the shares acquired.
To be eligible for exchange, shares of the Fund must have been registered in
the shareholder's name for at least 30 days. Shares of the Fund registered in a
shareholder's name for less than 30 days may be exchanged only upon receipt of
prior approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, not to approve such requests.
A shareholder wishing to make an exchange may do so by sending a written
request to Investor Services, or by contacting the telephone transaction line at
(800) 421-5684 ((800) 421-2833 for the hearing impaired). A shareholder
automatically has telephone exchange privileges unless otherwise designated in
the application form accompanying this Prospectus. Van Kampen and its
subsidiaries, including Investor Services (collectively, "VK"), and the Fund
employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither VK nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VK and the
Fund may be liable for any losses due to unauthorized or fraudulent instructions
if reasonable procedures are not followed. If the exchanging shareholder does
not have an account in the fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital gains
options (except dividend diversification) and authorized dealer of record as the
account from which shares are exchanged, unless otherwise specified by the
shareholder. In order to establish a systematic withdrawal plan for the new
account or reinvest dividends from the new account into another fund, however,
an exchanging shareholder must file a specific written request. The Fund
reserves the right to reject any order to acquire its shares through exchange.
In addition, the Fund may modify, restrict or terminate the exchange privilege
at any time on 60 days' notice to its shareholders of any termination or
material amendment.
A prospectus of any of these Participating Funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares in a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a quarterly, semi-annual or annual withdrawal plan. This plan provides
for the orderly use of the entire account, not only the income but also the
capital, if necessary. Each withdrawal constitutes a redemption of shares on
which any capital gain or loss will be recognized. The planholder may arrange
for monthly, quarterly, semi-annual, or annual checks in any amount not less
than $25. Such a systematic withdrawal plan may also be maintained by an
investor purchasing shares for a retirement plan established on a form made
available by the Fund. See "Shareholder Services -- Retirement Plans."
Class B shareholders and Class C shareholders who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under this plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with the purchase of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. Any gain or loss realized by the shareholder upon the redemption of
shares is a taxable event. The Fund reserves the right to amend or terminate the
systematic withdrawal program on 30 days' notice to its shareholders.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are in a non-escrow status may
appoint Investor Services as agent by completing the AUTHORIZATION FOR
REDEMPTION BY CHECK form and the appropriate section of the application and
returning the form and the application to
27
<PAGE> 30
Investor Services. Once the form is properly completed, signed and returned to
the agent, a supply of checks drawn on State Street Bank and Trust Company
("State Street Bank") will be sent to the Class A shareholder. These checks may
be made payable by the shareholder to the order of any person in any amount of
$100 or more.
When a check is presented to State Street Bank for payment, full and
fractional Class A shares required to cover the amount of the check are redeemed
from the shareholder's Class A account by Investor Services at the next
determined net asset value. Check writing redemptions represent the sale of
shares. Any gain or loss realized on the sale of Class A shares is a taxable
event. See "Redemption of Shares."
Checks will not be honored for redemption of shares held less than 15 days,
unless such Class A shares have been paid for by bank wire. Any Class A shares
for which there are outstanding certificates may not be redeemed by check. If
the amount of the check is greater than the proceeds of all uncertificated
shares held in the shareholder's Class A account, the check will be returned and
the shareholder may be subject to additional charges. A Class A shareholder may
not liquidate the entire account by means of a check. The check writing
privilege may be terminated or suspended at any time by the Fund or State Street
Bank. Retirement Plans and accounts that are subject to backup withholding are
not eligible for the privilege. A "stop payment" system is not available on
these checks. See the Statement of Additional Information for further
information regarding the establishment of the privilege.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.van-kampen.com for further instruction. VK and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
through the internet are genuine. Such procedures include requiring use of a
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed neither VK nor the Fund will be
liable for following instructions through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their
shares of the Fund at any time. To do so, a written request in proper form must
be sent directly to Van Kampen Investor Services Inc., P.O. Box 418256, Kansas
City, Missouri 64141-9256. Shareholders may also place redemption requests
through an authorized dealer. Orders received from authorized dealers must be at
least $500 unless transmitted via the FUNDSERV network. The redemption price for
such shares is the net asset value next calculated after an order is received by
an authorized dealer provided such order is transmitted to the Distributor prior
to the Distributor's close of business on such day. It is the responsibility of
authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time.
As described herein under "Purchase of Shares," redemptions of Class B shares
and Class C shares are subject to a CDSC. In addition, a CDSC of 1.00% may be
imposed on certain redemptions of Class A shares made within one year of
purchase for investments of $1 million or more. The CDSC incurred upon
redemption is paid to the Distributor in reimbursement for distribution-related
expenses. A custodian of a retirement plan account may charge fees based on the
custodian's fee schedule.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
record address has changed within the previous 30 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it will do so if a special request has been
made to Investor Services. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request.
28
<PAGE> 31
In the event the redemption is requested by a corporation, partnership, trust,
fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 120 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to Investor Services. Where Van Kampen Trust
Company serves as custodian, special IRA, 403(b)(7), or Keogh distribution forms
must be obtained from and be forwarded to Van Kampen Trust Company, P.O. Box
944, Houston, Texas 77001-0944. Contact the custodian for information.
In the case of redemption requests sent directly to Investor Services, the
redemption price is the net asset value per share next determined after the
request is received. Payment for shares redeemed will be made by check mailed
within seven days after acceptance by Investor Services of the request and any
other necessary documents in proper order. Such payment may be postponed or the
right of redemption suspended as provided by the rules of the SEC. If the shares
to be redeemed have been recently purchased by check, Investor Services may
delay mailing a redemption check until the purchase check has cleared, which may
take up to 15 days. A taxable gain or loss will be recognized by the shareholder
upon redemption of shares.
TELEPHONE REDEMPTIONS. In addition to the regular redemption procedures set
forth above, the Fund permits redemption of shares by telephone and for
redemption proceeds to be sent to the address of record for the account or to
the bank account of record as described below. To establish such privilege, a
shareholder must complete the appropriate section of the application
accompanying this Prospectus or call the Fund at (800) 341-2911 ((800) 421-2833
for the hearing impaired) to request that a copy of the Telephone Redemption
Authorization form be sent to them for completion. To redeem shares, contact the
telephone transaction line at (800) 421-5684. VK and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions, tape
recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
neither VK nor the Fund will be liable for following telephone instructions
which it reasonably believes to be genuine. VK and the Fund may be liable for
any losses due to unauthorized or fraudulent instructions if reasonable
procedures are not followed. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's regular redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, on a
regular business day will be processed at the net asset value per share
determined that day. These privileges are available for all accounts other than
retirement accounts 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 are expected to be wired on the next business day following the date
of redemption. This service is also not available with respect to shares held in
an individual retirement account (IRA) for which Van Kampen Trust Company acts
as custodian. The Fund reserves the right at any time to terminate, limit or
otherwise modify this redemption privilege.
GENERAL REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with a net asset value on the date of the notice of redemption less than the
minimum initial investment as specified in this Prospectus. At least 60 days
advance written notice of any such involuntary redemption is required and the
shareholder will be given an opportunity to purchase the required value of
additional shares at the next determined net asset value without sales charge.
An involuntary redemption may only occur if the shareholder account is less than
the minimum initial investment due to shareholder redemptions.
REDEMPTION UPON DEATH OR DISABILITY. The Fund will waive the CDSC on
redemptions following the death or disability of a Class B shareholder or Class
C shareholder. An individual will be considered disabled for this purpose if he
or she meets the definition thereof in Section 72(m)(7) of the Code, which in
pertinent part defines a person as disabled if such person "is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the
29
<PAGE> 32
Fund does not specifically adopt the balance of the Code's definition which
pertains to furnishing the Secretary of Treasury with such proof as he or she
may require, the Distributor will require satisfactory proof of disability
before it determines to waive the CDSC on Class B shares and Class C shares.
In cases of death or disability, the CDSC on Class B shares and Class C shares
will be waived where the decedent or disabled person is either an individual
shareholder or owns the shares as a joint tenant with right of survivorship or
is the beneficial owner of a custodial or fiduciary account, and where the
redemption is made within one year of the death or initial determination of
disability. This waiver of the CDSC on Class B shares and Class C shares applies
to a total or partial redemption, but only to redemptions of shares held at the
time of the death or initial determination of disability.
REINSTATEMENT PRIVILEGE. A Class A shareholder or Class B shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A shares of the Fund. A Class C shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class C shares of the Fund with credit given for any CDSC
paid upon such redemption. Such reinstatement is made at the net asset value
(without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption. Reinstatement at
net asset value is also offered to participants in those eligible retirement
plans held or administered by Van Kampen Trust Company for repayment of
principal (and interest) on their borrowings on such plans.
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DISTRIBUTION AND SERVICE PLANS
- --------------------------------------------------------------------------------
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may spend a portion of the Fund's average daily net assets
attributable to each class of shares in connection with distribution of the
respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Distribution Plan and the Service
Plan are being implemented through an agreement with the Distributor and
sub-agreements between the Distributor and brokers, dealers or financial
intermediaries (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance.
CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A shares of the Fund
pursuant to the Distribution Plan and Service Plan. From such amount, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class A shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts. The Fund pays
the Distributor the lesser of the balance of the 0.25% not paid to such brokers,
dealers or financial intermediaries or the amount of the Distributor's actual
distribution related expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C shares up to 0.75% of the Fund's average daily
net assets attributable to Class C shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution related expense attributable to the Class C shares. In
addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets attributable to the Class C shares pursuant to the Service Plan in
connection with the ongoing provision of services to holders of such shares by
the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.
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<PAGE> 33
OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A Shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, with respect to the Class A shares, there is no
carryover of such reimbursement obligations to succeeding years.
The Distributor's actual expenses with respect to Class B shares or Class C
shares for any given year may exceed the amounts payable to the Distributor with
respect to such class of shares under the Distribution Plan, the Service Plan
and payments received pursuant to the CDSC. In such event, with respect to any
such class of shares, any unreimbursed expenses will be carried forward and paid
by the Fund (up to the amount of the actual expenses incurred) in future years
so long as such Distribution Plan is in effect. Except as mandated by applicable
law, the Fund does not impose any limit with respect to the number of years into
the future that such unreimbursed expenses may be carried forward (on a Fund
level basis). Because such expenses are accounted on a Fund level basis, in
periods of extreme net asset value fluctuation such amounts with respect to a
particular Class B share or Class C share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
May 31, 1998, there were $7,507,229 and $743,135 of unreimbursed distribution
expenses with respect to Class B shares and Class C shares, respectively,
representing 19.01% and 21.23% of the Fund's average net assets attributable to
Class B shares and Class C shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the Fund or
recovered through CDSC.
The Distributor will not use the proceeds from the CDSC applicable to a
particular class of shares to defray distribution-related expenses attributable
to any other class of shares. Various federal and state laws prohibit national
banks and some state-chartered commercial banks from underwriting or dealing in
the Fund's shares. In addition, state securities laws on this issue may differ
from the interpretations of federal law, and banks and financial institutions
may be required to register as dealers pursuant to state law. In the unlikely
event that a court were to find that these laws prevent such banks from
providing such services described above, the Fund would seek alternate providers
and expects that shareholders would not experience any disadvantage.
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DISTRIBUTIONS FROM THE FUND
- --------------------------------------------------------------------------------
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gain dividends.
DIVIDENDS. Interest earned from debt securities is the Fund's main source of
income. This income, less expenses, is declared daily and distributed monthly as
dividends to shareholders. Unless the shareholder instructs otherwise, dividends
and capital gain dividends are automatically applied to purchase additional
shares of the Fund at the next determined net asset value. See "Shareholder
Services -- Reinvestment Plan."
The per share dividends on Class B shares and Class C shares may be lower than
the per share dividends on Class A shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
CAPITAL GAINS. The Fund may realize capital gains or losses when it sells
securities, depending on whether the sales prices for the securities are higher
or lower than their purchase prices. The Fund at least annually distributes to
shareholders its net capital gains, which are the excess of the Fund's net
long-term capital gains, if any on the sale of securities during the year over
its net short-term capital losses on the sale of securities, including capital
losses carried forward from prior years in accordance with tax laws ("capital
gain dividends"). As in the case of income dividends, capital gain dividends are
automatically reinvested in additional shares of the Fund at net asset value.
See "Shareholder Services -- Reinvestment Plan."
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TAX STATUS
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXATION. The Fund has elected and qualified, and intends to
continue to qualify each year, to be treated as a regulated investment company
under Subchapter M of the Code. To qualify as a regulated investment
31
<PAGE> 34
company, the Fund must comply with certain requirements of the Code relating to,
among other things, the source of its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including tax-exempt interest, taxable
income and net short-term capital gain, but not net capital gains), it will not
be required to pay federal income taxes on any income distributed to
shareholders. The Fund intends to distribute at least the minimum amount of net
investment income necessary to satisfy the 90% distribution requirement. The
Fund will not be subject to federal income tax on any net capital gains
distributed to shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute, by
December 31(st) of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income (not including tax-exempt income) for such year and (ii) 98%
of its capital gain net income (the latter of which generally is computed on the
basis of the one-year period ending on October 31(st) of such year), together
with any amounts that were not distributed in previous taxable years. For
purposes of the excise tax, any ordinary income or capital gain net income
retained by, and subject to federal income tax in the hands of, the Fund will be
treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.
Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or gain without receiving cash with which
to make distributions in the amounts necessary to satisfy the 90% distribution
requirement and the distribution requirements for avoiding income and excise
taxes. The Fund will monitor its transactions and may make certain tax elections
in order to mitigate the effect of these rules and prevent disqualification of
the Fund as a regulated investment company.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
DISTRIBUTIONS. Distributions of the Fund's net investment income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of 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. Distributions in excess of the Fund's earnings and profits
will first reduce the adjusted tax basis of a holder's shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder (assuming such shares are held as a capital asset). For a summary of the
tax rates applicable to capital gains (including capital 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.
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<PAGE> 35
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Fund distributions
generally will not qualify for the dividends received deduction for
corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31(st) prior to the date of
payment. In addition, certain other distributions made after the close of a
taxable year of the Fund may be "spilled back" and treated as paid by the Fund
(except for purposes of the 4% excise tax) during such taxable year. In such
case, shareholders will be treated as having received such dividends in the
taxable year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding and other taxes imposed by foreign countries and
U.S. possessions. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Investors may be entitled to claim
United States foreign tax credits with respect to such taxes, subject to certain
provisions and limitations contained in the Code. If more than 50% in value of
the Fund's total assets at the close of its fiscal year consists of securities
of foreign issuers and the Fund meets certain holding period requirements with
respect to such securities, the Fund will be eligible to file, and may file
elections with the Internal Revenue Service pursuant to which shareholders of
the Fund will be required to (i) include their respective pro rata portions of
such taxes in their United States income tax returns as gross income, and (ii)
treat such respective pro rata portions as taxes paid by them. Each shareholder
will be entitled, subject to certain limitations, to either deduct his pro rata
portion of such foreign taxes in computing his taxable income or use them as
foreign tax credits against his United States federal income taxes. No deduction
for such foreign taxes may be claimed by a shareholder who does not itemize
deductions. Each shareholder will be notified annually whether the foreign taxes
paid by the Fund will "pass through" for that year and, if so, such notification
will designate (i) the shareholder's portion of the foreign taxes paid to each
such country and (ii) the portion of dividends that represent income derived
from sources within each such country. The amount of foreign taxes for which a
shareholder may claim a credit in any year will be subject to an overall
limitation such that the credit may not exceed the shareholder's United States
federal income tax attributable to the shareholder's foreign source taxable
income. This limitation generally applies separately to certain specific
categories of foreign source income including "passive income" which includes,
among other types of income, dividends and interest. The foregoing is only a
general description of the foreign tax credit under current law. Because
application of the foreign tax credits depends on the particular circumstances
of each shareholder, shareholders are advised to consult their own tax advisers.
Under Code Section 988, foreign currency gains or losses from certain forward
contracts not traded in the interbank market as well as certain other gains or
losses attributable to currency exchange rate fluctuations are typically treated
as ordinary income or loss. Such income or loss may increase or decrease (or
possibly eliminate) the Fund's income available for distribution. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
Fund's income available for distribution is decreased or eliminated, all or a
portion of the dividends declared by the Fund may be treated for federal income
tax purposes as a return of capital or, in some circumstances, as capital gain.
Generally, a shareholder's tax basis in Fund shares will be reduced to the
extent that an amount distributed to such shareholder is treated as a return of
capital.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a regulated investment company
that holds stock of a PFIC will be subject to federal income tax (i) on a
portion of any "excess distribution" received on the stock or (ii) on any gain
from a sale or disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the regulated investment company distributes the PFIC
income as a taxable dividend to its stockholders. The balance of the PFIC income
will be included in the regulated investment company's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders. If the Fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, which most likely would have to be
distributed by the Fund to satisfy the distribution requirement for avoiding
income and excise taxes. In many instances it may be very difficult to make this
election due to certain requirements imposed with respect to the election.
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<PAGE> 36
As an alternative to making the above-described election to treat the PFIC as
a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (a "PFIC Mark-to-Market Election").
"Marking-to-market," in this context, means recognizing as ordinary income or
loss each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or distributions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the Internal Revenue Service consents to
revocation of the election. By making the PFIC Mark-to-Market Election, the Fund
could ameliorate the adverse tax consequences arising from its ownership of PFIC
stock, but in any particular year may be required to recognize income in excess
of the distributions it receives from the PFIC and proceeds from the
dispositions of PFIC stock.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding. Foreign
shareholders, including shareholders who are resident alien individuals, may be
subject to United States withholding tax on certain distributions (whether
received in cash or shares) at a rate of 30% or such lower rates as prescribed
by an applicable treaty.
SALE OF SHARES. The sale of shares (including transfers in connection with a
redemption or repurchase of shares) will be a taxable transaction for federal
income tax purposes. Selling shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
shares and the amount received. If such shares are held as a capital asset, the
gain or loss will be a capital gain or loss. 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 a summary of the tax rates applicable to capital gains, see
"Capital Gains Rates" below. For purposes of determining whether shares have
been held for six months or less, the holding period is suspended for any
periods during which the shareholder's risk of loss is diminished as a result of
holding one or more other positions in substantially similar or related property
or through certain options or short sales.
CAPITAL GAINS RATES. The maximum tax rate applicable to net capital gains
recognized by individuals and other non-corporate taxpayers is (i) the same as
the maximum ordinary income tax rate for capital assets held for one year or
less or (ii) 20% for capital assets held for more than one year. A special 28%
tax rate may apply to a portion of the capital gain dividends paid by the Fund
with respect to its taxable year ended May 31, 1998.
GENERAL. The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal income tax consequences of purchasing, holding and
disposing of shares, as well as the effects of state, local and foreign tax laws
and any proposed tax law changes.
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FUND PERFORMANCE
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its total return for prior periods.
Any such advertisement would include at least average annual total return
quotations for one year, five year and ten year periods or for the life of the
Fund. Other total return quotations, aggregate or average, over other time
periods may also be included.
The total return of the Fund for a particular period represents the increase
(or decrease) in the value of a hypothetical investment in the Fund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; the calculation assumes
the initial investment is made at the current maximum public offering price
(which includes a maximum sales charge of 4.75% for Class A shares); that all
income dividends or capital gains distributions during the period are reinvested
in Fund shares at net asset value; and that any applicable CDSC has been paid.
