<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
REGISTRATION NO. 33-74024
NO. 811-8286
================================================================================
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. 6 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 8 [X]
</TABLE>
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
(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 AMERICAN CAPITAL, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 30, 1998 pursuant to paragraph (b) of Rule 485
[ ] 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 case 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 AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
CROSS REFERENCE SHEET
(AS REQUIRED BY ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
- -------------- ------------------
<S> <C> <C>
PART A
- ------
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... The Fund; Investment Objectives and
Policies; Risk Factors; Investment
Practices; Description of Shares of the
Fund
5. Management of the Fund..................... Annual Fund Operating Expenses and Example;
The Fund; Investment Practices;
Investment Advisory Services; Inside Back
Cover
6. Capital Stock and Other Securities......... The Fund; Alternative Sales Arrangements;
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>
PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------------------------------------------
<C> <S> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Policies and Techniques;
Options, Futures Contracts and Related
Options; Repurchase Agreements; Loans of
Portfolio Securities; Investment
Restrictions; Portfolio Turnover
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 Agreement;
Distributor; Distribution and Service
Plans; Transfer Agent; Portfolio
Transactions and Brokerage; Other
Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; Exchange
Privilege
20. Tax Status................................. Tax Status of the Fund
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Fund Performance
23. Financial Statements....................... Report of Independent Accountants;
Financial Statements; Notes to Financial
Statements
</TABLE>
PART C
- ------
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE> 3
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
GLOBAL MANAGED ASSETS FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital Global Managed Assets Fund (the "Fund") is a
non-diversified, management investment company, commonly known as a mutual fund.
The Fund's investment objective is to seek to provide total return through a
managed balance of foreign and domestic equity and debt securities. There is no
assurance that the Fund will achieve its investment objective.
The Fund's investment adviser is Van Kampen American Capital Asset
Management, Inc. (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 April 30, 1998, containing
additional information about the Fund is hereby incorporated 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 at the SEC's internet web site
(http://www.sec.gov).
------------------
VAN KAMPEN AMERICAN CAPITAL SM
------------------
THIS PROSPECTUS IS DATED APRIL 30, 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........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Risk Factors................................................ 13
Investment Practices........................................ 15
Investment Advisory Services................................ 22
Alternative Sales Arrangements.............................. 26
Purchase of Shares.......................................... 29
Shareholder Services........................................ 39
Redemption of Shares........................................ 43
Distribution and Service Plans.............................. 46
Distributions from the Fund................................. 48
Tax Status.................................................. 49
Fund Performance............................................ 54
Description of Shares of the Fund........................... 56
Additional Information...................................... 57
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 5
- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital Global Managed Assets Fund (the "Fund") is
a non-diversified, open-end management investment company organized as a
Delaware business trust.
MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").
INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek to provide
total return through a managed balance of foreign and domestic equity and debt
securities. There is no assurance that the Fund will achieve its investment
objective. See "Investment Objective and Policies."
INVESTMENT POLICY. The Fund may, from time to time, be substantially invested in
foreign or domestic equity or debt securities based upon the Adviser's and
Subadviser's evaluation of economic and market trends and anticipated relative
return available from a particular type of security. The Fund will maintain at
least 25% of its total assets in debt securities.
The Fund may sell (write) and purchase call and put options. The Fund may
purchase and sell futures contracts and options on such contracts only for bona
fide hedging purposes. The use of options, futures contracts and options on
futures contracts may include additional risks. The Fund may purchase or sell
debt securities and currencies on a forward commitment basis and may lend
portfolio securities. See "Investment Practices."
RISK FACTORS. 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. See "Risk Factors."
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."
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
3
<PAGE> 6
$1 million or more are not subject to any sales charge at the time of purchase,
but a contingent deferred sales charge ("CDSC") of 1.00% may be imposed on
redemptions made within one year of purchase. Class A shares are subject to an
annual service fee of up to 0.25% of its average daily net assets attributable
to such class of shares. See "Purchase of Shares -- Class A Shares" and
"Distribution and Service Plans."
Class B Shares. Class B shares are offered at net asset value per share and are
subject to a maximum CDSC of 4.00% on redemptions made within the first or
second year after purchase and declining thereafter to 0.00% after the fifth
year. See "Redemption of Shares." Class B shares are subject to a combined
annual distribution fee and service fee of up to 1.00% of the Fund's average
daily net assets attributable to such class of shares. See "Purchase of
Shares -- Class B Shares" and "Distribution and Service Plans." Class B shares
convert automatically to Class A shares eight years after the end of the
calendar month in which the shareholder's order to purchase was accepted. See
"Alternative Sales Arrangements -- Conversion Feature."
Class C Shares. Class C shares are offered at net asset value per share and are
subject to a CDSC of 1.00% on redemptions made within one year of purchase. See
"Redemption of Shares." Class C shares are subject to a combined annual
distribution fee and service fee of up to 1.00% of the Fund's average daily net
assets attributable to such class of shares. See "Purchase of Shares -- Class C
Shares" and "Distribution and Service Plans."
INVESTMENT ADVISERS. Van Kampen American Capital 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 American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.
DISTRIBUTIONS FROM THE FUND. Dividends from net investment income are
distributed annually. Net capital gains, if any, 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 Year 1--1.00%
redemption proceeds)............ None(2) Year 1--4.00%
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 certain 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)........................... 1.00% 1.00% 1.00%
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)........................... 2.41% 2.42% 2.46%
Total Fund Operating Expenses (net of
reimbursement) (as a percentage of average
daily net assets)........................... 3.66% 4.42% 4.46%
</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 as a fund-level expense by NASD
Rules.
6
<PAGE> 9
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
EXAMPLE: ---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment assuming (i) an
operating expense ratio of 3.66% for
Class A shares, 4.42% for Class B
shares and 4.46% for Class C shares,
(ii) a 5.00% annual return and (iii)
redemption at the end of each time
period:
Class A............................. $83 $154 $228 $420
Class B............................. $84 $164 $239 $440*
Class C............................. $55 $135 $226 $458
You would pay the following expenses on
the same $1,000 investment assuming no
redemption at the end of each time
period:
Class A............................. $83 $154 $228 $420
Class B............................. $44 $134 $224 $440*
Class C............................. $45 $135 $226 $458
</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 "Distribution and Service Plans."
7
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for a share of beneficial interest
outstanding throughout each of the periods indicated)
- --------------------------------------------------------------------------------
The following financial highlights have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. 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 CLASS B SHARES
----------------------------------------------------------- ---------------------------
MAY 16, 1994
(COMMENCEMENT
YEAR YEAR YEAR OF INVESTMENT YEAR YEAR
ENDED ENDED ENDED OPERATIONS) TO ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(C) 1995 1994 1997 1996(C)
------------ ------------ ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period................ $10.530 $ 10.15 $ 9.19 $ 9.44 $10.379 $ 10.10
------- ------- ------- ------- ------- --------
Net Investment Income/Loss............. (0.088) -0- .08 .10 (.146) (.106)
Net Realized and Unrealized Gain/Loss... 1.014 1.242 1.1375 (.2475) .972 1.247
------- ------- ------- ------- ------- --------
Total from Investment Operations........ .926 1.242 1.2175 (.1475) .826 1.141
------- ------- ------- ------- ------- --------
Less:
Distributions from and in Excess of Net
Investment Income.................... -0- -0- .0775 .075 -0- -0-
Distributions from and in Excess of Net
Realized Gain........................ 1.294 .862 .1800 .0275 1.294 .862
------- ------- ------- ------- ------- --------
Total Distributions..................... 1.294 .862 .2575 .1025 1.294 .862
------- ------- ------- ------- ------- --------
Net Asset Value, End of the Period...... $10.162 $10.530 $ 10.15 $ 9.19 $ 9.911 $ 10.379
======= ======= ======= ======= ======= ========
Total Return*(a)........................ 8.94% 12.44% 13.30% (1.57%)** 8.10% 11.51%
Net Assets at End of the Period (In
millions).............................. $ 11.2 $ 8.5 $ 15.5 $ 11.5 $ 10.0 $ 9.9
Ratio of Expenses to Average Net
Assets*................................ 3.66% 2.87% 2.79% 2.75% 4.42% 3.76%
Ratio of Net Investment Income/Loss to
Average Net Assets*.................... (.67%) .00% .81% 1.54% (1.45%) (1.01%)
Portfolio Turnover...................... 231% 91% 135% 50%** 231% 91%
Average Commission Paid Per Equity Share
Traded(b).............................. $ .0606 $ .0214 -- -- $ .0606 $ .0214
<CAPTION>
CLASS B SHARES
-----------------------------
MAY 16, 1994
(COMMENCEMENT
YEAR OF INVESTMENT
ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ --------------
<S> <C> <C>
Net Asset Value,
Beginning of the Period................ $ 9.17 $ 9.44
------- -------
Net Investment Income/Loss............. (.01) .01
Net Realized and Unrealized Gain/Loss... 1.1375 (.2065)
------- -------
Total from Investment Operations........ 1.1275 (.1965)
------- -------
Less:
Distributions from and in Excess of Net
Investment Income.................... .0175 .046
Distributions from and in Excess of Net
Realized Gain........................ .1800 .0275
------- -------
Total Distributions..................... .1975 .0735
------- -------
Net Asset Value, End of the Period...... $ 10.10 $ 9.17
======= =======
Total Return*(a)........................ 12.31% (2.09%)**
Net Assets at End of the Period (In
millions).............................. $ 8.1 $ 7.4
Ratio of Expenses to Average Net
Assets*................................ 3.73% 3.92%
Ratio of Net Investment Income/Loss to
Average Net Assets*.................... (.09%) .13%
Portfolio Turnover...................... 135% 50%**
Average Commission Paid Per Equity Share
Traded(b).............................. -- --
<CAPTION>
CLASS C SHARES
-----------------------------------------------------------
MAY 16, 1994
(COMMENCEMENT
YEAR YEAR YEAR OF INVESTMENT
ENDED ENDED ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(C) 1995 1994
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period................ $10.395 $ 10.12 $ 9.20 $ 9.44
------- -------- ------- -------
Net Investment Income/Loss............. (0.139) (.104) (.02) .05
Net Realized and Unrealized Gain/Loss... .965 1.241 1.1375 (.2165)
------- -------- ------- -------
Total from Investment Operations........ .826 1.137 1.1175 (.1665)
------- -------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income.................... -0- -0- .0175 .046
Distributions from and in Excess of Net
Realized Gain........................ 1.294 .862 .1800 .0275
------- -------- ------- -------
Total Distributions..................... 1.294 .862 .1975 .0735
------- -------- ------- -------
Net Asset Value, End of the Period...... $ 9.927 $ 10.395 $ 10.12 $ 9.20
======= ======== ======= =======
Total Return*(a)........................ 8.09% 11.49% 12.16% (1.77%)**
Net Assets at End of the Period (In
millions).............................. $ 1.7 $ 1.7 $ 1.9 $ 1.3
Ratio of Expenses to Average Net
Assets*................................ 4.46% 3.78% 3.79% 3.36%
Ratio of Net Investment Income/Loss to
Average Net Assets*.................... (1.50%) (.99%) (.18%) .80%
Portfolio Turnover...................... 231% 91% 135% 50%**
Average Commission Paid Per Equity Share
Traded(b).............................. $ .0606 $ .0214 -- --
</TABLE>
*If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net
Assets................................. N/A 3.17% 3.68% 2.76% N/A 4.06%
Ratio of Net Investment Income/Loss to
Average Net Assets..................... N/A (.30%) (.07%) 1.53% N/A (1.30%)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net
Assets................................. 4.61% 3.93% N/A 4.07% 4.67% 3.38%
Ratio of Net Investment Income/Loss to
Average Net Assets..................... (.97%) .12% N/A (1.28%) (1.06%) .78%
</TABLE>
- ---------------
** Non-Annualized
(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A Not Applicable
8
<PAGE> 11
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
The Fund is a non-diversified, 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
diversified portfolio of securities by combining their resources in an effort to
achieve such goals.
Van Kampen American Capital 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 American Capital Distributors, Inc. (the "Distributor"). To obtain
prospectuses and other information on any of these other funds, please call the
telephone number on the cover page of the Prospectus.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
GENERAL. The investment objective of the Fund is to seek to provide total
return through a managed balance of foreign and domestic equity and debt
securities. Total return consists of current income, including dividends,
interest and discount accruals, and capital appreciation. The Adviser and the
Subadviser may vary the composition of the Fund from time to time based upon an
evaluation of economic and market trends and the anticipated relative total
return available from a particular type of security. Accordingly, the Fund may,
at any given time, be substantially invested in equity or debt securities. At
least 65% of the Fund's total assets will be invested in securities of issuers
located in at least three countries including the United States and at least 25%
of the Fund's assets will be maintained in debt securities. Achieving the Fund's
investment objective depends on management's abilities to assess the effect of
economic and market trends on different sectors of the market. There can be no
assurances that the investment objective of the Fund will be achieved. Because
of the managed approach of the Fund, portfolio turnover of the Fund may be
greater than portfolio turnover of other mutual funds resulting in increased
brokerage charges to the Fund.
The Adviser, subject to the direction of the Fund's Trustees, provides the
Fund with an overall investment program consistent with the Fund's objective and
policies. Investments may be shifted among the world's various capital markets
and among different types of securities in accordance with ongoing analysis
provided by the Adviser and the Subadviser of trends and developments affecting
such markets and securities. The Adviser and the Subadviser are sometimes
referred to herein collectively as the "Advisers."
9
<PAGE> 12
The Advisers utilize a "top-down" approach in selecting investments for the
Fund that emphasizes country selection and weighting rather than individual
security selection. This approach reflects the Advisers' philosophy for this
Fund that a diversified selection of securities representing exposure to world
markets based upon the economic outlook and current valuation levels for each
country is an effective way to maximize the return and minimize the risk
associated with global investment.
The Advisers determine country allocations for the Fund on an ongoing basis
within policy ranges dictated by each country's market capitalization and
liquidity. The Fund will invest in the United States and other industrialized
countries throughout the world that comprise the Morgan Stanley Capital
International World Index. These countries currently are Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Italy, Japan, the
Netherlands, New Zealand, Norway, Singapore/Malaysia, Spain, Sweden,
Switzerland, the United Kingdom and the United States. In addition, the Fund may
invest a portion of its assets in emerging country equity securities. The Fund
currently intends to invest in some or all of the following countries:
Argentina, Indonesia, Portugal, South Africa, Brazil, Malaysia, Philippines,
Thailand, India, Mexico, South Korea and Turkey.
By analyzing a variety of macroeconomic and political factors, the Advisers
develop fundamental projections on interest rates, currencies, corporate profits
and economic growth for each country. These country projections are then used to
determine what the Advisers believe to be a fair value for the securities market
of each country. Discrepancies between actual value and fair value, as
determined by the Advisers, provide an expected return for each securities
market. The expected return is adjusted by currency return expectations derived
from the Advisers' purchasing-power parity exchange rate model to arrive at an
expected total return in U.S. Dollars. The final country allocation decision is
then reached by considering the expected total return in light of various
country specific considerations such as market size, volatility, liquidity and
country risk.
Within a particular country, common stock investments are made through the
purchase of common stocks which, in the aggregate, replicate a broad market
index, which in most cases will be the Morgan Stanley Capital International
("MSCI") Index for the particular country. The MSCI Indices measure the
performance of stock markets worldwide. The various MSCI Indices are based on
the share prices of companies listed on the local stock exchange of the
specified country or countries within a specified region. The combined market
capitalization of companies in these indices represent approximately 60 percent
of the aggregate market value of the covered stock exchanges. Companies included
in the MSCI country index replicate the industry composition of the local market
and are a representative sampling of large, medium and small companies, subject
to liquidity. Non-domiciled companies
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traded on the local exchange and companies with restricted float due to dominant
shareholders or cross-ownership are avoided. The Advisers may overweight or
underweight an industry segment of a particular index if it concludes this would
be advantageous to the Fund.
The investment objective and policies, the percentage limitations, and the
types of securities in which the Fund may invest generally are not fundamental
policies and may be changed by the Trustees, unless expressly governed by
certain limitations as described under "Investment Practices -- Investment
Restrictions" which can be changed only by action of the shareholders. If there
is a change in the investment objective of the Fund, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs. For additional information regarding
the investment practices of the Fund see "Investment Practices."
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.
EQUITY AND DEBT SECURITIES. Equity securities in which the Fund may invest
include common stocks, preferred stocks and warrants or options to acquire such
securities.
Debt securities in which the Fund may invest include government securities and
high quality debt securities of U.S. and foreign corporations. Government
securities include debt securities issued or guaranteed by the United States or
foreign governments or their agencies, authorities or instrumentalities.
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 invest in debt obligations of supranational lending entities
organized or supported by several national governments. Supranational entities
in which the Fund may invest include, without limitation, 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 in 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
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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; 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 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, Inc. ("Moody's") or AA- or
better by Standard & Poor's Ratings Group ("S&P"), or that are not rated but
considered by the Advisers to be of equivalent quality. A description of the
Moody's and S&P ratings is included in the Statement of Additional Information.
DEPOSITARY RECEIPTS. The Fund may purchase foreign securities in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs")
or other securities representing underlying shares of foreign companies. These
securities are not necessarily denominated in the same currency as the
underlying securities but generally are denominated in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. ADRs are publicly
traded on exchanges or over-the-counter in the United States and are issued
through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is available in the
United States about an unsponsored ADR than about a sponsored ADR. The Fund may
invest in ADRs through both sponsored and unsponsored arrangements.
CURRENCY EFFECTS. The Fund may invest in securities denominated in United
States dollars and one or more foreign currencies. The percentage of assets
invested in securities of a particular country or denominated in a particular
currency will vary in accordance with the Advisers' 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
the Advisers in determining whether to increase or decrease the emphasis placed
upon a particular type of security within the Fund's investment portfolio.
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The returns available from securities denominated in foreign currencies can be
adversely affected by changes in exchange rates. The Advisers believe that the
use of foreign currency hedging techniques, including "cross-hedges", 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.
The Advisers believe 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. A hedge or cross-hedge cannot
protect completely against exchange rate risks, and if the Advisers are
incorrect in their judgment of future exchange rate relationships, the Fund
could be in a less advantageous position than if such a hedge had not been
established.
TEMPORARY SHORT-TERM INVESTMENTS. The Fund's policy generally is to invest in
a globally diversified portfolio of equity and longer term debt securities. In
the interest of preserving shareholders' capital and consistent with the Fund's
investment objective, however, the Advisers may employ a temporary defensive
investment strategy if they determine that such a strategy is warranted. Under a
defensive strategy, the Fund may hold cash (United States dollars or foreign
currencies) or invest any 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 purchase commercial paper only 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 Advisers to be of equivalent quality. In addition, for
temporary defensive reasons, such as during a time 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.
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RISK FACTORS
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FOREIGN SECURITIES AND CURRENCIES. Investing in securities issued by foreign
corporations and governments involves risks not typically associated with
investing in obligations issued by domestic corporations and the United States
government. The values of foreign investments are affected by changes in
currency rates or
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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 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 subject to
less 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. Furthermore,
issuers of foreign common stocks are subject to different, often less
comprehensive, accounting, reporting and disclosure requirements than domestic
issuers. Foreign custodial costs relating to the Fund's portfolio securities may
be higher than domestic custodial costs.
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
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Tax Status." In order to qualify,
among other requirements, the Fund will limit its investments so that, at the
close of each calendar quarter, (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,
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<PAGE> 17
under certain circumstances, present greater risks to an investor than an
investment in a diversified company.
YEAR 2000. 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 Advisers 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 Advisers
are taking steps that they believe are reasonably designed to address the Year
2000 Problem with respect to computer systems that it uses and 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 upon 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 default by the other party. The Fund will not invest more than
15% of its net assets in securities subject to repurchase agreements that do not
mature within seven days and in any other illiquid securities. In the event of
the bankruptcy of the seller of a repurchase agreement, the Fund could
experience delays in liquidating the underlying securities, and the Fund could
incur a 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 the Statement of
Additional Information.
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 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
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subject to conditions set forth in an SEC exemptive order authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES. The Advisers are 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 debt securities in the Fund's portfolio 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 Advisers are
authorized to place portfolio transactions, to the extent permitted by law, with
brokerage firms affiliated with the Fund, the Advisers or the Distributor and
with brokerage firms participating in the distribution of shares of the Fund if
they reasonably believe that the quality of the execution and the commission are
comparable to that available from other qualified brokerage firms. The Advisers
are authorized to pay higher commissions to brokerage firms that provide them
with investment and research information than to firms which do not provide such
services if the Advisers determine that such commissions are reasonable in
relation to the overall services provided. The information received may be used
by the Advisers in managing the assets of other advisory accounts as well as in
the management of the assets of the Fund.
PORTFOLIO TURNOVER. The Fund may experience a high rate of portfolio turnover
which may vary from year to year with respect to both its equity and debt
securities. The rate of portfolio turnover is not a limiting factor when the
Advisers deem it desirable to purchase or sell securities or to engage in
transactions in options, futures contracts and options on futures contracts. A
100% turnover rate would occur, for example, if all the securities held by the
Fund were replaced in a period of one year. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs, which
are borne directly by the Fund, and may result in realization of short-term
capital gains if securities are held for one year or less, which may be subject
to applicable income taxes. See "Tax Status." Although no assurance can be given
with respect to future portfolio turnover rates, it is anticipated that the
Fund's rate of portfolio turnover with respect to either its debt or equity
securities will not generally exceed 400%, with the rate of portfolio turnover
tending to be higher with respect to debt securities.
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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 the total value of the Fund's assets, and (b) any securities loan
is collateralized in accordance with applicable regulatory requirements. The
Advisers believe the risk of loss on such transactions is slight, because, if a
borrower were to default for any reason, the collateral should satisfy the
obligation. See the Statement of Additional Information.
RESTRICTED SECURITIES. The Fund may invest up to 15% of its net assets in
restricted securities and other illiquid assets. As used herein, restricted
securities are those that have been sold in the United States without
registration under the Securities Act of 1933, as amended ("1933 Act"), and are
thus subject to restrictions on resale. Excluded from the limitation, however,
are any restricted securities which are eligible for resale pursuant to Rule
144A under the 1933 Act and which have been determined to be liquid by the
Trustees or by the Advisers pursuant to Trustee-approved guidelines. The
determination of liquidity is based on the volume of reported trading in the
institutional secondary market for each security. The Trustees will carefully
monitor the Fund's investment in Rule 144A securities focusing on such factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of illiquidity
in the Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing these restricted securities. These difficulties and
delays could result in the Fund's inability to realize a favorable price upon
disposition of restricted securities, and in some cases might make disposition
of such securities at the time desired by the Fund impossible. Since market
quotations are not readily available for restricted securities, such securities
will be valued by a method that the Fund's Trustees believe accurately reflects
fair value. Also excluded from this limitation on restricted securities are
securities purchased by the Fund issued by 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.
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 to do so would cause more than 25% of its total assets,
taken at market value, to be involved in such sales.
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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 securities or foreign
currencies, or contracts based on financial indices including any stock index or
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
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 market values or 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. See the Statement of Additional Information for further discussion
of the use, risks and costs of futures contracts and options on futures
contracts.
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.
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See the Statement of Additional Information for further discussion of the use,
risks and costs of options on foreign currencies.
OPTIONS ON PORTFOLIO SECURITIES. The Fund may write call 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 written by it will be
conducted on recognized securities exchanges. There is no fixed limit on the
percentage of the Fund's assets upon which options may be written.
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 ("Counterparties") through direct
bilateral agreement with the Counterparty. The Fund will sell only OTC Options
(other than OTC currency options) that are subject to a buy-back provision
permitting the Fund to require 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 in illiquid securities.
The Fund will receive a premium (less any commissions) from the writing of
such contracts, consistent with the Fund's investment objective. The writing of
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 the writing of call options listed on
an exchange or traded in the over-the-counter market, where the Fund owns the
underlying security, tends to reduce such risks. The writer foregoes the
opportunity to profit from an increase in market price of the underlying
security above the exercise price so long as the option remains open. See the
Statement of Additional Information for more information.
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, for example, 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 approximating the
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<PAGE> 22
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 a 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 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 to
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.
POTENTIAL RISKS OF OPTIONS, FUTURES AND FORWARD CONTRACTS. The successful use
of the foregoing investment techniques depends on the ability of the Fund's
Advisers to forecast the markets and interest rate and currency exchange rate
movements correctly. Should the markets or 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, movements in the prices of such
instruments and movements in the price of the securities and currencies hedged
or used for cover may not be closely correlated 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
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. If a secondary market does not exist with respect to
an option
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<PAGE> 23
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. The Fund may not purchase or sell futures contracts or related options
for which the aggregate initial margin and premiums exceed 5% of the fair market
value of the Fund's assets. In order to prevent leverage in connection with the
purchase of futures contracts 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. The Fund's ability to engage in options
and futures transactions may be limited by tax considerations. See the Statement
of Additional Information.
FORWARD COMMITMENTS. The Fund may purchase or sell debt 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. This 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 take 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 either settle a Forward Commitment by taking delivery of the
securities or may either resell or repurchase a Forward Commitment on or before
the settlement date in which event the Fund may reinvest the proceeds in another
Forward Commitment. 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 securities of the Fund (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")). The percentage
21
<PAGE> 24
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 debt 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
debt securities issued by government or political subdivisions because such
issuers are not members of any industry, the Fund does not intend to invest
more that 25% of its total assets in debt securities issued or guaranteed
by any government (except U.S. Government, its agencies or
instrumentalities).
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, banker's acceptances, certificates
of deposit and similar evidence 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.
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------
THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $60 billion under management or supervision. Van Kampen American Capital's
more than 50 open-end and 38 closed-end funds and more than 2,500 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. Van Kampen American Capital Distributors, Inc., the distributor of
the Fund and the sponsor of the funds mentioned above, is also a wholly-owned
subsidiary of Van Kampen American Capital. Van Kampen American Capital is an
indirect wholly-owned subsidiary of Morgan Stanley Dean Witter &
22
<PAGE> 25
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 (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 global custody, securities clearance
services and securities lending.
THE SUBADVISER. The Subadviser is a wholly-owned subsidiary of Morgan Stanley
Group, Inc. 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 December 31, 1997, the
Subadviser had, together with its affiliated investment management companies,
assets under management (including assets under fiduciary advisory control)
totaling approximately $ 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 Group Inc. 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 Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. The Adviser 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 will be primarily responsible for
recommending the allocation of investments among various international markets
and currencies; recommendation and selection of particular securities in the
international markets; and placement of portfolio transactions in the foreign
markets. Under an investment advisory agreement between the Adviser and the Fund
(the "Advisory Agreement"), the Fund pays the Adviser a monthly fee computed on
average daily net assets of the Fund at the annual rate of 1.00% of the Fund's
average daily net assets.
23
<PAGE> 26
This fee is higher than that charged by most other mutual funds but the Fund's
Trustees believe it is justified by the special international nature of the Fund
and its asset allocation features and it is not necessarily higher than the fees
charged by certain mutual funds with an investment objective and investment
policies similar to those of the Fund. Under the Advisory Agreement, the Fund
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 shareholder
service agency fees, 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, ACCESS, Van Kampen American Capital or Morgan Stanley
Dean Witter & Co.), and all other business expenses not specifically assumed by
the Adviser. Advisory (management) fees and total operating expense ratios are
shown under the caption "Annual Fund Operating Expenses and Example" herein.
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 as the Adviser, the Subadviser or the Distributor may deem
appropriate, they 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 American Capital
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, the Adviser, the Subadviser and their respective 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. Barton M. Biggs, Madhav Dhar, Francine J. Bovich and Ann
D. Thivierge assumed the primary responsibility for the day-to-day management of
equity portion the Fund's portfolio on April 1, 1997.
Since 1980, Mr. Biggs has been Chairman and a director of the Subadviser, and
a Managing Director of the Subadviser and Morgan Stanley & Co. Incorporated
since 1975. Mr. Biggs is a director of Morgan Stanley Group, Inc. and a director
and chairman of other investment companies of the Subadviser. Mr. Biggs holds a
B.A. from Yale University and an M.B.A. from New York University.
Mr. Dhar is Managing Director of the Subadviser and Morgan Stanley & Co.
Incorporated. He has been with the Subadviser since 1984. Mr. Dhar is a co-head
24
<PAGE> 27
of the Subadviser's emerging markets group, and has been involved in the
launching of the Subadviser's country funds. Mr. Dhar holds a B.S. from St.