The Fund's total return will vary depending on market conditions, the securities
comprising the Fund's portfolio, the Fund's operating expenses and unrealized
net capital gains or losses during the period. Total return is based on
historical earnings and asset
34
<PAGE> 37
value fluctuations and is not intended to indicate future performance. No
adjustments are made to reflect any income taxes payable by shareholders on
dividends and distributions by the Fund.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
In addition to total return information, the Fund may also advertise its
current "yield." Yield figures are based on historical earnings and are not
intended to indicate future performance. Yield is determined by analyzing the
Fund's net income per share for a 30-day (or one-month) period (which period
will be stated in the advertisement), and dividing by the maximum offering price
per share on the last day of the period. A "bond equivalent" annualization
method is used to reflect a semiannual compounding.
For purposes of calculating yield quotations, net income is determined by a
standard formula prescribed by the SEC to facilitate comparison with yields
quoted by other investment companies. Net income computed for this formula
differs from net income reported by the Fund in accordance with generally
accepted accounting principles and from net income computed for federal income
tax reporting purposes. Thus the yield computed for a period may be greater or
less than the Fund's then current dividend rate.
The Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by the Fund, portfolio maturity and the Fund's
expenses.
Yield quotations should be considered relative to changes in the net asset
value of the Fund's shares, the Fund's investment policies, and the risks of
investing in shares of the Fund. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
To increase the yield of the Fund, the Adviser, may from time to time,
undertake to reduce the Fund's expenses by reducing fees payable to itself or
reimbursing certain Fund expenses. A yield quotation which reflects a fee waiver
of an expense reimbursement by the Adviser will be higher than a yield quotation
without such expense reimbursement or subsidy. The Adviser may stop such waivers
or reimbursements at any time.
Yield and total return are calculated separately for Class A shares, Class B
shares and Class C shares. Class A shares' total return figures include the
maximum sales charge of 4.75%; Class B shares' and Class C shares' total return
figures include any applicable CDSC. Because of the differences in sales charges
and distribution fees, the total returns for each of the classes will differ.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return,
which is a measure of the income actually earned by the Fund's investments, plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the rankings or ratings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds or with the Consumer Price Index, the Dow Jones
Industrial Average Index, other appropriate indices of investment securities, or
with investment or savings vehicles. The performance information may also
include evaluations of the Fund published by nationally recognized ranking
services and by nationally recognized financial publications. Such comparative
performance information will be stated in the same terms in which the
comparative data or indices are stated. Such advertisements and sales material
may also include a yield quotation as of a current period. In each case, such
total return and yield information, if any, will be calculated pursuant to rules
established by the SEC and will be computed separately for each class of the
Fund's shares. For these purposes, the performance of the Fund, as well as the
performance of other mutual funds or indices, do not reflect sales charges, the
inclusion of which would reduce Fund performance. The Fund will include
performance data for each class of shares of the Fund in any advertisement or
information including performance
35
<PAGE> 38
data of the Fund. The Fund may also refer to results of top performing world
bond markets as compiled by Morgan Stanley Capital International or other
independent statistical services.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by standard performance information required by the SEC as described
above.
The Fund's Annual Report and Semi-Annual Report contain additional performance
information. A copy of the Annual Report or Semi-Annual Report may be obtained
without charge by calling or writing the Fund at the telephone number and
address printed on the cover of this Prospectus.
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DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The Trust was originally incorporated in the State of Maryland on May 25,
1990. The Trust was reorganized as a business trust under the laws of the State
of Delaware as of August 31, 1995. On July 14, 1998, the Trust adopted its
current name.
The authorized capitalization of the Trust consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share, divided into classes.
The Fund currently offers three classes of shares, designated Class A shares,
Class B shares and Class C shares. Other classes may be established from time to
time in accordance with provisions of the Trust's Declaration of Trust.
Each class of shares represents an interest in the same assets of the Fund and
generally are identical in all respects except that each class bears certain
distribution expenses and has exclusive voting rights with respect to its
distribution fee. Except as described herein, there are no conversion,
preemptive or other subscription rights. In the event of liquidation, each of
the shares of the Fund is entitled to its portion of all of the Fund's net
assets after all debt and expenses of the Fund have been paid. Since Class B
shares and Class C shares pay higher distribution fees and transfer agency
costs, the liquidation proceeds to Class B shareholders and Class C shareholders
are likely to be lower than to other shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
1940 Act. More detailed information concerning the Fund is set forth in the
Statement of Additional Information.
The Trust's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to his or her private property for the satisfaction of any
obligation or liability of the Fund but the assets of the Fund only shall be
liable.
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Trust with
the SEC under the 1933 Act. Copies of the Registration Statement may be obtained
at a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.
The fiscal year end of the Fund is May 31. The Fund sends to its shareholders
at least semi-annually reports showing the Fund's portfolio and other
information. An Annual Report, containing financial statements audited by the
Fund's independent accountants, is sent to shareholders each year. After the end
of each year, shareholders will receive federal income tax information regarding
dividends and capital gains distributions.
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<PAGE> 39
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS, OR
REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666
FOR SHAREHOLDER AND DEALER
INQUIRIES THROUGH
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
DIAL (800) 421-2833
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424
VAN KAMPEN
GLOBAL GOVERNMENT
SECURITIES FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN
ASSET MANAGEMENT INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Subadviser
MORGAN STANLEY ASSET
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020
Distributor
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen
Global Government Securities Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen
Global Government Securities Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 40
- --------------------------------------------------------------------------------
GLOBAL GOVERNMENT
SECURITIES FUND
- --------------------------------------------------------------------------------
P R O S P E C T U S
SEPTEMBER 28, 1998
[VAN KAMPEN FUNDS LOGO]
GGS PRO 9/98
<PAGE> 41
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
Van Kampen Global Government Securities Fund (the "Fund") is a separate,
non-diversified series of Van Kampen World Portfolio Series Trust (the "Trust"),
an open-end management investment company. This Statement of Additional
Information is not a prospectus. This Statement of Additional Information should
be read in conjunction with the Fund's Prospectus (the "Prospectus") dated as of
the same date as this Statement of Additional Information. This Statement of
Additional Information does not include all the information a prospective
investor should consider before purchasing shares of the Fund. Investors should
obtain and read the Prospectus prior to purchasing shares of the Fund. A
Prospectus may be obtained without charge by writing or calling Van Kampen Funds
Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois 60181 or (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... B-2
Investment Policies and Techniques.......................... B-2
Options, Futures Contracts and Related Options.............. B-3
European Currency Transition................................ B-11
Repurchase Agreements....................................... B-11
Loans of Portfolio Securities............................... B-11
Investment Restrictions..................................... B-12
Trustees and Officers....................................... B-14
Legal Counsel............................................... B-21
Investment Advisory Agreements.............................. B-21
Distributor................................................. B-22
Distribution and Service Plans.............................. B-23
Transfer Agent.............................................. B-24
Portfolio Transactions and Brokerage........................ B-24
Determination of Net Asset Value............................ B-25
Purchase and Redemption of Shares........................... B-26
Exchange Privilege.......................................... B-28
Tax Status of the Fund...................................... B-29
Fund Performance............................................ B-29
Other Information........................................... B-30
Report of Independent Accountants........................... B-31
Financial Statements........................................ B-32
Notes to Financial Statements............................... B-39
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 28, 1998.
B-1
<PAGE> 42
GENERAL INFORMATION
Van Kampen World Portfolio Series Trust (the "Trust") was originally
incorporated in Maryland on May 25, 1990 as American Capital World Portfolio
Series, Inc. As of August 31, 1995, the Trust was reorganized as a business
trust under the laws of the State of Delaware as Van Kampen American Capital
World Portfolio Series Trust. On July 14, 1998, the Trust adopted its current
name. The Trust is currently comprised of one series: Van Kampen Global
Government Securities Fund (the "Fund").
Van Kampen Asset Management Inc. (the "Adviser"), Van Kampen Funds Inc.
(the "Distributor") and Van Kampen Investor Services Inc. ("Investor Services")
are wholly-owned subsidiaries of Van Kampen Investments Inc. ("Van Kampen"),
which is an indirect wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The principal office of the Fund, the Adviser, the Distributor and Van Kampen is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser ("MSAM" or the "Subadviser"), Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and Morgan
Stanley International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; credit
services; asset management; trading of futures, options, foreign exchange,
commodities and swaps (involving foreign exchange, commodities, indices and
interest rates); real estate advice, financing and investing; and securities
lending.
As of September 22, 1998, no one person was known to own beneficially or to
hold of record 5% or more of the outstanding shares of any class of the Fund
except for those listed below:
<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT
NAME AND ADDRESS SEPTEMBER 22, CLASS
OF HOLDER 1998 OF SHARES PERCENT OWNERSHIP
---------------- ------------- --------- -----------------
<S> <C> <C> <C>
Van Kampen Trust 582,863.99 A 20.82%
Company 721,128.96 B 15.32%
2800 Post Oak Blvd. 25,115.02 C 5.86%
Houston, TX 77056
</TABLE>
Van Kampen Trust Company acts as custodian for certain employee benefit
plans and independent retirement accounts.
INVESTMENT POLICIES AND TECHNIQUES
The Fund's primary investment objective is to seek to provide a high level
of current income. The Fund's secondary investment objectives are capital
appreciation and protection of principal. The Fund seeks to achieve its
investment objectives by investing.
B-2
<PAGE> 43
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the long-term debt
securities issued by various entities from "Aaa" to "C". High quality ratings
are as follows:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or exceptionally stable margin, and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- High quality by all standards. They are rated lower than the
best bond because margins of protection may not be as large as in Aaa
securities, fluctuation of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term risks
appear somewhat greater.
Standard & Poor's Ratings Group ("S&P") rates the long-term debt securities
of various entities in categories ranging from "AAA" to "D" according to
quality. High quality ratings are as follows:
AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
COMMERCIAL PAPER RATINGS
Moody's employs the designations "Prime-1," "Prime-2" and "Prime-3" to
indicate commercial paper having the highest capacity for timely repayment.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protections; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into four categories ranging
from "A" for the highest quality obligations to "D" for the lowest. A -- Issues
assigned its highest rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with numbers 1, 2, and 3
to indicate the relative degree of safety. A-1 -- This designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
A-2 -- Capacity for timely payments on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
"A-1".
OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS
The Fund may engage in transactions in options, futures contracts and
related options on futures contracts. Set forth below is certain additional
information regarding options, futures contracts and related options. See
Prospectus for further information.
WRITING CALL AND PUT OPTIONS
Purpose. The principal reason for writing options is to obtain, through
receipt of premiums, a greater current return or total return than would be
realized on the underlying securities alone. Such returns could be expected to
fluctuate because premiums earned from an option writing program and dividend or
interest income yields on portfolio securities vary as economic and market
conditions change. Writing options on portfolio securities is also likely to
result in a substantially higher portfolio turnover rate.
B-3
<PAGE> 44
Writing Options. The purchaser of a call option pays a premium to the
writer (i.e., the seller) for the right to buy the underlying security from the
writer at a specified price during a certain period. The Fund writes call
options either on a covered basis, or for cross-hedging purposes. A call option
is covered if, at all times during the option period, the Fund owns or has the
right to acquire the underlying subject to the call option. An option is for
cross-hedging purposes if it is not covered but is designed to provide a hedge
against a security which the Fund owns or has the right to acquire. In such
circumstances, the Fund collateralizes the option by maintaining in a segregated
account with the Fund's Custodian, cash or liquid securities in an amount not
less than the market value of the underlying security, marked to market daily,
while the option is outstanding.
The purchaser of a put option pays a premium to the writer (i.e., the
seller) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would write put options only
on a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its Custodian cash or liquid
securities in an amount of not less than the exercise price of the option, or
would hold a put on the same underlying security at an equal or greater exercise
price.
Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a writer of a call or put option, the Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously written by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is less (greater) than the premium it received on the sale of the
option. The Fund would also realize a gain if an option it has written lapses
unexercised.
The Fund could write options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. The
Fund could close out its position as a writer of an option only if a liquid
secondary market exists for options of that series, but there is no assurance
that such a market will exist, particularly in the case of over-the-counter
options, since they can be closed out only with the other party to the
transaction. Alternatively, the Fund could purchase an offsetting option, which
would not close out its position as a writer, but would provide an asset of
equal value to its obligation under the option written. If the Fund is not able
to enter into a closing purchase transaction or to purchase an offsetting option
with respect to an option it has written, it will be required to maintain the
securities subject to the call or the collateral underlying the put until a
closing purchase transaction can be entered into (or the option is exercised or
expires), even though it might not be advantageous to do so.
The exercise price of call options may be below ("in-the-money"), equal to
("at-the-money"), or above ("out-of-the-money") the current market value of the
underlying securities or futures contracts at the time the options are written.
The converse applies to put options.
Risks of Writing Options. By writing a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by writing a put option the Fund might become obligated
to purchase the underlying security at an exercise price that exceeds the then
current market price.
PURCHASING CALL AND PUT OPTIONS
The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire.
Alternatively, call options could be purchased for capital appreciation. Since
the premium paid for a call option is typically a small fraction of the price of
the underlying security, a given amount of funds will purchase call options
covering a much larger quantity of such security than could be purchased
directly. By purchasing call options, the Fund could benefit from any
significant increase in the price of the underlying security to a greater extent
than had it invested the same amount in the security directly. However, because
of the very high volatility of option premiums, the Fund would bear a
significant risk of losing the entire premium if the price of the underlying
security did not rise sufficiently, or if it did not do so before the option
expired.
B-4
<PAGE> 45
Put options may be purchased to protect (i.e., hedge) against anticipated
declines in the market value of either specific portfolio securities or of the
Fund's assets generally. Alternatively, put options may be purchased for capital
appreciation in anticipation of a price decline in the underlying security and a
corresponding increase in the value of the put option. The purchase of put
options for capital appreciation involves the same significant risk of loss as
described above for call options.
In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.
The Fund may be purchased either listed or over-the-counter options.
FUTURES CONTRACTS
The Fund may engage in transactions involving futures contracts and related
options in accordance with rules and interpretations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund would be exempt from
registration as a "commodity pool."
The Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies, or contracts based on
financial indices including any index of U.S. Government Securities, Foreign
Government Securities or corporate debt securities. U.S. futures contracts have
been designed by exchanges which have been designated "contracts markets" by the
CFTC, and must be executed through a futures commission merchant, or brokerage
firm, which is a member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing members
of the exchange. The Fund may enter into futures contracts which are based on
debt securities that are backed by the full faith and credit of the U.S.
Government, such as long-term U.S. Treasury Bonds, Treasury Notes, Government
National Mortgage Association modified pass-through mortgage-backed securities
and three-month U.S. Treasury Bills. The Fund may also enter into futures
contracts which are based on bonds issued by entities other than the U.S.
Government.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale or a futures
contract. Initially, the Fund is required to deposit with its Custodian in an
account in the broker's name an amount of cash or liquid securities equal to a
percentage (which may range upward from 5%) of the contract amount. This amount
is known as initial margin. The nature of initial margin in futures transactions
is different from that of margin in securities transactions in that futures
contract margin does not involve the borrowing of funds by the customer to
finance the transaction. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract, which is returned to the
Fund upon termination of the futures contract and satisfaction of its
contractual obligations. Subsequent payments to and from the broker, called
variation margin, are made on a daily basis as the price of the underlying
securities or index fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as marking to market.
For example, when the Fund has purchased a futures contract and the price
of the underlying security or index rises, that position increases in value, and
the Fund will receive from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund has purchased a futures contract
and the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract
serves as a temporary substitute for the purchase of individual securities,
which may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could
B-5
<PAGE> 46
be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
substantially reduces the risk to the Fund of a market decline and, by so doing,
provides an alternative to the liquidation of securities positions in the Fund
with attendant transaction costs.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
Special Risks Associated with Futures Transactions. There are several
risks connected with the use of futures contracts as a hedging device. These
include the risk of imperfect correlation between movements in the price of the
futures contracts and of the underlying securities, currency or index, the risk
of market distortion, the illiquidity risk and the risk of error in anticipating
price movement.
There may be an imperfect correlation, or no correlation, between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities, currency or index, upon which the
futures contract is based. If the price of the futures contract moves less than
the price of the securities being hedged, the hedge will not be fully effective.
To compensate for the imperfect correlation, the Fund could buy or sell futures
contracts in a greater (lesser) dollar amount than the dollar amount of
securities being hedged if the historical volatility of the securities being
hedged is greater (lesser) than the historical volatility of the securities,
currency or index, underlying the futures contract. It is also possible that the
value of futures contracts held by the Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.
There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities, currencies or index
underlying the futures contract due to certain market distortions. First, all
participants in the futures market are subject to margin depository and
maintenance requirements. Rather than meet additional margin depository
requirements, investors may close futures contracts through offsetting
transactions, which could distort the normal relationship between the futures
market and the securities, currencies or index underlying the futures contract.
Second, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions. Due to the possibility of price distortion in
the futures markets and because of the imperfect correlation between the
movements in the futures contracts and movements in the securities or currencies
underlying them, a correct forecast of general market trends by the Adviser may
still not result in a successful hedging transaction.
There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments on variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Adviser's ability to
predict correctly the direction of movements in the market. For example, if the
Fund hedges against a rise in interest rates, and interest rates instead fall,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings
B-6
<PAGE> 47
because it will have offsetting losses in futures contracts. In such cases, if
the Fund has insufficient cash, it may have to sell portfolio securities at a
time when it is disadvantageous to do so in order to meet the daily variation
margin.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
traders to substantial losses. In such event, and in the event of adverse price
movements, the Fund would be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may partially or completely offset losses on the
futures contract. However, as described in the Prospectus, there is no guarantee
that the price of the securities being hedged will, in fact, correlate with the
price movements in a futures contract and thus provide an offset to losses on
the futures contract.
The Fund will not enter into a futures contract or related option (except
for closing transactions) for other than for 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 amount may be
excluded in calculating the 5% limitation. The Fund's fundamental investment
restrictions or certain state securities laws to which the Fund may be subject
may further restrict the Fund's ability to engage in transactions in futures
contracts and related options.
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts.
Options on futures contracts to be written or purchased by the Fund will be
traded on United States or foreign exchanges or over-the-counter. An option on a
futures contract gives the purchasers the right, in return for the premium paid,
to assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put), at a specified exercise price
at any time during the option period. As a writer of an option on a futures
contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purpose as the sale of a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts would be intended to serve the same purpose as the actual
purchase of the futures contract.
RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS
In addition to the risks described above which apply to all options
transactions, there are several special risks relating to options on futures.
The Adviser will not purchase options on futures on any exchange unless in the
Adviser's opinion, a liquid secondary exchange market for such options exists.
Compared to the use of futures, the purchase of options on futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances, such as when there is no movement in the level of the index or in
the price of the underlying security, when the use of an option on a future
would result in a loss to the Fund when the use of a future would not.
B-7
<PAGE> 48
ADDITIONAL RISKS OF OPTIONS AND FUTURES TRANSACTIONS
Each of the United States exchanges and boards of trade has established
limitations governing the maximum number of call or put options on the same
underlying security or futures contract (whether or not covered) which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). Option positions of all investment companies advised by the Adviser
are combined for purposes of these limits. An exchange or board of trade may
order the liquidation of positions found to be in violation of these limits and
it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.
FORWARD COMMITMENTS
Relative to a Forward Commitment purchase, the Fund maintains a segregated
account (which is marked to market daily) of cash or liquid securities (which
may have maturities which are longer than the term of the Forward Commitment)
with the Fund's custodian in an aggregate amount equal to the amount of its
commitment as long as the obligation to purchase continues. Since the market
value of both the securities or currency subject to the Forward Commitment and
the securities or currency held in the segregated account may fluctuate, the use
of Forward Commitments may magnify the impact of interest rate changes on the
Fund's net asset value.
A Forward Commitment sale is covered if the Fund owns or has the right to
acquire the underlying securities or currency subject to the Forward Commitment.
A Forward Commitment sale is for cross-hedging purposes if it is not covered,
but is designed to provide a hedge against a decline in value of a security or
currency which the Fund owns or has the right to acquire. In either
circumstance, the Fund maintains in a segregated account (which is marked to
market daily) either the security or currency covered by the Forward Commitment
or cash or liquid securities (which may have maturities which are longer than
the term of the Forward Commitment) with the Fund's custodian in an aggregate
amount equal to the amount of its commitment as long as the obligation to sell
continues. By entering into a Forward Commitment sale transaction, the Fund
forgoes or reduces the potential for both gain and loss in the holding which is
being hedged by the Forward Commitment sale.
RISK FACTORS APPLICABLE TO OPTIONS ON U.S. GOVERNMENT SECURITIES
Treasury Bonds and Notes. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will thus be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.
Treasury Bills. Because the deliverable Treasury bill changes from week to
week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian so that it will be
treated as being covered.
B-8
<PAGE> 49
Mortgage-Related Securities. The following risk factors will be applicable
to options on mortgage-related securities. Currently such options are only
traded over-the-counter. Since the remaining principal balance of a
mortgage-related security declines each month as a result of mortgage payments,
the Fund as a writer of a mortgage-related call holding mortgage-related
securities as "cover" to satisfy its delivery obligation in the event of
exercise may find that the mortgage-related securities it holds no longer have a
sufficient remaining principal balance for this purpose.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which forward contracts or futures
contracts on foreign currencies will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio dollar value of a foreign
currency in which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the value of portfolio
securities, the Fund may purchase put options on the foreign currency. If the
value of the currency does decline, the Fund will have the right to sell such
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated the Fund could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Fund may write options on foreign currencies for the same types of
hedging purposes. For example, where the Fund anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Fund also may be required to forego all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.
The Fund intends to write covered call options on foreign currencies. A
call option written on a foreign currency by the Fund is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its Custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call option is also covered if the Fund has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or liquid securities
in a segregated account with its Custodian.
The value of foreign currency option is dependent upon the value of the
underlying foreign currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or both
currencies and has no relationship to the investment merits of a foreign
security. Because
B-9
<PAGE> 50
foreign currency transactions occurring in the interbank market (conducted
directly between currency traders, usually large commercial banks, and their
customers) involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by having
to deal in an odd lot market (generally consisting of transactions of less than
$1 million for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (i.e., less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
The Fund also intends to write call options on foreign currencies that are
not covered for cross-hedging purposes. A call option on a foreign currency is
for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, the Fund collateralizes the option by maintaining in a segregated
account with the Fund's Custodian, cash or liquid securities in an amount not
less than the value of the underlying foreign currency in U.S. dollars marked to
market daily.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES
Unlike transactions entered into by the Fund in futures contracts, options
on foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) by the Securities and Exchange Commission ("SEC"). To the contrary,
such instruments are traded through financial institutions acting as
market-makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the Fund
to liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it
B-10
<PAGE> 51
determines that foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery
of currency, the fixing of dollar settlement prices or prohibitions, on
exercise.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political 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
nonbusiness 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) lesser trading volume.
EUROPEAN CURRENCY TRANSITION
On January 1, 1999, the European Monetary Union (EMU) plans to implement a
new currency unit, the Euro, which is expected to reshape financial markets,
banking systems and monetary policies in Europe and other parts of the world.
Implementation of this plan will mean that financial transactions and market
information, including share quotations and company accounts, in participating
countries will be denominated in Euros. Monetary policy for participating
countries will be uniformly managed by a new central bank, the European Central
Bank (ECB).
The transition to the Euro may change the economic environment and behavior
of investors, particularly in European markets. For example, the process of
implementing the Euro may adversely affect financial markets world-wide and may
result in changes in the relative strength and value of the U.S. dollar or other
major currencies, as well as possible adverse tax consequences. The transition
to the Euro is likely to have a significant impact on fiscal and monetary policy
in the participating countries and may produce unpredictable effects on trade
and commerce generally. These resulting uncertainties could create increased
volatility in financial markets world-wide.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with banks or broker-dealers
deemed to be creditworthy by the Adviser under guidelines approved by the Board
of Trustees. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, usually not
more than seven days from the date of purchase, thereby determining the yield
during the purchaser's holding period. Repurchase agreements are fully
collateralized by the underlying debt securities and are considered to be loans
under the Investment Company Act of 1940, as amended ("1940 Act"). The Fund pays
for such securities only upon physical delivery or evidence of book entry
transfer to the account of a custodian or bank acting as agent. The seller under
a repurchase agreement will be required to maintain the value of the underlying
securities marked to market daily at not less than the repurchase price. The
underlying securities (normally securities of the U.S. Government, or its
agencies and instrumentalities) may have maturity dates exceeding one year. The
Fund does not bear the risk of a decline in value of the underlying securities
unless the seller defaults under its repurchase obligation. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and loss
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (b) possible lack
of access to income on the underlying security during this period, and (c)
expenses of enforcing its rights. See "Investment Practices -- Repurchase
Agreements" in the Prospectus for further information.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to unaffiliated brokers, dealers and
financial institutions provided that cash or liquid securities equal in value to
100% of the market value of the securities loaned is deposited by the borrower
with the Fund and is marked to market daily. While such securities are on loan,
the borrower is
B-11
<PAGE> 52
required to pay the Fund any income accruing thereon. Furthermore, the Fund may
invest the cash collateral in portfolio securities thereby increasing the return
to the Fund as well as increasing the market risk to the Fund. The Fund will not
lend its portfolio securities if such loans are not permitted by the laws or
regulations of any state in which its shares are qualified for sale. However,
should the Fund believe that lending securities is in the best interests of its
shareholders, it would consider withdrawing it shares from sale in any such
state.
Loans would be made for short-term purposes and subject to termination by
the Fund in the normal settlement time, currently three business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Fund and its shareholders, but any gain can be realized only if the borrower
does not default. The Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which may not be changed
without approval by the vote of a majority of its outstanding voting shares,
which is defined by the 1940 Act as the lesser of (i) 67% or more of the voting
securities present at the meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy;
or (ii) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities. These restrictions provide that the Fund
shall not:
1. Engage in the underwriting of securities of other issuers, except that
the Fund may sell an investment position even though it may be deemed
to be an underwriter under the federal securities laws.
2. Purchase any security (other than obligations of the United States
Government, its agencies, or instrumentalities) if more than 25% of its
total assets (taken at current value) would then be invested in a
single industry except that, if the value of securities owned by the
Fund with remaining maturities of less than 13 months exceeds 35% of
the value of the Fund's total assets, the Fund will invest at least 25%
of its assets in securities issued by banks. Although this policy is
not applicable to securities issued by government or political
subdivisions because such issues are not members of any industry, the
Fund does not intend to invest more than 25% of its total assets in the
securities issued or guaranteed by any government (except U.S.
Government, its agencies or instrumentalities).
3. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of
its net assets, or pledge more than 10% of its net assets in connection
with permissible borrowings or purchase additional securities when
money borrowed exceeds five percent of its net assets. Margin deposits
or payments in connection with the writing of options, or in connection
with the purchase or sale of forward contracts, futures, foreign
currency futures and related options, are not deemed to be a pledge or
other encumbrance.
4. Lend money except through the purchase of (i) United States and foreign
government securities, commercial paper, bankers' acceptances,
certificates of deposit and similar evidences of indebtedness, both
foreign and domestic, and (ii) repurchase agreements; or lend
securities in an amount exceeding 15% of the total assets of the Fund.
The purchase of a portion of an issue of securities described under (i)
above distributed publicly, whether or not the purchase is made on the
original issuance, is not considered the making of a loan.
5. Make short sales of securities, unless at the time of the sale it owns
or has the right to acquire an equal amount of such securities;
provided that this prohibition does not apply to the writing of options
or the sale of forward contracts, futures, foreign currency futures or
related options.
6. Purchase securities on margin but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities. The deposit or payment by the Fund of initial or
maintenance margin in connection with forward contracts, futures,
foreign currency futures or related options is not considered the
purchase of a security on margin.
7. Buy or sell real estate or interests in real estate including real
estate limited partnerships, provided that the foregoing prohibition
does not apply to a purchase and sale of publicly traded (i) securities
B-12
<PAGE> 53
which are secured by real estate, (ii) securities representing
interests in real estate, and (iii) securities of companies principally
engaged in investing or dealing in real estate.
8. Make investments for the purpose of exercising control or management
although the Fund retains the right to vote securities held by it,
except that the Fund may purchase securities of other investment
companies to the extent permitted by (i) the 1940 Act, as amended from
time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief from the provisions of the 1940 Act.
9. Invest in commodities or commodity contracts, except that the Fund may
enter into transactions in options, futures contracts or related
options including foreign currency futures contracts and related
options and forward contracts.
10. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making
and collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts, forward contracts, forward commitments and other investment
strategies and instruments that would be considered "senior securities"
but for the maintenance by the Fund of a segregated account with its
custodian or some other form of "cover".
11. Write, purchase or sell puts, calls or combinations thereof, except
that the Fund may (a) write covered or fully collateralized call
options, write secured put options, and enter into closing or
offsetting purchase transactions with respect to such options, (b)
purchase and sell options to the extent that the premiums paid for all
such options owned at any time do not exceed ten percent of its total
assets and (c) engage in transactions in interest rate futures
contracts and related options provided that such transactions are
entered into for bona fide hedging purposes (or that the underlying
commodity value of the Fund's long positions do not exceed the sum of
certain identified liquid investments as specified in CFTC
regulations), provided further that the aggregate initial margin and
premiums do not exceed 5% of the fair market value of the Fund's total
assets, and provided further that the Fund may not enter into net
aggregate long and short futures contracts or related options if more
than 50% of the Fund's total assets would be so invested.
In addition to the foregoing fundamental policies which may not be changed
without shareholder approval, the Fund is subject to the following policies
which may be amended by the Trustees and which apply at the time of purchase of
portfolio securities.
1. The Fund may not 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 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act.
2. The Fund may not invest more than 5% of its net assets in warrants or
rights valued at the lower of cost or market, nor more than 2% of its
net assets in warrants or rights (valued on such basis) which are not
listed on the New York Stock Exchange or American Stock Exchange.
Warrants or rights acquired in units or attached to other securities are
not subject to the foregoing limitation.
3. The Fund may not invest in securities of any company if any officer or
trustee of the Trust or of the Adviser owns more than 1/2 of 1% of the
outstanding securities of such company, and such officers and trustees
who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
4. The Fund may not invest in interests in oil, gas, or other mineral
exploration or development programs or invest in oil, gas, or mineral
leases, except that the Fund may acquire securities of public companies
which themselves are engaged in such activities.
5. The Fund may not invest more than 5% of its total assets in securities
of unseasoned issuers which have been in operation directly or through
predecessors for less than three years, 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
B-13
<PAGE> 54
Act, as amended from time to time, or (iii) an exemption or other relief
from the provisions of the 1940 Act.
6. The Fund may not purchase or otherwise acquire any security if, as a
result, more than 10% of its net assets (taken at current value) would
be invested in securities that are illiquid by virtue of the absence of
a readily available market. This policy includes repurchase agreements
maturing in more than seven days and over-the-counter options held by
the Fund and that portion of assets used to cover such options. This
policy does not apply to restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 (the "1993 Act")
which the Trustees or the Adviser under Board approved guidelines, may
determine are liquid nor does it apply to other securities for which,
notwithstanding legal or contractual restrictions on resale, a liquid
market exists.
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Fund and other
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. ("VK"), Van Kampen Investment Advisory Corp. ("Advisory
Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds
Inc., the distributor of the Fund's shares (the "Distributor"), Van Kampen
Management Inc., Van Kampen Advisors Corp., Van Kampen Insurance Agency of
Illinois Inc., Van Kampen Insurance Agency of Texas Inc., Van Kampen System
Inc., Van Kampen Recordkeeping Services Inc., American Capital Contractual
Services, Inc., Van Kampen Trust Company, Van Kampen Exchange Corp. and Van
Kampen Investor Services Inc., the Fund's transfer agent ("Investor Services").
Advisory Corp. and Asset Management sometimes are referred to herein
collectively as the "Advisers". For purposes hereof, the term "Fund Complex"
includes each of the open-end investment companies advised by the Advisers
(excluding the Van Kampen American Capital Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to August 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT
Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a
Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which
develops, manufactures, markets and services medical and
scientific equipment. Trustee/Director of each of the
funds in the Fund Complex.
Richard M. DeMartini*..................... President and Chief Operating Officer, Individual Asset
Two World Trade Center Management Group, a division of Morgan Stanley Dean
66th Floor Witter & Co. Mr. DeMartini is a Director of InterCapital
New York, NY 10048 Funds, Dean Witter Distributors, Inc. and Dean Witter
Date of Birth: 10/12/52 Trust Company. Trustee of the TCW/DW Funds. Director of
the National Healthcare Resources, Inc. Formerly Vice
Chairman of the Board of the National Association of
Securities Dealers, Inc. and Chairman of the Board of the
Nasdaq Stock Market, Inc. Trustee/Director of each of the
funds in the Fund Complex.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an executive
Sears Tower search firm. Prior to 1997, Partner, Ray & Berndtson,
233 South Wacker Drive Inc., an executive recruiting and management consulting
Suite 7000 firm. Formerly, Executive Vice President of ABN AMRO,
Chicago, IL 60606 N.A., a Dutch bank holding company. Prior to 1992,
Date of Birth: 06/03/48 Executive Vice President of La Salle National Bank.
Trustee on the University of Chicago Hospitals Board, The
International House Board and the Women's Board of the
University of Chicago. Trustee/Director of each of the
funds in the Fund Complex.
</TABLE>
B-14
<PAGE> 55
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------- --------------------------
<S> <C>
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Trustee/Director of each of the funds in the Fund
Complex.
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee/Director of each of
the funds in the Fund Complex.
Don G. Powell*............................ Chairman and a Director of VK. Chairman and a Director of
2800 Post Oak Blvd. the Advisers and the Distributor. Chairman and a Director
Houston, TX 77056 of Investor Services. Director or officer of certain
Date of Birth: 10/19/39 other subsidiaries of VK. Chairman of the Board of
Governors and the Executive Committee of the Investment
Company Institute. Prior to July of 1998, Director and
Chairman of VK/AC Holding, Inc. Prior to November 1996,
President, Chief Executive Officer and a Director of VKAC
Holding. Trustee/Director of each of the funds in the
Fund Complex and other funds advised by the Advisers or
Van Kampen Management Inc.
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company,
One ServiceMaster Way a business and consumer services company. Director of
Downers Grove, IL 60515 Illinois Tool Works, Inc., a manufacturing company; the
Date of Birth: 07/08/44 Urban Shopping Centers Inc., a retail mall management
company; and Stone Container Corp., a paper manufacturing
company. Trustee, University of Notre Dame. Formerly,
President and Chief Executive Officer, Waste Management,
Inc., an environmental services company, and prior to
that President and Chief Operating Officer, Waste
Management, Inc. Trustee/Director of each of the funds in
the Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee/Director of each of the
funds in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, and other open-end and closed-end funds advised
Date of Birth: 08/22/39 by the Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the Fund
Complex, and Trustee/Managing General Partner of other
open-end and closed-end funds advised by the Advisers or
Van Kampen Management Inc.
</TABLE>
- ---------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. DeMartini and
Powell are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter & Co. or its affiliates.
B-15
<PAGE> 56
OFFICERS
Messrs. McDonnell, Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin,
Wetherell and Hill are located at One Parkview Plaza, Oakbrook Terrace, IL
60181. The Fund's other officers are located at 2800 Post Oak Blvd., Houston, TX
77056.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND AGE DURING PAST 5 YEARS
------------ ---------------------
<S> <C>
Dennis J. McDonnell......... Executive Vice President and a Director of VK. President,
Date of Birth: 05/20/42 Chief Operating Officer and a Director of the Advisers, Van
President Kampen Advisors Inc., and Van Kampen Management Inc. Prior
to July of 1998, Director and Executive Vice President of
VK/AC Holding, Inc. Prior to April of 1998, President and a
Director of Van Kampen Merritt Equity Advisors Corp. Prior
to April of 1997, he was a Director of Van Kampen Merritt
Equity Holdings Corp. Prior to November 1996, Executive Vice
President and a Director of VK/AC Holding Inc. Prior to
September of 1996, Mr. McDonnell was Chief Executive Officer
and Director of MCM Group, Inc., McCarthy, Crisanti &
Maffei, Inc. and Chairman and Director of MCM Asia Pacific
Company, Limited and MCM (Europe) Limited. Prior to July of
1996, Mr. McDonnell was President, Chief Operating Officer
and Trustee of VSM Inc. and VCJ Inc. President of each of
the funds in the Fund Complex. President, Chairman of the
Board and Trustee/Managing General Partner of other
investment companies advised by the Advisers or their
affiliates.
Peter W. Hegel.............. Executive Vice President of the Advisers, Van Kampen
Date of Birth: 06/25/56 Management Inc. and Van Kampen Advisors Inc. Prior to July
Vice President of 1996, Mr. Hegel was a Director of VSM Inc. Prior to
September of 1996, he was a Director of McCarthy, Crisanti &
Maffei, Inc. Vice President of each of the funds in the Fund
Complex and certain other investment companies advised by
the Advisers or their affiliates.
Curtis W. Morell............ Senior Vice President of the Advisers, Vice President and
Date of Birth: 08/04/46 Chief Accounting Officer of each of the funds in the Fund
Vice President and Chief Complex and certain other investment companies advised by
Accounting Officer the Advisers or their affiliates.
Ronald A. Nyberg............ Executive Vice President, General Counsel, Secretary and
Date of Birth: 07/29/53 Director of VK. Mr. Nyberg is Executive Vice President,
Vice President and General Counsel, Assistant Secretary and a Director of the
Secretary Advisers and the Distributor, Van Kampen Advisors Inc., Van
Kampen Management Inc., Van Kampen Exchange Corp., American
Capital Contractual Services, Inc. and Van Kampen Trust
Company. Executive Vice President, General Counsel and
Assistant Secretary of Van Kampen Investor Services Inc.
Director or officer of certain other subsidiaries of VK.
Director of ICI Mutual Insurance Co., a provider of
insurance to members of the Investment Company Institute.
Prior to July of 1998, Director and Executive Vice
President, General Counsel and Secretary of VK/AC Holding,
Inc. Prior to April of 1998, Executive Vice President,
General Counsel and Director of Van Kampen Merritt Equity
Advisors Corp. Prior to April of 1997, he was Executive Vice
President, General Counsel and a Director of Van Kampen
Merritt Equity Holdings Corp. Prior to September of 1996, he
was General Counsel of McCarthy, Crisanti & Maffei, Inc.
Prior to July of 1996, Mr. Nyberg was Executive Vice
President and General Counsel of VSM Inc. and Executive Vice
President and General Counsel of VCJ Inc. Vice President and
Secretary of each of the funds in the Fund Complex and
certain other investment companies advised by the Advisers
or their affiliates.