Stephens College in Delhi University (India) and an M.B.A. from Carnegie-Mellon
University.
Ms. Bovich has been with the Subadviser since 1993. She is responsible for
portfolio management and communication of the Subadviser's asset allocation
strategy to institutional investor clients. Prior to 1993, Ms. Bovich was a
Principal and Executive Vice President of Westwood Management Corp. Prior to
that, Ms. Bovich was a Managing Director of Citicorp Investment Management, Inc.
where she was responsible for the Institutional Investment Management group. Ms.
Bovich holds a B.A. in Economics from Connecticut College and an M.B.A. in
Finance from New York University.
Ms. Thivierge is a Principal of the Subadviser. She is a member of MSAM asset
allocation committee, primarily representing the Total Fund Management team
since its inception in 1991. Ms. Thivierge has been with the Subadviser since
1986. Prior to 1986, Ms. Thivierge was with Edgewood Management Company. Ms.
Thivierge holds a B.A. in International Relations from James Madison College,
Michigan State University, and an M.B.A. in Finance from New York University.
The Subadviser has employed J. David Germany, Michael B. Kushma, Paul E.
O'Brien and Robert M. Smith to manage the fixed income portion 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
(Valedictorian) 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.
25
<PAGE> 28
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.
Robert Smith, a Principal of Morgan Stanley & Co. Incorporated, joined the
Subadviser in June 1994 and has had or shared primary responsibility for
managing the Morgan Stanley Global Fixed Income Fund's assets since July 1994.
Prior to joining the Subadviser he spent eight years as Senior Portfolio Manager
- -- Fixed Income at the State of Florida Pension Fund. Mr. Smith's
responsibilities included active total-rate-of-return management of long term
portfolios and supervision of other fixed income managers. A graduate of Florida
State University with a B.S. in Business, Mr. Smith also received an M.B.A. --
Finance from Florida State University and holds a Chartered Financial Analyst
(CFA) designation.
- ------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------
The Alternative Sales Arrangements permits an investor to choose the method of
purchasing shares of the Fund that is most beneficial given the amount of the
purchase and the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
maximum sales charge of up to 4.75% of the offering price (4.99% of the net
amount invested), reduced on investments of $100,000 or more. Investments of $1
million or more are not subject to any sales charge at the time of purchase, but
a CDSC of 1.00% may be imposed on certain 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% 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
26
<PAGE> 29
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 higher 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
27
<PAGE> 30
"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 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.
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."
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<PAGE> 31
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
- ------------------------------------------------------------------------------
GENERAL
The Fund offers three classes of shares to the public on a continuous basis
through the Distributor as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are acting as securities dealers ("dealers") and NASD members or eligible
non-NASD members who are acting as brokers or agents for investors ("brokers").
The terms "dealers" and "brokers" are sometimes referred to 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, ACCESS Investor Services, Inc. ("ACCESS"), a
wholly-owned subsidiary of Van Kampen American Capital. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A shares,
Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or deferred sales charge depending on the class of shares chosen by
the investor, as shown in the tables herein. Net asset value per share for each
class is determined once daily as of the close of trading on the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m., New York time) each day the
Exchange is open. 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
29
<PAGE> 32
to such class less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding.
Equity securities listed or traded on a national securities exchange are
valued at the last sale price. Unlisted equity securities and listed equity
securities for which the last sales price is not available are valued at the
most recent bid price. The net asset value of debt securities 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
Advisers deem 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, and
(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 on futures contracts 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 Adviser based on
procedures approved 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 acceptance by ACCESS.
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
30
<PAGE> 33
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 specified periods of time. The
Distributor may provide additional compensation to Edward D. Jones & Co. or an
affiliate thereof based on a combination of its sales of shares and increases in
assets under management. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total daily net assets of the Fund on an annual basis. These
programs will not change the price an investor will pay for shares or the amount
that the Fund will receive from such sale.
31
<PAGE> 34
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 herein.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED
AS % OF AS % OF TO DEALERS
SIZE OF OFFERING NET AMOUNT (AS A % OF
INVESTMENT PRICE INVESTED OFFERING PRICE)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
Less than $100,000...................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000......... 3.75% 3.90% 3.25%
$250,000 but less than $500,000......... 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000....... 2.00% 2.04% 1.75%
$1,000,000 or more*..................... * * *
- --------------------------------------------------------------------------------------
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC of
1.00% on redemptions made within one year of the purchase. A commission
will be paid to authorized dealers who initiate and are responsible for
purchases of $1 million or more as follows: 1.00% on sales to $2 million,
plus 0.80% on the next $1 million and 0.50% on the excess over $3
million.
In addition to the reallowances from the applicable public offering price
described herein, the Distributor may, from time to time, pay or allow
additional reallowances or promotional incentives, in the form of cash or other
compensation, to authorized dealers that sell shares of the Fund. Authorized
dealers which are reallowed all or substantially all of the sales charges may be
deemed to be underwriters for purposes of the 1933 Act.
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 interpretation of federal law
expressed herein and banks and other financial institutions may be required to
register as dealers pursuant to certain state laws.
32
<PAGE> 35
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
dealers 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.
VOLUME DISCOUNTS. The size of investment shown in the preceding sales charge
table applies to the total dollar amount being invested by any person in shares
of the Fund, or in any combination of shares of the Fund and shares of other
Participating Funds, although other Participating Funds may have different sales
charges.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
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
thirteen-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
thirteen-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 thirteen-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
33
<PAGE> 36
the minimum total purchase 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 ACCESS with appropriate backup data
for each participating investor in a computerized format fully compatible with
ACCESS' processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
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<PAGE> 37
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.
(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 Participating 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 of
organizations 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 details 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-
35
<PAGE> 38
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 American Capital 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. Prior to February 1, 1997, a commission will be paid to
authorized dealers who initiate and are responsible for such purchases
within a rolling twelve-month period as follows: 1.00% on sales to $5
million, plus 0.50% on the next $5 million and 0.25% on the excess over
$10 million. For purchases on February 1, 1997 and thereafter, a
commission will be paid as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million and 0.25%
on the excess over $50 million.
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and other Participating Funds, (iv) has a membership that the
authorized dealer can certify as to the group's members and (v) satisfies
other uniform criteria established by the Distributor for the purpose of
realizing 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> 39
The term "families" includes a person's spouse, children under 21 years of age
and grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with ACCESS by the investment
adviser, trust company or bank trust department, provided that ACCESS receives
federal funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized dealer may charge a transaction
fee for placing an order to purchase shares pursuant to this provision or for
placing a redemption order with respect to such shares. Authorized dealers will
be paid a service fee as described herein under "Distribution and Service Plans"
on purchases made as described in (3) through (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............................................ None
</TABLE>
- ------------------------------------------------------------------------------
37
<PAGE> 40
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 4.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Additionally, the Distributor
may, from time to time, pay additional promotional incentives in the form of
cash or other compensation to authorized dealers that sell Class B shares of the
Fund.
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the lesser of the then current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. It is presently the policy of the Distributor
not to accept any order for Class C shares in an amount of $1 million or more
because it ordinarily will be more advantageous for an investor making such an
investment to buy Class A shares.
In determining whether a CDSC is applicable to a redemption it is assumed that
the redemption is first of any shares in the shareholder's Fund account that are
not subject to a CDSC and second of shares held for more than one year or shares
acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of up to 1.00% of the purchase amount will
generally be paid to authorized dealers at the time of purchase. Authorized
dealers also will be paid ongoing commissions and transaction fees of up to
0.75% of the average daily net assets of the Fund's Class C shares 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.
38
<PAGE> 41
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 commissions or transaction fee is paid to
authorized dealers at the time of purchase of such shares, and (v) effected
pursuant to the right of the Fund to liquidate a shareholder's account as
described herein under "Redemption of Shares." The CDSC also is waived on
redemptions of Class C shares as it relates to the reinvestment of redemption
proceeds in shares of the same class of the Fund within 180 days after
redemption. See the Statement of Additional Information for further discussion
of waiver provisions.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investments in its shares at little or no extra cost to the investor. Below is a
description of such services.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares of the Fund are held by ACCESS, the Fund's transfer agent.
ACCESS performs bookkeeping, data processing and administration services related
to the maintenance of shareholder accounts. Except as described in this
Prospectus, after each share transaction in an account, the shareholder receives
a statement showing the activity in the account. Each shareholder who has an
account in certain of the Participating Funds will receive quarterly statements
from ACCESS showing any reinvestments of dividends and capital gains
distributions and any other activity in the account since the preceding
statement. Such shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gains distributions and systematic purchases or redemptions. Additions to an
investment account may be made at any time by purchasing shares through
authorized dealers or by mailing a check directly to ACCESS.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a
Surety Bond in a form acceptable to ACCESS. On the date the letter is received
ACCESS will calculate a
39
<PAGE> 42
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.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge) on the record date. Unless the shareholder instructs ACCESS 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 ACCESS. The investor may, on the initial application or prior to any
declaration, instruct that dividends be paid in cash and capital gains
distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize ACCESS to debit a bank account on a regular
basis to invest predetermined 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
American Capital Trust Company serves as custodian under the IRA, 403(b)(7) and
Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.
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 ACCESS has received the
application and the voided check or deposit slip, such shareholder's designated
bank account, following any redemption, will be credited with the proceeds of
such redemption. Once enrolled in the ACH plan, a shareholder may terminate
participation at any time by writing ACCESS.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application accompanying this
Prospectus or
40
<PAGE> 43
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 other
Participating Fund only if shares of that Participating Fund are available for
sale; however, during periods of suspension of sales, shares of the
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 upon receipt of prior
approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, not to approve such requests.
When Class B shares and Class C shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such shares from a Participating Fund. If such
Class B or Class C shares are redeemed and not exchanged for shares of another
Participating Fund, such Class B or Class C shares are subject to the CDSC
schedule imposed by the Participating Fund from which such shares were
originally purchased.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges
41
<PAGE> 44
unless otherwise designated in the application form accompanying this
Prospectus. Van Kampen American Capital and its subsidiaries, including ACCESS
(collectively "VKAC"), and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape recording telephone
communications, and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, neither VKAC nor the Fund
will be liable for following telephone instructions which it reasonably believes
to be genuine. VKAC and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed. If the exchanging shareholder does not have an account in the fund
whose shares are being acquired, a new account will be established with the same
registration, dividend and capital gain 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 mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for additional information regarding such
fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares in a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a quarterly, semi-annual or annual withdrawal plan. This plan provides
for the orderly use of the entire account, not only the income but also the
capital, if necessary. Each withdrawal constitutes a redemption of shares on
which any capital gain or loss will be recognized. The planholder may arrange
for monthly, quarterly, semi-annual or annual checks in any amount not less than
$25. Such a systematic withdrawal plan may also be maintained by an investor
purchasing Class B 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
42
<PAGE> 45
incurring a CDSC. Initial account balance means the amount of the shareholder's
investment at the time the election to participate in the plan is made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with the purchase of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. Any gain or loss realized by the shareholder upon redemption of shares
is a taxable event.
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.vkac.com
for further instruction. VKAC 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 VKAC 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, ACCESS 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 ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256.
Shareholders may also place redemption requests through an authorized dealer.
Orders received from authorized dealers must be at least $500 unless transmitted
via the FUNDSERV network. The redemption price for such shares is the net asset
value next calculated after an order is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit redemption requests received by them to the Distributor so they will be
received prior to such time.
As described herein under "Purchase of Shares," redemptions of Class B shares
or 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
43
<PAGE> 46
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 ACCESS. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request. In the event the redemption is requested by a corporation, partnership,
trust, fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 120 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to ACCESS. Where Van Kampen American Capital Trust
Company serves as IRA custodian, special IRA, 403(b)(7), or Keogh distribution
forms must be obtained from and be forwarded to Van Kampen American Capital
Trust Company, P.O. Box 944, Houston, Texas 77001-0944. Contact the custodian
for information.
In the case of redemption requests sent directly to ACCESS, the redemption
price is the net asset value per share next determined after the request is
received in proper form. Payment for shares redeemed will be made by check
mailed within seven days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payment may be postponed or the right
of redemption suspended as provided by the rules of the SEC. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check until it confirms the purchase check has cleared, which may
take up to fifteen 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
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<PAGE> 47
Prospectus or call the Fund at (800) 341-2911 to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. VKAC
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither VKAC nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VKAC and the
Fund may be liable for any losses due to unauthorized or fraudulent instructions
if reasonable procedures are not followed. ACCESS will record any calls.
Telephone redemptions may not be available if the shareholder cannot reach
ACCESS by telephone, whether because all telephone lines are busy or for any
other reason; in such case, a shareholder would have to use the Fund's regular
redemption procedure previously described. Requests received by ACCESS prior to
4:00 p.m., New York time, on a regular business day will be processed at the net
asset value per share determined that day. These privileges are available for
all accounts other than retirement accounts. The telephone redemption privilege
is not available for shares represented by certificates. If an account has
multiple owners, ACCESS may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions are expected to be wired on the next business day following the date
of redemption. This service is also not available with respect to shares held in
an individual retirement account (IRA) for which Van Kampen American Capital
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 will be given and the
shareholder will be given an opportunity to purchase the required value of
additional shares at the next determined net asset value without sales charge.
Any involuntary redemption may only occur if the shareholder account is less
than the minimum initial investment due to shareholder redemptions.
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<PAGE> 48
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 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 American Capital 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
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<PAGE> 49
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.
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
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<PAGE> 50
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 December 31, 1997, there were $666,494 and $29,521 of unreimbursed
distribution-related expenses with respect to Class B shares and Class C shares,
respectively, representing 6.63% and 1.71% of the Fund's net assets attributable
to Class B shares and Class C shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the Fund or
recovered through CDSCs.
The Distributor will not use the proceeds from the CDSC applicable to a
particular class of shares to defray distribution-related expenses attributable
to any other class of shares. Various federal and state laws prohibit national
banks and some state-chartered commercial banks from underwriting or dealing in
the Fund's shares. In addition, state securities laws on this issue may differ
from the interpretations of federal law, and banks and financial institutions
may be required to register as dealers pursuant to state law. In the unlikely
event that a court were to find that these laws prevent such banks from
providing such services described above, the Fund would seek alternate providers
and expects that shareholders would not experience any disadvantage.
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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 gains distributions.
DIVIDENDS. Dividends from net investment income (including stocks, interest
earned from other investments and net short-term capital gains, but not net
capital
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<PAGE> 51
gains) are the Fund's main source of income. Substantially all of this income,
less expenses, is distributed annually as dividends to shareholders. 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 distributions"). As in the case of dividends, capital gains distributions
are automatically reinvested in additional shares of the Fund at net asset value
unless the shareholder elects otherwise. See "Shareholder
Services -- Reinvestment Plan."
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TAX STATUS
- ------------------------------------------------------------------------------
FEDERAL INCOME TAXATION OF THE FUND. The Fund has elected and qualified and
intends to continue to qualify each year to be treated as a regulated investment
company under Subchapter M of the Code. To qualify as a regulated investment
company, the Fund must comply with certain requirements of the Code relating to,
among other things, the source of its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including tax-exempt interest, taxable
income and net short-term capital gain, but not net capital gains, which are the
excess of net long-term capital gains over net short-term capital losses), it
will not be required to pay federal income taxes on any income distributed to
shareholders. The Fund intends to distribute at least the minimum amount of net
investment income necessary to satisfy the 90% distribution requirement. The
Fund will not be subject to federal income tax on any net capital gains
distributed to shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute, by
December 31 of each year, at least 98% of its ordinary income (not including
tax-exempt income) for such year and at least 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31 of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain
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<PAGE> 52
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 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.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (i) at least 75% of its gross income is passive income or (ii)
an
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<PAGE> 53
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a regulated investment company
that holds stock of a PFIC will be subject to federal income tax on (i) a
portion of any "excess distribution" received on such stock or (ii) any gain
from a sale or disposition of such stock (collectively, "PFIC income"), plus
interest on such amounts, even if the regulated investment company distributes
the PFIC income as a taxable dividend to its shareholders. The balance of the
PFIC income will be included in the regulated investment company's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. If the Fund invests in a PFIC
and elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, which most likely would have to be
distributed to satisfy the 90% distribution requirement and the distribution
requirement for avoiding income and excise taxes. In most instances it will be
very difficult to make this election due to certain requirements imposed with
respect to the election.
As an alternative to making the above-described election to treat the PFIC as
a qualified electing fund, the Fund may make an election to annually
mark-to-market certain publicly traded PFIC stock (a "PFIC Mark-to-Market
Election"). "Marking-to-market," in this context, means recognizing as ordinary
income or loss each year an amount equal to the difference between the Fund's
adjusted tax basis in such PFIC stock and its fair market value. Losses will be
allowed only to the extent of net mark-to-market gain previously included by the
Fund pursuant to the election for prior taxable years. The Fund may be required
to include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the PFIC stock ceases to be publicly traded
or 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.
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 the Fund's net capital gains ("capital gains dividends"), if any, are taxable
to shareholders as long-term capital gains regardless of the length of time
shares of the Fund have been held by such shareholders. Distributions in excess
of the Fund's earnings and
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<PAGE> 54
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 Under the 1997 Tax Act" below. Tax-exempt shareholders
not subject to federal income tax on their income generally will not be taxed on
distributions from the Fund.
Shareholders receiving distributions in the form of additional shares issued
by the Fund will be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the distribution date. The basis of such shares will equal the
fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied. Fund
distributions will not qualify for the dividends received deduction for
corporations, except to the extent the Fund receives dividends from domestic
corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31 prior to the date of payment. In
addition, certain other distributions made after the close of a taxable year of
the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
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, the Fund will be eligible to, 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. Shareholders will be
entitled, subject to certain limitations, to either deduct their respective pro
rata portions of such foreign taxes in computing their taxable
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<PAGE> 55
incomes or use them as foreign tax credits against their 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 country and (ii) the portion of dividends that
represent income derived from sources within each 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 U.S.
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 rules described above 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 is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.
SALE OF SHARES. The sale of shares (including transfers in connection with a
redemption or repurchase of shares) will be a taxable transaction for federal
income tax purposes. Selling shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
shares and the amount received. If such shares are held as a capital asset, the
gain or loss will be a capital gain or loss and will be long-term if such shares
have been held for more than one year. For a summary of the tax rates applicable
to capital gains, see "Capital Gains Rates Under the 1997 Tax Act" below. Any
loss recognized upon a taxable disposition of shares held for six months or less
will be treated as a long-
53
<PAGE> 56
term capital loss to the extent of any capital gain dividends received with
respect to such shares. For purposes of determining whether shares have been
held for six months or less, the holding period is suspended for any periods
during which the shareholder's risk of loss is diminished as a result of holding
one or more other positions in substantially similar or related property or
through certain options or short sales.
CAPITAL GAINS RATES UNDER THE 1997 TAX ACT. Under the Taxpayer Relief Act of
1997 (the "1997 Tax Act"), 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, (ii) 28% for capital assets held for more than one year but not more than
18 months and (iii) 20% for capital assets held for more than 18 months. The
maximum net capital gains tax rate for corporations remains at 35%. The tax
rates for capital gains described above will apply to distributions of capital
gain dividends by the Fund (if, as expected, the Fund designates capital gain
dividends as 28% rate gain distributions or 20% rate gain distributions, in
accordance with its holding periods for the securities sold that generated such
capital gain dividends) as well as to sales and exchanges of shares in the Fund.
With respect to capital losses recognized on dispositions of shares held six
months or less where such losses are treated as long-term capital losses to the
extent of prior capital gain distributions received on such shares (see "Sale of
Shares" above), it is unclear how such capital losses offset the capital gains
referred to above. Shareholders should consult their own tax advisers as to the
application of the new capital gains rates to their particular circumstances.
GENERAL. The federal, state and local income tax discussion set forth above
is for general information only. Prospective investors should consult their
advisors regarding the specific federal tax consequences of purchasing, holding
and disposing of shares, as well as the effects of state, local and foreign tax
law 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 a one year period 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
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<PAGE> 57
charge of 4.75% for Class A shares); that all income dividends or capital gains
distributions during the period are reinvested in Fund shares at net asset
value; and that any applicable CDSC has been paid. The Fund's total return will
vary depending on market conditions, the securities comprising the Fund's
portfolio, the Fund's operating expenses and unrealized net capital gains or
losses during the period. Total return is based on historical earnings and asset
value fluctuations and is not intended to indicate future performance. No
adjustments are made to reflect any income taxes payable by shareholders on
dividends and distributions paid by the Fund.
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.
Total return is 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 ratings or rankings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds, with the Consumer Price Index, the Dow Jones
Industrial Average Index, Standard & Poor's, or NASDAQ Composite Index, other
appropriate indices of investment securities, or with investment or savings
vehicles. The performance information may also include evaluations of the Fund
published by nationally recognized ranking services and by nationally recognized
financial publications. Such comparative performance information will be stated
in the same
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<PAGE> 58
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 data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
The Fund's Annual Report and Semi-Annual Report contains additional
performance information. A copy of the Annual Report and 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 Fund was originally incorporated in Maryland on November 24, 1993. The
Fund was reorganized as a business trust under the laws of the State of Delaware
as of August 5, 1995 and adopted its current name as of that time. The
authorized capitalization of the Fund consists of an unlimited number of shares
of beneficial interest, par value $0.01 per share, divided into classes. The
Fund currently offers three classes of shares, designated Class A shares, Class
B shares and Class C shares. Other classes may be established from time to time
in accordance with provisions of the Fund's Declaration of Trust. Shares issued
by the Fund are fully paid, non-assessable and, except as described herein, have
no preemptive or conversion rights.
Each class of shares represents an interest in the same assets of the Fund and
generally are identical in all respects except that each class bears certain
distribution expenses and has exclusive voting rights with respect to its
distribution fee. There are no conversion, preemptive or other subscription
rights, except with respect to the conversion of certain shares into Class A
shares as described herein. In the event of liquidation, each of the shares of
the Fund is entitled to its portion of all of the Fund's net assets after all
debt and expenses of the Fund have been paid. Since Class B shares and Class C
shares pay higher distribution 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.
56
<PAGE> 59
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 Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the 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 December 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.
Shareholder inquiries should be directed to the Van Kampen American Capital
Global Managed Assets Fund, One Parkview Plaza, Oakbrook Terrace, Illinois
60181, Attn: Correspondence.
For Automated Telephone Service which provides 24-hour direct dial access to
Fund facts and shareholder account information, dial (800) 847-2424. For
inquiries through Telecommunications Device for the Deaf (TDD) dial (800)
421-2833.
57
<PAGE> 60
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 AMERICAN CAPITAL
GLOBAL MANAGED ASSETS FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Subadviser
MORGAN STANLEY ASSET
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020
Distributor
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen American Capital
Global Managed Assets Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital
Global Managed Assets Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICE WATERHOUSE LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 61
------------------------------------------------------------------------------
GLOBAL MANAGED
ASSETS FUND
------------------------------------------------------------------------------
P R O S P E C T U S
APRIL 30, 1998
------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 62
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
Van Kampen American Capital Global Managed Assets Fund (the "Fund") is a
non-diversified, open-end management investment company. This Statement of
Additional Information is not a prospectus. This Statement of Additional
Information should be read in conjunction with the Fund's prospectus (the
"Prospectus") dated as of the same date as this Statement of Additional
Information. This Statement of Additional Information does not include all the
information a prospective investor should consider before purchasing shares of
the Fund. Investors should obtain and read the Prospectus prior to purchasing
shares of the Fund. A Prospectus may be obtained without charge by writing or
calling Van Kampen American Capital Distributors, Inc. at One Parkview Plaza,
Oakbrook Terrace, IL 60181 at (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... B-2
Investment Policies and Techniques.......................... B-2
Options, Futures Contracts and Related Options.............. B-3
Repurchase Agreements....................................... B-11
Loans of Portfolio Securities............................... B-12
Investment Restrictions..................................... B-12
Trustees and Officers....................................... B-15
Legal Counsel............................................... B-23
Investment Advisory Agreements.............................. B-23
Distributor................................................. B-25
Distribution and Service Plans.............................. B-25
Transfer Agent.............................................. B-26
Portfolio Turnover.......................................... B-26
Portfolio Transactions and Brokerage........................ B-26
Determination of Net Asset Value............................ B-28
Purchase and Redemption of Shares........................... B-28
Exchange Privilege.......................................... B-31
Tax Status of the Fund...................................... B-32
Fund Performance............................................ B-32
Other Information........................................... B-32
Report of Independent Accountants........................... B-33
Financial Statements........................................ B-34
Notes to Financial Statements............................... B-55
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 30, 1998.
B-1
<PAGE> 63
GENERAL INFORMATION
The Fund was originally incorporated in Maryland on November 24, 1993 under
the name American Capital Global Managed Assets Fund, Inc. As of August 5, 1995,
the Fund was reorganized as a series of Van Kampen American Capital Global
Managed Assets Fund (the "Trust"), a business trust organized under the laws of
the State of Delaware, and adopted its current name.
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor"), and ACCESS
Investor Services, Inc. ("ACCESS") are wholly-owned subsidiaries of Van Kampen
American Capital, Inc. ("Van Kampen American Capital" or "VKAC"), which is an
indirect wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The
principal office of the Fund, the Adviser, the Distributor and VKAC 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 (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 global
custody, securities clearance services and securities lending.
VKAC uses an investment process designed to attempt to produce consistently
good short-term results, which should help lead to superior long-term
performance.
As of April 3, 1998, no person was known by the Fund to own beneficially or
to hold of record 5% or more of the outstanding Class A shares, Class B shares
or Class C shares of the Fund, except as follows:
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OWNERSHIP AT CLASS PERCENTAGE
OF HOLDER APRIL 3, 1998 OF SHARES OWNERSHIP
---------------- ------------- --------- ----------
<S> <C> <C> <C>
Van Kampen American Capital 263,782 A 24.66%
Trust Company 274,633 B 28.40%
2800 Post Oak Blvd. 11,559 C 7.06%
Houston, TX 77056
Merrill Lynch Pierce Fenner & 966,996 B 6.24%
Smith, Inc. 163,696 C 9.62%
Attn: Fund Administration
4800 Deer Lake Dr. E, 3rd
Fl.
Jacksonville, FL 32246-6484
</TABLE>
Van Kampen American Capital Trust Company acts as custodian for certain
employee benefit plans and independent retirement accounts.
INVESTMENT POLICIES AND TECHNIQUES
The Fund's investment objective is to seek to provide total return through
a managed balance of foreign and domestic equity and debt securities. The
following disclosures supplement disclosures set forth in the Prospectus.
Readers must refer also to the Prospectus for a complete presentation.
B-2
<PAGE> 64
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 larger than in Aaa securities.
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 can 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 also is likely to
result in a higher portfolio turnover.
B-3
<PAGE> 65
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 would write 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 would own or have
the right to acquire securities of the type that it would be obligated to
deliver if any outstanding option were exercised. An option is for cross-hedging
purposes if it is not covered by the security subject to the option, but is
designed to provide a hedge against another 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 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. In
addition, the Fund may purchase call options 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> 66
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 will not purchase call or put options on securities if as a
result, more than 10% of its net assets would be invested in premiums on such
options.
The Fund may purchase either listed or over-the-counter options.
OPTIONS ON STOCK INDICES
Options on stock indices are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash which amount will depend upon the closing
level of the stock index upon which the option is based being greater than (in
the case of a call) or less than (in the case of a put) the exercise price of
the option. The amount of cash received will be the difference between the
closing price of the index and the exercise price of the option, multiplied by a
specified dollar multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount.
Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indices are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on The Chicago Board Options Exchange, the American Stock Exchange and other
exchanges. The Fund may write or purchase options which are listed on an
exchange as well as options which are traded over-the-counter.
Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.
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.
Mortgage-Related Securities. The following special considerations will be
applicable to options on mortgage-related securities. Currently such options are
only traded over-the-counter. Since the remaining
B-5
<PAGE> 67
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.
FOREIGN CURRENCY OPTIONS
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 the 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 a 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 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
B-6
<PAGE> 68
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 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.
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 securities or foreign currencies, or contracts based on financial
indices including any stock index or 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-related 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.
Currently, stock index futures contracts can be purchased with respect to
the Standard & Poor's 500 Stock Index on the Chicago Mercantile Exchange
("CME"), the New York Stock Exchange Composite Index on the New York Futures
Exchange and the Value Line Stock Index on the Kansas City Board of Trade.