</TABLE>
B-16
<PAGE> 57
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND AGE DURING PAST 5 YEARS
------------ ---------------------
<S> <C>
Paul R. Wolkenberg.......... Executive Vice President and Director of VK. Executive Vice
Date of Birth: 11/10/44 President of the AC Adviser and the Distributor. President
Vice President and a Director of Investor Services. President and Chief
Operating Officer of Van Kampen Recordkeeping Services, Inc.
Prior to July of 1998, Director and Executive Vice President
of VK/AC Holding, Inc. Vice President of each of the funds
in the Fund Complex and certain other investment companies
advised by the Advisers or their affiliates.
Edward C. Wood III.......... Senior Vice President of the Advisers, VK and Van Kampen
Date of Birth: 01/11/56 Management Inc. Senior Vice President and Chief Operating
Vice President and Chief Officer of the Distributor. Vice President and Chief
Financial Officer Financial Officer of each of the funds in the Fund Complex
and certain other investment companies advised by the
Advisers or their affiliates.
John L. Sullivan............ First Vice President of VK and the Advisers. Treasurer of
Date of Birth: 08/20/55 each of the funds in the Fund Complex and certain other
Treasurer investment companies advised by the Advisers or their
affiliates.
Tanya M. Loden.............. Vice President of VK and the Advisers. Controller of each of
Date of Birth: 11/19/59 the funds in the Fund Complex and other investment companies
Controller advised by the Advisers or their affiliates.
Nicholas Dalmaso............ Vice President, Associate General Counsel and Assistant
Date of Birth: 03/01/65 Secretary of VK. Vice President, Associate General Counsel
Assistant Secretary and Assistant Secretary of the Advisers, the Distributor,
Van Kampen Advisors Inc. and Van Kampen Management Inc.
Assistant Secretary of each of the funds in the Fund Complex
and other investment companies advised by the Advisers or
their affiliates.
Huey P. Falgout, Jr......... Vice President, Assistant Secretary and Senior Attorney of
Date of Birth: 11/15/63 VK. Vice President, Assistant Secretary and Senior Attorney
Assistant Secretary of the Advisers, the Distributor, Investor Services, Van
Kampen Management Inc., American Capital Contractual
Services, Inc., Van Kampen Exchange Corp. and Van Kampen
Advisors Inc. Assistant Secretary of each of the funds in
the Fund Complex and other investment companies advised by
the Advisers or their affiliates.
Scott E. Martin............. Senior Vice President, Deputy General Counsel and Assistant
Date of Birth: 08/20/56 Secretary of VK. Senior Vice President, Deputy General
Assistant Secretary Counsel and Secretary of the Advisers, the Distributor, Van
Kampen Investor Services Inc., American Capital Contractual
Services, Inc., Van Kampen Management Inc., Van Kampen
Exchange Corp., Van Kampen Advisors Inc., Van Kampen
Insurance Agency of Illinois Inc., Van Kampen System Inc.
and Van Kampen Recordkeeping Services Inc. Prior to July of
1998, Senior Vice President, Deputy General Counsel and
Assistant Secretary of VK/AC Holding, Inc. Prior to April of
1998, Van Kampen Merritt Equity Advisors Corp. Prior to
April of 1997, Senior Vice President, Deputy General Counsel
and Secretary of Van Kampen American Capital Services, Inc.
and Van Kampen Merritt Holdings Corp. Prior to September of
1996, Mr. Martin was Deputy General Counsel and Secretary of
McCarthy, Crisanti & Maffei, Inc., and prior to July of
1996, he was Senior Vice President, Deputy General Counsel
and Secretary of VSM Inc. and VCJ Inc. Assistant Secretary
of each of the funds in the Fund Complex and other
investment companies advised by the Advisers or their
affiliates.
Weston B. Wetherell......... Vice President, Associate General Counsel and Assistant
Date of Birth: 06/15/56 Secretary of VK, the Advisers, the Distributor, Van Kampen
Assistant Secretary Management Inc. and Van Kampen Advisors Inc. Prior to
September of 1996, Mr. Wetherell was Assistant Secretary of
McCarthy, Crisanti & Maffei, Inc. Assistant Secretary of
each of the funds in the Fund Complex and other investment
companies advised by the Advisers or their affiliates.
</TABLE>
B-17
<PAGE> 58
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND AGE DURING PAST 5 YEARS
------------ ---------------------
<S> <C>
Steven M. Hill.............. Vice President of VK and the Advisers. Assistant Treasurer
Date of Birth: 10/16/64 of each of the funds in the Fund Complex and other
Assistant Treasurer investment companies advised by the Advisers or their
affiliates.
Michael Robert Sullivan..... Assistant Vice President of the Advisers. Assistant
Date of Birth: 03/30/33 Controller of each of the funds in the Fund Complex and
Assistant Controller other investment companies advised by the Advisers or their
affiliates.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 64 operating funds in the Fund Complex. For purposes of the following
compensation and benefits discussion, the Fund Complex is divided into the
following three groups: the funds advised by Asset Management (the "AC Funds"),
the funds advised by Advisory Corp. excluding funds organized as series of the
Van Kampen Series Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Van Kampen Series Fund, Inc. (the "MS Funds").
Each trustee/director who is not an affiliated person of VK, the Advisers, the
Distributor, Investor Services, or Morgan Stanley Dean Witter & Co. (each a
"Non-Affiliated Trustee") is compensated by an annual retainer and meeting fees
for services to the funds in the Fund Complex. Each fund in the Fund Complex
(except the money market series of the MS Funds) provides a deferred
compensation plan to its Non-Affiliated Trustees that allows trustees/directors
to defer receipt of their compensation and earn a return on such deferred
amounts. Deferring compensation has the economic effect as if the Non-Affiliated
Trustee reinvested his or her compensation into the funds. Each fund in the Fund
Complex (except the money market series of the MS Funds) provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
The trustees recently reviewed and adopted a standardized compensation and
benefits program for each fund in the Fund Complex. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes an annual retainer in
an amount equal to $50,000 per calendar year, due in four quarterly installments
on the first business day of each quarter. Payment of the annual retainer is
allocated among the funds in the Fund Complex (except the money market series of
the MS Funds) on the basis of the relative net assets of each fund as of the
last business day of the preceding calendar quarter. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes a per meeting fee from
each fund in the Fund Complex (except the money market series of the MS Funds)
in the amount of $200 per quarterly or special meeting attended by the
Non-Affiliated Trustee, due on the date of the meeting, plus reasonable expenses
incurred by the Non-Affiliated Trustee in connection with his or her services as
a trustee, provided that no compensation will be paid in connection with certain
telephonic special meetings.
For each AC Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from the AC
Funds includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting
fee in the amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.
For each VK Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from each VK
Fund includes an annual retainer in an amount
B-18
<PAGE> 59
equal to $2,500 per calendar year, due in four quarterly installments on the
first business day of each calendar quarter. Each Non-Affiliated Trustee
receives a per meeting fee from each VK Fund in the amount of $125 per regular
quarterly meeting attended by the Non-Affiliated Trustee, due on the date of
such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in
connection with his or her services as a trustee. Each Non-Affiliated Trustee
receives a per meeting fee from each VK Fund in the amount of $125 per special
meeting attended by the Non-Affiliated Trustee, due on the date of such meeting,
plus reasonable expenses incurred by the Non-Affiliated Trustee in connection
with his or her services as a trustee, provided that no compensation will be
paid in connection with certain telephonic special meetings.
For the period from July 2, 1997 up to and including December 31, 1997, the
compensation of each Non-Affiliated Trustee from the MS Funds was based
generally on the compensation amounts and methodology used by such funds prior
to their joining the current Fund Complex on July 2, 1997. Each trustee/director
was elected as a director of the MS Funds on July 2, 1997. Prior to July 2,
1997, the MS Funds were part of another fund complex (the "Prior Complex") and
the former directors of the MS Funds were paid an aggregate fee allocated among
the funds in the Prior Complex that resulted in individual directors receiving
total compensation between approximately $8,000 to $10,000 from the MS Funds
during such funds' last fiscal year.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.
B-19
<PAGE> 60
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
FUND COMPLEX
----------------------------------------------------------
AGGREGATE AGGREGATE TOTAL
YEAR FIRST PENSION OR ESTIMATED MAXIMUM COMPENSATION
APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS BEFORE DEFERRAL
ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON FROM FUND
NAME(1) BOARD FUND(2) EXPENSES(3) RETIREMENT(4) COMPLEX(5)
------- -------------- ------------------------ ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1991 $1,175 $30,328 $60,000 $111,197
Linda Hutton Heagy* 1995 975 3,141 60,000 111,197
R. Craig Kennedy* 1995 1,175 2,229 60,000 111,197
Jack E. Nelson* 1995 1,175 15,820 60,000 104,322
Jerome L. Robinson 1995 520 32,020 15,750 107,947
Phillip B. Rooney* 1997 1,175 0 60,000 74,697
Dr. Fernando Sisto* 1991 1,175 60,208 60,000 111,197
Wayne W. Whalen* 1995 1,175 10,788 60,000 111,197
</TABLE>
- ---------------
* Currently a member of the Board of Trustees.
(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Mr. Robinson retired from the Board of
Trustees on December 31, 1997. Trustees not eligible for compensation are
not included in the compensation table.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended May 31, 1998. The
following trustees deferred compensation from the Fund during the fiscal
year ended May 31, 1998: Mr. Branagan, $1,175; Ms. Heagy, $975; Mr. Kennedy,
$588; Mr. Nelson, $1,175; Mr. Robinson, $520; Mr. Rooney, $1,175; Dr. Sisto,
$588; and Mr. Whalen, $1,175. Amounts deferred are retained by the Fund and
earn a rate of return determined by reference to either the return on the
common shares of the Fund or other funds in the Fund Complex as selected by
the respective Non-Affiliated Trustee, with the same economic effect as if
such Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, each Fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The cumulative deferred
compensation (including interest) accrued with respect to each trustee,
including former trustees, from the Fund as of May 31, 1998 is as follows:
Mr. Branagan, $2,469; Dr. Caruso, $2,367; Mr. Gaughan, $292; Ms. Heagy,
$3,208; Mr. Kennedy, $2,042; Mr. Miller, $1,604; Mr. Nelson, $4,015; Mr.
Rees, $245; Mr. Robinson, $2,894; Mr. Rooney, $1,213; Dr. Sisto, $6,568; and
Mr. Whalen, $3,984. The deferred compensation plan is described above the
Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for each of the current trustees for the Funds' respective
fiscal years ended in 1997. The retirement plan is described above the
Compensation Table.
(4) For Mr. Robinson, this is the sum of the actual annual benefits payable by
the operating investment companies in the Fund Complex as of the date of his
retirement for each year of the 10-year period since his retirement. For the
remaining trustees, this is the sum of the estimated maximum annual benefits
payable by the operating investment companies in the Fund Complex for each
year of the 10-year period commencing in the year of such trustee's
anticipated retirement. The Retirement Plan is described above the
Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all operating investment companies in the Fund Complex as of December 31,
1997 before deferral by the trustees under the deferred compensation plan.
Because the funds in the Fund Complex have different fiscal year ends, the
amounts shown in this column are presented on a calendar year basis. Certain
trustees deferred all or a
B-20
<PAGE> 61
portion of their aggregate compensation from the Fund Complex during the
calendar year ended December 31, 1997. The deferred compensation earns a
rate of return determined by reference to the return on the shares of the
funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee, with the same economic effect as if such Non-Affiliated Trustee had
invested in one or more funds in the Fund Complex. To the extent permitted
by the 1940 Act, the Fund may invest in securities of those investment
companies selected by the Non-Affiliated Trustees in order to match the
deferred compensation obligation. The Advisers and their affiliates also
serve as investment adviser for other investment companies; however, with
the exception of Mr. Whalen, the Non-Affiliated Trustees were not trustees
of such investment companies. Combining the Fund Complex with other
investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $268,447 during the calendar year
ended December 31, 1997.
As of September 22, 1998, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
INVESTMENT ADVISORY AGREEMENTS
The Trust and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Trust retains the
Adviser to manage the investment of its assets place orders for the purchase and
sale of its portfolio securities. The Adviser obtains and evaluates economic,
statistical and financial information to formulate and implement the Fund's
investment programs. The Adviser also furnishes at no cost to the Fund (except
as noted herein) the services of sufficient executive and clerical personnel for
the shareholder reports, and notices and proxy solicitation materials. In
addition, the Adviser furnishes at no cost to the Fund the services of the
Fund's President, one or more Vice Presidents as needed, and a Secretary.
The Adviser has entered into a subadvisory agreement (the "Sub-advisory
Agreement") with the Subadviser to assist it in performing its investment
advisory functions. The Subadviser, subject to overall supervision by the
Adviser and the Trustees, is responsible for recommending an optimal asset
allocation and currency exposure of the Fund's assets of among various markets
and for recommending particular securities in such markets. The Adviser and
Subadviser are hereinafter sometimes referred to as the "Adviser."
Under the Advisory Agreement, the Trust bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of the Trust's Treasurer or other
principal financial officer and the personnel operating under his direction.
Charges are allocated among the investment companies advised or subadvised by
the Adviser. A portion of these amounts were paid to the Adviser or its parent
in reimbursement of personnel, office space, facilities and equipment costs
attributable to the provision of accounting services to the Trust. The services
provided by the Adviser are at cost. The Trust also pays service fees,
distribution fees, custodian fees, legal and auditing fees, the costs of reports
to shareholders and all other ordinary expenses not specifically assumed by the
Adviser. The Advisory Agreement also provides that the Adviser shall not be
liable to the Fund for any actions or omissions if it acted without willful
misfeasance, bad faith, negligence or reckless disregard of its obligations.
Under the Advisory Agreement, the Trust pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed at the annual rate of .75% of average daily net assets
of the Fund. For its services, the Subadviser receives from the Adviser a fee at
the annual rate of 50% of the compensation received by the Adviser.
The Fund's average net asset value for purposes of computing the advisory
fee is determined by taking the average of all determinations of the net asset
value for each business day during a given calendar month. Such
B-21
<PAGE> 62
fee is payable for each calendar month as soon as practicable after the end of
that month. The fee payable to the Adviser will be reduced by any commissions,
tender solicitation and other fees, brokerage or similar payments received by
the Adviser or any other direct or indirect majority-owned subsidiary of Van
Kampen in connection with the purchase and sale of portfolio investments of the
Trust less any direct expenses incurred by such subsidiary of Van Kampen in
connection with obtaining such payments. The Adviser agrees to use its best
efforts to recapture tender solicitation fees and exchange offer fees for the
Trust's benefit, and to advise the Trustees of the Trust of any other
commissions, fees, brokerage or similar payments which may be possible for the
Adviser or any direct or indirect majority-owned subsidiary of Van Kampen to
receive in connection with the Fund's portfolio transactions or other
arrangements which may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Trust for any fiscal year should exceed the most
restrictive expense limitation applicable in the states where the Trust's shares
are qualified for sale, the compensation due the Adviser will be reduced by the
amount of such excess and that, if the amount of such excess exceeds the
Adviser's monthly compensation, the Adviser will pay the Trust an amount
sufficient to make up the deficiency, subject to readjustment during the Trust's
fiscal year. Ordinary business expenses include the investment advisory fee and
other operating costs paid by the Trust except (1) interest and taxes, (2)
brokerage commissions, (3) certain litigation and indemnification expenses as
described in the Advisory Agreement and (4) payments made by the Fund pursuant
to its distribution plans.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Trustees or (ii) by vote of a majority
of the Fund's outstanding voting securities and (b) by the affirmative vote of a
majority of the Trustees who are not parties to the agreement or interested
persons of any such party by votes cast in person at a meeting called for such
purpose. The Advisory Agreement provides that it will terminate automatically if
assigned and that it may be terminated without penalty by either party on 60
days' written notice.
During the fiscal years ended May 31, 1996, 1997 and 1998, the Adviser
received $1,254,494, $918,419 and $565,378, respectively, in advisory fees from
the Fund. For such periods the Fund paid $31,987, $25,800 and $21,601,
respectively, for accounting services.
Pursuant to the Advisory Agreement, the Trust has agreed to indemnify the
Adviser against any taxes imposed by the United Kingdom on the Trust for its
investment related activities as contemplated in each Agreement. The Adviser may
not be indemnified, however, with respect to any liabilities incurred by such
party's 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 or to the Trust.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the Trust'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. 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 Funds as may be sold to the public. The Distributor is not
obligated to sell any stated number of shares. The Distributor bears the cost of
printing (but not typesetting) prospectuses used in connection with this
offering and certain other costs, including the cost of supplemental sales
literature and advertising. The Distribution and Service Agreement is renewable
from year to year if approved (a) by the Fund's Trustees or by a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the 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
B-22
<PAGE> 63
underwriting commissions on the sale of shares of the Fund for the last three
fiscal periods are shown in the chart below. Advantage Capital Corporation is a
former affiliated dealer of the Fund.
<TABLE>
<CAPTION>
DEALER REALLOWANCES
AMOUNTS RECEIVED BY
TOTAL UNDERWRITING RETAINED ADVANTAGE CAPITAL
COMMISSIONS BY DISTRIBUTOR CORPORATION
------------------ -------------- -------------------
<S> <C> <C> <C>
Fiscal Year Ended May 31, 1996.................. $178,914 $100,311 $25,458
Fiscal Year Ended May 31, 1997.................. $ 23,871 $ -0- N/A
Fiscal Year Ended May 31, 1998.................. $ 19,123 $ 1,942 N/A
</TABLE>
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through an agreement (the "Distribution and Service Agreement") with the
Distributor of each class of the Fund's shares, sub-agreements between the
Distributor and members of the NASD who are acting as securities dealers and
NASD members or eligible non-members who are acting as brokers or agents and
similar agreements between the Fund and financial intermediaries who are acting
as brokers (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance, which may include, but not
be limited to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to either class of shares without approval by a vote of a majority of
the outstanding voting shares of such class, and all material amendments to
either of the Plans must be approved by the Trustees and also by the
disinterested Trustees. Each of the Plans may be terminated with respect to
either class of shares at any time by a vote of a majority of the disinterested
Trustees or by a vote of a majority of the outstanding voting shares of such
class.
The Distributor has entered into agreements with Merrill Lynch ("Merrill")
under which the Fund shall be offered pursuant to the Merrill Program. Trustees
and other fiduciaries of retirement plans seeking to invest in multiple fund
families through broker-dealer retirement plan alliance programs should contact
Merrill for further information concerning the Merrill Program including, but
not limited to, minimum size and operational requirements.
For the fiscal year ended May 31, 1998, the Fund's aggregate expenses under
the Plans for Class A shares were $57,885 or 0.25%, of the Class A shares'
average daily net assets. For the fiscal year ended May 31, 1998, the Fund's
aggregate expenses under the Class B Plan were $489,809 or 1.00% of the Class B
shares' average net assets. Such expenses were paid to reimburse the Distributor
for the following payments: $363,340 for commissions and transaction fees paid
to financial intermediaries in respect of sales of Class B shares of the Fund
and $126,469 for fees paid to financial intermediaries for servicing Class B
shareholders and administering the Plans. For the fiscal year ended May 31,
1998, the Fund's aggregate expenses under the
B-23
<PAGE> 64
Plans for Class C shares were $44,916 or 1.00% of the Class C shares' average
net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $5,428 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class C shares of the Fund and
$39,488 for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Class C Plan.
TRANSFER AGENT
During the fiscal years ended May 31, 1996, 1997 and 1998, Investor
Services, shareholder service agent and dividend disbursing agent for the Fund,
received fees aggregating $357,968, $282,776 and $220,373, respectively, for
these services. Beginning in 1998, the transfer agency prices are determined
through negotiations with the Fund's Board of Trustees and are based on
competitive market benchmarks. Prior to 1998, the transfer agency prices were
determined on a cost plus profit basis.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the
Fund and for the placement of its portfolio business and the negotiation of the
commissions paid on such transactions. It is the policy of the Adviser to seek
the best security price available with respect to each transaction. In
over-the-counter transactions, orders are placed directly with a principal
market maker unless it is believed that a better price and execution can be
obtained by using a broker. Except to the extent that the Fund may pay higher
brokerage commissions for brokerage and research services (as described herein)
on a portion of its transactions executed on securities exchanges, the Adviser
seeks the best security price at the most favorable commission rate. In
selecting broker/dealers and in negotiating commissions, the Adviser considers
the firm's reliability, the quality of its execution services on a continuing
basis and its financial condition. When more than one firm is believed to meet
these criteria, preference may be given to firms which also provide research
services to the Fund or the Adviser.
Consistent with the Rules of Fair Practice of the NASD and subject to
seeking best execution and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of the Fund as a factor in the
selection of firms to execute portfolio transactions for the Funds.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services, a
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting the
transaction. Brokerage and research services include (a) furnishing advice as to
the value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, (b) furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts, and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).
Pursuant to provisions of the Advisory Agreement and the Sub-advisory
Agreement, the Trustees have authorized the Adviser to cause the Fund to incur
brokerage commissions in an amount higher than the lowest available rate in
return for research services provided to the Adviser. The Adviser is of the
opinion that the continued receipt of supplemental investment research services
from brokers is essential to its provision of high quality portfolio management
services to the Fund. The Adviser undertakes that such higher commissions will
not be paid by the Fund unless (a) the Adviser determines in good faith that the
amount is reasonable in relation to the services in terms of the particular
transaction or in terms of the Adviser's overall responsibilities with respect
to the accounts they exercise investment discretion, (b) such payment is made in
compliance with the provisions of Section 28(e) and other applicable state and
federal laws, and (c) in the opinion of the Adviser, the total commissions paid
by the Fund are reasonable in relation to the expected benefits to the Fund over
the long term. The investment advisory fee paid by the Fund under the Advisory
Agreement is not reduced as a result of the Adviser's receipt of research
services.
The Adviser places portfolio transactions for other advisory accounts,
including other investment companies. Research services furnished by firms
through which the Fund effects its securities transactions
B-24
<PAGE> 65
may be used by the Adviser in servicing all of their accounts; not all of such
services may be used by the Adviser in connection with the Fund. In the opinion
of the Adviser, the benefits from research services to each of the accounts
(including the Fund) managed by the Adviser cannot be measured separately.
Because the volume and nature of the trading activities of the accounts are not
uniform, the amount of commissions in excess of the lowest available rate paid
by each account for brokerage and research services will vary. However, in the
opinion of the Adviser, such costs to the Fund will not be disproportionate to
the benefits received by the Fund on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have 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 is 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.
The Adviser's brokerage practices are monitored on a quarterly basis by the
Brokerage Review Committee comprised of Trustees are not interested persons (as
defined in the 1940 Act) of the Adviser.
During the fiscal year ended May 31, 1998, the Fund paid $0 in brokerage
commissions on transactions totalling $0 to brokers selected primarily on the
basis of research services provided to the Adviser.
Effective October 31, 1996, Morgan Stanley Group Inc. ("Morgan Stanley")
became an affiliate of the Adviser. Effective May 31, 1997, Dean Witter Discover
& Co. ("Dean Witter") became an affiliate of the Adviser. The negotiated
commission paid to an affiliated broker on any transaction would be comparable
to that payable to a non-affiliated broker in a similar transaction.
The Fund paid the following commissions to these brokers during the periods
shown:
<TABLE>
<CAPTION>
AFFILIATED BROKERS
-------------------
MORGAN DEAN
BROKERS STANLEY WITTER
------- -------- --------
<S> <C> <C> <C>
Fiscal year 1996............................................ $0 N/A N/A
Fiscal year 1997............................................ $0 0 N/A
Fiscal year 1998............................................ $0 $ 0 $ 0
Fiscal year 1998 Percentage:
Commissions with affiliate to total commissions........... -- -- --
Value of brokerage transactions with affiliate to total
transactions........................................... -- -- --
</TABLE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined as of the close of the New York
Stock Exchange (the "Exchange") (currently 4:00 p.m., New York time) on each
business day on which the Exchange is open. The net asset value of Fund shares
is computed by dividing the value of all securities plus other assets, less
liabilities, by the number of shares outstanding, and adjusting to the nearest
cent per share.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the Exchange is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place on all business days in Japanese markets
on certain Saturdays and in various foreign markets on days which are not
business days in New York and on which the Fund's net asset value is not
calculated and on which the Fund does not effect sales, redemptions and
repurchases of its shares. There may be significant variations in the net asset
value of Fund shares on days when net asset value is not calculated and on which
shareholders cannot redeem on account of changes in prices of stocks traded in
foreign stock markets.
B-25
<PAGE> 66
The Fund calculates net asset value per share, and therefore effects sales,
redemptions and repurchases of its shares, as of the close of the Exchange once
on each day on which the Exchange is open. Such calculation does not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value as determined in good faith by the
Trustees.
The assets belonging to the Class A shares, the Class B shares and the
Class C shares will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting the expenses
and liabilities allocated to that class.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements the section in the Fund's Prospectus
captioned "Purchase of Shares."
LETTER OF INTENT
The Fund will escrow shares totalling 5% of the dollar amount of the Letter
of Intent to be held by Investor Services in the name of the shareholder. The
Letter of Intent does not obligate the investor to purchase the indicated
amount. In the event the Letter of Intent goal is not achieved within the
13-month period, the investor is required to pay the difference between sales
charges otherwise applicable to the purchases made during this period and sales
charges actually paid. Such payment may be made directly to the Distributor or,
if not paid, the Distributor will liquidate sufficient escrow shares to obtain
such difference. If the goal is exceeded in an amount which qualifies for a
lower sales charge, a price adjustment is made by refunding to the investor in
shares of the Fund, the amount of excess sales charges, if any, paid during the
13-month period.
CHECK WRITING PRIVILEGE
To establish the check writing privilege for Class A shares, a shareholder
must complete the appropriate section of the application and the Authorization
for Redemption form and return both documents to Investor Services before checks
will be issued. All signatures on the authorization card must be guaranteed if
any of the signatures are persons not referenced in the account registration or
if more than 30 days have elapsed since the shareholder service agent
established the account on its records. Moreover, if the shareholder is a
corporation, partnership, trust, fiduciary, executor or administrator, the
appropriate documents appointing authorized signers (corporate resolutions,
partnerships or trust agreements) must accompany the authorization card. The
documents must be certified in original form, and the certifications must be
dated within 120 days of their receipt by Investor Services.
The privilege does not carry over the accounts established through
exchanges or transfer. It must be requested separately for each fund account.
REDEMPTION OF SHARES
Redemptions are not made on days during which the Exchange is closed. The
right of redemption may be suspended and the payment therefor may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
For purposes of the CDSC -- Class A, when shares of one fund are exchanged
for shares of another fund, the purchase date for the shares of the fund
exchanged into will be assumed to be the date on which shares were purchased in
the fund from which the exchange was made. If the exchanged shares themselves
are
B-26
<PAGE> 67
acquired through an exchange, the purchase date is assumed to carry over from
the date of the original election to purchase shares subject to a CDSC -- Class
A rather than a front-end load sales charge. In determining whether a
CDSC -- Class A is payable, it is assumed that shares held the longest are the
first to be redeemed.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B
AND C")
As described in the Prospectus under "Purchase of Shares," redemptions of
Class B and Class C shares will be subject to a CDSC. The CDSC -- Class B and C
may be waived on redemptions of Class B shares and Class C shares in the
circumstances described below:
(a) Redemption Upon 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 Code, which in pertinent part
defines a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of long-
continued and indefinite duration." While the Fund does not specifically adopt
the balance of the Code's definition which pertains to furnishing the Secretary
of Treasury with such proof as he or she may require, the Distributor will
require satisfactory proof of death or disability before it determines to waive
the CDSC -- Class B and C.
In cases of disability or death, the CDSC -- Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC -- Class B or C applies to a total or partial
redemption, but only to redemptions of shares held at the time of the death or
initial determination of disability.
(b) Redemption in Connection with Certain Distributions from Retirement
Plans
The Fund will waive the CDSC -- Class B and C when a total or partial
redemption is made in connection with certain distributions from Retirement
Plans. The charge may be waived upon the tax-free rollover or transfer of assets
to another Retirement Plan invested in one or more Participating Funds (as
defined in the Prospectus); in such event, as described below, the Fund will
"tack" the period for which the original shares were held on to the holding
period of the shares acquired in the transfer or rollover for purposes of
determining what, if any CDSC -- Class B and C is applicable in the event that
such acquired shares are redeemed following the transfer or rollover. The charge
also will be waived on any redemption which results from the return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code, the return of
excess deferral amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from
the death or disability of the employee (see code Section 72(m)(7) and
72(t)(2)(A)(ii). In addition, the charge may be waived on any minimum
distribution required to be distributed in accordance with code Section
401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be specified by the shareholder upon his or her
election to participate in the Plan. The CDSC -- Class B and C may be waived on
redemptions made under the Plan.
The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
B-27
<PAGE> 68
systematically redeemed from the Fund without the imposition of a CDSC -- Class
B and C may not exceed a maximum of 12% annually of the shareholder's initial
account balance. The Fund reserves the right to change the terms and conditions
of the Plan and the ability to offer the Plan.
(d) Involuntary Redemptions of Shares in Accounts That Do Not Have the
Required Minimum Balance
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC -- Class B and C
upon such involuntary redemption.
(e) Reinvestment of Redemption Proceeds in Shares of the Same Fund Within
180 Days After Redemption
A shareholder who has redeemed shares of a Fund may reinvest at net asset
value, with credit for any CDSC -- Class C paid on the redeemed shares, any
portion or all of his or her redemption proceeds (plus that amount necessary to
acquire a fractional share to round off his or her purchase to the nearest full
share) in Class C shares of the Fund, provided that the reinvestment is effected
within 180 days after such redemption and the shareholder has not previously
exercised this reinvestment privilege with respect to Class C shares of the
Fund. Shares acquired in this manner will be deemed to have the original cost
and purchase date of the redeemed shares for purposes of applying the
CDSC -- Class C to subsequent redemptions.
(f) Redemption by Adviser
The Fund may waive the CDSC -- Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
EXCHANGE PRIVILEGE
The following supplements the discussion of "Shareholder
Services -- Exchange Privilege" in the Prospectus:
By use of the exchange privilege, the investor authorizes Investor Services
to act on telephonic, telegraphic or written exchange instructions from any
person representing himself to be the investor or the agent of the investor and
believed by Investor Services to be genuine. Van Kampen and its subsidiaries,
including Investor Services, and the Fund employ procedures considered by them
to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen, Investor Services, nor the Fund will be liable for following telephone
instructions which it reasonably believes to be genuine. Van Kampen, Investor
Services and the Fund may be liable for any losses due to unauthorized or
fraudulent instructions if reasonable procedures are not followed.
For purposes of determining the sales charge rate previously paid on Class
A shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of his securities, the security upon
which the highest sales charge rate was previously paid is deemed exchanged
first.
Exchange requests received on a business day prior to the time shares of
the funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the Fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
B-28
<PAGE> 69
A prospectus of any of these mutual funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund.
TAX STATUS OF THE FUND
The Trust and each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund has elected and
qualified, and intends to continue to qualify each year, to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). If the Fund complies with certain requirements of the Code
relating to, among other things, the source of its income and the
diversification of its assets, the Fund will not be subject to federal income
tax on any income distributed to its shareholders. The Fund will be subject to
tax if, among other things, it fails to distribute net capital gains, or if its
annual distributions, as a percentage of its income, are less than the
distributions required by tax laws.
FUND PERFORMANCE
The Fund's average annual total return (computed in the manner described in
the Prospectus) for Class A shares of the Fund for (i) the one year period ended
May 31, 1998 was 0.93%; (ii) the five year period ended May 31, 1998 was 3.14%;
and (iii) the six year and six and one-half month period since November 15,
1991, the commencement of investment operations, through May 31, 1998 was 3.77%.
The average annual total return (computed in the manner described in the
Prospectus) for Class B shares of the Fund for (i) the one year period ending
May 31, 1998 was 1.01%; (ii) the five year period ended May 31, 1998 was 3.11%;
and (iii) the six year and six and one-half month period since November 15,
1991, the commencement of distribution for Class B shares of the Fund, through
May 31, 1998 was 3.80%. The average annual total return (computed in the manner
described in the Prospectus) for Class C shares of the Fund for (i) the one year
period ending May 31, 1998 was 4.03%; (ii) the five year period ended May 31,
1998 was 3.36%; and (iii) the five year and one and one-half month period since
April 12, 1993, the commencement of distribution for Class C shares of the Fund,
through May 31, 1998 was 3.50%. 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 by the Fund's
investment practices.
The annualized current yield for Class A shares, Class B shares and Class C
shares of the Fund for the 30-day period ended May 31, 1998, was 4.37%, 3.78%
and 3.77%, respectively. The yield for Class A shares, Class B shares and Class
C shares is not fixed and will fluctuate in response to prevailing interest
rates and the market value of portfolio securities, and as a function of the
type of securities owned by the Fund, portfolio maturity and the Fund's
expenses.
Yield and total return are computed separately for Class A shares, Class B
shares and Class C shares.
From time to time, in reports or other communications, or in advertising or
sales material, the Fund may, illustrate in graph or chart form, or otherwise,
total returns of international stock markets as compared with the performance of
the United States market.
The Fund may, from time to time: (1) illustrate the benefits of
tax-deferral by comparing taxable investments to investments made through
tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return. Such illustrations may be in the
form of charts or graphs and will not be based on historical returns experienced
by the Fund.
From time to time marketing materials may provide a portfolio manager
update, an adviser update or discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's
B-29
<PAGE> 70
asset class diversification, top five sectors, ten largest holdings and other
Fund asset structures, such as duration, maturity, coupon, NAV, rating
breakdown, AMT exposure and number of issues in the portfolio. Materials may
also mention how Van Kampen believes the Fund compares relative to other Van
Kampen funds. Materials may also discuss the Dalbar Financial Services study
from 1984 to 1994 which 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 if shareholders purchased
their funds in direct or sales force distribution channels. The study showed
that investors working with a professional representative have tended over time
to earn higher returns than those who invested directly. The Fund will also be
marketed on the Internet.
OTHER INFORMATION
CUSTODY OF ASSETS -- State Street Bank and Trust Company, 225 West Franklin
Street, Boston, Massachusetts 02110 serves as Custodian for the Trust. It is
also anticipated that foreign sub-custodians will be used for certain of the
Fund's investments in foreign securities. Any such sub-custodian shall be
utilized pursuant to an agreement between the Custodian and foreign
sub-custodian that has been approved as required pursuant to Rule 17F-5 under
the 1940 Act. The Custodian and sub-custodians generally domestically, and
frequently abroad, do not actually hold certificates for the securities in their
custody, but instead have book records with domestic and foreign securities
depositories, which in turn have book records with the transfer agents of the
issuers of the securities.
SHAREHOLDER REPORTS -- Semiannual statements are furnished to shareholders, and
annually such statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS -- PricewaterhouseCoopers LLP, 200 East Randolph Street,
Chicago, Illinois 60601, the independent accountants for the Fund, performs an
annual audit of the Fund's financial statements.
B-30
<PAGE> 71
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Van Kampen American Capital Global Government Securities 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 American Capital Global
Government Securities Fund (the "Fund"), a series of Van Kampen American Capital
World Portfolio Series Trust, at May 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 1998 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
July 10, 1998
B-31
<PAGE> 72
Portfolio of Investments
May 31, 1998
<TABLE>
<CAPTION>
===============================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Government & Government Agency Obligations 53.6%
$ 569 Government National Mortgage Association
Pools................................. 8.000% 11/15/00 to 12/15/25 $ 591,882
5,600 United States Treasury Bonds..........12.000 05/15/05 7,613,368
3,800 United States Treasury Bonds.......... 8.125 08/15/19 4,809,356
200 United States Treasury Bonds.......... 6.250 08/15/23 209,188
20,900 United States Treasury Notes (a)...... 7.750 12/31/99 21,579,250
-----------
Total Long-Term Investments
(Cost $34,116,678)............................................................. 34,803,044
-----------
Short-Term Investments 46.1%
United States Government & Government Agency Obligations 42.5%
4,600 Federal Farm Credit Bank Discount Note (yielding 5.409%,
06/24/98 maturity)................................................. 4,584,218
4,000 Federal Home Loan Bank Discount Note (yielding 5.386%, 06/09/98
maturity).......................................................... 3,995,227
9,000 Federal Home Loan Mortgage Corp. Discount Note (yielding 5.411%,
06/15/98 maturity) (a)............................................. 8,981,275
10,000 Federal National Mortgage Association Discount Note (yielding
5.406%, 06/09/98 maturity) (a)..................................... 9,988,500
-----------
Total United States Government & Government Agency Obligations..... 27,549,220
Repurchase Agreement 3.6%
State Street Bank and Trust ($2,350,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated
05/29/98, to be sold on 06/01/98 at $2,350,979).................... 2,350,000
-----------
Total Short-Term Investments
(Cost $29,899,220)............................................................. 29,899,220
-----------
Total Investments 99.7%
(Cost $64,015,898)............................................................. 64,702,264
Other Assets in Excess of Liabilities 0.3%....................................... 186,319
-----------
Net Assets 100.0%................................................................ $64,888,583
===========
</TABLE>
(a) Assets segregated as collateral for forward purchase commitments.
B-32 See Notes to Financial Statements
<PAGE> 73
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
May 31, 1998
================================================================================
<S> <C>
Assets:
Total Investments (Cost $64,015,898)............................. $ 64,702,264
Receivables:
Interest....................................................... 850,695
Fund Shares Sold............................................... 67,439
Other............................................................ 28,252
------------
Total Assets................................................. 65,648,650
------------
Liabilities:
Payables:
Income Distributions........................................... 127,959
Distributor and Affiliates..................................... 89,970
Fund Shares Repurchased........................................ 59,572
Investment Advisory Fee........................................ 40,230
Forward Currency Contracts and Forward Commitments............... 226,364
Accrued Expenses................................................. 147,848
Trustees' Deferred Compensation and Retirement Plans............. 68,124
------------
Total Liabilities............................................ 760,067
------------
Net Assets....................................................... $ 64,888,583
============
Net Assets Consist of:
Capital.......................................................... $102,647,317
Accumulated Undistributed Net Investment Income.................. 1,126,836
Net Unrealized Appreciation...................................... 438,434
Accumulated Net Realized Loss.................................... (39,324,004)
------------
Net Assets....................................................... $ 64,888,583
============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $21,898,181 and 2,899,435 shares of
beneficial interest issued and outstanding).................... $ 7.55
Maximum sales charge (4.75%* of offering price)................ .38
------------
Maximum offering price to public............................... $ 7.93
============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $39,475,639 and 5,196,861 shares of
beneficial interest issued and outstanding).................... $ 7.60
============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $3,514,763 and 466,531 shares of
beneficial interest issued and outstanding).................... $ 7.53
============
</TABLE>
* On sales of $100,000 or more, the sales charge will be reduced.