Differences in the stocks included in the indexes may result in differences in
correlation of the futures contracts with movements in the value of the
securities being hedged. An interest rate futures contract is an agreement
pursuant to which a party agrees to take or make delivery of a special debt
security (such as a U.S. Treasury bond or notes) at a specified future time and
at a specific price.
Foreign stock index futures traded outside the United States include the
Nikkei Index of 225 Japanese stocks traded on the Singapore International
Monetary Exchange ("Nikkei Index"), Osaka Index of 50 Japanese stocks traded on
the Osaka Exchange, Financial Times Stock Exchange Index of the 100 largest
stocks on the London Stock Exchange, the All Ordinaries Share Price Index of 307
stocks on the Sydney, Melbourne Exchanges, Hang Seng Index of 33 stocks on the
Hong Kong Stock Exchange, Barclays Share Price Index of 40 stocks on the New
Zealand Stock Exchange and Toronto Index of 35 stocks on the Toronto Stock
Exchange. Futures and futures options on the Nikkei Index are traded on the CME
and United States
B-7
<PAGE> 69
commodity exchanges may develop futures and futures options on other indices of
foreign securities. Futures and options on United States devised indices of
foreign stocks are also being developed.
Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its Custodian in an
account in the broker's name an amount of cash or liquid securities equal to a
percentage (which will normally range upwards of 2%) 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 purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund receives from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund purchases a futures contract and
the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.
At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or a gain.
Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract
serves as a temporary substitute for the purchase of individual securities,
which may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
substantially reduces the risk to the Fund of a market decline and, by so doing,
provides an alternative to the liquidation of securities positions in the Fund
with attendant transaction costs. Ordinarily transaction costs associated with
futures transactions are lower than the transaction costs that would be incurred
in the purchase and sale of the underlying securities.
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 this imperfect correlation, the Fund could buy or sell futures
contracts in a greater dollar amount than the dollar amount of securities being
hedged if the historical volatility of the securities being hedged is greater
than the historical volatility of the securities, currency or index underlying
the futures contract. Conversely, the Fund could buy or sell futures contracts
in a lesser dollar amount than the dollar amount of the securities being hedged
if the historical volatility of the securities being hedged is less 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.
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<PAGE> 70
There is also the risk that the price of futures contracts may not be
closely correlated with movements in the securities, currency or index
underlying the futures contract due to certain market distortions. First, all
participants in the futures market are subject to margin depositary and
maintenance requirements. Rather than meet additional margin depositary
requirements, investors may close futures contracts through offsetting
transactions, which could distort the normal relationship between the futures
market and the securities or index underlying the futures contract. Second, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures markets may cause
temporary price distortions. Due to the possibility of price distortion in the
futures markets and because of the imperfect correlation between movements in
futures contracts and movements in the securities underlying them, a correct
forecast of general market trends by the Advisers may still not result in a
successful hedging transaction judged over a very short time frame.
There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.
Successful use of futures is also subject to the Advisers' ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.
The Fund will not enter into future contracts or option transactions
(except for closing transactions) other than for bona fide hedging purposes if
immediately thereafter, the sum of its initial margin and premiums on open
futures contracts and options exceed 5% of the fair market value of the Fund's
assets; however, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In order to prevent leverage in connection with the purchase of
futures contracts by the Fund, an amount of cash or liquid securities equal to
the market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the custodian.
Additional Risks of Options and Futures Transactions. Each of the United
States exchanges has established limitations governing the maximum number of
call or put options on the same underlying security or futures contract (whether
or not covered) which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). Option positions of all investment companies
advised by the Adviser are combined for purposes of these limits. An exchange
may order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of
B-9
<PAGE> 71
futures positions and subjecting some futures traders to substantial losses. In
such event, and in the event of adverse price movements, the Fund would be
required to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the portfolio being hedged, if any,
may partially or completely offset losses on the futures contract. However,
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. Options on futures contracts to be
written or purchased by the Fund will be traded on United States or foreign
exchange or over-the-counter.
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 purchaser 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 is 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 purposes 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 is intended to serve the same purpose as the actual purchase
of the futures contract.
In addition to the risks described above which apply to all options
transactions, there are several special risks relating to options on futures.
The Advisers will not purchase options on futures on any exchange unless, in the
Advisers' 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.
FORWARD COMMITMENTS
For each Forward Commitment purchased by the Fund, 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
foregoes or reduces the potential for both gain and loss in the security which
is being hedged by the Forward Commitment sale. See the Prospectus for further
information.
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<PAGE> 72
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES
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.
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 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.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with domestic or foreign
banks or broker-dealers deemed to be creditworthy by the Adviser under
guidelines approved by the Trustees. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a debt
security and
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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 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 its
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 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 debt 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 debt 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
debt securities issued or guaranteed by any government (except U.S.
Government, its agencies or instrumentalities).
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<PAGE> 74
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 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.
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. 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 (i) securities 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, including real estate investment
trusts.
6. 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.
7. 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."
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 Fund's Trustees and which apply at the time of
purchase of portfolio securities.
1. The Fund may not 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.
2. The Fund may not 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.
3. The Fund may not 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.
4. The Fund may not invest in securities of other investment companies
except as part of a merger, reorganization or other acquisition and
except that the Fund may purchase securities of other investment
companies to the extent permitted by (i) the 1940 Act, as amended from
time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief from the provisions of the 1940 Act.
5. 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
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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.
6. The Fund may not invest in securities of any company if any officer or
director of the Fund or of the Adviser owns more than 1/2 of 1% of the
outstanding securities of such company, and such officers and directors
who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
7. 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.
8. 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 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act.
9. The Fund may not purchase or otherwise acquire any security if, as a
result, more than 15% 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 that portion of over-the-counter
options held by the Fund required to be treated as illiquid under
applicable law 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 which the
Trustees or the Adviser under Trustee-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. Excluded from this limitation are securities purchased
by the Fund 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) on exemption or other relief from the provisions
of the 1940 Act.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
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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 VK/AC
Holding, Inc. ("VKAC Holding"), Van Kampen American Capital, Inc. ("Van Kampen
American Capital" or "VKAC"), Van Kampen American Capital Investment Advisory
Corp. ("Advisory Corp."), Van Kampen American Capital Asset Management, Inc.
("Asset Management"), Van Kampen American Capital Distributors, Inc., the
distributor of the Fund's shares (the "Distributor"), Van Kampen American
Capital Advisors Corp., Van Kampen Merritt Equity Advisors Corp., Van Kampen
American Capital Insurance Agency of Illinois, Inc., VK/AC System, Inc., Van
Kampen American Capital Record Keeping Services, Inc., American Capital
Contractual Services, Inc., Van Kampen American Capital Trust Company, Van
Kampen American Capital Exchange Corporation, and ACCESS Investors Services
Inc., the Fund's transfer agent ("ACCESS"). 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.
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.
</TABLE>
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<PAGE> 77
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------- --------------------------
<S> <C>
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 VKAC. Chairman and a Director
2800 Post Oak Blvd. of the Advisers and the Distributor. Chairman and a
Houston, TX 77056 Director of ACCESS. Director or officer of certain other
Date of Birth: 10/19/39 subsidiaries of VKAC. Chairman of the Board of Governors
and the Executive Committee of the Investment Company
Institute. 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
American Capital Management Inc.
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company,
One ServiceMaster Way a business and consumer services. Director of Illinois
Downers Grove, IL 60515 Tool Works, Inc., a manufacturing company; the Urban
Date of Birth: 07/08/44 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 American Capital
Management, Inc. Trustee/Director of each of the funds in
the Fund Complex, and other open-end and closed-end funds
advised by the Advisers or Van Kampen American Capital
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-16
<PAGE> 78
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>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Dennis J. McDonnell......... President Executive Vice President and a Director of
Date of Birth: 05/20/42 VKAC and VK/AC Holding, Inc. President,
Chief Operating Officer and a Director of
the Advisers, Van Kampen American Capital
Advisors, Inc., and Van Kampen American
Capital Management, Inc. 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 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
November 1996, Executive Vice President and
a Director of VKAC Holding. 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 of other investment
companies advised by the Advisers or their
affiliates.
Peter W. Hegel.............. Vice President Executive Vice President of the Advisers,
Date of Birth: 06/25/56 Van Kampen American Capital Management,
Inc. and Van Kampen American Capital
Advisors, Inc. Prior to July 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............ Vice President and Chief Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 Accounting Officer President and Chief Accounting Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
</TABLE>
B-17
<PAGE> 79
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel,
Date of Birth: 07/29/53 Secretary and Director of VKAC and VK/AC
Holding, Inc. Mr. Nyberg is also Executive
Vice President, General Counsel and a
Director of Van Kampen Merritt Equity
Holdings Corp. Executive Vice President,
General Counsel, Assistant Secretary and a
Director of the Advisers and the
Distributor, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital
Management, Inc., Van Kampen American
Capital Exchange Corporation, American
Capital Contractual Services, Inc. and Van
Kampen American Capital Trust Company.
Executive Vice President, General Counsel
and Assistant Secretary of ACCESS. Director
or officer of certain other subsidiaries of
VKAC. Prior to June of 1997, Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to April of 1997,
he was Executive Vice President, General
Counsel and Director of Van Kampen Merritt
Equity Advisors Corp. 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. Prior to September of
1996, he was General Counsel of McCarthy,
Crisanti & Maffei, 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.
Alan T. Sachtleben.......... Vice President Executive Vice President of the Advisers,
Date of Birth: 04/20/42 Van Kampen American Capital Management,
Inc. and Van Kampen American Capital
Advisors, Inc. Vice President of each of
the funds in the Fund Complex and certain
other investment companies advised by the
Advisers or their affiliates.
Paul R. Wolkenberg.......... Vice President Executive Vice President and Director of
Date of Birth: 11/10/44 VKAC, and VK/AC Holding Inc. Executive Vice
President of the AC Adviser and the
Distributor. President and a Director of
ACCESS. President and Chief Operating
Officer of Van Kampen American Capital
Record Keeping Services, Inc. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.
</TABLE>
B-18
<PAGE> 80
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Edward C. Wood III.......... Vice President and Chief Senior Vice President of the Advisers and
Date of Birth: 01/11/56 Financial Officer Van Kampen American Capital Management,
Inc. Vice President and Chief 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............ Treasurer First Vice President of the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Tanya M. Loden.............. Controller Vice President of the Advisers. Controller
Date of Birth: 11/19/59 of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or their affiliates.
Nicholas Dalmaso............ Assistant Secretary Associate General Counsel and Assistant
Date of Birth: 03/01/65 Secretary of VKAC. Vice President,
Associate General Counsel and Assistant
Secretary of the Advisers, the Distributor,
Van Kampen American Capital Advisors, Inc.
and Van Kampen American Capital 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......... Assistant Secretary Vice President and a Senior Attorney of
Date of Birth: 11/15/63 VKAC. Vice President and Assistant
Secretary of the Advisers, the Distributor,
ACCESS, Van Kampen American Capital
Management, Inc., American Capital
Contractual Services, Inc., Van Kampen
American Capital Exchange Corporation and
Van Kampen American Capital Advisors, 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-19
<PAGE> 81
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of VKAC and
VKAC Holding, Inc. Senior Vice President,
Deputy General Counsel and Secretary of the
Advisers, the Distributor, ACCESS American
Capital Contractual Services, Inc., Van
Kampen American Capital Management, Inc.,
Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital
Insurance Agency of Illinois, Inc., VKAC
System, Inc., Van Kampen American Capital
Record Keeping Services, Inc. and 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......... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: 06/15/56 and Assistant Secretary of VKAC, the
Advisers, the Distributor, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital 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.
Steven M. Hill.............. Assistant Treasurer Vice President of the Advisers. Assistant
Date of Birth: 10/16/64 Treasurer of each of the funds in the Fund
Complex and other investment companies
advised by the Advisers or their
affiliates.
Michael Robert Sullivan..... Assistant Controller Assistant Vice President of the Advisers.
Date of Birth: 03/30/33 Assistant Controller of each of the funds
in the Fund Complex and 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
Morgan Stanley Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Morgan Stanley Fund, Inc. (the "MS Funds").
Each
B-20
<PAGE> 82
trustee/director who is not an affiliated person of the Advisers, the
Distributor, ACCESS, Van Kampen American Capital 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 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
B-21
<PAGE> 83
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.
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 $840 $30,328 $60,000 $111,197
Linda Hutton Heagy* 1995 840 3,141 60,000 111,197
R. Craig Kennedy* 1995 840 2,229 60,000 111,197
Jack E. Nelson* 1995 840 15,820 60,000 104,322
Jerome L. Robinson 1995 840 32,020 15,750 107,947
Phillip B. Rooney* 1997 630 0 60,000 74,697
Dr. Fernando Sisto* 1973 840 60,208 60,000 111,197
Wayne W. Whalen* 1995 840 10,788 60,000 111,197
</TABLE>
- ---------------
* Currently a member of the Board of Trustees. Mr. Phillip B. Rooney became a
member of the Board of Trustees effective April 14, 1997 and thus does not
have a full fiscal year of information to report.
(1) Mr. Robinson is not designated by an asterisk because he is currently not a
member of the Board of Trustees, but was a member 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 December 31, 1997. The
following trustees deferred compensation from the Fund during the fiscal
year ended December 31, 1997: Mr. Branagan, $840; Ms. Heagy, $840; Mr.
Kennedy, $420; Mr. Nelson, $840; Mr. Robinson, $840; Mr. Rooney, $420; Dr.
Sisto, $420; and Mr. Whalen, $840. 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
B-22
<PAGE> 84
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 December 31, 1997 is as follows: Mr. Branagan, $1,315;
Dr. Caruso, $1,223; Mr. Gaughan, $267; Ms. Heagy, $2,019; Mr. Kennedy,
$1,295; Mr. Miller, $1,307; Mr. Nelson, $2,417; Mr. Rees, $205; Mr.
Robinson, $2,353; Mr. Rooney, $424; Dr. Sisto, $1,409; and Mr. Whalen,
$2,415. 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 such 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 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 April 4, 1998, the trustees and officers of the Fund as a group owned
less than 1% of the Fund's outstanding shares.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
INVESTMENT ADVISORY AGREEMENTS
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The Adviser obtains and evaluates
economic, statistical, and financial information to formulate and implement
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 Fund as are necessary to prepare registration statements, prospectuses,
shareholder reports, and notices and proxy solicitation materials. In addition,
the Adviser furnishes at no cost to the Fund the services of the Fund's
President, one or more Vice Presidents as needed, and a Secretary.
B-23
<PAGE> 85
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 will be primarily responsible for
recommending the allocation of investments among various international markets
and currencies; recommendation and selection of particular securities in the
international markets; and placement of portfolio transactions in the foreign
markets. The Adviser and Subadviser are hereinafter sometimes referred to as the
"Advisers."
Under the Advisory Agreement, the Fund 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 a 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 Fund. The services provided by the
Adviser are at cost. The Fund 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
company Fund for any actions or omissions if it acted in good faith without
negligence or misconduct.
Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Fund at the annual
rate of 1.00% of the 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 of the determinations of net
asset value for each business day during a given calendar month. Such fee is
payable for each calendar month as soon as practicable after the end of that
month. The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any direct or indirect majority-owned subsidiary of VK/AC Holding,
Inc., in connection with the purchase and sale of portfolio investments of the
Fund, less any direct expenses incurred by such subsidiary of VK/AC Holding,
Inc. in connection with obtaining such payments. The Adviser agrees to use its
best efforts to recapture tender solicitation fees and exchange offer fees for
the Fund's benefit, and to advise the Trustees of the Fund of any other
commissions, fees, brokerage or similar payments which may be possible under
applicable laws for the Adviser or any direct or indirect majority-owned
subsidiary of VK/AC Holding, Inc. to receive in connection with the Fund's
portfolio transactions or other arrangements which may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed the most restrictive
expense limitations applicable in the states where the Fund's shares are
qualified for sale, the compensation due the Adviser will be reduced by the
amount of such excess and that, if a reduction in and refund of the advisory fee
is insufficient, the Adviser will pay the Fund monthly an amount sufficient to
make up the deficiency, subject to readjustment during the year. Ordinary
business expenses include the investment advisory fee and other operating costs
paid by the Fund 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 Fund's 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 shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on not more than 60 days' nor less than 30 days' written notice.
During the fiscal years ended December 31, 1995, 1996 and 1997, the Adviser
received $27,072, $250,405 and $225,799 respectively, in advisory fees from the
Fund. For such periods the Fund paid $29,687, $29,574 and $21,458 respectively,
for accounting services. A substantial portion of these amounts was paid to the
B-24
<PAGE> 86
Adviser in reimbursement of personnel, facilities and equipment costs
attributable to the provision of accounting services to the Fund.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers. The Distributor's obligation is an agency or "best efforts"
arrangement under which the Distributor is required to take and pay for only
such shares of the Fund as may be sold to the public. The Distributor is not
obligated to sell any stated number of shares. The Distributor bears the cost of
printing (but not typesetting) prospectuses used in connection with this
offering and certain other costs, including the cost of supplemental sales
literature and advertising. The Distribution and Service Agreement is renewable
from year to year if approved (a) by the Fund's Trustees or by a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of Trustees who are not parties to the Distribution and
Service Agreement or interested persons of any party, by votes cast in person at
a meeting called for such purpose. The Distribution and Service Agreement
provides that it will terminate if assigned, and that it may be terminated
without penalty by either party on 90 days' written notice. Total underwriting
commissions on the sales 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 Funds.
<TABLE>
<CAPTION>
DEALER REALLOWANCES
AMOUNTS RECEIVED BY
TOTAL UNDERWRITING RETAINED ADVANTAGE CAPITAL
COMMISSIONS BY DISTRIBUTOR CORPORATION
------------------ -------------- -------------------
<S> <C> <C> <C>
Fiscal Year Ended December 31, 1995............. $49,245 $15,161 $96,613
Fiscal Year Ended December 31, 1996............. $51,459 $ 3,550 N/A
Fiscal Year Ended December 31, 1997............. $45,169 $ 3,483 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 any class of shares without approval by a vote of a majority of the
outstanding voting shares of
B-25
<PAGE> 87
such class, and all material amendments to either of the Plans must be approved
by the Trustees and also by the disinterested Trustees. Each of the Plans may be
terminated with respect to any class of shares at any time by a vote of a
majority of the disinterested Trustees or by a vote of a majority of the
outstanding voting shares of such class.
For the fiscal year ended December 31, 1997, the Fund's aggregate expenses
under the Plans for Class A shares were $19,053 or 0.25%, of the Class A shares'
average daily net assets. Such expenses were paid to reimburse the Distributor
for payments made to financial intermediaries for servicing Fund shareholders
and for administering the Plans. For the fiscal year ended December 31, 1997,
the Fund's aggregate expenses under the Class B Plan were $98,827 or 1.00% of
the Class B shares' average net assets. Such expenses were paid to reimburse the
Distributor for the following payments: 72,308 for commissions and transaction
fees paid to financial intermediaries in respect of sales of Class B shares of
the Fund and $26,519 for fees paid to financial intermediaries for servicing
Class B shareholders and administering the Plans. For the fiscal year ended
December 31, 1997, the Fund's aggregate expenses under the Plans for Class C
shares were $15,440 or 1.00% of the Class C shares' average net assets. Such
expenses were paid to reimburse the Distributor for the following payments:
$5,300 for commissions and transaction fees paid to financial intermediaries in
respect of sales of Class C shares of the Fund and $10,140 for fees paid to
financial intermediaries for servicing Class C shareholders and administering
the Class C Plan.
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.
TRANSFER AGENT
During the fiscal years ended December 31, 1995, 1996 and 1997, ACCESS,
shareholder service agent and dividend disbursing agent for the Fund, received
fees, determined on a cost plus profit basis, aggregating $131,969, $106,078 and
99,444 respectively, for these services. 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.
PORTFOLIO TURNOVER
The portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year.
Securities which mature in one year or less at the time of acquisition are not
included in this computation. The turnover rate may vary greatly from year to
year as well as within a year. The Fund's portfolio turnover rate for prior
years is shown under "Financial Highlights" in the Prospectus. The annual
turnover rate is expected to exceed 100%, which is higher than that of many
other investment companies. A 100% turnover rate would occur if all the Fund's
portfolio securities were replaced during one year.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisers are responsible for decisions to buy and sell securities for
the Fund and for the placement of its portfolio business and the negotiation of
the commissions paid on such transactions. It is the policy of the Advisers 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 below)
on a portion of its transactions executed on securities exchanges, the Advisers
seek the best security price at the most favorable commission rate. In selecting
broker-dealers and in negotiating commissions, the Advisers consider the firm's
reliability, the quality of its execution services on a continuing basis and its
financial condition. When more than one firm is
B-26
<PAGE> 88
believed to meet these criteria, preference may be given to firms which also
provide research services to the Fund or the Advisers.
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 Advisers may consider sales of shares of the Fund and of the other Van
Kampen American Capital mutual funds as a factor in the selection of firms to
execute portfolio transactions for the Fund.
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 Subadvisory
Agreement, the Fund's Trustees have authorized the Advisers 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 Advisers. The Advisers are of
the opinion that the continued receipt of supplemental investment research
services from dealers is essential to its provision of high quality portfolio
management services to the Fund. The Advisers undertake that such higher
commissions will not be paid by the Fund unless (a) the Advisers determine in
good faith that the amount is reasonable in relation to the services in terms of
the particular transaction or in terms of the Advisers' overall responsibilities
with respect to the accounts as to which 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 Advisers,
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
Advisers' receipt of research services.
The Advisers place portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by firms
through which the Fund effects its securities transactions may be used by the
Advisers in servicing all of its accounts; not all of such services may be used
by the Advisers in connection with the Fund. In the opinion of the Advisers, the
benefits from research services to each of the accounts (including the Fund)
managed by the Advisers 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
Advisers, such costs to the Fund will not be disproportionate to the benefits
received by the Fund on a continuing basis.
The Advisers seek to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations among the Fund and other advisory accounts, the main factors
considered by the Advisers are the relative net assets, 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.
B-27
<PAGE> 89
Effective October 31, 1996, Morgan Stanley Group Inc. ("Morgan Stanley")
became as affiliate of the Adviser. Effective May 31, 1997, Dean Witter & Co.
("Dean Witter") become 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>
MORGAN DEAN
BROKERS STANLEY WITTER
------- ------- ------
<S> <C> <C> <C>
Commission Paid:
Fiscal 1995............................................... 93,024 $1,620 0
Fiscal 1996............................................... 94,286 $1,981 $ 30
Fiscal 1997............................................... 41,941 $ 0 $ 0
Fiscal 1997 Percentages:
Commissions with affiliates to total commissions.......... N/A 0% 0%
Value of brokerage transactions with affiliates to total
brokerage transactions................................. N/A 0% 0%
</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.
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
Adviser based on procedures approved 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."
INVESTMENTS BY MAIL
A shareholder investment account may be opened by completing the
application accompanying this prospectus and forwarding the application, through
the authorized dealer, to ACCESS, at P.O. Box 419319, Kansas City, Missouri
64141-6319. The account is opened only upon acceptance of the application by the
shareholder service agent. The minimum initial investment of at least $500 per
class of shares, in the form of a check payable to the Fund, must accompany the
application. This minimum may be waived by the Distributor
B-28
<PAGE> 90
for plans involving continuing investments. Minimum subsequent investments of at
least $25 per class of shares may be mailed directly to ACCESS. All such
investments are made at the public offering price of Fund shares next computed
following receipt of payment by ACCESS. Confirmations of the opening of an
account and of all subsequent transactions in the account are forwarded by
ACCESS to the investor's authorized dealer.
In processing applications and investments, ACCESS acts as agent for the
investor and for the authorized dealer named thereon, and also as agent for the
Distributor, in accordance with the terms of the Prospectus. If ACCESS ceases to
act as such, a successor company named by the Fund will act in the same
capacities so long as the account remains open.
LETTER OF INTENT
Purchases of Class A shares of the Participating Funds described above
under "Cumulative Purchase Discount," made pursuant to the Letter of Intent and
still owned are also included in determining the applicable quantity discount. A
Letter of Intent permits an investor to establish a total investment goal to be
achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal as if it were a single
investment. Escrowed shares totaling 5% of the dollar amount of the Letter of
Intent are held by ACCESS in the name of the shareholder. The effective date of
a Letter of Intent may be back-dated up to 90 days in order that any investments
made during this 90-day period, valued at the investor's cost, can become
subject to the Letter of Intent. The Letter of Intent does not obligate the
investor to purchase the indicated amount. In the event the Letter of Intent
goal is not achieved within the thirteen-month period, the investor is required
to pay the difference between sales charges otherwise applicable to the
purchases made during this period and sales charges actually paid. Such payment
may be made directly to the Distributor or, if not paid, the Distributor will
liquidate sufficient escrowed shares to obtain such difference. If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding the investor in shares of the Fund the amount of
excess sales charges, if any, paid during the thirteen-month period.
REDEMPTION OF SHARES
Redemptions are not made on days during which the Exchange is closed. The
right of redemption may be suspended and the payment therefor may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to determine fairly the value of its net assets; or (d)
the SEC, by order, so permits.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
For investments in the amount of $1,000,000 or more of Class A shares of
the Fund ("Qualified Purchaser"), the front-end sales charge will be waived and
a contingent deferred sales charge ("CDSC -- Class A") of 1.00% is imposed in
the event of redemptions within one year of the purchase. If a CDSC -- Class A
is imposed upon redemption, the amount of the CDSC -- Class A will be equal to
the lesser of 1.00% of the net asset value of the shares at the time of purchase
or 1.00% of the net asset value of the shares at the time of redemption.
The CDSC -- Class A will be imposed only if a Qualified Purchaser redeems
an amount which causes the value of the account to fall below the total dollar
amount of purchase payments made by the Qualified Purchaser without an initial
sales charge during the one year period prior to the redemption. No CDSC --
Class A will be imposed on exchanges between funds. For purposes of the
CDSC -- Class A, when shares of one fund are exchanged for shares of another
fund, the purchase date for the shares of the fund exchanged into will be
assumed to be the date on which shares were purchased in the fund from which the
exchange was made. If the exchanged shares themselves are acquired through an
exchange, the purchase date is assumed to carry over from the date of the
original election to purchase shares subject to a CDSC -- Class A rather than
B-29
<PAGE> 91
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.
Cumulative Purchase Discounts and Letters of Intent will apply to the net
asset value privilege. Also, in order to establish an amount of $1,000,000 or
more, a Qualified Purchaser may aggregate shares of the Participating Funds
described in the Prospectus.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B
AND C")
As described in the Prospectus under "Purchase of Shares," redemption of
Class B shares and Class C shares may 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 death or disability, the CDSC -- Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC -- Class B and C applies to a total or partial
redemption, but only to redemptions of shares held at the time of the death or
initial determination of disability.
(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 will be waived upon the tax-free rollover or transfer of
assets to another Retirement Plan invested in one or more of Van Kampen American
Capital funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held onto the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC -- Class B and C is applicable in the event that such acquired shares
are redeemed following the transfer or rollover. The charge also will be waived
on any redemption which results from the return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code, the return of excess deferral
amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan (the
"Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be specified by the shareholder upon his or her
election to participate in the Plan. The CDSC -- Class B and C will be waived on
redemptions made under the Plan.
The amount of the shareholder's investment in the Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from the Fund without the imposition of a CDSC -- Class
B and C may not exceed
B-30
<PAGE> 92
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 Class C 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 ACCESS to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by ACCESS to be genuine. Van Kampen American Capital and its
subsidiaries, including ACCESS, and the Fund employ procedures considered by
them to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen American Capital, ACCESS nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Van Kampen
American Capital, ACCESS and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed.
For purposes of determining the sales charge rate previously paid on Class
A shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of his securities, the security upon
which the highest sales charge rate was previously paid is deemed exchanged
first.
Exchange requests received on a business day prior to the time shares of
the funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
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.
B-31
<PAGE> 93
TAX STATUS OF THE FUND
The Trust and each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund will be subject
to tax if, 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
December 31, 1997 was 3.72% and (ii) the three year and six and a half month
period ended December 31, 1997 was 7.52%. The Fund's average annual total return
(computed in the manner described in the Prospectus) for Class B shares of the
Fund for the (i) one year period ended December 31, 1997 was 4.28% and (ii) the
three year and six and a half month period ended December 31, 1997 was 7.51%.