B-33 See Notes to Financial Statements
<PAGE> 74
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended May 31, 1998
================================================================================
<S> <C>
Investment Income:
Interest (Net of foreign withholding taxes of $35,968)........... $ 5,076,036
------------
Expenses:
Distribution (12b-1) and Service Fees (Attributed to
Classes A, B and C of $56,251, $484,180 and $44,655,
respectively)................................................... 585,086
Investment Advisory Fee.......................................... 565,378
Shareholder Services............................................. 331,795
Custody.......................................................... 128,870
Shareholder Reports.............................................. 101,447
Legal............................................................ 16,516
Trustees' Fees and Expenses...................................... 11,644
Other............................................................ 135,450
------------
Total Expenses............................................... 1,876,186
------------
Net Investment Income............................................ $ 3,199,850
============
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments.................................................... $ 365,527
Forward Commitments............................................ 1,678,085
Foreign Currency Transactions.................................. (16,360)
------------
Net Realized Gain................................................ 2,027,252
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period........................................ 1,613,248
------------
End of the Period:
Investments.................................................. 686,366
Forward Commitments.......................................... (247,932)
------------
438,434
------------
Net Unrealized Depreciation During the Period.................... (1,174,814)
------------
Net Realized and Unrealized Gain................................. $ 852,438
============
Net Increase in Net Assets from Operations....................... $ 4,052,288
============
</TABLE>
B-34 See Notes to Financial Statements
<PAGE> 75
Statement of Changes in Net Assets
For the Years Ended May 31, 1998 and 1997
<TABLE>
<CAPTION>
============================================================================================
Year Ended Year Ended
May 31, 1998 May 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income........................................ $ 3,199,850 $ 7,404,343
Net Realized Gain/Loss....................................... 2,027,252 (9,480,352)
Net Unrealized Appreciation/Depreciation During the Period... (1,174,814) 5,119,861
------------ ------------
Change in Net Assets from Operations......................... 4,052,288 3,043,852
------------ ------------
Distributions from Net Investment Income..................... (3,294,238) (7,378,393)
Distributions in Excess of Net Investment Income............. (1,178,795) -0-
------------ ------------
Distributions from and in Excess of Net Investment Income*... (4,473,033) (7,378,393)
------------ ------------
Net Change in Net Assets from Investment Activities.......... (420,745) (4,334,541)
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold.................................... 14,155,976 8,442,389
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 2,660,059 4,489,376
Cost of Shares Repurchased................................... (39,710,065) (63,966,605)
------------ ------------
Net Change in Net Assets from Capital Transactions........... (22,894,030) (51,034,840)
------------ ------------
Total Decrease in Net Assets................................. (23,314,775) (55,369,381)
Net Assets:
Beginning of the Period...................................... 88,203,358 143,572,739
------------ ------------
End of the Period
(Including accumulated undistributed net investment
income of $1,126,836 and $94,388, respectively)........ $ 64,888,583 $ 88,203,358
============ ============
Year Ended Year Ended
May 31, 1998 May 31, 1997
- --------------------------------------------------------------------------------------------
*Distributions from and in Excess of Net Investment Income:
Class A Shares............................................. $ (1,462,620) $ (2,102,906)
Class B Shares............................................. (2,753,416) (4,816,433)
Class C Shares............................................. (256,997) (459,054)
------------ ------------
$ (4,473,033) $ (7,378,393)
============ ============
</TABLE>
B-35 See Notes to Financial Statements
<PAGE> 76
Financial Highlights
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
=================================================================================================
Year Ended May 31,
-----------------------------------------------
Class A Shares 1998(a) 1997(a) 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $7.604 $ 7.92 $ 8.24 $ 8.26 $ 9.01
------ ------ ------- ------ --------
Net Investment Income......................... .352 .526 .56 .60 .78
Net Realized and Unrealized Gain/Loss......... .088 (.310) (.328) (.016) (.5715)
------ ------ ------- ------ --------
Total from Investment Operations................ .440 .216 .232 .584 .2085
------ ------ ------- ------ --------
Less:
Distributions from and in Excess of Net
Investment Income........................... .491 .532 .552 .604 .726
Distributions from and in Excess of Net
Realized Gain............................... -0- -0- -0- -0- .2325
------ ------ ------- ------ --------
Total Distributions............................. .491 .532 .552 .604 .9585
------ ------ ------- ------ --------
Net Asset Value, End of the Period.............. $7.553 $7.604 $ 7.92 $ 8.24 $ 8.26
====== ====== ======= ====== ========
Total Return (b)................................ 5.98% 2.65% 2.81% 7.52% 1.89%
Net Assets at End of the Period (In millions)... $ 21.9 $ 25.7 $ 36.4 $ 47.9 $ 62.8
Ratio of Expenses to Average Net Assets (c)..... 1.95% 1.57% 1.51% 1.42% 1.45%
Ratio of Net Investment Income to Average Net
Assets (c).................................... 4.69% 6.58% 6.66% 7.18% 8.12%
Portfolio Turnover.............................. 276% 161% 239% 209% 236%
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended through May 31, 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC's
reimbursement of certain expenses was less than 0.01%.
B-36 See Notes to Financial Statements
<PAGE> 77
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------------
Class B Shares 1998(a) 1997(a) 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $7.645 $ 7.96 $ 8.28 $ 8.30 $ 9.04
------ ------ ------ ------ -------
Net Investment Income........................ .299 .477 .49 .53 .69
Net Realized and Unrealized Gain/Loss........ .083 (.320) (.318) (.006) (.5435)
------ ------ ------ ------ -------
Total from Investment Operations............... .382 .157 .172 .524 .1465
------ ------ ------ ------ -------
Less:
Distributions from and in Excess of Net
Investment Income.......................... .431 .472 .492 .544 .654
Distributions from and in Excess of
Net Realized Gain.......................... -0- -0- -0- -0- .2325
------ ------ ------ ------ -------
Total Distributions............................ .431 .472 .492 .544 .8865
------ ------ ------ ------ -------
Net Asset Value, End of the Period............. $7.596 $7.645 $ 7.96 $ 8.28 $ 8.30
====== ====== ====== ====== =======
Total Return (b)............................... 4.98% 2.00% 2.06% 6.69% 1.07%
Net Assets at End of the Period (In millions).. $ 39.5 $ 56.9 $ 97.7 $123.4 $ 147.5
Ratio of Expenses to Average Net Assets (c).... 2.72% 2.33% 2.27% 2.18% 2.22%
Ratio of Net Investment Income to
Average Net Assets (c)........................ 3.91% 5.86% 5.91% 6.41% 7.30%
Portfolio Turnover............................. 276% 161% 239% 209% 236%
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended through May 31, 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC's
reimbursement of certain expenses was less than 0.01%.
B-37 See Notes to Financial Statements
<PAGE> 78
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------------------------
Class C Shares 1998(a) 1997(a ) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $7.585 $ 7.91 $ 8.22 $ 8.25 $ 8.99
------ ------ ------ ------ ------
Net Investment Income........................ .293 .471 .46 .51 .63
Net Realized and Unrealized Gain/Loss........ .087 (.324) (.278) .004 (.4835)
------ ------ ------ ------ ------
Total from Investment Operations............... .380 .147 .182 .514 .1465
------ ------ ------ ------ ------
Less:
Distributions from and in Excess of Net
Investment Income.......................... .431 .472 .492 .544 .654
Distributions from and in Excess of
Net Realized Gain.......................... -0- -0- -0- -0- .2325
------ ------ ------ ------ ------
Total Distributions............................ .431 .472 .492 .544 .8865
----- ------ ------ ------ ------
Net Asset Value, End of the Period............. 7.534 $7.585 $ 7.91 $ 8.22 $ 8.25
===== ====== ====== ====== ======
Total Return (b)............................... 5.02% 1.88% 2.20% 6.60% 1.19%
Net Assets at End of the Period (In millions).. $ 3.5 $ 5.6 $ 9.5 $ 18.5 $ 23.5
Ratio of Expenses to Average Net Assets (c).... 2.72% 2.33% 2.27% 2.18% 2.22%
Ratio of Net Investment Income to
Average Net Assets (c)....................... 3.90% 5.84% 5.91% 6.42% 7.13%
Portfolio Turnover............................. 276% 161% 239% 209% 236%
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended through May 31, 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC's
reimbursement of certain expenses was less than 0.01%.
B-38 See Notes to Financial Statements
<PAGE> 79
Notes to Financial Statements
May 31, 1998
================================================================================
1. Significant Accounting Policies
Van Kampen American Capital Global Government Securities Fund (the "Fund") is
organized as a series of Van Kampen American Capital World Portfolio Series
Trust, a Delaware business trust, and is registered as a non-diversified
open-end management investment company under the Investment Company Act of 1940,
as amended. The Fund's investment objective is to seek total return through a
managed balance of foreign and domestic debt securities. Investments in foreign
securities involve certain risks not ordinarily associated with investments in
securities of domestic issuers, including fluctuations in foreign exchange
rates, future political and economic developments, and the possible imposition
of exchange controls or other foreign governmental laws or restrictions. The
Fund commenced investment operations on November 15, 1991. The distribution of
the Fund's Class C shares commenced on April 12, 1993.
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 are stated at values using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. Security Transactions - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Asset Management Inc. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
B-39
<PAGE> 80
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
C. Income and Expenses - Interest income is recorded on an accrual basis. The
Fund accounts for discounts and premiums on the same basis as is used for
federal income tax reporting. Accordingly, original issue discounts on debt
securities purchased are amortized over the life of the security. Premiums on
debt securities are not amortized. Market discounts are recognized at the time
of sale as realized gains for book purposes and ordinary income for tax
purposes.
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. Currency Translation - Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars based on quoted exchange rates as of noon Eastern Time. Purchases
and sales of portfolio securities are translated at the rate of exchange
prevailing when such securities were acquired or sold. Income and expenses are
translated at rates prevailing when accrued. Gains and losses on the sale of
securities are not segregated for financial reporting purposes between amounts
arising from changes in exchange rates and amounts arising from changes in the
market prices of securities. Realized gain and loss on foreign currency includes
the net realized amount from the sale of currency and the amount realized
between trade date and settlement date on security transactions.
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.
At May 31, 1998, for federal income tax purposes, cost of long- and
short-term investments is $64,020,822, the aggregate gross unrealized
appreciation is $689,608, and the aggregate gross unrealized depreciation is
$8,164, resulting in net unrealized appreciation of $681,444.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At May 31, 1998, the Fund had an accumulated capital loss carryforward
for tax purposes of $38,133,185, which expires between May 31, 2003 and May 31,
2006. Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year,
wash sales, and the mark to market of open forward currency contracts at May 31,
1998.
F. Distribution of Income and Gains - The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on transactions in foreign
currencies. These realized gains and losses
B-40
<PAGE> 81
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
are included as net realized gains or losses for financial reporting purposes.
Net realized gains, if any, are distributed annually.
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 1998 fiscal year have been identified and appropriately reclassified.
Permanent book and tax basis differences relating to the recognition of net
realized losses on paydowns of mortgage pool obligations totaling $4,981 and net
realized gains on foreign currency transactions of $2,310,612 were reclassified
from accumulated net realized gain/loss to accumulated undistributed net
investment income.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly. Investment advisory fees are calculated monthly, based on the average
daily net assets of the Fund at the annual rate of .75%. The Adviser has entered
into a subadvisory agreement with Morgan Stanley Asset Management Inc. (the
"Subadviser"), who provides advisory services to the Fund and the Adviser with
respect to the Fund's investments. The Adviser pays 50% of its investment
advisory fee to the Subadviser.
For the year ended May 31, 1998, the Fund recognized expenses of
approximately $16,500, 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 May 31, 1998, the Fund recognized expenses of
approximately $21,600 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended May
31, 1998, the Fund recognized expenses of approximately $220,400. Beginning in
1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit per trustee under the plan is $2,500.
B-41
<PAGE> 82
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At May 31, 1998, capital aggregated $32,864,290, $62,712,562 and $7,070,465
for Classes A, B and C, respectively. For the year ended May 31, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
================================================================================
Sales:
<S> <C> <C>
Class A........................................... 752,769 $ 5,695,255
Class B........................................... 1,071,748 8,110,111
Class C........................................... 46,375 350,610
---------- ------------
Total Sales......................................... 1,870,892 $ 14,155,976
========== ============
Dividend Reinvestment:
Class A........................................... 122,857 $ 929,454
Class B........................................... 209,735 1,595,886
Class C........................................... 17,848 134,719
---------- ------------
Total Dividend Reinvestment......................... 350,440 $ 2,660,059
========== ============
Repurchases:
Class A........................................... (1,350,521) $(10,227,695)
Class B........................................... (3,525,942) (26,883,122)
Class C........................................... (343,258) (2,599,248)
---------- ------------
Total Repurchases................................... (5,219,721) $(39,710,065)
========== ============
</TABLE>
B-42
<PAGE> 83
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
At May 31, 1997, capital aggregated $36,467,276, $79,889,687 and $9,184,384
for Classes A, B and C, respectively. For the year ended May 31, 1997,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................... 415,170 $ 3,285,624
Class B........................................... 612,589 4,868,118
Class C........................................... 36,431 288,647
---------- ------------
Total Sales......................................... 1,064,190 $ 8,442,389
========== ============
Dividend Reinvestment:
Class A........................................... 169,671 $ 1,338,753
Class B........................................... 365,738 2,907,050
Class C........................................... 30,907 243,573
---------- ------------
Total Dividend Reinvestment......................... 566,316 $ 4,489,376
========== ============
Repurchases:
Class A........................................... (1,805,879) $(14,262,345)
Class B........................................... (5,798,718) (45,573,947)
Class C........................................... (523,469) (4,130,313)
---------- ------------
Total Repurchases................................... (8,128,066) $(63,966,605)
========== ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B and Class C shares
will automatically convert to Class A shares after the eighth and tenth years,
respectively. 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....................................................... 4.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and Thereafter........................................ None None
</TABLE>
B-43
<PAGE> 84
Notes to Financial Statements (Continued)
May 31, 1998
===============================================================================
For the year ended May 31, 1998, VKAC, as Distributor for the Fund, received
commissions on sales of the Fund's Class A shares of approximately $1,700 and
CDSC on the redeemed shares of approximately $146,800. 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 and forward commitments, were $105,714,133 and
$110,206,655, respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, foreign currency exposure, or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly, except when taking delivery of a
security underlying a forward commitment. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
forward commitment.
Purchasing securities on a forward commitment involves a risk that the market
value at the time of delivery may be lower than the agreed upon purchase price
resulting in an unrealized loss. Selling securities on a forward commitment
involves different risks and can result in losses more significant than those
arising from the purchase of such securities. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contracts.
A. Forward Purchase Commitments--The Fund trades certain securities under the
terms of forward purchase commitments, whereby the settlement occurs at a
specific future date. Forward purchase commitments are privately negotiated
transactions between the Fund and dealers. While forward purchase commitments
are outstanding, the Fund maintains sufficient collateral of cash or securities
in a segregated account with its custodian. The forward purchase commitments are
marked to market on a daily basis with changes in value reflected as a component
of unrealized appreciation/depreciation.
B-44
<PAGE> 85
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
The following forward purchase commitments were outstanding at May 31, 1998:
<TABLE>
<CAPTION>
Par Amount
in Local Unrealized
Currency Settlement Current Appreciation/
(000) Description Date Value Depreciation
=======================================================================================================
<S> <C> <C> <C> <C>
2,025-AU$ Australia (Commonwealth of),
7.50%, 07/15/05 maturity ......................... 07/30/98 $1,431,677 $ 22,429
2,100-AU$ Australia (Commonwealth of),
9.00%, 09/15/04 maturity.......................... 08/13/98 1,573,350 23,072
1,700-CA$ Canada (Government of),
7.50%, 03/01/01 maturity.......................... 08/13/98 1,229,790 (119)
670-CA$ Canada (Government of),
9.75%, 06/01/21 maturity.......................... 08/13/98 704,272 7,516
4,900-DKK Denmark (Kingdom of),
8.00%, 03/15/06 maturity.......................... 06/26/98 855,831 1,598
9,700-DKK Denmark (Kingdom of),
8.00%, 05/15/03 maturity.......................... 08/13/98 1,617,741 15,223
2,600-DEM Germany (Federal Republic of),
6.25%, 01/04/24 maturity.......................... 08/06/98 1,622,239 21,583
5,100-DEM Germany Unity (Federal Republic),
8.00%, 01/21/02 maturity.......................... 08/06/98 3,183,024 17,865
8,200-DEM Germany (Treuhandanstalt),
7.50%, 09/09/04 maturity.......................... 08/06/98 5,264,003 40,406
3,000-DEM Germany Unity (Federal Republic),
8.00%, 01/21/02 maturity.......................... 08/13/98 1,871,091 7,366
2,900-DEM Germany (Treuhandanstalt),
7.00%, 11/25/99 maturity.......................... 08/20/98 1,684,412 2,843
5,100,000-ITL Italy (Republic of),
9.50%, 02/01/06 maturity.......................... 08/13/98 3,700,646 35,912
70,000-JPY Japan (Government of),
5.50%, 03/20/02 maturity.......................... 07/30/98 592,073 5,369
340,000-JPY Japan (Government of),
3.40%, 03/22/04 maturity.......................... 08/13/98 2,764,685 36,619
170,000-JPY Japan (Government of),
5.50%, 03/20/02 maturity.......................... 08/13/98 1,435,583 9,858
21,000-SEK Sweden (Kingdom of),
6.00%, 02/09/05 maturity.......................... 08/13/98 2,832,752 42,533
10,500-SEK Sweden (Kingdom of),
13.00%, 06/15/01 maturity......................... 08/13/98 1,630,237 14,005
2,800-GBP United Kingdom,
7.75%, 09/08/06 maturity.......................... 08/06/98 5,157,497 43,504
----------- --------
$39,150,903 $347,582
=========== ========
</TABLE>
B-45
<PAGE> 86
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
B. Closed but Unsettled Forward Commitments-In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to settlement of the obligation. In doing so, the Fund realizes a gain or loss
on the transaction at the time the forward commitment is closed. However,
settlement of both the purchase and sale is still scheduled to occur in the
denominated foreign currency at a future date. The net difference in the amount
of foreign currency on the trade is marked to market daily with any fluctuation
included as a component of unrealized gain/loss on forwards.
The following closed but unsettled forward transactions were outstanding at
May 31, 1998:
<TABLE>
<CAPTION>
Unrealized
Loss
Local Currency on Net
-------------------- Currency US$ Net
Description/Currency Receivable Payable Difference Receivable
=================================================================================
<S> <C> <C> <C> <C>
Ireland (Republic of) - Pound
(1,000,000 par, 8.00%, 08/18/06).. 1,264,222 1,252,142 $4,493 $17,075
====== =======
</TABLE>
B-46
<PAGE> 87
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
C. Forward Currency Contracts--A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Upon the settlement of the contract, a realized gain or loss is recognized
and is included as a component of realized gain/loss on forwards. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contracts.
The following forward currency contracts were outstanding as of May 31, 1998:
<TABLE>
<CAPTION>
Unrealized
Current Appreciation/
Description Value Depreciation
================================================================================
<S> <C> <C>
Long Contracts
Australian Dollar,
1,000,000 expiring 07/21/98.................... $ 626,888 $ (27,012)
Canadian Dollar,
3,800,000 expiring 07/17/98.................... 2,610,822 (48,566)
1,100,000 expiring 07/17/98.................... 755,764 (9,107)
German Mark,
4,950,000 expiring 07/13/98.................... 2,781,474 7,277
6,900,000 expiring 07/13/98.................... 3,877,206 (37,243)
14,500,000 expiring 07/13/98................... 8,147,752 (30,477)
3,855,422 expiring 07/15/98.................... 2,166,671 3,195
865,200 expiring 07/17/98...................... 486,282 2,024
Danish Krone,
7,200,000 expiring 07/22/98.................... 1,061,484 3,361
10,200,000 expiring 07/22/98................... 1,503,769 (5,107)
Spanish Peseta,
75,000,000 expiring 07/14/98................... 495,675 1,604
British Pound Sterling,
4,106,000 expiring 07/17/98.................... 6,690,391 (154,311)
Italian Lira,
6,952,000,000 expiring 07/20/98................ 3,956,348 19,122
Japanese Yen,
220,000,000 expiring 07/16/98.................. 1,599,510 (71,334)
525,000,000 expiring 07/16/98.................. 3,817,012 (130,356)
Swedish Krona,
25,730,000 expiring 07/14/98.................. 3,287,738 (107,348)
---------- --------
Total Long Contracts.......................... 43,864,786 (584,278)
---------- --------
</TABLE>
B-47
<PAGE> 88
Notes to Financial Statements (Continued)
May 31, 1998
<TABLE>
<CAPTION>
=====================================================================
Unrealized
Current Appreciation/
Description Value Depreciation
- ---------------------------------------------------------------------
<S> <C> <C>
Forward Currency Contracts (Continued)
Short Contracts
Swiss Franc,
3,200,000 expiring 07/15/98............. $2,170,937 $ (7,461)
German Mark,
4,745,000 expiring 07/13/98............. 2,666,282 8,766
Spanish Peseta,
75,000,000 expiring 07/14/98............ 495,675 357
British Pound Sterling,
300,000 expiring 07/17/98............... 488,825 (4,567)
750,000 expiring 07/17/98............... 1,222,064 (3,314)
200,000 expiring 07/17/98............... 325,884 (524)
---------- ---------
Total Short Contracts................... $7,369,667 (6,743)
---------- ---------
$(591,021)
=========
</TABLE>
6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.
Annual fees under the Plans of up to .25% for Class A and 1.00% each for
Class B and Class C shares are accrued daily. Included in these fees for the
year ended May 31, 1998, are payments retained by VKAC of approximately
$373,326.
B-48
<PAGE> 89
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
List of all financial statements and exhibits as part of the Registration
Statement.
(a) Financial Statements
Included in Part A of the Registration Statement:
Financial Highlights
Included in Part B of the Registration Statement:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<C> <S>
(1)(a) First Amended and Restated Agreement and Declaration of
Trust(7)
(b) Second Certificate of Amendment+
(c) Second Amended and Restated Certificate of Designation+
(2) Amended and Restated Bylaws(7)
(4) Specimen Share Certificate
(a) Class A Shares+
(b) Class B Shares+
(c) Class C Shares+
(5)(a) Investment Advisory Agreement between Van Kampen American
Capital World Portfolio Series Trust and Van Kampen
American Capital Asset Management, Inc.(8)
(b) Investment Sub-Advisory Agreement between Van Kampen
American Capital Asset Management, Inc. and Morgan
Stanley Asset Management, Inc.(8)
(6)(a) Distribution and Service Agreement(8)
(b) Form of Dealer Agreement(7)
(c) Form of Broker Agreement(7)
(d) Form of Bank Agreement(7)
(8)(a) Custodian Contract(8)
(b) Transfer Agency and Service Agreement(8)
(9)(a) Data Access Services Agreement(6)
(b) Fund Accounting Agreement(8)
(10) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(7)
(11) Consent of PricewaterhouseCoopers LLP+
(13) Investment Letter(2)
(14)(a) Individual Retirement Account Brochure with Application(4)
(b) 403(b)(7) Custodial Account(3)
(c) ORP 403(b)(7) Custodial Account(3)
(d) Retirement Plans for the Small Business-Forms Package and
Plan Documents(5)
(e) Prototype Profit Sharing/Money Purchase Plan and Trust(1)
(f) Prototype 401(k) Plan and Trust(1)
(g) Salary Reduction Simplified Employee Pension Plan(4)
</TABLE>
C-1
<PAGE> 90
<TABLE>
<S> <C>
(15)(a) Plan of Distribution Pursuant to Rule 12b-1(8)
(b) Form of Shareholder Assistance Agreement(8)
(c) Form of Administrative Service Agreement(8)
(d) Service Plan(7)
(16) Computation of Performance Information+
(17)(a) List of certain investment companies in response to Item
29(a)+
(b) List of officers and directors of Van Kampen Funds Inc. in
response to Item 29(b)+
(18) Amended Multiple Class Plan(8)
(24) Power of Attorney+
(27) Financial Data Schedules+
</TABLE>
- -------------
(1) Incorporated herein by reference to Post Effective Amendment No. 61 to Van
Kampen Growth and Income Fund's Registration Statement on Form N-1A, File
No. 2-21657, filed on March 27, 1991.
(2) Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File No. 33-37879, filed
on July 19, 1991.
(3) Incorporated herein by reference to Post-Effective Amendment No. 30 to Van
Kampen Reserve Fund's Registration Statement on Form N-1A, File No.
2-50870, filed on September 24, 1992.
(4) Incorporated herein by reference to Post-Effective Amendment No. 31 to Van
Kampen Reserve Fund's Registration Statement on Form N-1A, File No.
2-50870, filed on September 24, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment No. 18 to Van
Kampen Government Securities Fund's Registration Statement on Form N-1A,
File No. 2-90482, filed on February 25, 1994.
(6) Incorporated herein by reference to Post-Effective Amendment No. 1 to Van
Kampen Utilities Income Fund's Registration Statement on Form N-1A, File
No. 33-68452, filed on May 19, 1994.
(7) Incorporated herein by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, File No. 33-37879, filed
on September 27, 1996.
(8) Incorporated herein by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, File No. 33-37879, filed
on September 26, 1997.
+ Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See "General Information" in the Statement of Additional Information.
C-2
<PAGE> 91
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
AS OF SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
(2)
NUMBER OF RECORD HOLDERS
(1) -----------------------------
TITLE OF CLASS CLASS A CLASS B CLASS C
-------------- ------- ------- -------
<S> <C> <C> <C>
Shares of Beneficial Interest, par value $0.01 per
share 2,459 3,241 501
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's First
Amended and Restated Agreement and Declaration of Trust.
Article 8; Section 8.4 of the First Amended and Restated 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 interest of the Trust,
(ii) willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (iii) for a criminal
proceeding, not having a reasonable cause to believe that such conduct was
unlawful (collectively "Disabling Conduct"). Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of Disabling Conduct in the conduct of his or her office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C-3
<PAGE> 92
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of Van Kampen Asset Management Inc. (the "Adviser"). For
information as to the business, profession, vocation and employment of a
substantial nature of directors and officers of the Adviser, reference is made
to the Adviser's current Form ADV (File No. 801-1669) filed under the Investment
Advisers Act of 1940, as amended, incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen Funds Inc., (the
"Distributor"), which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17(a) incorporated by
reference herein.
(b) Van Kampen Funds Inc., which is an affiliated person of an affiliated
person of Registrant, is the sole principal underwriter for Registrant. The
name, principal business address and positions and offices with Van Kampen Funds
Inc. of each of the directors and officers thereof are set forth in Exhibit
17(b) incorporated herein by reference. Except as disclosed under the heading,
"Trustees and Officers" in Part B of this Registration Statement, none of such
persons has any position or office with Registrant.
(c) Not applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, Van Kampen Investor Services Inc., 7501
Tiffany Springs Parkway, Kansas City, Missouri 64153, or at the State Street
Bank and Trust Company, 1776 Heritage Drive, North Quincy, Massachusetts 02171;
(ii) by the Adviser, will be maintained at its offices, located at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181; and (iii) by the Distributor, the
principal underwriter, will be maintained at its offices located at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
C-4
<PAGE> 93
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN WORLD PORTFOLIO
SERIES TRUST, hereby certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized in the City of Oakbrook Terrace and State of Illinois,
on the 9th day of September, 1998.
VAN KAMPEN WORLD PORTFOLIO
SERIES TRUST
By: /s/ RONALD A. NYBERG
------------------------------------
Ronald A. Nyberg, Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on September 9, 1998 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
Principal Executive Officer:
/s/ DENNIS J. MCDONNELL* President
- -----------------------------------------------------
Dennis J. McDonnell
Principal Financial Officer:
/s/ EDWARD C. WOOD III* Vice President and Chief Financial Officer
- -----------------------------------------------------
Edward C. Wood III
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- -----------------------------------------------------
J. Miles Branagan
/s/ RICHARD M. DEMARTINI* Trustee
- -----------------------------------------------------
Richard M. DeMartini
/s/ LINDA HUTTON HEAGY* Trustee
- -----------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
- -----------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------
Jack E. Nelson
/s/ DON G. POWELL* Trustee
- -----------------------------------------------------
Don G. Powell
/s/ PHILLIP B. ROONEY* Trustee
- -----------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
- -----------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------
Wayne W. Whalen
* Signed by Ronald A. Nyberg pursuant to a power of attorney filed herewith.
/s/ RONALD A. NYBERG September 9, 1998
- -----------------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
<PAGE> 94
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 15 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON SEPTEMBER 28, 1998
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S>
(1)(b) Second Certificate of Amendment
(c) Second Amended and Restated Certificate of Designation
(4)(a) Specimen Share Certificate Class A Shares
(b) Specimen Share Certificate Class B Shares
(c) Specimen Share Certificate Class C Shares
(11) Consent of PricewaterhouseCoopers LLP
(16) Computation of Performance Information
(17)(a) List of certain investment companies in response to Item
29(a)
(b) List of officers and directors of Van Kampen Funds Inc. in
response to Item 29(b)
(24) Power of Attorney
(27) Financial Data Schedules
</TABLE>
<PAGE> 1
Exhibit 1(b)
SECOND CERTIFICATE OF AMENDMENT DATED JULY 14, 1998
TO
FIRST AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST DATED JUNE 21, 1995
WHEREAS, the Trustees of Van Kampen American Capital World Portfolio Series
Trust, a Delaware business trust (the "Trust") have approved the amendment of
the Trust's First Amended and Restated Agreement and Declaration of Trust dated
June 21, 1995 ("Declaration of Trust") in accordance with Section 9.5 thereof;
WHEREAS, the Trustees have authorized the proper officers of the Trust,
including the officer whose name appears below, to effect such amendment;
NOW, THEREFORE, the Declaration of Trust is amended as follows:
1. The first sentence of Section 1.1 is amended and restated in its
entirety to read as follows:
1.1 Name. The name of the Trust shall be
"VAN KAMPEN WORLD PORTFOLIO SERIES TRUST"
and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever used
in this Agreement and Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees in their
capacity as Trustees, and not individually or personally, and
shall not refer to the officers, agents or employees of the Trust
or of such Trustees, or to the holders of the Shares of the Trust
or any Series. If the Trustees determine that the use of such
name is not practicable, legal or convenient at any time or in
any jurisdiction, or if the Trust is required to discontinue the
use of such name pursuant to Section 10.7 hereof, then subject to
that Section, the Trustees may use such other designation, or
they may adopt such other name for the Trust as they deem proper,
and the Trust may hold property and conduct its activities under
such designation or name.
EXECUTED, to be effective as of July 14, 1998
/s/ Ronald A. Nyberg
-------------------------------------
Ronald A. Nyberg, Secretary
<PAGE> 1
Exhibit 1(c)
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
Second Amended and Restated Certificate of Designation
of
Van Kampen Global Government Securities Fund
The undersigned, being the Secretary of Van Kampen World Portfolio Series Trust,
a Delaware business trust (the "Trust"), pursuant to the authority conferred
upon the Trustees of the Trust by Section 6.1 of the Trust's First Amended and
Restated Agreement and Declaration of Trust ("Declaration"), and by the
affirmative vote of a Majority of the Trustees does hereby amend and restate in
its entirety the Amended and Restated Certificate of Designation of the Van
Kampen American Capital Global Government Securities Fund Series of the Trust
dated December 12, 1996 by redesignating such Series as the Van Kampen Global
Government Securities Fund Series (the "Fund") with the following rights,
preferences and characteristics:
1. SHARES. The beneficial interest in the Fund shall be divided into Shares
having a nominal or par value of $0.01 per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Fund. The
Trustees shall have the authority from time to time to authorize separate Series
of Shares for the Trust as they deem necessary or desirable.
2. CLASSES OF SHARES. The Shares of the Fund shall be initially divided into
three classes--Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Fund
3. SALES CHARGES. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Fund's prospectus.
4. CONVERSION. Each Class B Share and certain Class C Shares of the Fund shall
be converted automatically, and without any action or choice on the part of the
Shareholder thereof, into Class A Shares of the Fund at such times and pursuant
to such terms, conditions and restrictions as may be established by the Trustees
and as set forth in the Fund's Prospectus.
5. ALLOCATION OF EXPENSES AMONG CLASSES. Expenses related solely to a
particular Class (including, without limitation, distribution expenses under an
administrative or service agreement, plan or other arrangement, however
designated) shall be borne by that Class and shall be appropriately reflected
(in a manner determined by the Trustees) in the net asset value, dividends,
distribution and liquidation rights of the Shares of that Class.
<PAGE> 2
6. SPECIAL MEETINGS. A special meeting of Shareholders of a Class of the Fund
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders of
shares of such Class at any time by a Majority of the Trustees.
7. OTHER RIGHTS GOVERNED BY DECLARATION. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust or with respect to any Class of Shares set forth in the
Declaration shall apply to Shares of the Fund unless otherwise specified in this
Certificate of Designation, in which case this Certificate of Designation shall
govern.
8. AMENDMENTS, ETC. Subject to the provisions and limitations of Section 9.5
of the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
any officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, the holders of a majority of all the Shares of the affected
Classes outstanding and entitled to vote.
9. INCORPORATION OF DEFINED TERMS. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in the
Declaration.