The Fund's average annual total return (computed in the manner described in the
Prospectus) for Class C shares for (i) the one year period ended December 31,
1997 was 7.13% and (ii) the three year and six and a half month period ended
December 31, 1997 was 8.12%. These results are based on historical earnings and
asset value fluctuations and are not intended to indicate future performance.
Such information should be considered in light of the Fund's investment
objectives and policies as well as the risks incurred in the Fund's investment
practices. Future results will be affected by changes in the general level of
prices of securities available for purchase and sale by the Fund.
The Fund may, from time to time: (1) illustrate the benefits of
tax-deferral by comparing taxable investments to investments made through
tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return. Such illustrations may be in the
form of charts or graphs and will not be based on historical returns experienced
by the Funds.
The Fund seeks to remain fully invested and diversified across many
industries to achieve consistent long-term performance. From time to time
marketing materials may provide a portfolio manager update, an Adviser update or
discuss general economic conditions and outlooks. The top 10 holdings of the
Fund may also be listed in marketing pieces. Materials may also mention how Van
Kampen American Capital believes the Fund compares relative to other Van Kampen
American Capital funds. Materials may also discuss the Dalbar Financial Services
study from 1984 to 1994 which examined investor cash flow into and out of all
types of mutual funds. The ten year study found that investors who bought mutual
fund shares and held such shares outperformed investors who bought and sold. The
Dalbar study conclusions were consistent regardless of whether shareholders
purchased their 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 Franklin Street,
Boston, Massachusetts 02110 serves as Custodian for the Fund. 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 the foreign sub-custodian
that has been approved by the Trustees pursuant to Rule 17-5 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 -- Price Waterhouse LLP, 200 East Randolph Drive,
Chicago, Il. 60601, the independent accountants for the Fund, performs annual
audits of the Fund's financial statements.
B-32
<PAGE> 94
Report of Independent Accountants
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS 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
Managed Assets Fund (the "Fund") at December 31, 1997, 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 December 31, 1997 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 6, 1998
B-33
<PAGE> 95
Portfolio of Investments
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS AND EQUIVALENTS 59.0%
AUSTRALIA 0.0%
Broken Hill Proprietary Co., Ltd.................................. 53 $ 489
Coles Myer, Ltd................................................... 278 1,333
GIO Australia Holding............................................. 42 107
M.I.M. Holdings, Ltd.............................................. 16 10
-------
1,939
-------
AUSTRIA 0.7%
Austrian Airlines (a)............................................. 100 2,130
Bank Austria, AG.................................................. 200 10,133
Bank Austria, AG.................................................. 132 6,531
Bank Austria, AG, Preferred Shares................................ 132 5,873
Bank Austria, AG, Preferred Shares................................ 100 4,750
Bau Holding, AG................................................... 100 6,254
Boehler-Uddeholm, AG.............................................. 100 5,862
EA-Generali, AG................................................... 100 26,276
Flughafen Wien, AG................................................ 100 3,974
Lenzing, AG (a)................................................... 100 5,930
Mayr-Melnhof Karton, AG (a)....................................... 100 5,384
Oest Brau-Beteiligungs, AG........................................ 100 4,996
Oest Elektrizitats, Class A....................................... 200 21,217
OMV, AG........................................................... 100 13,854
Radex-Heraklith, AG............................................... 100 3,444
Steyr-Daimler-Puch, AG............................................ 100 2,684
VA Technologie, AG................................................ 100 15,184
Wienerberger Baustoffindustrie, AG................................ 100 19,198
-------
163,674
-------
CANADA 2.0%
Abitibi Consolidated Inc. (a)..................................... 200 2,792
Alcan Aluminum, Ltd............................................... 400 11,028
Avenor, Inc....................................................... 200 2,855
Bank of Montreal.................................................. 400 17,732
Bank of Nova Scotia............................................... 400 18,852
Barrick Gold Corp................................................. 700 13,054
BCE, Inc.......................................................... 800 26,675
</TABLE>
See Notes to Financial Statements
B-34
<PAGE> 96
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
CANADA (CONTINUED)
Bombardier, Inc., Class B..................................................... 600 $ 12,344
Cameco Corp................................................................... 100 3,247
Canadian Imperial Bank........................................................ 700 21,847
Canadian Natural Resources (a)................................................ 200 4,283
Canadian Occidental Petroleum................................................. 300 6,791
Canadian Pacific.............................................................. 600 16,165
Cominco....................................................................... 200 3,058
Corel Corp. (a)............................................................... 200 322
Dofasco, Inc.................................................................. 200 3,219
Echo Bay Mines................................................................ 300 756
Gulf Canada Resource (a)...................................................... 600 4,199
Imasco........................................................................ 400 14,135
Imperial Oil.................................................................. 300 19,313
Inco, Ltd..................................................................... 300 5,101
IPL Energy, Inc............................................................... 200 9,153
Loewen Group, Inc............................................................. 100 2,575
MacMillan Bloedel............................................................. 300 3,117
Magna International, Inc., Class A............................................ 100 6,270
Moore Corp.................................................................... 200 3,009
Newbridge Networks Corp. (a).................................................. 300 10,507
Noranda, Inc.................................................................. 500 8,607
Norcen Energy Resources....................................................... 700 8,033
Northern Telecom.............................................................. 400 35,590
Nova Corp..................................................................... 1,000 9,517
Petro......................................................................... 700 9,980
Placer Dome, Inc.............................................................. 500 6,298
Potash Corporation of Saskatchewan, Inc....................................... 100 8,331
Power Corporation of Canada................................................... 200 7,166
Renaissance Energy (a)....................................................... 200 4,129
Rogers Communications, Inc., Class B (a)..................................... 300 1,448
Royal Bank of Canada.......................................................... 600 31,741
Seagram Co., Ltd.............................................................. 600 19,418
Talisman Energy, Inc. (a).................................................... 300 9,184
Teck Corp., Class B........................................................... 200 3,016
</TABLE>
See Notes to Financial Statements
B-35
<PAGE> 97
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
CANADA (CONTINUED)
TELUS Corp...................................................................... 300 $ 6,655
Thomson Corp.................................................................... 1,000 27,466
TransCanada PipeLines........................................................... 600 13,393
Westcoast Energy, Inc........................................................... 300 6,928
Weston George................................................................... 100 8,537
--------
467,836
--------
FRANCE 3.8%
Accor, SA....................................................................... 100 18,593
Air Liquide..................................................................... 150 23,478
Alcatel Alsthom, SA............................................................. 300 38,132
AXA-UAP......................................................................... 650 50,296
Banque Nationale de Paris....................................................... 461 24,503
BIC............................................................................. 100 7,299
Carrefour, SA................................................................... 100 52,172
Casino-Guichard-Perrachon, SA................................................... 150 8,349
Compagnie de Saint Gobain....................................................... 204 28,981
Compagnie Financiere Paribas, SA................................................ 225 19,552
Compagnie Generale des Eaux..................................................... 203 28,333
Compagnie Generale des Eaux (Warrants, expiring 05/01/02) (a)................... 200 136
Elf Aquitaine, SA............................................................... 600 69,785
France Telecom, SA (a).......................................................... 1,500 54,407
Groupe Danone................................................................... 200 35,723
Havas, SA....................................................................... 153 11,007
L'Oreal......................................................................... 150 58,694
Lafarge, SA..................................................................... 250 16,404
Legrand, SA..................................................................... 50 9,961
LVMH (Moet Hennessy Louis Vuitton) (a).......................................... 200 33,198
Michelin (CGDE), Class B........................................................ 404 20,339
Peugeot Citroen................................................................. 150 18,917
Pinault-Printemps-Redoute, SA................................................... 50 26,676
Promodes........................................................................ 50 20,744
Rhone-Poulenc, SA............................................................... 714 31,984
Sanofi, SA...................................................................... 200 22,265
Schneider, SA................................................................... 300 16,290
</TABLE>
See Notes to Financial Statements
B-36
<PAGE> 98
Portfolio of Investments (Continued)
December 31,1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (CONTINUED)
SEFIMEG (Societe Francaise d'Investissements Immobiliers et de Gestion)......... 100 $ 4,985
Societe Generale................................................................ 206 28,067
Suez Lyonnaise des Eaux......................................................... 296 32,755
Thomson CSF..................................................................... 300 9,456
Total, SA, Class B.............................................................. 500 54,415
-----------
875,896
-----------
GERMANY 3.5%
AGIV, AG (a).................................................................... 100 1,890
Allianz, AG..................................................................... 400 103,616
BASF, AG........................................................................ 1,000 35,437
Bayer Hypotheken Bank, AG....................................................... 450 21,963
Bayer Vereinsbank, AG........................................................... 300 19,628
Bayer, AG....................................................................... 1,200 44,826
Daimler-Benz, AG................................................................ 800 56,122
Deutsche Bank, AG............................................................... 850 60,007
Deutsche Telekom, AG............................................................ 3,400 63,976
Dresdner Bank, AG............................................................... 750 34,604
Hochtief, AG.................................................................... 200 7,893
Linde, AG....................................................................... 50 30,518
Mannesmann, AG.................................................................. 50 25,265
Merck KGaA...................................................................... 250 8,130
Metro........................................................................... 150 5,378
Preussag, AG.................................................................... 50 15,259
RWE, AG......................................................................... 550 29,503
RWE, AG, Preferred Shares....................................................... 400 16,899
SAP, AG......................................................................... 100 30,379
SAP, AG, Preferred Shares....................................................... 50 16,357
Schering, AG.................................................................... 150 14,467
Siemens, AG..................................................................... 950 56,241
Thyssen, AG..................................................................... 50 10,701
Veba, AG........................................................................ 750 51,071
Viag, AG........................................................................ 50 26,932
Volkswagen, AG.................................................................. 50 28,128
-----------
815,190
-----------
</TABLE>
See Notes to Financial Statements
B-37
<PAGE> 99
Portfolio of Investments (Continued)
December 31,1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
HONG KONG 0.0%
Hong Kong Land Holding.................................. 1,264 $ 2,427
----------
ITALY 2.6%
Assicurazioni Generali.................................. 2,500 61,405
Banca Commerciale Italiana.............................. 4,000 13,906
Banco Ambrosiano Veneto, SpA............................ 1,000 3,827
Credito Italiano........................................ 5,000 15,418
Edison, SpA............................................. 2,000 12,097
Ente Nazionale Idrocarburi, SpA......................... 21,000 119,067
Fiat, SpA............................................... 9,200 26,758
Fiat, Di Risp, SpA...................................... 2,300 3,803
Fiat, Priv, SpA......................................... 2,400 3,663
Instituto Bancario San Paolo............................ 2,500 23,884
Instituto Mobiliare Italiano............................ 1,500 17,807
Instituto Nazionale delle Assicurazioni (INA)........... 10,000 20,266
Italcementi, SpA........................................ 1,000 6,970
Italgas, SpA............................................ 2,000 8,253
Mediaset, SpA........................................... 3,000 14,737
Mediobanca, SpA......................................... 1,000 7,852
Montedison, SpA (a)..................................... 10,000 8,982
Olivetti & C., SpA (a).................................. 8,000 4,834
Parmalat Finanziara, SpA (a)........................... 5,000 7,151
Pirelli, SpA............................................ 5,000 13,369
Rinascente, SpA......................................... 1,000 7,462
Riunione Adriatica di Sicurta, SpA...................... 750 7,356
Sirti, SpA.............................................. 1,000 6,049
Telecom Italia Mob, SpA................................. 17,500 80,773
Telecom Italia Mob, Di Risp, SpA........................ 2,500 7,109
Telecom Italia, SpA..................................... 12,500 79,847
Telecom Italia, Di Risp, SpA............................ 2,906 12,813
----------
595,458
----------
JAPAN 6.5%
Ajinomoto Co., Inc...................................... 2,000 19,453
Aoyama Trading Co....................................... 100 1,784
Asahi Bank, Ltd. (a).................................... 900 3,653
</TABLE>
See Notes to Financial Statements
B-38
<PAGE> 100
Portfolio of Investments (Continued)
December 31,1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Asahi Chemical Industry Co.............................. 5,800 $ 19,634
Asahi Glass Co.......................................... 2,800 13,296
Bank of Tokyo........................................... 2,200 30,329
Bridgestone Corp........................................ 2,000 43,348
Dai Nippon Printing..................................... 2,800 52,539
Daiei, Inc. (a)......................................... 1,000 4,136
Daiwa House Industries.................................. 1,000 5,285
Daiwa Securities........................................ 400 1,379
Denso Corp.............................................. 1,000 17,998
Ebara Corp.............................................. 1,000 10,569
Fanuc................................................... 600 22,700
Fuji Bank............................................... 600 2,426
Fuji Photo Film Co...................................... 1,000 38,294
Fujitsu (a)............................................. 3,000 32,167
Hitachi................................................. 2,800 19,943
Honda Motor Co.......................................... 1,000 36,685
Japan Air Lines Co. (a)................................. 3,000 8,157
Japan Energy Corp....................................... 2,000 1,884
Jusco Co................................................ 1,000 14,092
Kajima Corp............................................. 2,000 5,039
Kansai Electric Power................................... 1,700 28,774
Kao Corp................................................ 2,000 28,797
Kawasaki Steel Corp..................................... 1,000 1,363
Kirin Brewery Co........................................ 2,800 20,372
Kubota Corp............................................. 5,800 15,281
Kumagai Gumi Co......................................... 1,000 544
Kyocera Corp............................................ 400 18,136
Marubeni Corp........................................... 6,800 11,926
Marui Co................................................ 1,000 15,547
Matsushita Electric Industries.......................... 3,000 43,884
Mitsubishi Chemical..................................... 4,800 6,874
Mitsubishi Corp......................................... 2,000 15,777
Mitsubishi Electric Corp................................ 3,800 9,720
Mitsubishi Estate....................................... 800 8,700
</TABLE>
See Notes to Financial Statements
B-39
<PAGE> 101
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Mitsubishi Heavy Industries............................. 8,000 $ 33,331
Mitsubishi Trust & Banking Corp......................... 1,000 10,033
Mitsui Trust & Banking Co............................... 800 1,550
Mitsukoshi.............................................. 1,000 2,658
NEC Corp................................................ 2,000 21,291
Nippon Express Co....................................... 2,800 13,939
Nippon Oil Co........................................... 4,000 10,324
Nippon Steel Corp....................................... 5,800 8,573
Nippon Telegraph & Telephone Corp....................... 15 128,667
Nissan Fire & Marine Insurance.......................... 700 2,128
Nissan Motor Co......................................... 3,800 15,716
NKK Corp................................................ 6,000 4,779
Nomura Securities....................................... 1,400 18,657
Odakyu Electric Railway................................. 5,000 21,598
Osaka Gas Co............................................ 5,000 11,411
Sakura Bank............................................. 1,800 5,142
Sankyo Co............................................... 1,000 22,593
Sanyo Electric Co....................................... 4,000 10,416
Sega Enterprises........................................ 200 3,615
Sekisui Chemical Co..................................... 1,000 5,078
Sekisui House........................................... 1,800 11,566
Sharp Corp.............................................. 1,000 6,878
Shimizu Corp............................................ 1,800 4,163
Shiseido Co............................................. 1,000 13,633
Softbank Corp........................................... 210 5,468
Sony Corp............................................... 600 53,305
Sumitomo Chemical....................................... 4,000 9,190
Sumitomo Corp........................................... 2,000 11,182
Sumitomo Metal Industries............................... 1,000 1,279
Sumitomo Metal Mining Co................................ 1,000 3,293
Taisei Corp............................................. 4,800 7,867
Taisho Pharmacy Co...................................... 1,000 25,504
Takeda Chemical Industries.............................. 2,000 56,981
The Long-Term Credit Bank of Japan, Ltd................. 3,000 4,802
</TABLE>
See Notes to Financial Statements
B-40
<PAGE> 102
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
The Sanwa Bank, Ltd.......................................................... 3,000 $ 30,329
Tobu Railway Co.............................................................. 1,800 5,625
Tokio Marine & Fire Insurance Co............................................. 2,800 31,738
Tokyo Electric Power......................................................... 2,000 36,456
Tokyo Gas Co................................................................. 5,800 13,148
Tokyu Corp................................................................... 2,000 7,720
Toray Industries, Inc........................................................ 3,000 13,441
Tostem Corp.................................................................. 500 5,361
Toto......................................................................... 1,000 6,387
Toyota Motor Corp............................................................ 4,800 137,489
Yamanouchi Pharmaceutical Co................................................. 1,000 21,444
Yasuda Trust & Banking (a)................................................... 700 697
---------
1,506,930
---------
NETHERLANDS 1.1%
ABN Amro Holdings, NV........................................................ 1,235 24,059
Ahold Koninklijke, NV........................................................ 309 8,061
Akzo Nobel, NV............................................................... 100 17,242
Elsevier, NV................................................................. 600 9,706
ING Groep, NV................................................................ 645 27,166
KLM Royal Dutch Air Lines, NV................................................ 101 3,736
Koninklijke KNP BT, NV....................................................... 100 2,303
Koninklijke PTT Nederland, NV (ADR).......................................... 416 17,357
Philips Electronics, NV...................................................... 300 17,991
Royal Dutch Petroleum Co..................................................... 1,600 87,826
Unilever, NV................................................................. 400 24,659
Wolters Kluwer, NV........................................................... 101 13,045
---------
253,151
---------
NORWAY 0.4%
Aker RGI ASA, Series A....................................................... 200 3,601
Bergesen d.y. ASA, Series A.................................................. 100 2,356
Bergesen d.y. ASA, Series B Non Voting....................................... 100 2,329
Christiania Bank............................................................. 1,600 6,456
Dyno Industrier ASA.......................................................... 100 1,923
Elkem ASA.................................................................... 100 1,327
</TABLE>
See Notes to Financial Statements
B-41
<PAGE> 103
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
NORWAY (CONTINUED)
Hafslund ASA, Series A....................................................... 200 $ 1,218
Kvaerner ASA, Series A....................................................... 100 5,091
Leif Hoegh & Co.............................................................. 100 2,031
NCL Holdings ASA (a)........................................................ 555 1,984
Norsk Hydro ASA.............................................................. 600 29,205
Norske Skogindustrier ASA.................................................... 100 2,897
Orkla ASA.................................................................... 100 8,597
Petroleum Geo-Services (a)................................................... 100 6,296
Storebrand ASA (a)........................................................... 800 5,632
--------
80,943
--------
PORTUGAL 0.9%
Banco Comercial Portugues.................................................... 1,000 20,451
Banco Espirito Santo e Comercial............................................. 600 17,855
Banco Totta & Acores......................................................... 300 5,891
BPI-SGPS, SA................................................................. 500 12,157
Cimpor-Cimentos de Portugal.................................................. 500 13,105
Corticeira Amorim, SA........................................................ 100 1,195
Elec De Portugal (a)......................................................... 2,300 43,551
Jeronimo Martins............................................................. 200 6,346
Jeronimo Martins............................................................. 174 945
Jeronimo Martins, SPGS, SA................................................... 500 15,865
Portucel Industrial-Empresa Produtora de Celulose............................ 600 3,661
Portugal Telecom, SA......................................................... 1,200 55,681
Soares Da Costa, SA (a)...................................................... 100 695
Sonae Investimentos.......................................................... 300 12,134
UNICER-Uniao Cervejeira, SA.................................................. 300 4,238
--------
213,770
--------
SPAIN 1.7%
Argentaria, SA............................................................... 300 18,254
Autopistas Cesa.............................................................. 630 8,457
BCO Bilbao Vizcaya........................................................... 1,800 58,247
BCO Central Hispan........................................................... 800 19,481
BCO Santander................................................................ 900 30,069
Corporacion Financiera Alba, SA.............................................. 100 10,535
</TABLE>
See Notes to Financial Statements
B-42
<PAGE> 104
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
SPAIN (CONTINUED)
Corporacion Mapfre........................................................... 200 $ 5,304
Empresa Nacional de Celulosas, SA............................................ 100 1,362
Endesa, SA................................................................... 2,800 49,714
Fomento Construcciones y Contratas, SA....................................... 400 15,228
Gas Natural SDG, SA.......................................................... 400 20,742
Iberdrola, SA................................................................ 2,300 30,269
Inmobiliaria Metropolitana Vasco Central, SA................................. 105 4,735
Repsol, SA................................................................... 800 34,132
Tabacalera, SA, Class A...................................................... 100 8,106
Telefonica De Espana......................................................... 2,300 65,671
Union Electrica Fenosa, SA................................................... 800 7,667
Viscofan Industria Navarra De Envolturas Celulosicas, SA..................... 100 2,511
--------
390,484
--------
SWEDEN 1.6%
ABB, AB, Class A............................................................. 2,000 23,678
AGA, AB, Class B............................................................. 600 7,935
Astra, AB, Class A........................................................... 3,733 64,646
Atlas Copco, AB, Class A..................................................... 500 14,925
Electrolux, AB, Class B...................................................... 200 13,879
Ericsson Telefonaktiebolaget LM, Class B (a)................................. 2,300 86,468
Granges, AB (a).............................................................. 100 1,568
Hennes & Mauritz, AB, Class B................................................ 500 22,040
Securitas, AB, Class B....................................................... 200 6,045
Skandia Forsaekrings, AB..................................................... 300 14,150
Skandinaviska Enskilda Banken, Class A....................................... 1,400 17,721
Skanska, AB, Class B......................................................... 300 12,299
SKF, AB, Class B............................................................. 400 8,514
Stora Kopparbergs Bergslags Aktiebolag, Class A.............................. 800 10,076
Svenska Cellulosa, AB, Class B............................................... 500 11,241
Svenska Handelsbkn, Class A (a).............................................. 500 17,286
Volvo, AB, Class B........................................................... 1,100 29,509
--------
361,980
--------
</TABLE>
See Notes to Financial Statements
B-43
<PAGE> 105
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND 2.3%
Abb AG....................................................................... 10 $ 12,558
Alusuisse - Lonza Holding.................................................... 10 9,602
Credit Suisse Group.......................................................... 200 30,934
Holderbank Financiere Glarus AG.............................................. 10 8,158
Nestle, AG................................................................... 50 74,904
Novartis (a)................................................................. 80 129,756
Roche Holdings Bearer, AG.................................................... 2 30,797
Roche Holdings Genusscheine, AG.............................................. 8 79,414
SGS Holdings................................................................. 5 9,581
SMH, AG...................................................................... 10 5,516
Sulzer, AG................................................................... 10 6,337
Swiss Bank Corp. (a)......................................................... 90 27,963
Swiss Reinsurance............................................................ 20 37,394
Union Bank of Switzerland.................................................... 30 43,362
Zurich Versicherungs-Gesellschaft............................................ 60 28,579
--------
534,855
--------
UNITED KINGDOM 6.7%
Abbey National............................................................... 1,700 30,603
Arjo Wiggins Apple........................................................... 1,525 4,058
B.A.T Industries............................................................. 4,450 40,580
Barclays..................................................................... 2,175 57,902
Bass......................................................................... 1,975 30,721
BG........................................................................... 5,536 24,915
BG, Class B (a).............................................................. 6,275 2,989
Blue Circle Industries....................................................... 4,175 23,418
BOC Group.................................................................... 1,400 23,018
Boots Co..................................................................... 1,700 24,474
British Aerospace............................................................ 575 16,386
British Airways.............................................................. 1,525 14,027
British Petroleum............................................................ 8,513 112,614
British Sky Broadcast........................................................ 2,475 18,537
British Telecommunications................................................... 8,150 64,218
BTR.......................................................................... 5,675 17,151
Cable & Wireless............................................................. 3,525 30,976
</TABLE>
See Notes to Financial Statements
B-44
<PAGE> 106
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Centrica (a)................................................................. 6,275 $ 9,225
Commercial Union............................................................. 1,225 17,082
EMI Group.................................................................... 1,260 10,513
General Electric............................................................. 3,975 25,757
Glaxo Wellcome............................................................... 4,450 106,091
Granada Group................................................................ 825 12,602
Great Universal Stores....................................................... 1,350 17,007
Guinness..................................................................... 5,800 53,063
Hanson....................................................................... 1,050 4,685
HSBC Holdings (ADR).......................................................... 2,325 57,359
Imperial Chemical Industries................................................. 1,425 22,259
Kingfisher................................................................... 1,125 15,706
Ladbroke Group............................................................... 1,525 6,613
Land Securities.............................................................. 1,225 19,517
Lloyds TSB Group............................................................. 6,725 87,489
Marks & Spencer.............................................................. 3,700 36,591
MEPC......................................................................... 1,400 11,681
National Power............................................................... 2,000 19,710
P & O Finance (a)............................................................ 1,250 14,218
Prudential Corp.............................................................. 3,425 41,707
Redland...................................................................... 2,000 11,235
Reed International........................................................... 2,925 27,865
Reuters Holdings............................................................. 2,475 27,034
Rio Tinto.................................................................... 2,000 24,654
RMC Group.................................................................... 1,050 14,866
Royal Bank Scot Group........................................................ 1,150 14,661
Royal Sun Alliance........................................................... 2,000 20,137
Safeway...................................................................... 1,225 6,901
Sainsbury J Finance.......................................................... 2,275 19,169
Scottish Power............................................................... 2,000 17,673
Smithkline Beecham........................................................... 6,725 69,312
Tesco........................................................................ 3,025 24,944
Thames Water................................................................. 1,400 20,845
Thorn........................................................................ 857 2,224
Unilever..................................................................... 3,900 33,547
</TABLE>
See Notes to Financial Statements
B-45
<PAGE> 107
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Description Shares Market Value
- ---------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Vodafone Group........................... 4,650 $ 33,606
Zeneca Group............................. 1,400 49,590
----------
1,543,725
UNITED STATES 25.0%...................... ----------
Abbott Laboratories, Inc. (b)............ 1,500 98,344
Aluminum Company of America.............. 500 35,188
American Express Co...................... 900 80,325
American Home Products Corp.............. 1,000 76,500
American International Group, Inc. (b)... 1,350 146,812
Amoco Corp............................... 900 76,612
AT&T Corp. (b)........................... 2,900 177,625
Banc One Corp............................ 1,400 76,038
BankAmerica Corp......................... 1,040 75,920
BellSouth Corp........................... 2,000 112,625
Boeing Co................................ 540 26,426
Bristol-Myers Squibb Co.................. 880 83,270
Campbell Soup Co......................... 1,000 58,125
Caterpillar, Inc......................... 300 14,569
Chevron Corp. (b)........................ 1,300 100,100
Chrysler Corp............................ 1,100 38,706
Citicorp (b)............................. 1,220 154,254
Coca-Cola Co. (b)........................ 3,400 226,525
Columbia/HCA Healthcare Corp............. 1,300 38,513
Computer Associates International, Inc... 1,050 55,519
Consolidated Edison Co................... 1,800 73,800
CSX Corp................................. 500 27,000
Dow Chemical Co.......................... 800 81,200
Du Pont (E. I.) de Nemours & Co.......... 1,100 66,069
Duke Energy Corp......................... 600 33,225
Dun & Bradstreet Corp.................... 500 15,469
Eastman Kodak Co......................... 1,400 85,137
Electronic Data Systems Corp............. 900 39,544
Enron Corp............................... 800 33,250
Exxon Corp............................... 1,800 110,137
</TABLE>
See Notes to Financial Statements
B-46
<PAGE> 108
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Federal National Mortgage Association........ 1,700 $ 97,006
First Union Corp............................. 1,800 92,250
General Electric Co. (b)..................... 2,300 168,762
General Motors Corp.......................... 1,600 97,000
General Reinsurance Corp. (a)................ 500 106,000
Heinz (H. J.) & Co........................... 1,000 50,813
Hewlett-Packard Co........................... 1,500 93,750
Home Depot, Inc.............................. 1,000 58,875
Intel Corp. (b).............................. 2,020 141,905
International Business Machines Corp......... 1,000 104,562
International Paper Co....................... 500 21,563
ITT Corp. (a)................................ 200 16,575
JP Morgan & Co., Inc......................... 700 79,012
Kmart Corp. (a).............................. 200 2,313
Latin American Discovery Fund, Inc. (c)...... 12,800 229,600
Lilly (Eli) & Co. (a)........................ 2,000 139,250
McDonald's Corp.............................. 900 42,975
Merck & Co., Inc. (b)........................ 1,930 205,062
Microsoft Corp. (a) (b)...................... 1,630 210,677
Minnesota Mining & Manufacturing Co.......... 700 57,444
Mobil Corp................................... 700 50,531
Morgan Stanley Asia Pacific Fund, Inc. (c)... 6,200 46,113
Motorola, Inc................................ 1,200 68,475
Norfolk Southern Corp........................ 1,500 46,219
Oracle Systems Corp. (a)..................... 1,950 43,509
Pfizer, Inc.................................. 1,240 92,457
PG&E Corp. (b)............................... 1,100 33,481
Philip Morris Cos., Inc...................... 1,120 50,750
PPG Industries, Inc.......................... 500 28,563
Procter & Gamble Co.......................... 1,600 127,700
Raytheon Co., Class A........................ 102 5,030
Sara Lee Corp................................ 1,200 67,575
SBC Communications, Inc...................... 900 65,925
Sears, Roebuck & Co.......................... 1,400 63,350
</TABLE>
See Notes to Financial Statements
B-47
<PAGE> 109
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Description Shares Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Southern Co......................................................................... 2,300 $ 59,513
Texas Utilities Co.................................................................. 600 24,938
Time Warner, Inc.................................................................... 1,100 68,200
Travelers Group, Inc................................................................ 1,800 96,975
Wal-Mart Stores, Inc. (b)........................................................... 5,000 197,187
Walt Disney Co. (b)................................................................. 1,400 138,687
Waste Management, Inc............................................................... 1,000 27,500
Weyerhaeuser Co..................................................................... 400 19,625
------------
5,754,524
------------
TOTAL COMMON AND PREFERRED STOCKS AND EQUIVALENTS 59.0%........................... 13,562,782
------------
U. S. GOVERNMENT OBLIGATIONS 10.7%
U. S. Treasury Bond ($600,000 par, 8.125% coupon, 08/15/19 maturity)................ 750,750
U. S. Treasury Note ($500,000 par, 6.250% coupon, 10/31/01 maturity)................ 508,515
U. S. Treasury Note ($350,000 par, 6.375% coupon, 05/15/99 maturity)................ 353,227
U. S. Treasury Note ($690,000 par, 7.250% coupon, 05/15/04 maturity)................ 744,662
U. S. Treasury Note ($100,000 par, 3.625% coupon, 07/15/02 maturity)................ 99,500
------------
TOTAL U. S. GOVERNMENT OBLIGATIONS 10.7%.......................................... 2,456,654
------------
TOTAL LONG-TERM INVESTMENTS 69.7% (Cost $14,054,267)................................ 16,019,436
------------
SHORT-TERM INVESTMENTS 29.1%
REPURCHASE AGREEMENT 9.6%
State Street Bank & Trust Co. ($2,203,000 par collateralized by U.S.
Government Obligations in a pooled cash account, dated 12/31/97,
to be sold on 01/02/98 at $2,203,611) (b)........................................... 2,203,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 19.5%
Federal Farm Credit Bank Consolidated Discount Note ($4,500,000 par,
5.621% coupon, 01/21/98 maturity) (b)............................................... 4,486,050
------------
TOTAL SHORT-TERM INVESTMENTS 29.1% (Cost $6,689,050)................................ 6,689,050
------------
TOTAL INVESTMENTS 98.8% (Cost $20,743,317).......................................... 22,708,486
FOREIGN CURRENCY 0.5% (Various Denominations, Cost $130,608)........................ 127,067
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%.......................................... 158,341
------------
NET ASSETS 100.0%................................................................... $ 22,993,894
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated as collateral for open futures transactions and forward
commitments.
(c) Related party transactions. See Footnote 2.
ADR - American Depository Receipt
See Notes to Financial Statements
B-48
<PAGE> 110
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $20,743,317)............................................. $22,708,486
Foreign Currency at Market Value (Cost $130,608)................................. 127,067
Cash............................................................................. 952
Deposit on Variation Margin...................................................... 125,000
Receivables:
Variation Margin on Futures.................................................... 134,344
Interest....................................................................... 32,190
Dividends...................................................................... 24,516
Fund Shares Sold............................................................... 24,396
Investments Sold............................................................... 5,892
Forward Commitments and Foreign Currency Contracts............................... 115,534
Unamortized Organizational Costs................................................. 4,328
Other............................................................................ 956
-----------
Total Assets................................................................ 23,303,661
-----------
Liabilities:
Payables:
Fund Shares Repurchased........................................................ 161,037
Distributor and Affiliates..................................................... 19,976
Investment Advisory Fee........................................................ 19,180
Investments Purchased.......................................................... 4,166
Accrued Expenses................................................................. 85,751
Trustees' Deferred Compensation and Retirement Plans............................. 19,657
-----------
Total Liabilities........................................................... 309,767
-----------
Net Assets....................................................................... $22,993,894
-----------
Net Assets Consist of:
Capital.......................................................................... $21,107,082
Net Unrealized Appreciation...................................................... 2,108,124
Accumulated Net Realized Gain.................................................... 7,907
Accumulated Net Investment Loss.................................................. (229,219)
-----------
Net Assets....................................................................... $22,993,894
===========
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $11,232,338 and 1,105,334 shares of beneficial interest issued
and outstanding)............................................................ 10.16
Maximum sales charge (4.75%* of offering price)............................. .51
-----------
Maximum offering price to public............................................ $ 10.67
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $10,041,715 and 1,013,227 shares of beneficial interest issued
and outstanding)............................................................ $ 9.91
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$1,719,841 and 173,243 shares of beneficial interest issued and outstanding) $ 9.93
===========
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
B-49
<PAGE> 111
Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
Investment Income:
Interest............................................................................. $ 448,841
Dividends (Net of foreign withholding taxes of $24,871).............................. 224,376
----------
Total Income.................................................................... 673,217
==========
Expenses:
Investment Advisory Fee.............................................................. 225,799
Custody.............................................................................. 188,853
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $26,058, $104,880 and $16,688, respectively).................................... 147,626
Shareholder Services................................................................. 133,536
Shareholder Reports.................................................................. 61,420
Registration and Filing Fees......................................................... 57,286
Audit................................................................................ 53,017
Trustees' Fees and Expenses.......................................................... 8,814
Amortization of Organizational Costs................................................. 3,289
Legal................................................................................ 580
Other................................................................................ 40,075
----------
Total Expenses.................................................................. 920,295
----------
Net Investment Loss.................................................................. $ (247,078)
==========
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments........................................................................ $2,251,618
Futures............................................................................ 332,649
Forward Commitments................................................................ 185,985
Foreign Currency Transactions...................................................... (230,478)
----------
Net Realized Gain.................................................................... 2,539,774
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period............................................................ 2,579,885
End of the Period: ---------
Investments..................................................................... 1,965,169
Futures......................................................................... 34,343
Forward Commitments............................................................. 56,021
Forward Currency Contracts...................................................... 56,747
Foreign Currency Translation....................................................... (4,156)
----------
2,108,124
----------
Net Unrealized Depreciation During the Period........................................ (471,761)
----------
Net Realized and Unrealized Gain..................................................... $2,068,013
==========
Net Increase in Net Assets from Operations........................................... $1,820,935
==========
</TABLE>
See Notes to Financial Statements
B-50
<PAGE> 112
Statement of Changes in Net Assets
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Loss............................................ $ (247,078) $ (112,792)
Net Realized Gain.............................................. 2,539,774 1,701,201
Net Unrealized Appreciation/Depreciation During the Period..... (471,761) 1,005,068
----------- ------------
Change in Net Assets from Operations........................... 1,820,935 2,593,477
Distribution from Net Realized Gain*........................... (2,665,787) (1,608,530)
----------- ------------
Net Change in Net Assets from Investment Activities............ (844,852) 984,947
----------- ------------
From Capital Transactions:
Proceeds from Shares Sold...................................... 6,116,272 7,742,285
Net Asset Value of Shares Issued Through
Dividend Reinvestment.......................................... 2,487,060 1,377,670
Cost of Shares Repurchased..................................... (4,866,248) (15,458,267)
----------- ------------
Net Change in Net Assets from Capital Transactions............. 3,737,084 (6,338,312)
----------- ------------
Total Increase/Decrease in Net Assets.......................... 2,892,232 (5,353,365)
Net Assets:
Beginning of the Period........................................ 20,101,662 25,455,027
----------- ------------
End of the Period (Including accumulated net investment
loss of $229,219 and $7,148, respectively)................... $22,993,894 $20,101,662
=========== ===========
<CAPTION>
Year Ended Year Ended
*Distributions by Class December 31, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------------------
Distributions from Net Realized Gain:
<S> <C> <C>
Class A Shares................................................. $ (1,273,008) $ (713,178)
Class B Shares................................................. (1,192,389) (762,464)
Class C Shares................................................. (200,390) (132,888)
------------ ------------
$ (2,665,787) $ (1,608,530)
============ ============
</TABLE>
See Notes to Financial Statements
B-51
<PAGE> 113
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
May 16, 1994
(Commencement
Year Ended of Investment
December 31, Operations) to
--------------------------------------
Class A Shares 1997 1996 (c) 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period.............................................. $ 10.530 $ 10.15 $ 9.19 $ 9.44
-------- ------- ------- -----------
Net Investment Income/Loss........................................... (0.088) -0- .08 .10
Net Realized and Unrealized
Gain/Loss........................................................... 1.014 1.242 1.1375 (.2475)
-------- ------- ------- -----------
Total from Investment Operations........................................ .926 1.242 1.2175 (.1475)
-------- ------- ------- -----------
Less:
Distributions from and in Excess of Net
Investment Income................................................... -0- -0- .0775 .075
Distributions from and in Excess of Net
Realized Gain....................................................... 1.294 .862 .18 .0275
-------- ------- ------- -----------
Total Distributions..................................................... 1.294 .862 .2575 .1025
-------- ------- ------- -----------
Net Asset Value, End of the Period...................................... $10.162 $10.530 $ 10.15 $ 9.19
======== ======= ======= ==========
Total Return* (a)....................................................... 8.94% 12.44% 13.30% (1.57%)**
Net Assets at End of the
Period (In millions)................................................. $ 11.2 $ 8.5 $ 15.5 $ 11.5
Ratio of Expenses to Average Net Assets*................................ $ 3.66% 2.87% 2.79% 2.75%
Ratio of Net Investment Income/Loss to
Average Net Assets*.................................................. (.67%) .00% .81% 1.54%
Portfolio Turnover...................................................... 231% 91% 135% 50%**
Average Commission Paid
Per Equity Share Traded (b)........................................... $.0606 $ .0214 -- --
*If certain expenses had not been assumed by VKAC, total
return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets................................. N/A 3.17% 3.68% 2.76%
Ratio of Net Investment Income/Loss to
Average Net Assets..................................................... N/A (.30%) (.07%) 1.53%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A - Not Applicable.
See Notes to Financial Statements
B-52
<PAGE> 114
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
May 16, 1994
Year Ended (Commencement
December 31, of Investment
-------------------------------- Operations) to
Class B Shares 1997 1996 (c) 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................................ $ 10.379 $ 10.10 $ 9.17 $ 9.44
--------- --------- --------- ---------
Net Investment Income/Loss........................................... (.146) (.106) (.01) .01
Net Realized and Unrealized Gain/Loss................................ .972 1.247 1.1375 (.2065)
--------- --------- --------- ---------
Total from Investment Operations........................................ .826 1.141 1.1275 (.1965)
--------- --------- --------- ---------
Less:
Distributions from and in Excess
of Net Investment Income........................................... -0- -0- .0175 .046
Distributions from and in Excess of Net Realized Gain................ 1.294 .862 .18 .0275
--------- --------- --------- ---------
Total Distributions..................................................... 1.294 .862 .1975 .0735
--------- --------- --------- ---------
Net Asset Value, End of the Period...................................... $ 9.911 $10.379 $ 10.10 $ 9.17
========= ========= ========= =========
Total Return* (a)....................................................... 8.10% 11.51% 12.31% (2.09%)**
Net Assets at End of the Period (In millions)........................... $ 10.0 $ 9.9 $ 8.1 $ 7.4
Ratio of Expenses to Average Net Assets*................................ 4.42% 3.76% 3.73% 3.92%
Ratio of Net Investment Income/Loss to Average Net Assets*.............. (1.45%) (1.01%) (.09%) .13%
Portfolio Turnover...................................................... 231% 91% 135% 50%**
Average Commission Paid Per Equity Share Traded (b)..................... $ .0606 $ .0214 -- --
*If certain expenses had not been assumed by VKAC, total return
would have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................................. N/A 4.06% 4.61% 3.93%
Ratio of Net Investment Income/Loss to Average Net Assets............... N/A (1.30%) (.97%) .12%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A - Not Applicable.
See Notes to Financial Satements
B-53
<PAGE> 115
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
May 16, 1994
Year Ended (Commencement
December 31, of Investment
------------------------------- Operations) to
Class C Shares 1997 1996(c) 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period.................... $10.395 $ 10.12 $ 9.20 $ 9.44
------- ------- ------- ----------
Net Investment Income/Loss................... (0.139) (.104) (.02) .05
Net Realized and Unrealized
Gain/Loss.................................. .965 1.241 1.1375 (.2165)
------- ------- ------- ----------
Total from Investment Operations.............. .826 1.137 1.1175 (.1665)
------- ------- ------- ----------
Less:
Distributions from and in Excess of Net
Investment Income.......................... -0- -0- .0175 .046
Distributions from and in Excess of Net
Realized Gain.............................. 1.294 .862 .18 .0275
------- ------- ------- ----------
Total Distributions........................... 1.294 .862 .1975 .0735
------- ------- ------- ----------
Net Asset Value, End of the Period............ $ 9.927 $10.395 $ 10.12 $ 9.20
======= ======= ======= ==========
Total Return* (a)............................. 8.09% 11.49% 12.16% (1.77%)**
Net Assets at End of the Period
(In millions)................................ $ 1.7 $ 1.7 $ 1.9 $ 1.3
Ratio of Expenses to Average
Net Assets*.................................. 4.46% 3.78% 3.79% 3.36%
Ratio of Net Investment Income/Loss to
Average Net Assets*......................... (1.50%) (.99%) (.18%) .80%
Portfolio Turnover............................ 231% 91% 135% 50%**
Average Commission Paid Per
Equity Share Traded (b)..................... $ .0606 $ .0214 -- --
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Operating Expenses to Average
Net Assets.................................. N/A 4.07% 4.67% 3.38%
Ratio of Net Investment Income/Loss to
Average Net Assets.......................... N/A (1.28%) (1.06%) .78%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A - Not Applicable.
B-54
<PAGE> 116
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Global Managed Assets Fund (the "Fund") is organized
as 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 equity and debt securities. The Fund
commenced investment operations on May 16, 1994, with three classes of
beneficial interest, Class A, Class B and Class C shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION-Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sales price is not
available are valued at their last quoted bid price. Fixed income securities are
stated at value using market quotations. For those securities where quotations
or prices are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
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 fully 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-55
<PAGE> 117
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31 1997
C. INCOME AND EXPENSES-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. 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. FOREIGN 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. Realized and unrealized gains and
losses on 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. ORGANIZATIONAL COSTS-The Fund has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $15,000. These costs
are being amortized on a straight line basis over the 60-month period ending May
15, 1999. The Adviser has agreed that in the event any of the initial shares of
the Fund originally purchased by VKAC are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
F. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At December 31, 1997, for federal income tax purposes cost of long- and
short-term investments, including foreign currencies, is $20,931,773, the
aggregate gross unrealized appreciation is $2,498,182 and the aggregate gross
unrealized depreciation is $594,402, resulting in net unrealized appreciation of
$1,903,780.
Net realized gains or losses may differ for financial purposes primarily as
a result of post-October losses which may not be recognized for tax purposes
until the first day of the following fiscal year, wash sales, straddle loss
deferrals and the mark to market of open futures contracts at December 31, 1997.
B-56
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
G. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays dividends
annually from net investment income and from net realized gains on securities,
if any. Net investment income for federal income tax purposes includes gains and
losses realized on certain transactions in foreign currencies. These realized
gains and losses are included as net realized gains or losses for financial
reporting purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified. As a result,
permanent differences of $23,459 due to the characterization of income for tax
purposes have been reclassified from accumulated net realized gain to
accumulated net investment loss. In addition, permanent differences of $1,548
relating to certain expenses which are not deductible for tax purposes have been
reclassified from accumulated net investment loss to capital.
For Federal income tax purposes, the following information is furnished
with respect to the distributions paid by the Fund during its taxable year ended
December 31, 1997. The Fund designated $1,326,884 as a 28% rate capital gain
distribution and $0 as a 20% rate capital gain distribution. Shareholders were
sent a 1997 Form 1099-DIV in January 1998 representing their proportionate share
of the capital gain distribution to be reported on their income tax returns. For
corporate shareholders 7.01% of the distributions qualify for the dividend
received deductions.
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. On March 31, 1997, the Adviser terminated its subadvisory agreement
with John Govett & Co., Ltd. and with shareholder approval has changed the
subadviser to Morgan Stanley Asset Management Inc. (the "Subadviser") effective
April 1, 1997. The Subadviser provides advisory services to the Fund and the
Adviser with respect to the Fund's investments in foreign securities. Investment
advisory fees are calculated monthly, based on the average daily net assets of
the Fund at the annual rate of 1.00%. The Adviser pays 50% of its investment
advisory fee to the Subadviser.
For the year ended December 31, 1997, the Fund recognized expenses of
approximately $600 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 December 31, 1997, the Fund recognized expenses of
approximately $21,500 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
December 31, 1997, the Fund recognized
B-57
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
expenses of approximately $99,400, representing ACCESS' cost of providing
transfer agency and shareholder services plus a profit.
Additionally, for the year ended December 31, 1997, the Fund reimbursed VKAC
approximately $1,500 related to the direct cost of consolidating the VKAC open-
end fund complex. Payment was contingent upon the realization by the Fund of
cost efficiencies in certain expense categories resulting from the
consolidation.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund 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 equal to $2,500.
During the period, the Fund owned shares of the following Morgan Stanley
Funds which were managed by the Subadviser:
<TABLE>
<CAPTION>
TRANSACTIONS
DURING THE PERIOD
% OF NET ASSETS COST OF PROCEEDS
AT DECEMBER 31, 1997 PURCHASES OF SALES
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Latin America Discovery Fund, Inc..................... 1.00% $203,571 $ 0
Morgan Stanley Asia Pacific Fund, Inc................. .20% $148,575 $67,970
</TABLE>
At December 31, 1997, VKAC owned 10,604, 53 and 53 shares of Classes A, B
and C of the Fund, respectively.
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.
B-58
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
At December 31, 1997, capital aggregated $9,892,195, $9,614,733 and
$1,600,154 for Classes A, B and C, respectively. For the year ended December 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................ 326,563 $ 3,557,326
Class B................................ 182,617 1,967,735
Class C................................ 54,786 591,211
------- -----------
Total Sales.............................. 563,966 $ 6,116,272
======= ===========
Dividend Reinvestment:
Class A................................ 122,002 $ 1,233,093
Class B................................ 110,121 1,086,423
Class C................................ 16,955 167,544
------- -----------
Total Dividend Reinvestment.............. 249,078 $ 2,487,060
======= ===========
Repurchases:
Class A................................ (151,742) $(1,673,088)
Class B................................ (233,838) (2,537,474)
Class C................................ (60,449) (655,686)
------- ===========
Total Repurchases........................ (446,029) $(4,866,248)
======= ===========
</TABLE>
B-59
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
At December 31, 1996, capital aggregated $6,775,618, $9,098,727 and
$1,497,201 for Classes A, B and C, respectively. For the year ended December 31,
1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................... 343,389 $ 3,674,083
Class B............................... 319,565 3,371,501
Class C............................... 66,272 696,701
--------- ------------
Total Sales............................. 729,226 $ 7,742,285
========= ============
Dividend Reinvestment:
Class A............................... 58,774 $ 608,282
Class B............................... 65,677 670,411
Class C............................... 9,677 98,977
--------- ------------
Total Dividend Reinvestment............. 134,128 $ 1,377,670
========= ============
Repurchases:
Class A............................... (1,122,082) $(11,975,953)
Class B............................... (233,170) (2,467,031)
Class C............................... (95,831) (1,015,283)
--------- ------------
Total Repurchases....................... (1,451,083) $(15,458,267)
--------- ------------
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within 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-60
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
For the year ended December 31, 1997, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$3,600 and CDSC on the redeemed shares of approximately $18,700. 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 $37,616,711 and
$38,518,494, 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 exercising a call option
contract or taking delivery of a security underlying a futures or forward
contract. In these instances, the recognition of gain or loss is postponed until
the disposal of the security underlying the contract. 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.
Summarized on the following pages are the specific types of derivative
financial instruments used by the Fund.
FORWARD PURCHASE COMMITMENTS
The Fund trades certain securities under the terms of forward commitments,
whereby the settlement occurs at a specific future date. Forward commitments are
privately negotiated transactions between the Fund and dealers. While forward
commitments are outstanding, the Fund maintains sufficient collateral of cash or
securities in a segregated account with its custodian. The commitments are
marked to market on a daily basis with changes in value reflected as a component
of unrealized appreciation or depreciation on forwards. Risks may arise as a
result of the potential inability of the counterparties to meet the terms of
their contracts.
B-61
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
The following forward purchase commitments were outstanding as of December
31, 1997:
<TABLE>
<CAPTION>
PAR AMOUNT
IN LOCAL
CURRENCY UNREALIZED
(000) DESCRIPTION COUPON MATURITY APPRECIATION
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUSTRALIA (Government of)
200-AUD Settlement 01/21/98...................... 9.000% 09/15/04 $ 1,702
AUSTRALIA (Commonwealth)
200-AUD Settlement 01/29/98...................... 9.000 09/15/04 3,042
CANADA (Government of)
120-CAD Settlement 01/29/98...................... 9.750 06/01/21 4,311
DENMARK (Kingdom of)
1,400-DKK Settlement 03/19/98...................... 8.000 03/15/06 3,060
GERMANY UNITY (Fed Republic of)
300-DEM Settlement 01/23/98...................... 8.000 01/21/02 2,376
GERMANY (Treuhandanstalt)
800-DEM Settlement 01/23/98...................... 7.500 09/09/04 7,261
500-DEM Settlement 02/03/98...................... 7.000 11/25/99 2,901
IRELAND (Republic of)
90-IEP Settlement 03/06/98...................... 8.000 08/18/06 5,451
ITALY (Republic of)
600,000-ITL Settlement 01/30/98...................... 9.500 02/01/06 14,963
JAPAN
40,000-JPY Settlement 01/29/98...................... 5.500 03/20/02 1,537
30,000-JPY Settlement 01/29/98...................... 3.400 06/20/05 3,749
SWEDEN (Kingdom of)
3,100-SEK Settlement 01/29/98...................... 6.000 02/09/05 5,616
UNITED KINGDOM
60-GBP Settlement 01/23/98...................... 8.000 06/07/21 2,738
225-GBP Settlement 01/23/98...................... 7.750 09/08/06 80
---------
Total Forward Purchase Commitments
(Cost $3,691,957).................... $ 58,787
=========
</TABLE>
CLOSED BUT UNSETTLED FORWARD COMMITMENTS
In certain situations, the Fund has entered into closing transactions for
outstanding forward commitments prior to settlement of the obligation. In doing
so, the Fund determines a gain or loss on the
B-62
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
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 foreign currency difference on the
trade is marked to market daily and included as a component of unrealized
appreciation/depreciation on forwards.
The following closed but unsettled forward transactions were still
outstanding as of December 31, 1997:
<TABLE>
<CAPTION>
Local Currency US$ Net Unrealized
-------------------
Description/Currency Receivable Payable (Payable) Gain/(Loss)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GERMANY (TREUHANDANSTALT) - MARK
(400,000 par, 7.500%, 01/23/98) 453,391 455,511 $ (1,178) $ 1,237
UNITED KINGDOM - POUND
(50,000 par, 7.750%, 01/23/98) 54,822 55,494 (1,104) (4,003)
-------- --------
$ (2,282) $ (2,766)
======== ========
</TABLE>
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 December
31, 1997:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS
Australian Dollar,
130,000 expiring 02/17/98......................... $ 84,818 $ (6,813)
Canadian Dollar,
335,000 expiring 01/09/98......................... 234,498 (9,850)
110,000 expiring 03/27/98......................... 77,174 (400)
Deutsche Mark,
735,640 expiring 01/09/98......................... 409,144 (3,904)
120,000 expiring 01/09/98......................... 66,741 (1,573)
128,640 expiring 01/16/98......................... 71,576 (3,424)
92,660 expiring 01/16/98.......................... 51,556 (2,602)
383,522 expiring 01/16/98......................... 213,393 (10,065)
175,000 expiring 02/04/98......................... 97,479 (4,271)
1,070,000 expiring 03/13/98....................... 597,294 (11,353)
373,227 expiring 03/13/98......................... 208,342 (2,670)
</TABLE>
B-63
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- --------------------------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS (CONTINUED)
Danish Krone,
1,535,000 expiring 01/09/98................................... $ 224,130 $ (1,938)
Spanish Peseta,
2,641,912 expiring 02/12/98................................... 17,360 (840)
279,528 expiring 02/12/98..................................... 1,837 (94)
45,000,000 expiring 03/13/98.................................. 295,941 (6,073)
French Franc,
495,965 expiring 01/21/98..................................... 82,507 (3,993)
146,785 expiring 01/21/98..................................... 24,419 (1,219)
Pound Sterling,
310,000 expiring 03/13/98..................................... 507,372 (11,878)
Italian Lira,
65,880,600 expiring 01/21/98.................................. 37,235 (765)
83,361,370 expiring 01/21/98.................................. 47,114 (2,186)
95,651,000 expiring 01/21/98.................................. 54,060 (2,518)
226,302,350 expiring 01/21/98................................. 127,902 (5,957)
174,542,000 expiring 01/21/98................................. 98,648 (1,352)
24,500,000 expiring 02/04/98.................................. 13,846 (518)
83,420,530 expiring 02/19/98.................................. 47,141 (2,159)
690,000,000 expiring 03/13/98................................. 389,917 (7,881)
Japanese Yen,
62,000,000 expiring 01/09/98.................................. 475,460 (39,919)
18,000,000 expiring 01/09/98.................................. 138,037 (5,139)
112,740,000 expiring 01/26/98................................. 866,702 (65,805)
3,498,390 expiring 01/29/98................................... 26,906 (94)
3,890,810 expiring 02/26/98................................... 30,050 (950)
Netherlands Guilder,
47,209 expiring 02/19/98...................................... 23,355 (1,145)
22,638 expiring 02/19/98...................................... 11,199 (561)
Swedish Krona,
2,800,000 expiring 03/13/98................................... 353,346 (8,416)
--------- --------
6,006,499 (228,325)
--------- --------
SHORT CONTRACTS
Canadian Dollar,
123,000 expiring 03/23/98..................................... 86,286 (380)
176,111 expiring 03/23/98..................................... 123,544 (544)
Swiss Franc,
300,000 expiring 03/13/98..................................... 207,049 3,963
</TABLE>
B-64
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
FUTURES CONTRACTS
A futures contract is an agreement involving the delivery of a particular asset
on a specified future date at an agreed upon price. The Fund generally invests
in stock index futures as a substitute for purchasing and selling specific
securities. Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are periodically received from or made to the broker based
upon changes in the value of the contract (the variation margin). The risk of
loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the year ended December 31, 1997,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- -------------------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1996...................................... 0
Futures Opened........................................................ 104
Futures Closed........................................................ (86)
Futures Split (S&P 500 Index Futures 2-for-1)......................... 1
-------
Outstanding at December 31, 1997...................................... 19
=======
</TABLE>
B-65
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- --------------------------------------------------------------------------------------
<S> <C> <C>
SHORT CONTRACTS (CONTINUED)
Deutsche Mark,
428,432 expiring 01/16/98.................................. $ 238,381 $ 6,619
176,390 expiring 01/16/98.................................. 98,144 1,856
138,242 expiring 03/16/98.................................. 77,183 1,817
Spanish Peseta,
2,921,440 expiring 02/12/98................................ 19,197 803
French Franc,
40,000 expiring 01/21/98................................... 6,654 119
620,750 expiring 01/21/98.................................. 100,271 3,404
503,719 expiring 03/16/98.................................. 84,058 1,942
Italian Lira,
286,185,820 expiring 01/21/98.............................. 161,747 5,721
359,551,500 expiring 01/21/98.............................. 203,212 6,788
59,720,500 expiring 02/19/98............................... 33,748 1,252
23,700,030 expiring 02/19/98............................... 13,393 616
Japanese Yen,
122,740,000 expiring 01/26/98.............................. 866,702 133,301
13,212,100 expiring 01/29/98............................... 101,614 8,386
6,643,725 expiring 01/29/98................................ 51,097 3,903
36,217,500 expiring 01/29/98............................... 278,547 21,453
12,946,450 expiring 02/05/98............................... 99,674 10,326
61,285,000 expiring 02/05/98............................... 471,831 43,169
6,635,750 expiring 02/05/98................................ 51,088 3,912
33,727,200 expiring 02/26/98............................... 260,484 15,516
5,651,550 expiring 02/26/98................................ 43,648 1,305
Netherlands Guilder,
69,847 expiring 02/19/98................................... 34,555 1,445
Swedish Krona,
1,178,364 expiring 02/19/98................................ 148,620 8,380
---------- --------
$3,860,727 285,072
---------- --------
$ 56,747
========
</TABLE>
B-66
<PAGE> 128
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
The futures contracts outstanding as of December 31, 1997, and the
description and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- ------------------------------------------------------------------------------------------
<S> <C> <C>
FSTE 100
March 1998--Long Contracts
(Current Notional Value of 129,575 GBP per contract)..... 3 $ 12,094
S&P 500 Index Futures
March 1998--Long Contracts
(Current Notional Value of $244,775 per contract)........ 2 (10,025)
TSE Topix
March 1998--Short Contracts
(Current Notional Value of 11,910,000 JPY per contract).. 8 37,531
OMX Stock Index
January 1998--Short Contracts
(Current Notional Value of 240,730 SEK per contract)..... 5 (3,615)
TSE 35
March 1998--Short Contract
(Current Notional Value of 179,775 CAD per contract)..... 1 (1,642)
----- --------
19 $ 34,343
===== ========
</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 December 31, 1997, are payments retained by VKAC of approximately
$79,300.