July 14, 1998
/s/ Ronald A. Nyberg
____________________________
Ronald A. Nyberg, Secretary
<PAGE> 1
EXHIBIT 4(a)
NUMBER SHARES
__________ __________
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
CLASS A
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
* SEE REVERSE FOR CERTAIN DEFINITIONS
_______________
CUSIP 921130401
_______________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen Global Government Securities Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF ITS DULY
AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN GLOBAL GOVERNMENT SECURITIES
AND DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
--------------------------------------------------
AUTHORIZED OFFICER
- ----------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
NUMBER CLASS A SHARES
KC
<S> <C> <C> <C>
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
VAN KAMPEN INVESTOR SERVICES
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
-----------------------------------------
-----------------------------------------
</TABLE>
<PAGE> 2
PAGE 2
- ------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
---------------------------------------------
Attorney
- ----------------------------------------------------------------------
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, 19
------------------------------------------------------- ----
---------------------------------------------------------------
Owner
---------------------------------------------------------------
Signature of Co-Owner, if any
IMPORTANT [ BEFORE SIGNING, READ AND COMPLY CAREFULLY
[ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ------- Custodian ----------
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
-------------------------------
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
PAGE 1
EXHIBIT 4(b)
NUMBER SHARES
__________ __________
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
CLASS B
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
___________________
CUSIP 92113U500
___________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen Global Government Securities Fund, transferable
on the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF ITS DULY
AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN
GLOBAL GOVERNMENT SECURITIES FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED BY VAN KAMPEN INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
-----------------------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER CLASS B SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND
RETURN TO:
VAN KAMPEN INVESTOR SERVICES
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
--------------------------------------
--------------------------------------
--------------------------------------
</TABLE>
<PAGE> 2
PAGE 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ---------------------------------------------
- ----------------------------------------------------------------------- Attorney
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, ------------------------------------------ 19 -----
---------------------------------------------------
Owner
---------------------------------------------------
Signature of Co-Owner, if any
IMPORTANT [ BEFORE SIGNING, READ AND COMPLY CAREFULLY
[ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIT MIN. ACT --------- Custodian -----------
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties -------------------------------
(State)
JT TEN - as joint tenants
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
PAGE 1
EXHIBIT 4 (c)
NUMBER SHARES
_________ _____________
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
CLASS C
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
___________________
CUSIP 92113U609
___________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen Global Government Securities Fund, transferable
on the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF ITS DULY
AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN
GLOBAL GOVERNMENT SECURITIES FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED BY VAN KAMPEN INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
-----------------------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER CLASS C SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND
RETURN TO:
VAN KAMPEN INVESTOR SERVICES
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
--------------------------------------
--------------------------------------
--------------------------------------
</TABLE>
<PAGE> 2
PAGE 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ---------------------------------------------
- ----------------------------------------------------------------------- Attorney
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, ------------------------------------------ 19 -----
---------------------------------------------------
Owner
---------------------------------------------------
Signature of Co-Owner, if any
IMPORTANT [ BEFORE SIGNING, READ AND COMPLY CAREFULLY
[ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIT MIN. ACT --------- Custodian -----------
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties -------------------------------
(State)
JT TEN - as joint tenants
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 15 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated July
10, 1998, relating to the financial statements and financial highlights of Van
Kampen Global Government Securities Fund, a series of Van Kampen World Portfolio
Series Trust, (formely known as Van Kampen American Capital Global Government
Securities Fund, a series of Van Kampen American Capital World Portofolio Series
Trust), which appears in such Statement of Additional Information, and to the
incorporation by reference of our report into the Prospectus which constitutes
part of this Registration Statement. We also consent to the references to us
under the headings "Financial Highlights" and "Independent Accountants" in such
Prospectus and to the reference to us under the heading "Independent
Accountants" in such Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
September 23, 1998
<PAGE> 1
Exhibit 16
GLOBAL GOVERNMENT SECURITIES FUND - CLASS A SHARES
Total Return Calculation One Year Period Ended May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Formula P(1+T)n = ERV
Including Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,009.31 = ERV
One year period ended 5/31/98 1 = n
TOTAL RETURN FOR THE PERIOD 0.93% = T
Excluding Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,059.80 = ERV
One year period ended 5/31/98 1 = n
TOTAL RETURN FOR THE PERIOD 5.98% = T
Total Return Calculation Five Years Ended May 31, 1998
Formula P(1+T)n = ERV
Including Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,166.93 = ERV
Five years ended 5/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 3.14% = T
Excluding Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,225.16 = ERV
Five years ended 5/31/98 5 = n
TOTAL RETURN FOR THE PERIOD 4.15% = T
</TABLE>
<PAGE> 2
GOVERNMENT SECURITIES FUND - CLASS A SHARES
Total Return Calculation Inception Through May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Formula P(1+T)n = ERV
Including Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,273.50 = ERV
Inception through 5/31/98 6.54 = n
TOTAL RETURN FOR THE PERIOD 3.77% = T
Excluding Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,336.98 = ERV
Inception through 5/31/98 6.54 = n
TOTAL RETURN FOR THE PERIOD 4.54% = T
Non-Standardized Cumulative Total Return Calculation
Inception Through May 31, 1998
Formula ERV - P
--------
P = T
Including Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,273.50 = ERV
TOTAL RETURN FOR THE PERIOD 27.35% = T
Excluding Payment of the Sales Charge
Net Asset Value $7.55
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,336.98 = ERV
TOTAL RETURN FOR THE PERIOD 33.70% = T
</TABLE>
<PAGE> 3
GOVERNMENT SECURITIES FUND - CLASS B SHARES
Total Return Calculation One Year Period Ended May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Formula P(1+T)n = ERV
Including Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,010.12 = ERV
One year period ended 5/31/98 1 = n
TOTAL RETURN FOR THE PERIOD 1.01% = T
Excluding Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,049.81 = ERV
One year period ended 5/31/98 1 = n
TOTAL RETURN FOR THE PERIOD 4.98% = T
Total Return Calculation Five Years Ended May 31, 1998
Formula P(1+T)n = ERV
Including Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,165.74 = ERV
Five years ended 5/31/98 5.00 = n
TOTAL RETURN FOR THE PERIOD 3.11% = T
Excluding Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,178.32 = ERV
Five years ended 5/31/98 5.00 = n
TOTAL RETURN FOR THE PERIOD 3.34% = T
</TABLE>
<PAGE> 4
GOVERNMENT SECURITIES FUND - CLASS B SHARES
Total Return Calculation Inception Through May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Formula P(1+T)n = ERV
Including Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,275.84 = ERV
Inception through 5/31/98 6.54 = n
TOTAL RETURN FOR THE PERIOD 3.80% = T
Excluding Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,275.84 = ERV
Inception through 5/31/98 6.54 = n
TOTAL RETURN FOR THE PERIOD 3.80% = T
Non-Standardized Cumulative Total Return Calculation
Inception Through May 31, 1998
Formula ERV - P
-------
P = T
Including Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,275.84 = ERV
TOTAL RETURN FOR THE PERIOD 27.58% = T
Excluding Payment of the CDSC
Net Asset Value $7.60
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,275.84 = ERV
TOTAL RETURN FOR THE PERIOD 27.58% = T
</TABLE>
<PAGE> 5
GOVERNMENT SECURITIES FUND - CLASS C SHARES
Total Return Calculation One Year Period Ended May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Formula P(1+T)n = ERV
Including Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,040.27 = ERV
One year period ended 5/31/98 1 = n
TOTAL RETURN FOR THE PERIOD 4.03% = T
Excluding Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,050.19 = ERV
One year period ended 5/31/98 1 = n
TOTAL RETURN FOR THE PERIOD 5.02% = T
Total Return Calculation Five Years Ended May 31, 1998
Formula P(1+T)n = ERV
Including Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,179.56 = ERV
Five years ended 5/31/98 5.00 = n
TOTAL RETURN FOR THE PERIOD 3.36% = T
Excluding Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,179.56 = ERV
Five years ended 5/31/98 5.00 = n
TOTAL RETURN FOR THE PERIOD 3.36% = T
</TABLE>
<PAGE> 6
GOVERNMENT SECURITIES FUND - CLASS C SHARES
Total Return Calculation Inception Through May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Formula P(1+T)n = ERV
Including Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,193.57 = ERV
Inception through 5/31/98 5.14 = n
TOTAL RETURN FOR THE PERIOD 3.50% = T
Excluding Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,193.57 = ERV
Inception through 5/31/98 5.14 = n
TOTAL RETURN FOR THE PERIOD 3.50% = T
Non-Standardized Cumulative Total Return Calculation
Inception Through May 31, 1998
Formula ERV - P
-------
P = T
Including Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,193.57 = ERV
TOTAL RETURN FOR THE PERIOD 19.36% = T
Excluding Payment of the CDSC
Net Asset Value $7.53
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,193.57 = ERV
TOTAL RETURN FOR THE PERIOD 19.36% = T
</TABLE>
<PAGE> 1
EXHIBIT 17(a)
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN FUNDS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
AUGUST 27, 1998
Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Short-Term Global Income Fund
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Utility Fund
Van Kampen American Capital Value Fund
Van Kampen Great American Companies Fund
Van Kampen Growth Fund
Van Kampen Prospector Fund
Van Kampen Aggressive Growth Fund
Van Kampen Foreign Securities Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Limited Maturity Government Fund
Van Kampen Global Managed Assets Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust
Asset Allocation Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Comstock Portfolio
<PAGE> 2
Van Kampen Small Capitalization Fund
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax -Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
Van Kampen Aggressive Equity Fund
Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Emerging Markets Debt Fund
Van Kampen Equity Growth Fund
Van Kampen Global Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Fixed Income Fund
Van Kampen Global Franchise Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth and Income Fund II
Van Kampen High Yield & Total Return Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund
Van Kampen Latin American Fund
Van Kampen MidCap Growth Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Van Kampen U.S. Real Estate Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Insured Municipals Income Trust..........................................................................Series 401
Arizona Insured Municipals Income Trust................................................................. Series 18
California Insured Municipals Income Trust.............................................................. Series 174
Colorado Insured Municipals Income Trust................................................................ Series 87
Connecticut Insured Municipals Income Trust ............................................................ Series 37
Florida Insured Municipals Income Trust................................................................. Series 120
Georgia Insured Municipals Income Trust................................................................. Series 86
Kentucky Investors' Quality Tax-Exempt Trust............................................................ Series 60
Maryland Investors' Quality Tax-Exempt Trust............................................................ Series 86
Massachusetts Insured Municipals Income Trust........................................................... Series 35
Michigan Insured Municipals Income Trust................................................................ Series 151
Minnesota Insured Municipals Income Trust............................................................... Series 62
Missouri Insured Municipals Income Trust................................................................ Series 107
New Jersey Insured Municipals Income Trust.............................................................. Series 123
New York Insured Municipals Income Trust................................................................ Series 146
North Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 95
Ohio Insured Municipals Income Trust.................................................................... Series 110
Pennsylvania Insured Municipals Income Trust............................................................ Series 237
South Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 86
Tennessee Insured Municipals Income Trust............................................................... Series 41
Virginia Investors' Quality Tax-Exempt Trust............................................................ Series 81
Van Kampen American Capital Insured Income Trust........................................................ Series 71
Internet Trust.......................................................................................... Series 11
Strategic Ten Trust, United States Portfolio............................................................ August 1998 Series
Strategic Ten Trust, United States Portfolio............................................................ August 1998
Traditional Series
Strategic Five Trust, United States Portfoliio.......................................................... August 1998 Series
Strategic Five Trust, United States Portfolio........................................................... August 1998
Traditional Series
EAFE Strategic 20 Trust................................................................................. August 1998 Series
EURO Strategic 20 Trust................................................................................. August 1998 Series
Strategic Picks Opportunity Trust....................................................................... August 1998 Series
Strategic Fifteen Trust Global Portfolio................................................................ July 1998 Series
Strategic Thirty Trust Global Portfolio................................................................. July 1998 Series
Great International Firms Trust......................................................................... Series 5
Blue Chip Opportunity and Treasury Trust................................................................ Series 6
Blue Chip Opportunity Trust............................................................................. Sereis 4
Baby Boomer Opportunity Trust........................................................................... Series 4
Global Energy Trust..................................................................................... Series 6
Brand Name Equity Trust................................................................................. Series 6
Edward Jones Select Growth Trust........................................................................ July 1998 Series
Banking Trust........................................................................................... Series 3
Morgan Stanley High-Technology 35 Index Trust........................................................... Series 3
Health Care Trust....................................................................................... Series 3
Telecommunications Trust................................................................................ Series 3
Utility Trust........................................................................................... Series 3
Financial Services Trust................................................................................ Series 1
Natcity Investments, Inc. Great American Equities Trust................................................. Series 1
First Albany Banking Growth Trust....................................................................... Series 1
Gruntal Global Transport Trust.......................................................................... Series 1
</TABLE>
<PAGE> 1
EXHIBIT 17 (b)
Officers
Van Kampen Funds Inc.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman Houston, TX
Richard F. Powers, III Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman President Oakbrook Terrace, IL
Douglas B. Gehrman Executive Vice President Houston, TX
Ronald A. Nyberg Executive Vice President, General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
John. E. Doyle Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Richard G. Gold Sr. Vice President Annapolis, MD
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Mark T. McGannon Sr. Vice President Oakbrook Terrace, IL
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
Colette M. Saucedo Sr. Vice President Houston, TX
Frederick Shepherd Sr. Vice President Houston, TX
Steven P. Sorenson Sr. Vice President Oakbrook Terrace, IL
Michael L. Stallard Sr. Vice President Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward C. Wood Sr. Vice President and Oakbrook Terrace, IL
Chief Operating Officer
Glenn M. Cackovic 1st Vice President Laguna Nigel, CA
Eric J. Hargens 1st Vice President Orlando, FL
David B. Hogaboom 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President Danville, CA
Carl Mayfield 1st Vice President Oakbrook Terrace, IL
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
George J. Vogel 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
Robert J. Abreu Vice President New York, NY
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Sheldon Barker Vice President Moon, PA
Patricia A. Bettlach Vice President Chesterfield, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
Michael P. Boos Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Robert C. Brooks Vice President Oakbrook Terrace, IL
William F Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
Joseph N. Caggiano Vice President New York, NY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Daniel R. Chambers Vice President Austin, TX
Richard J. Charlino Vice President Houston, TX
Deanna Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Vice President, Associate Oakbrook Terrace, IL
General Counsel & Asst. Secretary
Tracey M. DeLusant Vice President New York, NY
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Jonathan Eckard Vice President Tampa, FL
Huey P. Falgout, Jr. Vice President, Assistant Houston, TX
Secretary and Senior Attorney
Charles Edward Fisher Vice President Naperville, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhoven Vice President Englewood, CO
Charles Friday Vice President Gibsonia, PA
Timothy D. Griffith Vice President Kirkland, WA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Joseph Hays Vice President Cherry Hill, NJ
Daniel M. Hazard Vice President Huntington Beach, CA
Gregory Heffington Vice President Ft. Collins, CO
Susan J. Hill Vice President and Senior Attorney Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Robert S. Hunt Vice President Phoenix, MD
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Jeffrey S. Kinney Vice President Overland Park, KS
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
Richard D. Kozlowski Vice President Atlanta, GA
Bradford N. Langs Vice President Oakbrook Terrace, IL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
S. William Lehew III Vice President Charlotte, NC
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Kevin S. Marsh Vice President Bellevue, WA
Linda S. MacAyeal Vice President and Senior Attorney Oakbrook Terrace, IL
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
Maura A. McGrath Vice President New York, NY
John Mills Vice President Kenner, LA
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Ted Morrow Vice President Dallas, TX
Robert Muller, Jr. Vice President Cypress, TX
Peter Nicholas Vice President Beverly, MA
Michael D. Ossmen Vice President Oakbrook Terrace, IL
Todd W. Page Vice President Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Anthony Piazza Vice President Old Bridge, NJ
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Fairlawn, OH
Daniel D. Reams Vice President Royal Oak, MI
Michael W. Rohr Vice President Oakbrook Terrace, IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Thomas Rowley Vice President St. Louis, MO
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Andrew J. Scherer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Gwen L. Shaneyfelt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorensen Vice President Oakbrook Terrace, IL
Kimberly M. Spangler Vice President Fairfax, VA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Gary R. Steele Vice President Philadelphia, PA
Richard Stefanec Vice President Los Angeles, CA
James D. Stevens Vice President North Andover, MA
William C. Strafford Vice President Granger, IN
Mark A. Syswerda Vice President Oakbrook Terrace, IL
David A. Tabone Vice President Scottsdale, AZ
James C. Taylor Vice President Naperville, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Todd Volkman Vice President Austin, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
David M. Wynn Vice President Phoenix, AZ
James R. Yount Vice President Mercer Island, WA
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Joan E. Blackwood Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Gregory T. Brunk Asst. Vice President Oakbrook Terrace, IL
Gina Costello Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Sarah K. Gieser Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Houston, TX
Valri G. Hamilton Asst. Vice President Houston, TX
Laurie L. Jones Asst. Vice President Houston, TX
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
Pamela D. Meyer Asst. Vice President Phoenix, AZ
Stuart R. Moehlman Asst. Vice President Houston, TX
Cathy Napoli Asst. Vice President Oakbrook Terrace, IL
Steven R. Norvid Asst. Vice President Oakbrook Terrace, IL
Vincent M. Pellegrini Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
Vanessa M. Sanchez Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Christina L. Schmieder Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Sharon M. C. Wells Asst. Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
Theresa M. Renn Officer Oakbrook Terrace, IL
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN FUNDS INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ----------------------------
<S> <C> <C>
Don G. Powell Chairman 2800 Post Oak Blvd.
Houston, TX 77056
Richard F. Powers, III Chief Executive Officer One Parkview Plaza
Oakbrook Terrace, IL 60181
John H. Zimmerman President One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President, One Parkview Plaza
General Counsel Oakbrook Terrace, IL 60181
& Assistant Secretary
William R. Rybak Executive Vice President One Parkview Plaza
& Chief Financial Officer Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open End Trusts (individually, a "Trust") as indicated on
Schedule 1 attached hereto and incorporated by reference, each a Delaware
business trust except for the Van Kampen American Capital Pennsylvania Tax Free
Income Fund being a Pennsylvania business trust, and being officers and
directors of the Morgan Stanley Fund, Inc. (the "Corporation"), a Maryland
corporation, do hereby, in the capacities shown below, individually appoint
Dennis J. McDonnell and Ronald A. Nyberg, each of Oakbrook Terrace, Illinois,
and each of them, as the agents and attorneys-in-fact with full power of
substitution and resubstitution, for each of the undersigned, to execute and
deliver, for and on behalf of the undersigned, any and all amendments to the
Registration Statement filed by each Trust or the Corporation with the
Securities and Exchange Commission pursuant to the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Dated: April 24, 1998
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Dennis J. McDonnell President and Trustee/Director
- ------------------------------
Dennis J. McDonnell
/s/ Edward C. Wood III Vice President and Chief Financial Officer
- ------------------------------
Edward C. Wood III
/s/ J. Miles Branagan Trustee/Director
- ------------------------------
J. Miles Branagan
/s/ Richard M. DeMartini Trustee/Director
- ------------------------------
Richard M. DeMartini
/s/ Linda Hutton Heagy Trustee/Director
- ------------------------------
Linda Hutton Heagy
/s/ R. Craig Kennedy Trustee/Director
- ------------------------------
R. Craig Kennedy
/s/ Jack E. Nelson Trustee/Director
- ------------------------------
Jack E. Nelson
/s/ Don G. Powell Trustee/Director
- ------------------------------
Don G. Powell
/s/ Phillip B. Rooney Trustee/Director
- ------------------------------
Phillip B. Rooney
/s/ Fernando Sisto, Sc.D. Trustee/Director
- ------------------------------
Fernando Sisto, Sc. D.
/s/ Wayne W. Whalen Trustee/Director and Chairman
- ------------------------------
Wayne W. Whalen
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> GLOBAL GOV'T A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 64,015,898<F1>
<INVESTMENTS-AT-VALUE> 64,702,264<F1>
<RECEIVABLES> 918,134<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 28,252<F1>
<TOTAL-ASSETS> 65,648,650<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 760,067<F1>
<TOTAL-LIABILITIES> 760,067<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 32,864,290
<SHARES-COMMON-STOCK> 2,899,435
<SHARES-COMMON-PRIOR> 3,374,330
<ACCUMULATED-NII-CURRENT> 1,126,836<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (39,324,004)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 438,434<F1>
<NET-ASSETS> 21,898,181
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,076,036<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,876,186)<F1>
<NET-INVESTMENT-INCOME> 3,199,850<F1>
<REALIZED-GAINS-CURRENT> 2,207,252<F1>
<APPREC-INCREASE-CURRENT> (1,174,814)<F1>
<NET-CHANGE-FROM-OPS> 4,052,288<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,462,620)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 752,769
<NUMBER-OF-SHARES-REDEEMED> (1,350,521)
<SHARES-REINVESTED> 122,857
<NET-CHANGE-IN-ASSETS> (3,760,257)
<ACCUMULATED-NII-PRIOR> 94,388<F1>
<ACCUMULATED-GAINS-PRIOR> (39,045,625)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,378<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,876,186<F1>
<AVERAGE-NET-ASSETS> 22,500,321
<PER-SHARE-NAV-BEGIN> 7.604
<PER-SHARE-NII> 0.352
<PER-SHARE-GAIN-APPREC> 0.088
<PER-SHARE-DIVIDEND> (0.491)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.553
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> GLOBAL GOV'T B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 64,015,898<F1>
<INVESTMENTS-AT-VALUE> 64,702,264<F1>
<RECEIVABLES> 918,134<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 28,252<F1>
<TOTAL-ASSETS> 65,648,650<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 760,067<F1>
<TOTAL-LIABILITIES> 760,067<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 62,712,562
<SHARES-COMMON-STOCK> 5,196,861
<SHARES-COMMON-PRIOR> 7,441,320
<ACCUMULATED-NII-CURRENT> 1,126,836<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (39,324,004)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 438,434<F1>
<NET-ASSETS> 39,475,639
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,076,036<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,876,186)<F1>
<NET-INVESTMENT-INCOME> 3,199,850<F1>
<REALIZED-GAINS-CURRENT> 2,207,252<F1>
<APPREC-INCREASE-CURRENT> (1,174,814)<F1>
<NET-CHANGE-FROM-OPS> 4,052,288<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,753,416)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,071,748
<NUMBER-OF-SHARES-REDEEMED> (3,525,942)
<SHARES-REINVESTED> 209,735
<NET-CHANGE-IN-ASSETS> (17,414,031)
<ACCUMULATED-NII-PRIOR> 94,388<F1>
<ACCUMULATED-GAINS-PRIOR> (39,045,625)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 563,378<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,876,186<F1>
<AVERAGE-NET-ASSETS> 48,417,968
<PER-SHARE-NAV-BEGIN> 7.645
<PER-SHARE-NII> 0.299
<PER-SHARE-GAIN-APPREC> 0.083
<PER-SHARE-DIVIDEND> (0.431)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.596
<EXPENSE-RATIO> 2.72
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> GLOBAL GOVT C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 64,015,898<F1>
<INVESTMENTS-AT-VALUE> 64,702,264<F1>
<RECEIVABLES> 918,134<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 28,252<F1>
<TOTAL-ASSETS> 65,648,650<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 760,067<F1>
<TOTAL-LIABILITIES> 760,067<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,070,465
<SHARES-COMMON-STOCK> 466,531
<SHARES-COMMON-PRIOR> 745,566
<ACCUMULATED-NII-CURRENT> 1,126,836<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (39,324,004)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 438,434<F1>
<NET-ASSETS> 3,514,763
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,076,036<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,876,186)<F1>
<NET-INVESTMENT-INCOME> 3,199,850<F1>
<REALIZED-GAINS-CURRENT> 2,027,252<F1>
<APPREC-INCREASE-CURRENT> (1,174,814)<F1>
<NET-CHANGE-FROM-OPS> 4,052,288<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (256,997)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,375
<NUMBER-OF-SHARES-REDEEMED> (343,258)
<SHARES-REINVESTED> 17,848
<NET-CHANGE-IN-ASSETS> (2,140,487)
<ACCUMULATED-NII-PRIOR> 94,388<F1>
<ACCUMULATED-GAINS-PRIOR> (39,045,625)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,378<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,876,186<F1>
<AVERAGE-NET-ASSETS> 4,465,511
<PER-SHARE-NAV-BEGIN> 7.585
<PER-SHARE-NII> 0.293
<PER-SHARE-GAIN-APPREC> 0.087
<PER-SHARE-DIVIDEND> (0.431)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.534
<EXPENSE-RATIO> 2.72
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