B-67
<PAGE> 129
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
(b) Exhibits
<TABLE>
<S> <C>
(1)(a) First Amended and Restated Agreement and Declaration of
Trust(9)
(b) Certificate of Amendment(9)
(c) Amended and Restated Certificate of Designation+
(2) Amended and Restated Bylaws(9)
(4)(a) Specimen Class A Share Certificate(10)
(b) Specimen Class B Share Certificate(10)
(c) Specimen Class C Share Certificate(10)
(5)(a) Investment Advisory Agreement+
(b) Investment Sub-Advisory Agreement+
(6)(a) Distribution and Service Agreement+
(b) Form of Dealer Agreement(10)
(c) Form of Broker Agreement(10)
(d) Form of Bank Agreement(10)
(8)(a) Custodian Agreement(11)
(b) Transfer Agency and Service Agreement+
(9)(a) Data Access Services Agreement(10)
(b) Fund Accounting Agreement+
(10) Opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(10)
(11)(a) Consent of Price Waterhouse LLP+
(b) Consent of Trustees(8)
(13) Investment Letter(7)
(14)(a) Individual Retirement Account Brochure with Application(4)
(b) 403(b)(7) Custodial Account(2)
(c) ORP 403(b)(7) Custodial Account(2)
(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(3)
(h) Simplified Employee Pension Plan Brochure with
Application(6)
(15)(a) Plan of Distribution Pursuant to 12b-1(10)
(b) Form of Shareholder Assistance Agreement(10)
(c) Form of Administrative Service Agreement(10)
(d) Service Plan(10)
(16) Computation Measure for Performance Information+
(17)(a) List of Certain Investment Companies in Response to Item
29(a)(11)
(b) List of Officers and Directors of Van Kampen American
Capital Distributors, Inc. in Response to Item 29(b)(11)
</TABLE>
C-1
<PAGE> 130
<TABLE>
<S> <C>
(18) Amended Multiple Class Plan(10)
(24) Power of Attorney+
(27) Financial Data Schedules+
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 61 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Growth and Income Fund, File Number 2-21657, filed March 26, 1991.
(2) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Reserve Fund, File Number 2-50870, filed September 24, 1992.
(3) Incorporated herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital World Portfolio Series Trust, File Number 33-37879, filed September
24, 1993.
(4) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Reserve Fund, File Number 2-50870, filed September 24, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Government Securities Fund, File Number 2-90482, filed February 25,
1994.
(6) Incorporated herein by reference to Post-Effective Amendment No. 69 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Growth and Income Fund, File Number 2-21657, filed March 24, 1994.
(7) Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File Number 33-74024,
filed May 6, 1994.
(8) Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A, File Number 33-74024,
filed July 19, 1995.
(9) Incorporated herein by reference to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form N-1A, File Number 33-74024,
filed April 22, 1996.
(10)Incorporated herein by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A, File Number 33-74024,
filed April 30, 1997.
(11)Incorporated herein by reference to Post-Effective Amendment No. 75 to Van
Kampen American Capital Growth and Income Fund Registration Statement on
Form N-1A, File Number 2-21657, filed March 27, 1997.
+ Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See "General Information" in the Statement of Additional Information.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
AS OF APRIL 3, 1998
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ---------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Shares of Beneficial Interest, $0.01 par value 2,152 1,098 836
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or
C-2
<PAGE> 131
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.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the Adviser. For information as to the business, profession,
vocation and employment of a substantial nature of directors and officers of the
Adviser, reference is made to the Adviser's current Form ADV (File No. 801-1669)
filed under the Investment Advisers Act of 1940, as amended, incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17(a) incorporated by
reference herein.
(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
officers thereof are set forth in Exhibit 17(b). Except as disclosed under the
heading, "Trustees and Officers" in Part B of this Registration Statement, none
of such persons has any position or office with Registrant.
(c) Not applicable.
C-3
<PAGE> 132
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, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the Adviser, will
be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181; and (iii) by the Distributor, the principal underwriter, will be
maintained at its offices located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
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> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN AMERICAN CAPITAL
GLOBAL MANAGED ASSETS FUND, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Oakbrook Terrace and the State of Illinois, on the
24th day of April, 1998.
VAN KAMPEN AMERICAN CAPITAL GLOBAL
MANAGED ASSETS FUND
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 April 24, 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 April 24, 1998
- -----------------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>
<PAGE> 134
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
INDEX TO EXHIBITS TO AMENDMENT NO. 6 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
ON APRIL 27, 1998
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
(1) (c) Amended and Restated Certificate of Designation
(5) (a) Investment Advisory Agreement
(b) Investment Sub-Advisory Agreement
(6) (a) Distribution and Service Agreement
(8) (b) Transfer Agency and Service Agreement
(9) (b) Fund Accounting Agreement
(11)(a) Consent of Price Waterhouse LLP
(16) Computation Measure for Performance Information
(24) Power of Attorney
(27) Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT(1)(C)
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
Amended and Restated Certificate of Designation
of
Van Kampen American Capital Global Managed Assets Fund
The undersigned, being the Secretary of Van Kampen American Capital Global
Managed Assets Fund, 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 Certificate of Designation of the
Van Kampen American Capital Global Managed Assets Fund Series of the Trust
dated June 21, 1995 by redesignating the following classes of Shares of the
Trust with the following rights, preferences and characteristics:
1. Shares. The beneficial interest in the Trust 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 Trust. 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 Trust 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
Trust.
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 Trust's prospectus.
4. Conversion. Each Class B Share and certain Class C Shares of the Trust
shall be converted automatically, and without any action or choice on the part
of the Shareholder thereof, into Class A Shares of the Trust at such times and
pursuant to such terms, conditions and restrictions as may be established by
the Trustees and as set forth in the Trust'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
Trust 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 Trust 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 Trust outstanding and entitled
to vote or, if such amendment affects the Shares of one or more but not all of
the Classes of the Trust, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.
9. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.
December 12, 1996
/s/ Ronald A. Nyberg
---------------------------
Ronald A. Nyberg, Secretary
<PAGE> 1
EXHIBIT (5)(A)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this May 31, 1997, by and between VAN KAMPEN
AMERICAN CAPITAL GLOBAL MANAGED ASSETS, a Delaware business trust (hereinafter
referred to as the "FUND"), and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation (hereinafter referred to as the "ADVISER").
The FUND and the ADVISER agree as follows:
(1) SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the control, direction and supervision of the
FUND's Trustees and in conformity with applicable laws, the FUND's Agreement
and Declaration of Trust ("Declaration of Trust"), By-laws, registration
statements, prospectus and stated investment objectives, policies and
restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including,
by way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale
of portfolio investments for the FUND's account with brokers or dealers
selected by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by
way of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing of
routine legal services except for services provided by outside counsel to the
FUND selected by the Trustees, and the supervision of the FUND's Treasurer and
the personnel working under his direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND trustee and Fund officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER
shall use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Trustees of appropriate policies and procedures, the ADVISER may, to the extent
authorized by law, cause the FUND to pay a broker or dealer that provides
brokerage and research services to the ADVISER an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized
by law, the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND
shall pay, or arrange for others to pay, all its expenses other than those
expressly stated to be payable by the ADVISER hereunder, which expenses payable
by the FUND shall include (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase and sale of portfolio
investments; (iii) compensation of its trustees and officers other than those
who are affiliated persons of the ADVISER; (iv) compensation of its Treasurer,
compensation of personnel working under the Treasurer's direction, and expenses
of office space, facilities, and equipment used by the Treasurer and such
personnel in the performance of their normal duties for the FUND which consist
of maintenance of the accounts, books and other documents which constitute the
record forming the basis for the FUND's financial statements, preparation of
such
<PAGE> 2
financial statements and other FUND documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the FUND's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the FUND selected by the Trustees; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the FUND and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the FUND; (xi) all other expenses incidental to holding meetings of the FUND's
shareholders including proxy solicitations therefor; (xii) expenses for
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the FUND's membership in
trade associations approved by the Trustees; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits or
proceedings to which the FUND is a party and the legal obligation which the
FUND may have to indemnify its officers and trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the FUND
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.
For a period of one year commencing on the effective date of this
Agreement, the ADVISER and the FUND agree that the retention of (i) the chief
executive officer, president, chief financial officer and secretary of the
ADVISER and (ii) each director, officer and employee of the ADVISER or any of
its Affiliates (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) who serves as an officer of the FUND (each person referred to
in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his
or her current capacities, is in the best interest of the FUND and the FUND's
shareholders. In connection with the ADVISER's acceptance of employment
hereunder, the ADVISER hereby agrees and covenants for itself and on behalf of
its Affiliates that neither the ADVISER nor any of its Affiliates shall make
any material or significant personnel changes or replace or seek to replace any
Essential Person or cause to be replaced any Essential Person, in each case
without first informing the Board of Trustees of the FUND in a timely manner.
In addition, neither the ADVISER nor any Affiliate of the ADVISER shall change
or seek to change or cause to be changed, in any material respect, the duties
and responsibilities of any Essential Person, in each case without first
informing the Board of Trustees of the FUND in a timely manner.
(2) ROLE OF ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (the
"1940 Act"), any of the shareholders, trustees, officers and employees of the
FUND may be a shareholder, trustee, director, officer or employee of, or be
otherwise interested in, the ADVISER, and in any person controlled by or under
common control with the ADVISER, and the ADVISER, and any person controlled by
or under common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad
faith, negligence or reckless disregard of obligations or duties hereunder on
the part of the ADVISER, neither the ADVISER nor any subadviser shall be
subject to liability to the FUND, or to any shareholder of the FUND, for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
<PAGE> 3
(3) COMPENSATION PAYABLE TO THE ADVISER
The FUND shall pay to the ADVISER, as compensation for the services
rendered, facilities furnished and expenses paid by the ADVISER, a monthly fee
computed at the annual rate of 1.00% of the FUND's average daily net assets.
Average daily net assets shall be determined by taking the average of the
net assets for each business day during a given calendar month calculated in
the manner provided in the FUND's Declaration of Trust. Such fee shall be
payable for each calendar month as soon as practicable after the end of that
month.
The fees payable to the ADVISER by the FUND pursuant to this Section 3
shall be reduced by any commissions, tender solicitation and other fees,
brokerage or similar payments received by the ADVISER, or any other direct or
indirect majority owned subsidiary of VK/AC Holding, Inc., in connection with
the purchase and sale of portfolio investments of the FUND, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with the FUND's portfolio transactions and
shall advise the Trustees of any other commissions, fees, brokerage or similar
payments which may be possible for the ADVISER or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc. to receive in connection with
FUND's portfolio transactions or other arrangements which may benefit the FUND.
In the event that the ordinary business expenses of the FUND for any
fiscal year should exceed 1.5% of the first $30 million of the FUND's average
daily assets plus 1% of any excess over $30 million, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess.
The Adviser's compensation shall be so reduced by a reduction or a refund
thereof, at the time such compensation is payable after the end of each
calendar month during such fiscal year of the FUND, and if such amount should
exceed such monthly compensation, the ADVISER shall pay the FUND an amount
sufficient to make up the deficiency, subject to readjustment during the FUND's
fiscal year. For purposes of this paragraph, all ordinary business expenses of
the FUND shall include the investment advisory fee and other operating expenses
paid by the FUND except (i) for interest and taxes; (ii) brokerage commissions;
(iii) as a result of litigation in connection with a suit involving a claim for
recovery by the FUND; (iv) as a result of litigation involving a defense
against a liability asserted against the FUND, provided that, if the ADVISER
made the decision or took the actions which resulted in such claim, it acted in
good faith without negligence or misconduct; (v) any indemnification paid by
the FUND to its officers and trustees and the ADVISER in accordance with
applicable state and federal laws as a result of such litigation; and (vi)
amounts paid to Van Kampen American Capital Distributors, Inc., the distributor
of the FUND's shares, in connection with a distribution plan adopted by the
FUND's Trustees pursuant to Rule 12b-1 under the Investment Company Act of
1940.
If the ADVISER shall serve for less than the whole of any month, the
foregoing compensation shall be prorated.
(4) BOOKS AND RECORDS
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any
of such records upon the FUND's request. The ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the Act.
(5) DURATION OF AGREEMENT
This Agreement shall become effective on the date hereof, and shall remain
in full force until May 31, 1999 unless sooner terminated as hereinafter
provided. This Agreement shall continue in force from year to year
<PAGE> 4
thereafter, but only so long as such continuance is approved at least
annually by the vote of a majority of the FUND's Trustees who are not parties
to this Agreement or interested persons of any such parties, cast in person at
a meeting called for the purpose of voting on such approval , and by a vote of
a majority of the FUND's Trustees or a majority of the FUND's outstanding
voting securities.
This Agreement shall terminate automatically in the event of its
assignment. The Agreement may be terminated at any time by the FUND's
Trustees, by vote of a majority of the FUND's outstanding voting securities, or
by the ADVISER, on 60 days' written notice, or upon such shorter notice as may
be mutually agreed upon. Such termination shall be without payment of any
penalty.
(6) MISCELLANEOUS PROVISIONS
For the purposes of this Agreement, the terms "affiliated person, "
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the 1940 Act and
the Rules and Regulations thereunder, subject, however, to such exemptions as
may be granted to either the ADVISER or the FUND by the Securities and Exchange
Commission (the "Commission"), or such interpretive positions as may be taken
by the Commission or its staff, under the 1940 Act, and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the Rules and Regulations thereunder.
The execution of this Agreement has been authorized by the FUND's Trustees
and by the sole shareholder. This Agreement is executed on behalf of the FUND
or the Trustees of the FUND as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the FUND individually but are binding only upon the
assets and property of the FUND. A Certificate of Trust in respect of the FUND
is on file with the Secretary of State of Delaware.
All questions concerning the validity, meaning and effect of this
Agreement shall be determined in accordance with the laws (without giving
effect to the conflict-of-law principles thereof) of the State of Delaware
applicable to contracts made and to be performed in that state.
In connection with its employment hereunder, the ADVISER hereby agrees and
covenants not to change its name without the prior consent of the Board of
Trustees of the FUND.
The parties hereto each have caused this Agreement to be signed in
duplicate on its behalf by its duly authorized officer on the above date.
VAN KAMPEN AMERICAN CAPITAL VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC. Global Managed Assets Fund
By:/s/ Dennis J. McDonnell By:/s/ Peter W. Hegel
----------------------------- -----------------------------
Name: Dennis J. McDonnell Name: Peter W. Hegel
Its: President Its: Executive Vice President
<PAGE> 1
EXHIBIT(5)(B)
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
and
MORGAN STANLEY ASSET MANAGEMENT INC.
THIS AGREEMENT is made as of this May 31, 1997 by and between MORGAN STANLEY
ASSET MANAGEMENT INC., a Delaware Corporation, located at 1221 Avenue of the
Americas, New York, New York 10020, and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC. ("VKAC") a Delaware Corporation, located at One Parkview
Plaza, Oakbrook Terrace, IL 60181.
WHEREAS, VKAC has heretofore sponsored and acts as Investment Adviser to Van
Kampen American Capital Global Managed Assets Fund (the "Fund"); and
WHEREAS, MORGAN STANLEY ASSET MANAGEMENT INC. ("MSAM") has available a staff of
experienced investment personnel and facilities for providing investment
sub-advisory services to the investment portfolio; and
WHEREAS, MSAM is an investment adviser registered under the Investment Advisers
Act of 1940, as amended and is willing to provide VKAC with investment advisory
services on the terms and conditions hereinafter set forth; and
WHEREAS, VKAC and MSAM (jointly referred to as "the Advisers") desire to enter
into an agreement for MSAM to provide sub-advisory services to the Fund and to
VKAC with respect to the Fund's investments.
NOW THEREFORE it is mutually agreed:
1. Investment Sub-Advisory Services
1.1 Investment Advice
a) Subject to the overall policies, control, direction and review of the
Fund's Trustees, MSAM shall keep under review the investments of the Fund and
continuously furnish to the Fund and to VKAC (1) investment advice with respect
to all or such portion of the Fund's assets as the Advisers agree to from time
to time; (2) economic, statistical and research information and advice,
including advice on the allocation of investments among countries, relating to
all or such portion of the Fund's assets as the Advisers shall agree to from
time to time; (3) recommendations as to the voting of proxies solicited by or
with respect to securities under MSAM's supervision; and (4) an investment
program with respect to securities and recommendations as to what securities
shall be purchased, sold or exchanged, and what portion, if any, of the
securities shall be held in money market instruments.
b) The Advisers are responsible for the allocation of the Fund's assets
among the various securities markets of the world. The Advisers will determine
at least quarterly the percentage of the assets that shall be allocated to each
of the Advisers (the "Asset Allocation"). The Asset Allocation will specify the
percentage and nature of the assets of the Fund allocated to each of the
Advisers for management on the effective date of the determination and will
apply to cash inflows or outflows and income and expense accruals thereafter
until such time as the Asset Allocation is redetermined. Each of the Advisers
will be responsible for the allocation of assets among the securities markets
within various regions as they agree to from time to time.
c) Unless otherwise instructed by VKAC or the Trustees, and subject to
the provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Trustees, MSAM shall determine the
securities to be purchased and sold by the Fund and shall place orders for the
purchase, sale or exchange of securities for the Fund's accounts with brokers
or dealers and to that end
<PAGE> 2
MSAM is authorized by the Trustees to give instructions to the
Custodian and any Sub-Custodian of the Fund as to deliveries of such
securities, transfers of currencies and payments of cash for the account of the
Fund.
d) In performing these services, MSAM shall adhere to the Fund's
investment objectives, restrictions and limitations as contained in its
Prospectus, Statement of Additional Information, or Agreement and Declaration
of Trust and shall comply with all statutory and regulatory restrictions,
limitations and requirements applicable to the activity of the Fund.
e) Unless otherwise instructed by VKAC or the Trustees, and subject to
the provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Trustees, MSAM shall have executed and
performed on behalf of and at the expense of the Fund:
i) Purchases, sales, exchanges, conversions, and placement or orders for
execution, and
ii) Reporting of all transactions to VKAC and to other entities as
directed by VKAC or by the Trustees.
f) MSAM shall provide the Trustees at least quarterly, in advance of the
regular meetings of the Trustees, a report of its activities hereunder on
behalf of the Fund and its proposed strategy for the next quarter, all in such
form and detail as requested by the Trustees. MSAM shall also make an
investment officer available to attend such meetings of the Trustees as the
Trustees may reasonably request.
1.2 Restriction of MSAM's Powers
(a) MSAM shall not commit the Fund to any extent beyond the amount of the
cash and securities placed by the Fund under the control of MSAM.
(b) In carrying out its duties hereunder MSAM shall comply with all
reasonable instruction of the Fund or VKAC in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Trustees or by any other person authorized by a resolution of the
Trustees provided a certified copy of such resolution has been supplied to
MSAM.
(c) All securities, cash, and other assets of the Fund shall be placed
and maintained in the care of a member bank of the Federal Reserve System of
the United States approved by the Trustees as custodian and one or more
"Eligible Foreign Custodians" (as defined in Rule 17f-5 under the Investment
Company Act of 1940 (the "1940 Act")) approved by the Trustees as
sub-custodians.
(d) Persons authorized by resolution of the Trustees shall have the right
to inspect and copy contracts, notes, vouchers, and copies of entries in books
or electronic recording media relating to the Fund's transactions at the
registered office of MSAM at any time during normal business hours. Such
records, in relation to each transaction effected by MSAM on behalf of the Fund
shall be maintained by MSAM for a period of seven years from the date of such
transaction.
1.3 Purchase and Sale of Securities
In performing the services described above, MSAM shall use its best
efforts to obtain for the Fund the most favorable price and execution
available. Subject to prior authorization of appropriate policies and
procedures by the Trustees, MSAM may, to the extent authorized by law, cause
the Fund to pay a broker or dealer who provides brokerage and research services
an amount of commission for effecting the Fund's investment transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, in recognition of the brokerage and research
services provided by the broker or dealer. To the extent authorized by law,
MSAM shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of such action.
<PAGE> 3
1.4 Custodian
MSAM shall not act as Custodian for the securities or any other assets of
the Fund. All such assets shall be held by the Custodian or Sub-Custodian
appointed by the Trustees.
2. DUTIES OF VKAC
2.1 Provision of Information
VKAC shall advise MSAM from time to time with respect to the Fund of its
investment objectives and of any changes or modifications thereto, as well as
any specific investment restrictions or limitations by sending to MSAM a copy
of each registration statement relating to the Fund as filed with the
Securities and Exchange Commission. As requested by MSAM, VKAC shall furnish
such information to MSAM as to holdings, purchases, and sales of the securities
under its management as will reasonably enable MSAM to furnish its investment
advice under this Agreement.
2.2 Compensation to MSAM
The fee for the services provided under this Agreement will be determined
as follows:
(a) An amount for each month (or such other valuation period as may be
mutually agreed upon) equivalent, on an annual basis, to 50% of the
compensation actually received by VKAC pursuant to the investment advisory fee
schedule set forth in the Investment Advisory Agreement between the Fund and
VKAC taking into account any waiver or return to the Fund of any or all of such
advisory fee by VKAC (with any such return of fees to be treated as if not
actually received). The value of the assets of the Fund shall be computed as of
the close of business on the last day of each valuation period for the Fund,
using the average of all the daily determinations of the net value of the
assets of the Fund.
(b) The foregoing fee shall be paid in cash by VKAC to MSAM within five
(5) business days after the last day of the valuation period.
3. MISCELLANEOUS
3.1 Activities of MSAM
The services of MSAM as Sub-Adviser to VKAC under this Agreement are not
to be deemed exclusive, MSAM and its affiliates being free to render services
to others. It is understood that shareholders, trustees, officers and employees
of MSAM may become interested in the Fund or VKAC as a shareholder, trustee,
officer, partner or otherwise.
3.2 Services to Other Clients
VKAC acknowledges that MSAM may have investment responsibilities, or
render investment advice to, or perform other investment advisory services for,
other individuals or entities ("Clients"). Subject to the provisions of this
paragraph, VKAC agrees that MSAM may give advice or exercise investment
responsibility and take such other action with respect to such Clients which
may differ from advice given or the timing or nature of action taken with
respect to the Fund, provided that MSAM acts in good faith, and provided,
further, that it is MSAM policy to allocate, within its reasonable discretion,
investment opportunities to the Fund over a period of time on a fair and
equitable basis relative to the Clients, taking into account the investment
objectives and policies of the Fund and any specific investment restrictions
applicable thereto. VKAC acknowledges that one or more of the Clients may at
any time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Fund may have an interest from time to
time, whether in transactions which may involve the Fund or otherwise. MSAM
shall have no obligation to acquire for the Fund a position in any investment
which any Client may acquire, and VKAC shall have no first refusal,
coinvestment or other rights in respect of any such investment, either for the
Fund or otherwise.
<PAGE> 4
3.3 Best Efforts
It is understood and agreed that in furnishing the investment advice and
other services as herein provided, MSAM shall use its best professional
judgment to recommend actions which will provide favorable results for the
Fund. MSAM shall not be liable to the Fund or to any shareholder of the Fund
to any greater degree than VKAC.
3.4 Duration of Agreement
a) This Agreement, unless terminated pursuant to paragraph b or c below
or Section 2.2(c), shall continue in effect through May 31, 1999, and
thereafter shall continue in effect from year to year, provided its continued
applicability is specifically approved at least annually by the Trustees or by
a vote of the holders of a majority of the outstanding shares of the Fund. In
addition, such continuation shall be approved by vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval. As used in this paragraph, the term "interested person" shall
have the same meaning as set forth in the 1940 Act.
b) This Agreement may be terminated by sixty (60) days' written notice by
either VKAC or MSAM to the other party. The Agreement may also be terminated at
any time, without the payment of any penalty, by the Fund (by vote of the
Trustees or, by the vote of a majority of the outstanding voting securities of
such Fund), on sixty (60) days' written notice to both VKAC and MSAM. This
Agreement shall automatically terminate in the event of the termination of the
investment advisory agreement between VKAC and the Fund.
c) This Agreement shall terminate in the event of its assignment. The
term "assignment" for this purpose shall have the same meaning set forth in
Section 2(a)(4) of the 1940 Act.
d) Termination shall be without prejudice to the completion of any
transactions which MSAM shall have committed to on behalf of the Fund prior to
the time of termination. MSAM shall not effect and the Fund shall not be
entitled to instruct MSAM to effect any further transactions on behalf of the
Fund subsequent to the time termination takes effect.
e) This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
i) If VKAC or MSAM shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide reconstruction or
amalgamation upon terms previously approved in writing by the party not in
liquidation) or if a receiver or receiver and manager of any of the assets of
any of them is appointed; or
ii) If either of the parties hereto shall commit any breach of the
provisions hereof and shall not have remedied such breach within 30 days after
the service of notice by the party not in breach on the other requiring the
same to be remedied.
f) On the termination of this Agreement and completion of all matters
referred to in the foregoing paragraph (d) MSAM shall deliver or cause to be
delivered to the Fund copies of all documents, records and books of the Fund
required to be maintained pursuant to Rules 31a-1 or 31a-2 of the 1940 Act
which are in MSAM's possession, power or control and which are valid and in
force at the date of termination.
3.5 Notices
Any notice, request, instruction, or other document to be given under this
Agreement by any party hereto to the other parties shall be in writing and
delivered personally or sent by mail or telecopy (with a hard
<PAGE> 5
copy to follow),
If to MSAM, to:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
attn: Warren J. Olsen
with a copy to:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
attn: Harold J. Schaaff, Esq.
If to VKAC, to:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
attn: Dennis J. McDonnell
with a copy to:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
attn: Ronald A. Nyberg, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be presumed to have
been duly given to the party to which it is addressed, on the date three (3)
days after mailing, and in the case of delivery by telecopy, on the date the
hard copy is received.
3.6 Choice of Law
This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of the United
States and the State of New York, without regard to the conflicts of laws
principles thereof.
3.7 Miscellaneous Provisions
The execution of this Agreement has been authorized by the Fund's Trustees
and by the shareholders. This Agreement is executed on behalf of the Fund or
the Trustees of the Fund as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but are binding only upon the
assets and property of the Fund. A Certificate of Trust in respect of the Fund
is on file with the Secretary of State of Delaware.
<PAGE> 6
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
VAN KAMPEN AMERICAN CAPITAL MORGAN STANLEY
ASSET MANAGEMENT, INC. ASSET MANAGEMENT, INC.
By: /s/ Dennis J. McDonnell By: /s/ Harold J. Schaaff, Jr.
---------------------------------- --------------------------------
Name: Dennis J. McDonnell Name: Harold J. Schaaff, Jr.
-------------------------------- ------------------------------
Its: President and Chief Operating Officer Its: General Counel and Secretary
-------------------------------- -------------------------------
<PAGE> 1
EXHIBIT (6)(A)
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of May 31, 1997 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS
(the "Fund") and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
1. (a) Appointment of Distributor. The Fund appoints the Distributor as
a principal underwriter and exclusive distributor of each class of its shares
of beneficial interest (the "Shares") offered for sale from time to time
pursuant to the then current prospectus of the Fund, subject to different
combinations of front-end sales charges, distribution fees, service fees and
contingent deferred sales charges. Classes of shares, if any, subject to a
front-end sales charge and a distribution and/or service fee are referred to
herein as "FESC Classes" and the Shares of such classes are referred to herein
as "FESC Shares." Classes of shares, if any, subject to a contingent-deferred
sales charge and a distribution and/or a service fee are referred to herein as
"CDSC Classes" and Shares of such classes are referred to herein as "CDSC
Shares." Classes of shares, if any, subject to a front-end sales charge, a
contingent-deferred sales charge and a distribution and/or service fee are
referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares." The Fund reserves the right to
refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.
(b) Best Efforts. The Distributor shall use its best efforts to sell,
through its organization and through other dealers and agents, the Shares which
the Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares. Without
the prior approval of the Board of Trustees, the Distributor shall not,
directly or indirectly, distribute, sell or market, through its organization or
other brokers, dealers or agents, shares of any investment companies unless the
Board of Trustees of the Fund determines that such companies do not compete, or
potentially compete, with the Fund.
(c) Positions in the Shares. The Distributor agrees that it will not
take any long or short positions in the Shares, except for long positions in
those Shares purchased by the Distributor in accordance with any systematic
sales plan described in the then current Prospectus of the Fund and except as
permitted by Section 2 hereof, and that so far as it can control the situation,
it will prevent any of its trustees, officers or shareholders from taking any
long or short positions in the Shares, except for legitimate investment
purposes.
(d) Essential Personnel. The Distributor and the Fund agree that the
retention of (i) the chief executive officer, president, treasurer and
secretary of the Distributor, and (ii) each director, officer and employee of
the Distributor or any of its affiliates (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund
(each person referred to in (i) or (ii) hereinafter being referred to as an
"Essential Person "), in his or her current capacities, is in the best interest
of the Fund and the Fund's shareholders. In connection with the Distributor's
acceptance of employment hereunder, the Distributor hereby agrees and covenants
for itself and on behalf of its Affiliates that neither the Distributor nor any
of its Affiliates shall replace or seek to replace any Essential Person or
cause to be replaced any Essential Person, in each case without first
consulting with the Board of Trustees of the Fund in a timely manner. In
addition, neither the Distributor nor any Affiliate of the Distributor shall
change or seek to change or cause to be changed, in any material respect, the
duties and responsibilities of any Essential Person, in each case without first
consulting with the Board of Trustees of the Fund in a timely manner.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment
1
<PAGE> 2
company or the acquisition by the Fund of all or substantially all of
the assets of or the outstanding Shares of any investment company; (b) in
connection with a pro rata distribution directly to the holders of Shares in
the nature of a stock dividend or stock split or in connection with any other
recapitalization approved by the Board of Trustees; (c) upon the exercise of
purchase or subscription rights granted to the holders of Shares on a pro rata
basis; (d) in connection with the automatic reinvestment of dividends and
distributions from the Fund; or (e) in connection with the issue and sale of
Shares to trustees, officers and employees of the Fund, to directors, officers
and employees of the investment adviser of the Fund or any principal
underwriter (including the Distributor) of the Fund, to retirees of the
Distributor that purchased shares of any mutual fund distributed by the
Distributor prior to retirement, to directors, officers and employees of Van
Kampen American Capital, Inc. (the parent company of the Distributor), VK/AC
Holding, Inc. (the parent company of The Van Kampen American Capital, Inc.),
Morgan Stanley, Dean Witter, Discover & Co. (the parent company of VK/AC
Holding, Inc.) and to the subsidiaries of Van Kampen American Capital, Inc.;
(f) to any trust, pension, profit-sharing or other benefit plan for any of the
aforesaid persons; and (g) to any group of persons as permitted by Rule 22d-1
under the 1940 Act approved from time to time by the Board of Trustees and set
forth in the then current Prospectus of the Fund.
The Distributor shall have the right to buy from the Fund the Shares
needed, but not more than the Shares needed (except for reasonable allowances
for clerical errors, delays and errors of transmission and cancellation of
orders) to fill unconditional orders for Shares received by the Distributor
from dealers, agents and investors during each period when particular net asset
values and public offering prices are in effect as provided in Section 3
hereof; and the price which the Distributor shall pay for the Shares so
purchased shall be the respective net asset value used in determining the
public offering price on which such orders were based. The Distributor shall
notify the Fund at the end of each such period, or as soon thereafter on that
business day as the orders received in such period have been compiled, of the
number of Shares of each class that the Distributor elects to purchase
hereunder.
3. (a) Public Offering Price. The public offering price per Share shall
be determined in accordance with the then current Prospectus of the Fund. In
no event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess
of the applicable maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as in effect
from time to time. The net asset value per share for each class of Shares,
respectively, shall be determined in the manner provided in the Declaration of
Trust and By-Laws of the Trust as then amended, the Certificate of Designation
with respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the Fund's
Multiple Class Plan adopted by the Board of Trustees in accordance with Section
18 of the 1940 Act and Rule 18f-3 thereunder. The Fund will cause immediate
notice to be given to the Distributor of each change in net asset value as soon
as it is determined.
(b) Discounts to Dealers. Discounts to dealers purchasing FESC Shares
from the Distributor for resale and to brokers and other eligible agents making
sales of FESC Shares to investors and compensation payable from the Distributor
to dealers, brokers and other eligible agents making sales of CDSC Shares and
Combination Shares shall be set forth in the selling agreements between the
Distributor and such dealers or agents, respectively, as from time to time
amended, and, if such discounts and compensation are described in the then
current Prospectus for the Fund, shall be as so set forth. In connection with
the Distributor's employment hereunder, the Distributor hereby agrees to
distribute the Shares through brokers, dealers and other agents of Dean Witter
Distributors, Inc. on a "proprietary basis" substantially identical to the
distribution of shares of proprietary open-end investment companies distributed
by Dean Witter Distributors, Inc.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund Shares,
the Distributor will in all respects duly comply with all state and federal
laws relating to the sale of such securities and with all applicable rules and
regulations of all regulatory bodies, including without limitation, the Rules
of Fair Practice of the National Association of Securities Dealers, Inc., and
all applicable rules and regulations of the Securities and Exchange Commission
under the 1940 Act, and will indemnify and save the Fund
2
<PAGE> 3
harmless from any damage or expense on account of any unlawful act by
the Distributor or its agents or employees. The Distributor is not, however,
to be responsible for the acts of other dealers or agents, except to the extent
that they shall be acting for the Distributor or under its direction or
authority. None of the Distributor, any dealer, any agent or any other person
is authorized by the Fund to give any information or to make any
representations, other than those contained in the Registration Statement or
Prospectus heretofore or hereafter filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act") (as
any such Registration Statement and Prospectus may have been or may be amended
from time to time), covering the Shares, and in any supplemental information to
any such Prospectus approved by the Fund in connection with the offer or sale
of Shares. None of the Distributor, any dealer, any broker or any other person
is authorized to act as agent for the Fund in connection with the offering or
sale of Shares to the public or otherwise. All such sales shall be made by the
Distributor as principal for its own account.
In selling Shares to investors, the Distributor will adopt and comply with
certain standards, as set forth in Exhibit III attached hereto as to when each
respective class of Shares may appropriately be sold to particular investors.
The Distributor will require every broker, dealer and other eligible agent
participating in the offering of the Shares to agree to adopt and comply with
such standards as a condition precedent to their participation
in the offering.
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration
of Shares under the federal securities laws, and the Fund
will exercise its best efforts to obtain said registration
and qualification;
(ii) all expenses in connection with the printing of
any notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any other
notice or communication sent to shareholders in connection
with any meeting of the shareholders or otherwise, any
annual, semiannual or other reports or communications sent
to the shareholders, and the expenses of sending
prospectuses relating to the Shares to existing
shareholders;
(iii) all expenses of any federal or state
original-issue tax or transfer tax payable upon the
issuance, transfer or delivery of Shares from the Fund to
the Distributor; and
(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent Shares.
(b) The Distributor will pay the costs and expenses of qualifying
and maintaining qualification of the Shares for sale under the
securities laws of the various states. The Distributor will also permit its
officers and employees to serve without compensation as trustees and officers
of the Fund if duly elected to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket
costs and expenses actually incurred by it in connection with
distribution of each class of Shares respectively in accordance with and
subject to the terms of a plan (the "12b-1 Plan") adopted by the Fund pursuant
to Rule 12b-1 under the 1940 Act as such 12b-1 Plan may be in effect from time
to time; provided, however, that no payments shall be due or paid to the
Distributor hereunder with respect to a class of Shares unless and until this
Agreement shall have been approved for each such class by a majority of the
Board of Trustees of the Fund and by a majority of the "Disinterested Trustees"
(as such term is defined in such 12b-1 Plan) by vote cast in person at a
meeting called for the purpose of voting on this Agreement. A copy of such
12b-1 Plan as in effect on the date of this Agreement is attached as Exhibit I
hereto. The Fund reserves the right to terminate such 12b-1 Plan with respect
to a class of Shares at any time, as specified in the Plan. The persons
authorized to direct the payment of funds pursuant to this Agreement and the
12b-1
3
<PAGE> 4
Plan shall provide to the Fund's Board of Trustees, and the Trustees
shall review, at least quarterly, a written report with respect to class of
Shares setting forth the amounts so paid, the purposes for which such
expenditures were made for each such class of Shares, comparing the amounts
paid by such class of Shares with amounts paid by classes of shares issued by
investment companies not governed by the Board of Trustees and distributed by
the Distributor or by direct or indirect Affiliates of the Distributor and such
other information as the Board of Trustees may from time to time request.
(d) The Fund shall compensate the Distributor for providing
services to, and the maintenance of, shareholder accounts in the Fund
(including prepaying service fees to eligible brokers, dealers and financial
intermediaries and expenses incurred in connection therewith) and the
Distributor may pay as agent for and on behalf of the Fund a service fee with
respect to each class of Shares to brokers, dealers and financial
intermediaries for the provision of shareholder services and the maintenance of
shareholder accounts in the Fund in the amount with respect to each class of
Shares set forth from time to time in the Fund's prospectus. The Fund shall
compensate the Distributor for such expenses in accordance with the terms of a
service plan (the "Service Plan"), as such Service Plan may be in effect from
time to time; provided, however, that no service fee payments shall be due or
paid to the Distributor hereunder with respect to a class of Shares unless and
until this Agreement shall have been approved for each such class by a majority
of the Board of Trustees of the Fund and by a majority of the Disinterested
Trustees by vote cast in person at a meeting called for the purpose of voting
on this Agreement. A copy of such Service Plan as in effect on the date of
this Agreement is attached as Exhibit II hereto. The Fund reserves the right
to terminate such Service Plan with respect to a class of Shares at any time,
as specified in the Plan. The persons authorized to direct the payment of
funds pursuant to this Agreement and the Service Plan shall provide to the
Fund's Board of Trustees, and the Trustees shall review, at least quarterly, a
written report with respect to each class of Shares setting forth the amounts
paid as service fees for each such class of Shares comparing the amounts paid
as service fees by such class of Shares with amounts paid by classes of shares
issued by investment companies not governed by the Board of Trustees and
distributed by the Distributor or by direct or indirect Affiliates of the
Distributor and such other information as the Board of Trustees may from time
to time request.
6. Redemption of Shares. In connection with the Fund's
redemption of its Shares, the Fund hereby authorizes the Distributor to
repurchase, upon the terms and conditions hereinafter set forth, as the Fund's
agent and for the Fund's account, such Shares as may be offered for sale to the
Fund from time to time by holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal
and state legislation, any applicable rules of the National Association
of Securities Dealers, Inc., and any applicable rules and regulations of the
Securities and Exchange Commission under the 1940 Act, the Distributor may
accept offers of holders of Shares to resell such Shares to the Fund on such
terms and conditions and at such prices as described and provided for in the
then current Prospectus of the Fund.
(b) The Distributor agrees to notify the Fund at such times as
the Fund may specify of the number of each class of Shares,
respectively, repurchased for the Fund's account and the time or times of such
repurchases, and the Fund shall notify the Distributor of the prices and, in
the case of a class of CDSC Shares or Combination Shares, of the deferred sales
charge as described below, if any, applicable to repurchases of Shares of such
class.
(c) The Fund shall have the right to suspend or revoke the
foregoing authorization at any time; unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by telegraph or by written instrument from any of the Fund's officers.
In the event that the Distributor's authorization is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of
the Board of Trustees of the Fund.
(d) The Distributor agrees that all repurchases of Shares made
by the Distributor shall be made only as agent for the Fund's account
and pursuant to the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to
pay, for the Fund's account,
4
<PAGE> 5
the repurchase price (together with any applicable contingent
deferred sales charge) of any Shares so repurchased for the Fund against the
authorized transfer of book shares from an open account and against delivery of
any other documentation required by the Board of Trustees of the Fund or, in
the case of certificated Shares, against delivery of the certificates
representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other
compensation in respect of any repurchases of FESC Shares for the Fund
under the foregoing authorization and appointment as agent. With respect to
any repurchase of CDSC Shares or Combination Shares, the Distributor shall
receive the deferred sales charge, if any, applicable to the respective class
of Shares that have been held for less than a specified period of time with
respect to such class as set forth from time to time in the Fund's Prospectus.
The Distributor shall receive no other commission or other compensation in
respect of any repurchases of CDSC Shares or Combination Shares for the Fund
under the foregoing authorization and appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms
of this Agreement are redeemed or repurchased by the Fund or by the
Distributor as agent or are tendered for redemption within seven business days
after the date of the Distributor's confirmation of the original purchase by
the Distributor, the Distributor shall forfeit the amount above the net asset
value received by it in respect of such Shares, provided that the portion, if
any, of such amount re-allowed by the Distributor to dealers or agents shall be
repayable to the Fund only to the extent recovered by the Distributor from the
dealer or agent concerned. The Distributor shall include in agreements with
such dealers and agents a corresponding provision for the forfeiture by them of
their concession with respect to FESC Shares purchased by them or their
principals and redeemed or repurchased by the Fund or by the Distributor as
agent within seven business days after the date of the Distributor's
confirmation of such initial purchases.
7. Indemnification. The Fund agrees to indemnify and hold harmless the
Distributor and each of its trustees and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground
that the registration statement, Prospectus, shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading under the 1933 Act or any other statute or the common law. However,
the Fund does not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund by or on behalf of the
Distributor. In no case (i) is the indemnity of the Fund in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its securityholders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this Section with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or any such person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any such
person (or after the Distributor or the person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund shall
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them.
If the Fund does not elect to assume the defense of any suit, it will
5
<PAGE> 6
reimburse the Distributor, officers or trustees or controlling person
or persons, defendant or defendants in the suit for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees to notify the
Distributor promptly of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the issuance
or sale of any of the Shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Fund and each of its trustees and officers and each person, if
any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the 1933 Act
or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor. In no
case (i) is the indemnity of the Distributor in favor of the Fund or any person
indemnified to be deemed to protect the Fund or any such person against any
liability to which the Fund or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligation and duties
under this Amended Agreement, or (ii) is the Distributor to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the Fund or
person (or after the Fund or such person shall have received notice of service
on any designated agent). However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and trustees and to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
Fund or controlling persons, defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the Distributor does
not elect to assume the defense of any suit, it will reimburse the Fund,
officers and trustees or controlling person or persons, defendant or defendants
in the suit, for the reasonable fees and expenses of any counsel retained by
them. The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Shares.
8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.
6
<PAGE> 7
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.
9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
10. Notice. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office
of such party or at such other address as such party shall have designated in
writing.
11. Name. In connection with its employment hereunder, the Distributor
hereby agrees and covenants not to change its name without the prior consent of
the Board of Trustees.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN AMERICAN CAPITAL
GLOBAL MANAGED ASSETS FUND
By: /s/ DENNIS J. MCDONNELL
----------------------------
Name: Dennis J. McDonnell
Title: President
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By: /s/ RONALD A. NYBERG
---------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
8
<PAGE> 1
EXHIBIT (8)(b)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between each of the
VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A" hereto,
which are organized under the laws of the state and as the entities set forth
in Schedule "A" hereto (collectively, the "Funds"), and ACCESS INVESTOR
SERVICES, INC., a Delaware corporation ("ACCESS").
R E C I T A L:
-------------
WHEREAS, each of the Funds desires to appoint ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent and ACCESS
desires to accept such appointments;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1. Terms of Appointment; Duties of ACCESS.
---------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement, each
of the Funds hereby employs and appoints ACCESS as its transfer agent, dividend
disbursing agent and shareholder service agent.
1.02 ACCESS hereby accepts such employment and appointments and agrees
that on and after the effective date of this Agreement it will act as the
transfer agent, dividend disbursing agent and shareholder service agent for
each of the Funds on the terms and conditions set forth herein.
1.03 ACCESS agrees that its duties and obligations hereunder will be
performed in a competent, efficient and workmanlike manner with due diligence
in accordance with reasonable industry practice, and that the necessary
facilities, equipment and personnel for such performance will be provided.
1.04 For a period of one year commencing on the effective date of this
Agreement, ACCESS and each of the Funds agree that the retention of (i) the
chief executive officer, president, chief financial officer, chief operating
officer and secretary of ACCESS and (ii) each director, officer and employee of
ACCESS or any of its Affiliates (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")) who serves as an officer of the Funds (each
person referred to in (i) or (ii) hereinafter being referred to as an
"Essential Person"), in his or her current capacities, is in the best interest
<PAGE> 2
of the Funds and the Funds' shareholders. In connection with ACCESS's
acceptance of employment hereunder, ACCESS hereby agrees and covenants for
itself and on behalf of its Affiliates that neither ACCESS nor any of its
Affiliates shall make any material or significant personnel changes or replace
or seek to replace any Essential Person or cause to be replaced any Essential
Person, in each case without first informing the Board of Trustees of the Funds
in a timely manner. In addition, neither ACCESS nor any Affiliate of ACCESS
shall change or seek to change or cause to be changed, in any material
respect, the duties and responsibilities of any Essential Person, in each case
without first informing the Board of Trustees of the Funds in a timely
manner.
1.05 In order to assure compliance with section 1.03 and to implement a
cooperative effort to improve and maintain the quality of transfer agency,
dividend disbursing and shareholder services received by each of the Funds and
their shareholders, ACCESS agrees to provide and maintain quantitative
performance objectives, including maximum target turn-around times and maximum
target error rates, for the various services provided hereunder. ACCESS also
agrees to provide a reporting system designed to provide the Board of Trustees
of each of the Funds (the "Board") on a quarterly basis with quantitative data
comparing actual performance for the period with the performance objectives.
The foregoing procedures are designed to provide a basis for continuing
monitoring by the Board of the quality of services rendered hereunder.
Article 2. Fees and Expenses.
------------------
2.01 For the services to be performed by ACCESS pursuant to this
Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee
schedules agreed upon from time to time by each of the Funds and ACCESS.
2.02 In addition to the amounts paid under section 2.01 above, each of the
Funds agrees to reimburse ACCESS promptly for such Fund's reasonable
out-of-pocket expenses or advances paid on its behalf by ACCESS in connection
with its performance under this Agreement for postage, freight, envelopes,
checks, drafts, continuous forms, reports and statements, telephone, telegraph,
costs of outside mailing firms, necessary outside record storage costs, media
for storage of records (e.g., microfilm, microfiche and computer tapes) and
printing costs incurred due to special requirements of such Fund. In addition,
any other special out-of-pocket expenses paid by ACCESS at the specific request
of any of the Funds will be promptly reimbursed by the requesting Fund.
Postage for mailings of dividends, proxies, Fund reports and other mailings
Page 2
<PAGE> 3
to all shareholder accounts shall be advanced to ACCESS by the concerned Fund
three business days prior to the mailing date of such materials.
Article 3. Representations and Warranties of Access.
-----------------------------------------
ACCESS represents and warrants to each of the Funds that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of the State of Delaware.
3.02 It is duly qualified to carry on its business in each jurisdiction in
which the nature of its business requires it to be so qualified.
3.03 It is empowered under applicable laws and regulations and by its
charter and bylaws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05 It has and will continue to have during the term of this Agreement
access to the necessary facilities, equipment and personnel to perform its
duties and obligations hereunder.
3.06 It will maintain a system regarding "as of" transactions as follows:
(a) Each "as of" transaction effected at a price other than that in
effect on the day of processing for which an estimate has not been given
to any of the affected Funds and which is necessitated by ACCESS' error,
or delay for which ACCESS is responsible or which could have been avoided
through the exercise of reasonable care, will be identified, and the net
effect of such transactions determined, on a daily basis for each such
Fund.
(b) The cumulative net effect of the transactions included in
paragraph (a) above will be determined each day throughout each month.
If, on any day during the month, the cumulative net effect upon any Fund
is negative and exceeds an amount equivalent to 1/2 of 1 cent per share
of such Fund, ACCESS shall promptly make a payment to such Fund (in cash
or through use of a credit as described in paragraph (c) below) in such
amount as necessary to reduce the negative cumulative net effect to less
than 1/2 of 1 cent per share of such Fund. If on the last business day
of the month the cumulative net effect (adjusted by the amount of any
payments or credits used pursuant to the preceding sentence) upon any
Fund is negative, such Fund shall be entitled to a reduction in the
monthly transfer agency fee next payable by an equivalent amount, except
as provided in paragraph (c) below. If on the last
Page 3
<PAGE> 4
business day of the month the cumulative net effect (similarly adjusted)
upon any Fund is positive, ACCESS shall be entitled to recover certain
past payments, credits used and reductions in fees, and to a credit
against all future payments and fee reductions made under this paragraph
to such Fund, as described in paragraph (c) below.
(c) At the end of each month, any positive cumulative net effect
upon any Fund shall be deemed to be a credit to ACCESS which shall first
be applied to recover any payments, credits used and fee reductions made
by ACCESS to such Fund under paragraph (b) above during the calendar year
by increasing the amount of the monthly transfer agency fee next payable
in an amount equal to prior payments, credits used and fee reductions
made during such year, but not exceeding the sum of that month's credit
and credits arising in prior months during such year to the extent such
prior credits have not previously been utilized as contemplated by this
paragraph (c). Any portion of a credit to ACCESS not so used shall
remain as a credit to be used as payment against the amount of any future
negative cumulative net effects which would otherwise require a payment,
use of a credit or fee reduction to such Fund pursuant to paragraph (b)
above.
Article 4. Representations and Warranties of the Funds.
--------------------------------------------
Each of the Funds hereby represents and warrants on behalf of itself
only and not on behalf of any other Funds which are a party to this Agreement
that:
4.01 It is duly organized and existing and in good standing under the laws
of the commonwealth or state set forth in Schedule "A" hereto.
4.02 It is empowered under applicable laws and regulations and by its
Declaration of Trust and by-laws to enter into and perform this Agreement.
4.03 All requisite proceedings have been taken by its Board to authorize
it to enter into and perform this Agreement.
4.04 It is an open-end, management investment company registered under the
Investment Company Act of 1940, as amended.
Page 4
<PAGE> 5
4.05 A registration statement under the Securities Act of 1933, as
amended, is currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue to be made, with
respect to all of its shares being offered for sale.
Article 5. Indemnification.
---------------
5.01 ACCESS shall not be responsible for and each of the Funds shall
indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities (collectively, "Losses") arising out of or attributable to:
(a) All actions of ACCESS required to be taken by ACCESS for the
benefit of such Fund pursuant to this Agreement, provided that ACCESS has
acted in good faith with due diligence and without negligence or willful
misconduct.
(b) The reasonable reliance by ACCESS on, or reasonable use by
ACCESS of, information, records and documents which have been prepared or
maintained by or on behalf of such Fund or have been furnished to ACCESS
by or on behalf of such Fund.
(c) The reasonable reliance by ACCESS on, or the carrying out by
ACCESS of, any instructions or requests of such Fund.
(d) The offer or sale of such Fund's shares in violation of any
requirement under the federal securities laws or regulations or the
securities laws or regulations of any state or in violation of any stop
order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such shares in such state unless
such violation results from any failure by ACCESS to comply with written
instructions of such Fund that no offers or sales of such Fund's shares
be made in general or to the residents of a particular state.
(e) Such Fund's refusal or failure to comply with the terms of this
Agreement, or such Fund's lack of good faith, negligence or willful
misconduct or the breach of any representation or warranty of such Fund
hereunder. Notwithstanding the foregoing, no Fund shall be required to
indemnify or hold ACCESS harmless from and against any Losses arising out
of or attributable to any action or failure to take action, or any
information, records or
Page 5
<PAGE> 6
documents prepared or maintained, on behalf of
the Fund by the Fund's investment adviser or distributor, or any person
providing fund accounting or legal services to the Fund that is also an
officer or employee of Van Kampen American Capital, Inc. or its
subsidiaries unless such person or entity is otherwise entitled to
indemnification from the Fund.
5.02 ACCESS shall indemnify and hold harmless each of the Funds from and
against any and all Losses arising out of or attributable to ACCESS' refusal or
failure to comply with the terms of this Agreement, or ACCESS' lack of good
faith, or its negligence or willful misconduct, or the breach of any
representation or warranty of ACCESS hereunder.
5.03 At any time ACCESS may apply to any authorized officer of any of the
Funds for instructions, and may consult with any of the Funds' legal counsel,
at the expense of such concerned Fund, with respect to any matter arising in
connection with the services to be performed by ACCESS under this Agreement,
and ACCESS shall not be liable and shall be indemnified by such concerned Fund
for any action taken or omitted by it in good faith in reasonable reliance upon
such instructions or upon the opinion of such counsel. ACCESS shall be
protected and indemnified in acting upon any paper or document reasonably
believed by ACCESS to be genuine and to have been signed by the proper person
or persons and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the concerned Fund.
ACCESS shall also be protected and indemnified in recognizing stock
certificates which ACCESS reasonably believes to bear the proper manual or
facsimile signatures of the officers of the concerned Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event that any party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable to the other for any damages resulting from such
failure to perform or otherwise from such causes.
5.05 In no event and under no circumstances shall any party to this
Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which one party may be
required to indemnify another, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim.
Page 6
<PAGE> 7
The party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
Article 6. Covenants of Each of the Funds and ACCESS.
------------------------------------------
6.01 Each of the Funds shall promptly furnish to ACCESS the following:
(a) Certified copies of the resolution of its Board authorizing the
appointment of ACCESS and the execution and delivery of this Agreement.
(b) Certified copies of its Declaration of Trust or Articles of
Incorporation and by-laws and all amendments thereto.
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to each of the Funds for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.03 ACCESS shall keep records relating to the services to be
performed hereunder in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of each of the Funds
(hereinafter referred to as "Fund Records") prepared or maintained by ACCESS
hereunder shall be maintained and kept current in compliance with Section 31 of
the Investment Company Act of 1940 and the Rules thereunder (such Section and
Rules being hereinafter referred to as the "1940 Act Requirements"). To the
extent required by the 1940 Act Requirements, ACCESS agrees that all Fund
Records prepared or maintained by ACCESS hereunder are the property of the
concerned Fund and shall be preserved and made available in accordance with the
1940 Act Requirements, and shall be surrendered promptly to the concerned Fund
on its request. ACCESS agrees at such reasonable times as may be requested by
the Board and at least quarterly to provide (i) written confirmation to the
Board that all Fund Records are maintained and kept current in accordance with
the 1940 Act Requirements, and (ii) such other reports regarding its
performance hereunder as may be reasonably requested by the Board.
Page 7
<PAGE> 8
6.04 ACCESS and each of the Funds agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of any of
the Fund Records, ACCESS will endeavor to notify each of the concerned
Funds and to secure instructions from an authorized officer of each of the
concerned Funds as to such inspection. ACCESS reserves the right, however, to
exhibit such Fund Records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit such Fund records to such
person.
Article 7. Term and Termination Of Agreement.
----------------------------------
7.01 The initial term of this Agreement shall expire May 31, 1999,
and thereafter this Agreement shall automatically be renewed for
successive one year periods to begin on June 1 of each year unless any party
provides notice to the other party at least 120 days in advance of that date
that this Agreement is not to be renewed.
7.02 Notwithstanding the foregoing, any party may terminate this
Agreement for good and reasonable cause at any time by giving written
notice to the other party at least 60 days prior to the date on which such
termination is to be effective or such shorter period as may be required by
law.
7.03 Any unpaid fees or reimbursable expenses payable to ACCESS at
the termination date of this Agreement shall be due on that termination date.
ACCESS agrees to use its best efforts to cooperate with the Funds and the
successor transfer, dividend disbursement, or shareholder servicing agent
or agents in accomplishing an orderly transition.
Article 8. Miscellaneous.
--------------
8.01 Except as provided in section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the written consent of ACCESS or the concerned Fund, as the case may
be; provided, however, that no consent shall be required for any merger of any
of the Funds with, or any sale of all or substantially all the assets of
any of the Funds to, another investment company.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
Page 8
<PAGE> 9
8.03 ACCESS may, without further consent on the part of any of the
Funds, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to each of
the Funds for the acts and omissions of DST, Inc. or other qualified
servicer as it is for its own acts and omissions.
8.04 Without the prior approval of the Boards of Trustees of the
Funds, ACCESS shall not, directly or indirectly, provide services,
including services such as transfer agent, dividend disbursing agent or
shareholder service agent, to any investment companies.
8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes
any prior agreement with respect thereto, whether oral or written, and
this Agreement may not be modified except by written instrument executed
by the affected parties.
8.06 The execution of this Agreement has been authorized by the
Funds' Trustees. This Plan is executed on behalf of the Funds or the
Trustees of the Funds as Trustees and not individually and the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Funds individually but are binding only
upon the assets and property of the Funds. A Certificate of Trust in
respect of each of the Funds is on file with the appropriate state
agency.
8.07 For each of those Funds which have one or more portfolios as
set forth in Schedule "A" hereto, all obligations of those Funds under
this Agreement shall apply only on a portfolio-by-portfolio basis and the
assets of one portfolio shall not be liable for the obligations of any
other.
8.08 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties
hereto agree to renegotiate such affected portions in good faith.
8.09 All questions concerning the validity, meaning and effect of
this Agreement shall be determined in accordance with the laws (without
giving effect to the conflict-of-law principles thereof) of the State of
Delaware applicable to contracts made and to be performed in that state.
8.10 (a) Any dispute, controversy, or claim arising out of or
relating to this Agreement, or the breach, termination or validity
thereof, shall be finally settled by arbitration in accordance with
the Expedited Procedures
Page 9
<PAGE> 10
of the commercial arbitration Rules of the American Arbitration
Association (the "AAA") then in effect (the "Rules"). The
arbitration shall be held in Chicago, Illinois.
(b) There shall be one arbitrator who shall be selected jointly by
the parties. If the parties are unable to agree on an arbitrator
within 15 days after a demand for arbitration is made by a party,
the arbitrator shall be appointed by the AAA in accordance with the
Rules. The hearing shall be held within 90 days of the appointment
of the arbitrator. Notwithstanding the Expedited Procedures
of the Rules, the arbitrator, at his discretion, may schedule
additional days of hearings.
(c) Either party may, without inconsistency with this Agreement,
seek from a court any interim or provisional relief in aid of
arbitration, pending the establishment of the arbitral tribunal.
The parties hereby submit to the exclusive jurisdiction of the
federal and state courts located in the northern district of the
state of Illinois for any such relief in aid of arbitration, or for
any relief relating to arbitration, except for the enforcement of an
arbitral award which may be enforced in any court having
jurisdiction.
(d) Any arbitration proceedings or award rendered hereunder and the
validity, effect and interpretation of Section 8.10 shall be
governed by the Federal Arbitration Act (9 U.S.C. Sections 1 et
--
seq.) The award shall be final and binding upon the parties.
---
Judgment upon any award may be entered in any court having
jurisdiction.
(e) This Agreement and the rights and obligations of the Parties
shall remain in full force and effect pending the award in any
arbitration proceeding hereunder.
Page 10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf and through their duly authorized
officers, as of the date first above written.
EACH OF THE VAN KAMPEN AMERICAN CAPITAL
OPEN END FUNDS LISTED ON SCHEDULE
"A" HERETO
BY: /s/ Ronald A. Nyberg
----------------------------------
Vice President
ATTEST:
/s/ Nicholas Dalmaso
- ----------------------------------
Assistant Secretary
ACCESS INVESTOR SERVICES, INC.
BY: /s/ Paul R. Wolkenberg
---------------------------------
President and Chief Executive Officer
ATTEST:
/s/ Huey P. Falgout
- ---------------------------------
Assistant Secretary
Page 11
<PAGE> 12
SCHEDULE "A"
------------
VAN KAMPEN AMERICAN CAPITAL OPEN-END FUNDS
<TABLE>
<CAPTION>
Organization Type
Fund Name State of [Business Trust
(including Portfolios) Organization "T"]
=====================================================================================================
<S> <C> <C>
Van Kampen American Capital Aggressive Growth Fund DE T
Van Kampen American Capital California Insured Tax Free Fund DE T
Van Kampen American Capital Comstock Fund DE T
Van Kampen American Capital Corporate Bond Fund DE T
Van Kampen American Capital Emerging Growth Fund DE T
Van Kampen American Capital Enterprise Fund DE T
Van Kampen American Capital Equity Income Fund DE T
Van Kampen American Capital Florida Insured Tax Free Income Fund DE T
Van Kampen American Capital Foreign Securities Fund DE T
Van Kampen American Capital Global Managed Assets Fund DE T
Van Kampen American Capital Government Securities Fund DE T
Van Kampen American Capital Government Target Fund DE T
Van Kampen American Capital Great American Companies Fund DE T
Van Kampen American Capital Growth Fund DE T
Van Kampen American Capital Growth and Income Fund DE T
Van Kampen American Capital Harbor Fund DE T
Van Kampen American Capital High Income Corporate Bond Fund DE T
Van Kampen American Capital High Yield Fund DE T
Van Kampen American Capital Insured Tax Free Income Fund DE T
Van Kampen American Capital Intermediate Term Municipal Income Fund DE T
</TABLE>
Page 12
<PAGE> 13
<TABLE>
<CAPTION>
Organization Type
Fund Name State of [Business Trust
(including Portfolios) Organization "T"]
=====================================================================================================
<S> <C> <C>
Van Kampen American Capital Life Investment Trust DE T
Asset Allocation Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock Portfolio
Van Kampen American Capital Limited Maturity Government Fund DE T
Van Kampen American Capital Municipal Income Fund DE T
Van Kampen American Capital New Jersey Tax Free Income Fund DE T
Van Kampen American Capital New York Tax Free Income Fund DE T
Van Kampen American Capital Pace Fund DE T
Van Kampen American Capital Pennsylvania Tax Free Income Fund PA T
Van Kampen American Capital Prospector Fund DE T
Van Kampen American Capital Real Estate Securities Fund DE T
Van Kampen American Capital Reserve Fund DE T
Van Kampen American Capital Short-Term Global Income Fund DE T
Van Kampen American Capital Small Capitalization Fund DE T
Van Kampen American Capital Strategic Income Fund DE T
Van Kampen American Capital Tax-Exempt Trust DE T
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Tax Free High Income Fund DE T
Van Kampen American Capital Tax Free Money Fund DE T
Van Kampen American Capital U.S. Government Fund DE T
Van Kampen American Capital U.S. Government Trust for Income DE T
Van Kampen American Capital Utility Fund DE T
Van Kampen American Capital Value Fund DE T
</TABLE>
PAGE 13
<PAGE> 14
<TABLE>
<CAPTION>
Organization Type
Fund Name State of [Business Trust
(including Portfolios) Organization "T"]
=====================================================================================================
<S> <C> <C>
Van Kampen American Capital World Portfolio Series Trust DE T
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities
Fund
</TABLE>
PAGE 14
<PAGE> 1
EXHIBIT (9)(b)
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, dated May 31, 1997, by and between the parties set
forth in Schedule A hereto (designated collectively hereafter as the "Funds")
and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware
corporation ("Advisory Corp.").
W I T N E S S E T H:
WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, Advisory Corp. has the capability of providing certain
accounting services to the Funds; and
WHEREAS, each desires to utilized Advisory Corp. in the provision of
such accounting services; and
WHEREAS, Advisory Corp. intends to maintain its staff in order to
accommodate the provision of all such services.
NOW THEREFORE, in consideration of the premises and the mutual
covenants spelled out herein, it is agreed between the parties hereto as
follows:
1. Appointment of Advisory Corp.. As agent, Advisory Corp. shall provide
each of the Funds the accounting services ("Accounting Services") as set forth
in Paragraph 2 of this Agreement. Advisory Corp. accepts such appointment and
agrees to furnish the Accounting Services in return for the compensation
provided in Paragraph 3 of this Agreement.
2. Accounting Services to be Provided. Advisory Corp. will provide to each
respective Fund accounting related services in connection with the maintenance
of the financial records of such Fund, including without limitation: (i)
maintenance of the general ledger and other financial books and records; (ii)
processing of portfolio transactions; (iii) coordination of the valuation of
portfolio securities; (iv) calculation of the Fund's net asset value; (v)
coordination of financial and regulatory reporting; (vi) preparation of
financial reports for each Fund's Board of Trustees; (vii) coordination of tax
and financial compliance issues; (viii) the establishment and maintenance of
accounting policies; (ix) recommendations with respect to dividend policies; (x)
preparation of each Fund's financial reports and other accounting and tax
related notice information to shareholders; and (xi) the assimilation and
interpretation of accounting data for meaningful management review. Advisory
Corp. shall provide accurate maintenance of each Fund's financial books and
records as required by the applicable securities statutes and regulations, and
shall hire persons (collectively the "Accounting Service Group") as needed to
provide such Accounting Services.
<PAGE> 2
3. Expenses and Reimbursements. Advisory Corp. shall be reimbursed by the
Funds for all costs and services incurred in connection with the provision of
the aforementioned Accounting Services ("Accounting Service Expenses"),
including but not limited to all salary and related benefits paid to the
personnel of the Accounting Service Group, overhead and expenses related to
office space and related equipment and out-of-pocket expenses.
The Accounting Services Expenses will be paid by Advisory Corp. and
reimbursed by the Funds. Advisory Corp. will tender to each Fund a monthly
invoice as of the last business day of each month which shall certify the total
support service expenses expended. Except as provided herein, Advisory Corp.
will receive no other compensation in connection with Accounting Services
rendered in accordance with this Agreement.
4. Payment for Accounting Service Expenses Among the Funds. As to one
quarter (25%) of the Accounting Service Expenses incurred under the Agreement,
the expense shall be allocated between all Funds based on the number of classes
of shares of beneficial interest that each respective Fund has issued. As to the
remaining three quarters (75%) of the Accounting Service Expenses incurred under
the Agreement, the expense shall be allocated between all Funds based on their
relative net assets. For purposes of determining the percentage of expenses to
be allocated to any Fund, the liquidation preference of any preferred shares
issued by any such Fund shall not be considered a liability of such Fund for the
purposes of calculating relative net assets of such Fund.
5. Maintenance of Records. All records maintained by Advisory Corp. in
connection with the performance of its duties under this Agreement will remain
the property of each respective Fund and will be preserved by Advisory Corp. for
the periods prescribed in Section 31 of the 1940 Act and the rules thereunder or
such other applicable rules that may be adopted from time to time under the act.
In the event of termination of the Agreement, such records will be promptly
delivered to the respective Funds. Such records may be inspected by the
respective Funds at reasonable times.
6. Liability of Advisory Corp. Advisory Corp. shall not be liable to any
Fund for any action taken or thing done by it or its agents or contractors on
behalf of the fund in carrying out the terms and provisions of the Agreement if
done in good faith and without gross negligence or misconduct on the part of
Advisory Corp., its agents or contractors.
7. Indemnification By Funds. Each Fund will indemnify and hold Advisory
Corp. harmless from all lost, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by Advisory Corp. resulting from: (a) any
claim, demand, action or suit in connection with Advisory Corp.'s acceptance of
this Agreement; (b) any action or omission by Advisory Corp. in the performance
of its duties hereunder; (c) Advisory Corp.'s acting upon instructions believed
by it to have been executed by a duly authorized officer of the Fund; or (d)
Advisory Corp.'s acting upon information provided by the Fund in form and under
policies agreed to by Advisory Corp. and the Fund. Advisory Corp. shall not be
entitled to such indemnification in respect of actions or omissions constituting
gross negligence or willful misconduct of Advisory Corp. or its agents or
contractors. Prior to confessing any claim against it which may be subject to
this indemnification, Advisory Corp. shall give the Fund reasonable opportunity
to defend against said claim in its own name or in the name of Advisory Corp.
8. Indemnification By Advisory Corp. Advisory Corp. will indemnify and
hold harmless each Fund from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Fund resulting from any
claim, demand, action or suit arising out of Advisory Corp.'s failure to comply
with the terms of this Agreement or which arises out of the gross negligence or
willful misconduct of Advisory Corp. or its agents or contractors; provided that
such negligence or misconduct is not attributable to the Funds, their agents or
contractors. Prior to confessing any claim against it which may be subject to
this indemnification, the Fund shall give Advisory Corp. reasonable opportunity
to defend against said claim in its own name or in the name of such Fund.
<PAGE> 3
9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers or shareholders of both the Funds and Advisory
Corp. (including Advisory Corp.'s affiliates), and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided by a specific provision of applicable
law.
11. Execution, Amendment and Termination. The term of this Agreement shall
begin as of the date first above written, and unless sooner terminated as herein
provided, this Agreement shall remain in effect through May, 1998, and
thereafter from year to year, if such continuation is specifically approved at
least annually by the Board of Trustees of each Fund, including a majority of
the independent Trustees of each Fund. This Agreement may be modified or amended
from time to time by mutual agreement between the parties hereto and may be
terminated after May, 1998, by at least sixty (60) days' written notice given by
one party to the others. Upon termination hereof, each Fund shall pay to
Advisory Corp. such compensation as may be due as of the date of such
termination and shall likewise reimburse Advisory Corp. for its costs, expenses
and disbursements payable under this Agreement to such date. This Agreement may
be amended in the future to include as additional parties to the Agreement other
investment companies for with Advisory Corp., any subsidiary or affiliate serves
as investment advisor or distributor if such amendment is approved by the
President of each Fund.
12. Assignment. Any interest of Advisory Corp. under this Agreement shall
not be assigned or transferred, either voluntarily or involuntarily, by
operation of law or otherwise, without the prior written consent of the Funds.
This Agreement shall automatically and immediately terminate in the event of its
assignment without the prior written consent of the Funds.
13. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt of
such notices. Until further notice to the other parties, it is agreed that for
this purpose the address of each Fund is One Parkview Plaza, Oakbrook Terrace,
Illinois 60181, Attention: President and that of Advisory Corp. for this purpose
is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: President.
14. Personal Liability. As provided for in the Agreement and Declaration of
Trust of the various Funds, under which the Funds are organized as
unincorporated trusts, the shareholders, trustees, officers, employees and other
agents of the Fund shall not personally be found by or liable for the matters
set forth hereto, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder.
15. Interpretative Provisions. In connection with the operation of this
Agreement, Advisory Corp. and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement.
16. State Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Illinois.
17. Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this amended and restated
Agreement to be executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
---------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
---------------------------------------
Dennis J. McDonnell, President
<PAGE> 5
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
("MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 6
OPEN END FUNDS
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL
FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Government Target Fund ("Government Target
Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment Trust"
or "LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities
Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust")
on behalf of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
<PAGE> 7
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust") on behalf of
its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate Term Municipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust")
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust") on behalf of its
series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities
Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund
("Pennsylvania Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 8
AMENDMENT NUMBER ONE
TO THE
FUND ACCOUNTING AGREEMENT
THIS AMENDMENT NUMBER ONE, dated July 24, 1997, to the Fund Accounting
Agreement dated May 31, 1997 (the "Agreement") by and between the parties set
forth in Schedule A, attached hereto and incorporated by reference and VAN
KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation
("Advisory Corp.").
W I T N E S S E T H
WHEREAS, the following party, being an open-end management investment
company as that term is defined in the Investment Company Act of 1940, as
amended, wishes to become party to the Agreement:
ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("ASSET
MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL FUNDS"):
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
WHEREAS, the original parties desire to add the aforementioned
additional entity as party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement be amended to add the party mentioned above as party to the
Agreement.
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
-----------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
-----------------------------------------
Dennis J. McDonnell, President
<PAGE> 10
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California
Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey
Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania
Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
("MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 11
OPEN END FUNDS
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL
FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Government Target Fund ("Government Target
Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment Trust"
or "LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities
Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on behalf
of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
<PAGE> 12
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust") on behalf of
its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate Term Municipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust")
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust") on behalf of its
series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities
Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund
("Pennsylvania Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 13
AMENDMENT NUMBER TWO
TO THE
FUND ACCOUNTING AGREEMENT
THIS AMENDMENT NUMBER TWO, dated April 23, 1998, to the Fund Accounting
Agreement dated May 31, 1997 (the "Agreement") by and between the parties set
forth in Schedule A, attached hereto and incorporated by reference and VAN
KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation
("Advisory Corp.").
W I T N E S S E T H
WHEREAS, the following party, being an open-end management investment
company as that term is defined in the Investment Company Act of 1940, as
amended, wishes to become party to the Agreement:
ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC."):
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Comstock Portfolio ("LIT Comstock Portfolio")
WHEREAS, the original parties desire to add the aforementioned
additional entity as party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement be amended to add the party mentioned above as party to the
Agreement.
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
---------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
---------------------------------------
Dennis J. McDonnell, President
<PAGE> 15
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California
Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey
Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania
Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
Van Kampen American Capital Senior Income Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
("MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 16
OPEN END FUNDS
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL
FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Government Target Fund ("Government Target
Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment Trust"
or "LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Morgan Stanley Real Estate Securities Portfolio ("LIT Morgan Stanley
Real Estate Securities Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on behalf
of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
<PAGE> 17
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust") on behalf of
its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate Term Municipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust")
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust") on behalf of its
series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities
Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund
("Pennsylvania Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 1
EXHIBIT (11)(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6, to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
February 6, 1998, relating to the financial statements and financial highlights
of Van Kampen American Capital Global Managed Assets Fund, which appears in
such Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Financial Highlights" and "Independent Accountants" in such Prospectus and
under the heading "Independent Accountants" in such Statement of Additional
Information.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
April 27, 1998
<PAGE> 1
EXHIBIT 16
GLOBAL MANAGED ASSETS FUND - CLASS A SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1997
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $10.16
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,037.17 = ERV
One year period ended 12/31/97 1 = n
TOTAL RETURN FOR THE PERIOD 3.72% = T
Excluding Payment of the Sales Charge
Net Asset Value $10.16
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,089.38 = ERV
One year period ended 12/31/97 1 = n
TOTAL RETURN FOR THE PERIOD 8.94% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1997
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $10.16
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,301.27 = ERV
Inception through 12/31/97 3.63 = n
TOTAL RETURN FOR THE PERIOD 7.52% = T
Excluding Payment of the Sales Charge
Net Asset Value $10.16
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,366.04 = ERV
Inception through 12/31/97 3.63 = n
TOTAL RETURN FOR THE PERIOD 8.97% = T
<PAGE> 2
GLOBAL MANAGED ASSETS FUND - CLASS A SHARES
Non-Standardized Cumulative Total Return Calculation
Inception Through December 31, 1997
Formula
ERV - P
-------
P = T
Including Payment of the Sales Charge
Net Asset Value $10.16
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,301.27 = ERV
TOTAL RETURN FOR THE PERIOD 30.13% = T
Excluding Payment of the Sales Charge
Net Asset Value $10.16
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,366.04 = ERV
TOTAL RETURN FOR THE PERIOD 36.60% = T
<PAGE> 3
GLOBAL MANAGED ASSETS FUND - CLASS B SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1997
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $9.91
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,042.81 = ERV
One year period ended 12/31/97 1 = n
TOTAL RETURN FOR THE PERIOD 4.28% = T
Excluding Payment of the CDSC
Net Asset Value $9.91
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,081.00 = ERV
One year period ended 12/31/97 1 = n
TOTAL RETURN FOR THE PERIOD 8.10% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1997
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $9.91
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,300.52 = ERV
Inception through 12/31/97 3.63 = n
TOTAL RETURN FOR THE PERIOD 7.51% = T
Excluding Payment of the CDSC
Net Asset Value $9.91
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,325.52 = ERV
Inception through 12/31/97 3.63 = n
TOTAL RETURN FOR THE PERIOD 8.07% = T
<PAGE> 4
GLOBAL MANAGED ASSETS FUND - CLASS B SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1997
Formula
ERV - P
-------
P = T
Including Payment of the CDSC
Net Asset Value $9.91
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,300.52 = ERV
TOTAL RETURN FOR THE PERIOD 30.05% = T
Excluding Payment of the CDSC
Net Asset Value $9.91
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,325.52 = ERV
TOTAL RETURN FOR THE PERIOD 32.55% = T
<PAGE> 5
GLOBAL MANAGED ASSETS FUND - CLASS C SHARES
TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1997
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $9.93
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,071.30 = ERV
One year period ended 12/31/97 1 = n
TOTAL RETURN FOR THE PERIOD 7.13% = T
Excluding Payment of the CDSC
Net Asset Value $9.93
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,080.85 = ERV
One year period ended 12/31/97 1 = n
TOTAL RETURN FOR THE PERIOD 8.09% = T
TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1997
n
Formula P(1+T) = ERV
Including Payment of the CDSC
Net Asset Value $9.93
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,327.62 = ERV
Inception through 12/31/97 3.63 = n
TOTAL RETURN FOR THE PERIOD 8.12% = T
Excluding Payment of the CDSC
Net Asset Value $9.93
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,327.62 = ERV
Inception through 12/31/97 3.63 = n
TOTAL RETURN FOR THE PERIOD 8.12% = T
<PAGE> 6
GLOBAL MANAGED ASSETS FUND - CLASS C SHARES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1997
Formula
ERV - P
-------
P = T
Including Payment of the CDSC
Net Asset Value $9.93
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,327.62 = ERV
TOTAL RETURN FOR THE PERIOD 32.76% = T
Excluding Payment of the CDSC
Net Asset Value $9.93
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,327.62 = ERV
TOTAL RETURN FOR THE PERIOD 32.76% = T
<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>
<PAGE> 2
SCHEDULE 1
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL EMREGING GROWTH FUND
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
VAN KAMPEN AMERICAN CAPITAL PACE FUND
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> Global Managed Class A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 20,873,925<F1>
<INVESTMENTS-AT-VALUE> 22,835,553<F1>
<RECEIVABLES> 221,338<F1>
<ASSETS-OTHER> 4,328<F1>
<OTHER-ITEMS-ASSETS> 242,442<F1>
<TOTAL-ASSETS> 23,303,661<F1>
<PAYABLE-FOR-SECURITIES> 4,166<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 305,601<F1>
<TOTAL-LIABILITIES> 309,767<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,892,195
<SHARES-COMMON-STOCK> 1,105,334
<SHARES-COMMON-PRIOR> 808,511
<ACCUMULATED-NII-CURRENT> (229,219)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 7,907<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,108,124<F1>
<NET-ASSETS> 11,232,338
<DIVIDEND-INCOME> 224,376<F1>
<INTEREST-INCOME> 448,841<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (920,295)<F1>
<NET-INVESTMENT-INCOME> (247,078)<F1>
<REALIZED-GAINS-CURRENT> 2,539,774<F1>
<APPREC-INCREASE-CURRENT> (471,761)<F1>
<NET-CHANGE-FROM-OPS> 1,820,935<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,273,008)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 326,563
<NUMBER-OF-SHARES-REDEEMED> (151,742)
<SHARES-REINVESTED> 122,002
<NET-CHANGE-IN-ASSETS> 2,718,871
<ACCUMULATED-NII-PRIOR> (7,148)<F1>
<ACCUMULATED-GAINS-PRIOR> 157,379<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 225,799<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 920,295<F1>
<AVERAGE-NET-ASSETS> 10,423,150
<PER-SHARE-NAV-BEGIN> 10.530
<PER-SHARE-NII> (0.088)
<PER-SHARE-GAIN-APPREC> 1.014
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.294)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.162
<EXPENSE-RATIO> 3.66
<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> 12
<NAME> Global Managed Class B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 20,873,925<F1>
<INVESTMENTS-AT-VALUE> 22,835,553<F1>
<RECEIVABLES> 221,338<F1>
<ASSETS-OTHER> 4,328<F1>
<OTHER-ITEMS-ASSETS> 242,442<F1>
<TOTAL-ASSETS> 23,303,661<F1>
<PAYABLE-FOR-SECURITIES> 4,166<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 305,601<F1>
<TOTAL-LIABILITIES> 309,767<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,614,733
<SHARES-COMMON-STOCK> 1,013,227
<SHARES-COMMON-PRIOR> 954,327
<ACCUMULATED-NII-CURRENT> (229,219)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 7,907<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,108,124<F1>
<NET-ASSETS> 10,041,715
<DIVIDEND-INCOME> 224,376<F1>
<INTEREST-INCOME> 448,841<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (920,295)<F1>
<NET-INVESTMENT-INCOME> (247,078)<F1>
<REALIZED-GAINS-CURRENT> 2,539,774<F1>
<APPREC-INCREASE-CURRENT> (471,761)<F1>
<NET-CHANGE-FROM-OPS> 1,820,935<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,192,389)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 182,617
<NUMBER-OF-SHARES-REDEEMED> (233,838)
<SHARES-REINVESTED> 110,121
<NET-CHANGE-IN-ASSETS> 137,001
<ACCUMULATED-NII-PRIOR> (7,148)<F1>
<ACCUMULATED-GAINS-PRIOR> 157,379<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 225,799<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 920,295<F1>
<AVERAGE-NET-ASSETS> 10,487,989
<PER-SHARE-NAV-BEGIN> 10.379
<PER-SHARE-NII> (0.146)
<PER-SHARE-GAIN-APPREC> 0.972
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.294)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.911
<EXPENSE-RATIO> 4.42
<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> 13
<NAME> Global Managed Class C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 20,873,925<F1>
<INVESTMENTS-AT-VALUE> 22,835,553<F1>
<RECEIVABLES> 221,338<F1>
<ASSETS-OTHER> 4,328<F1>
<OTHER-ITEMS-ASSETS> 242,442<F1>
<TOTAL-ASSETS> 23,303,661<F1>
<PAYABLE-FOR-SECURITIES> 4,166<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 305,601<F1>
<TOTAL-LIABILITIES> 309,767<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,600,154
<SHARES-COMMON-STOCK> 173,243
<SHARES-COMMON-PRIOR> 161,951
<ACCUMULATED-NII-CURRENT> (229,219)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 7,907<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,108,124<F1>
<NET-ASSETS> 1,719,841
<DIVIDEND-INCOME> 224,376<F1>
<INTEREST-INCOME> 448,841<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (920,295)<F1>
<NET-INVESTMENT-INCOME> (247,078)<F1>
<REALIZED-GAINS-CURRENT> 2,539,774<F1>
<APPREC-INCREASE-CURRENT> (471,761)<F1>
<NET-CHANGE-FROM-OPS> 1,820,935<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (200,390)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,786
<NUMBER-OF-SHARES-REDEEMED> (60,449)
<SHARES-REINVESTED> 16,955
<NET-CHANGE-IN-ASSETS> 36,360
<ACCUMULATED-NII-PRIOR> (7,148)<F1>
<ACCUMULATED-GAINS-PRIOR> 157,379<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 225,799<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 920,295<F1>
<AVERAGE-NET-ASSETS> 1,668,774
<PER-SHARE-NAV-BEGIN> 10.395
<PER-SHARE-NII> (0.139)
<PER-SHARE-GAIN-APPREC> 0.965
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.294)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.927
<EXPENSE-RATIO> 4.46
<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>
